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WELBORN, JUFFORD, BROWN fd,TOOLEY Frank J. Woodrow, Esq. May 6, 1986 - ~ /r Pa e 2 ~~ ~ f ~~ ~,.~ r.c..~, f E~ }a~ ~tv= BLM's records show no application for nor approval of / ~ L any interest of the Allens in Sublease I. Since BLM's approvaT- is required before the Allens' can obtain any valid interest as sublessee (or royalty owner, see paragraph 2(d) of 1975 Agreement), we continue to doubt the Allens' claim to Sublease ~. I as part of the property to be reconveyed upon termination of the 1975 Agreement. Sublease II (the third parcel) was acquired directly from U.S. Steel by GMPC on September 3, 1981, and approved by the 8LM effective August 1, 1982. It contains an additional 80 acres in Lots 16, 17 and a part of Lot 19 in Section 35, T. 12 S., R. 91 W., 6th P.M, and a small portion of Lot 1 in Section 2, T. I3 S., R. 91 W., 6th P.M. We understand that the Allens claim no interest in Sublease II and we know of no basis for any such claim. We have no idea of the basis for the `independent operator's' estimation of one million tons of remaining reserves, but such a figure could only be even remotely accurate on an in-place basis. Clearly, only approximately 396,000 tons of clean coal which ran be 'produced and marketed' remain and that is the basis on which any future production royalties would be fi ured under the 1975 Agreement. Assuming the Allens' price of 20.00 per ton, with which we do not necessarily agree, total production ro alties to the Allens from a complete mineout would be only 225,000, as the following chart shows: Sublease I Sublease II Total Marketable Tons 242,000 154,000 396,000 Assumed Price $20/T $20/T Rate 48(12(d)) 1$(~2(f)) Maximum Royalty $194,000 $31,000 $225,000 ~---- Of course, on termination of the 1975 Agreement, all production and minimum royalty payments will stop. But, the enclosed report of April 18, 1986, shows that advance and minimum royalties and fees totaling $296,090.76 have been paid and are available to be recouped against the remaining coal. We, therefore, conclude that the Allens have been more than ~-- fully compensated for all coal to the extent contemplated by the 1975 Agreement, and that any further compensation would be inappropriate. Certainly the Allens would suffer no damage -c