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,~~ -, „ <br />Ludt M. Gas - BLM <br />Brndx~e Rcdanatiar ai kerr Gnl <br />Seprarlrr l5, ?000 <br />Pale 4 <br />As you maybe aware, significant high-quality coal reserves remain on both the Kerr Federal Lease <br />and in adjacen[ areas. Following abandonment of the railroad spur-line serving Walden and the <br />consequent cessation of mining due to a lack of reliable and economically feasible transportation <br />for the coal, Kerr has continued to explore alternatives for utilization of this valuable coal <br />resource. Conceptual evaluation in the late 1980's and eazly 1990's of the feasibility of developing <br />a small coal gassificarion and co-generation facility indicated reasonable technical and economic <br />viability, given coal prices and electricity rates at the time, however adequate funding was not <br />available to proceed further. Recent increases in both the demand for and price of natural gas and <br />projections for a strong future market, however, have made both development of coal-bed <br />methane (CBM) and in-siru gasification considerably more attractive. CBM development is <br />particularly attEactive due to limited capital costs, the relatively short time interval between <br />development and production, and very limited potential for adverse environmental impacts. While <br />the coal deposits of the San Juan and Raton Creek Basins in Southwestern Colorado have been <br />extensively explored and developed for CBM, other major coal deposits including the Denver <br />Basin, Green River Basin, Umta Basin and North Pazk Basin have not been extensively evaluated <br />for CBM potential <br />Given favorable condiriorts and economics for CBM evaluation and development, Kerr is <br />currently pursuing possible evaluation of Kert's North Park coal reserves for CBM development <br />potential From both an evaluation and potential future production perspective, existing <br />boreholes/wells could be valuable. Keats, therefore, proposing that any further action on <br />borehole closure and reclamation be deferred for five years (2005) in order to complete any <br />prelirrtirtary evaluation of CBM development potential If this preliminary evaluation does not <br />indica[e reasonable feasibility of CBM development potential, approximately 46 boreholes/wells <br />would then be abandoned, sealed, and reclaimed. This number excludes those wells currendyused <br />for monitoring, identified USGS wells, and the two wells recornmended for potential water supply <br />development. Approximately 19 wells maybe the responsibility of the L15GS or the appropriate <br />federal government entity. <br />After you have the opportunity to review the table, accompanying map and recommendations, <br />please feel free [o contact me with anyquestions or comments. <br />Regards, <br />Montgomery Watson Mining Group for Kerr Coal Company <br />~~~ /~~ <br />obert Peterson~vY <br />4C rF'I ettl t(i~~~~i~~T~i4~M <br />Senior Pro Manager <br />RJP: slw <br />cc: G. Patterson/Kert (Southfield) S. Brown/CDMG <br />R. Munson/EFC F.J. James/MWMG <br />J. Mossman/Kerr <br />v~ur~a»~eamm.rt.e. <br />H/~rtV.W <br />