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Snell & Wilmer <br />L.L.P. <br />Mr. Mike Long <br />May 4, 2001 <br />Page 8 <br />VI. <br />ANY EFFORT TO FIND POWDERHORN IN VIOLATION OR TO <br />FORECLOSE ITS BOND WOULD BE INEQUITABLE AS POWDERHORN <br />IS NOT CONDUCTING COAL MINING OPERATIONS .4ND IS <br />PROCEEDING WITH ACTIVITIES NECESSARY TO IMPLEMENT ITS <br />RECLAMATION PLAN IN ACCORDANCE WITH STATE LAW <br />Powderhom understands how Frontier's current status creates a difficult situation from <br />the State's perspective. However, should the State determine that Frontier's status creates an <br />unabated violation by Powderhom, it will have unfair and probably unintended consequences to <br />both Powderhor and Quaker, which could affect the bankruptcy reorganization, and possibly the <br />ability of the company to carry out the reclamation plan. An unabated violation could result in a <br />permit block against Quaker and its subsidiaries under the Applicant Violator System. <br />Even were the State inclined to seek foreclosure of the Bond, State law identifies limited <br />circumstances under which DMG may take such drastic measures. In particular, the regulations <br />state that a Bond may be forfeited when the "aermittee has violated any of the terms or <br />conditions of the bond and has failed to take adequate corrective action." 2 CCR 407-2, <br />3.04.1(1)(a) (emphasis added). Here, Powderhom has violated no term or condition of its Bond. <br />Rather, the State is directly imputing a violation as a result of the status of Frontier, despite the <br />fact that Frontier has not been found incapable of meeting its surety obligations nor does it <br />appear that the adequacy of the reinsurance agreement has been evaluated. <br />The regulation also provides the permittee the opportunity to take corrective action. The <br />30 day period provided by the State to abate the NOV is too short a timeframe to reasonably <br />expect Powderhom [o be able to take corrective action. The bankruptcy proceeding and the <br />inactive status of the mine make it difficult to find a surety willing to provide a bond. DMG may <br />not foreclose the bond until it can be shown that Powderhom has "failed to take adequate <br />corrective action" and a reasonable amount of time has passed. <br />In fact, Powderhom continues to work diligently with the State in implementing its <br />reclamation plan. The onset of litigation and attention that could result from an enforcement or <br />bond forfeiture proceeding can only serve to delay implementation of on-the-ground reclamation. <br />Furthermore, the fact that no surface disturbance is occurring and that there is no threat to public <br />safety, human health or the environment, weigh in favor of rescission of the NOVs. <br />10917.1 <br />