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III IIIIIIIIIIIII III ass S/ G, Doc Date:12111@001 C-ultibi+ S8 Nate: ?hp~ ~ar4 rey.aP~ KERR COAL COMPANY BONDING COST ESTIMATE Introduction bo~A pa s ~m 'mac ~9-9i r,~l7err~. ~~ salt cgoy of ~N,c ~ MpnP ~e ~ a%,t -5~ ~Fy C/a/~ S-I-S ~iC~ . In compliance with the applicable regulations promulgated under the Colorado Surface Mining and Reclamation Act, Stipulation R-4 to renewed permit number C-006-80, and technical discussions between Kerr Coal Company ("Kerr") and the Colorado Mined Land Reclamation Division ("Division"), Kerr hereby submits it's estimate of the reclamation costs necessary to reclaim the Marr Strip Mine ("Mine"). The total estimated reclamation cost is 55,346,285. This is the estimated cost, for bonding purposes, which the Colorado Mined Land Reclamation Board ("MLRB") would incur, through standard Colorado contracting procedures, to implement the approved reclamation plan in the unlikely event that Kerr was to default under its approved Permit. The methods, assumptions and detailed calculations which lead up to this bonding cost estimate are presented in the pages that follow. Methodoloaies and Assumptions--General Approach The methodology utilized in the preparation of this bonding cost estimate has centered on the selection of the most accurate and widely used reference guides, available on a national basis, for estimating unit costs for the various components of the approved reclamation plan. The only areas in which Kerr does not use published references as the basis for its calculation involve areas for which there is no published data (e.g. revegetation costs--actual independent contractor costs incurred at the Mine were used). Kerr and the MLRD have agreed to utilize the CRG with appropriate adjustments to reflect projected job conditions and costs for estimating unit costs for operating heavy equipment because it is the best reference currently available for this purpose. As Dataquest, the publisher of the CRG, stated in the report submitted by Kerr to MLRD: "The major application of the [Rental Rate Blue Book] is in force account and claims negotiations. Its summary analysis facilitates these negotiations. The major application of CRG is estimating ownership and operating costs for bidding jobs. CRG is a more accurate tool for determining actual costs." The following sections detail the various assumptions and methods used to calculate the bond amount. These assumptions and methods reflect the agreements between the MLRD and Kerr which were reached in January, 1987. Methodoloaies and Assumptions--Specific Approach Determination of the bond amount necessary to provide for complete • reclamation of the Mine and associated facilities involved a series of logical steps. 1R Revised 4/90