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Mike Long, Director, Minerals and Geology CONFIDENTIAL Page 2 II. Background and Facts The Fruita Mine was developed by Dorchestor Coal Co. (Dorchestor) through a permit issued under provisions of the Col- orado Mined Land Reclamation Act The upper "cameo" bench of the Fruita Mine was constructed in 1977, prior to enactment of the Federal Surface Mining Control and Reclamation Act of 1977 (SMCRA), 30 U.S.C. Section 1201 et sec. SMCRA provides for a delegation of enforcement authority to individual States if they enact State programs no less effective than SMCRA. 30 U.S.C. Sections 2353(a), 1273(c). Colorado enacted its Act and Regula- tions and its program was approved by the U.S. Department of the Interior's Office of Surface Mining Reclamation and Enforcement (OSM) on December 15, 1980. Dorchestor received interim coal permit No. 79-60 under provisions of SMCRA, from OSM before Colorado promulgated its Act and Regulations. American Shield took over Dorchestor's interim permit in 1986. American Shield submitted a reclamation plan in - 1989 as a revision to interim permit No. 79-016, which revi- sion was approved by DMG.**1 _ In 1990, American Shield performed backfilling and grading reclamation activities in accordance with its approved reclama- tion plan and permit. DMG approved a Phase I release of liabil- ity to American Shield for backfilling and grading on May 17, 1991, after a DMG inspector verified the disturbed area had been backfilled and graded in compliance with the approved revised reclamation plan. American Shield then reduced its bond from $91,000 to $46,000. In a ten day notice issued July 2, 1991 the Albuquerque Field Office of OSM (AFO) disapproved DMG's decision to approve this partial bond release based on OSM's determination that the highwall must be eliminated. DMG subsequently issued NOV 91-029 to American Shield on September 29, 1991 for failure to eliminate the highwall. 1** Dorchestor had submitted an application for a permanent per- mit in 1981; however, no permanent permit was issued by DMG for the Fruita Mine.