2015-12-16_GENERAL DOCUMENTS - C1981022

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In Reply Refer To: 3485(CO-921) COC61357 COC70615 CERTIFIED MAIL — Return Receipt Requested Oxbow Mining, LLC. 3737 Highway 133 Somerset, CO 81434 DRAFT DECISION Royalty Rate Reductions Granted On November 8, 2012, Oxbow Mining LLC. (OML) submitted a Category 1 a Expanded Recovery - adverse geologic conditions - Royalty Rate Reduction Application. OML is requesting a royalty rate reduction for the remaining recoverable coal in leases COC61357 and COC70615 pursuant to section 39 of the Mineral Leasing Act of 1920, as amended, and the implementing regulations at 43 C.F.R 3485.2(c). A Category 1 royalty rate reduction may be granted when a lessee shows that adverse geologic conditions make the coal reserves identified in the application economically unrecoverable at the lease royalty rate using current standard industry operating practices. At the time of the application the subject leases were being developed by longwall mining methods using standard industry operating practice in accordance with the approved Resource Recovery and Protection Plan for the Elk Creek Mine. Adverse geologic conditions affecting the remaining Elk Creek Mine reserves included: 1. Ground Control. As mining operations are conducted at increasing depth, controlling ground pressure becomes increasingly challenging and expensive. Recent MSHA policy requires that if any blockage due to stress related issues occurs, the operator must cease longwall operations, abandon reserves and move the longwall to a new area. In the current District 4 area of the mine, such stress related problems have occurred twice, each time forcing longwall moves, as well as a loss of resource, productivity, and revenue. 2. Sand Channels. The application accurately indicates that sand channels are difficult to predict and are discovered during mining. Elk Creek has experienced sand channels in the past