2015-12-16_GENERAL DOCUMENTS - C1981022

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2 that have resulted in costly longwall moves and lost coal resources. Because sand channels have been encountered in the past, it is reasonable to expect that the mine could encounter more in the future. 3. Shale Partings. Oxbow does not operate a coal preparation plant for segregating shale from coal. Hence the value and market for the coal is reduced. The shale partings are weak and also add to roof support needs, thus increasing operating costs. 4. Ventilation and Methane Control. Deeper coal is associated with greater methane release from the "gob" areas. Surface gob vent boreholes, in -seam degasification and other extra mine ventilation efforts become necessary to maintain compliance and support operations. In January 2013, a third occurrence caused another shut -down of longwall operations, underscoring the significance of the adverse geologic conditions at Elk Creek. Development continued throughout the year 2013 and every possible attempt was made to recover the longwall but failed. In January 2014, all mining activity was idled and has not resumed. Because of the extended duration of such shut -downs, coal customers have been lost and Oxbow may or may not be able to re -acquire these customers. The BLM is persuaded that the geologic conditions described in the application and confirmed by the field office mining engineer's inspections of the mine are severe and create a situation where resource recovery would be reduced in absence of a royalty rate reduction. The adverse conditions are anticipated to continue throughout the remaining life of the Elk Creek Mine. Therefore, in order to encourage the maximum economic recovery of the resource and in the interest of conservation of natural resources, the royalty rate for 1,517.13 acres of lease COC61357 and 725.9 acres of lease COC70615 is reduced from 8 to 5 percent. The following are the terms and conditions of the royalty rate reduction: 1. The lessee shall certify to the State Director, Colorado, prior to the end of each 12 -month period following the approval date of this decision that the conditions justifying the need for the royalty rate reductions continue to exist. The royalty rate reductions shall terminate upon the date that the annual certification of continuing conditions is due but has not been filed by the lessee. 2. The royalty rate reduction will terminate after the production of 13.1 million tons, or on December 1, 2016, whichever occurs first. 3. The royalty rate reductions are transferable upon assignment of the leases. 4. Upon termination or expiration of the royalty rate reductions, the royalty rate reverts automatically to the 8 percent rate specified in the lease documents without subsequent notification to the lessee.