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<br />21. Mr. Calarco stated that he analyzed market supplies and <br />demand on a regular basis to assist the management team in revising <br />the business plan. His prediction was that the demand will <br />increase but the price per ton will decrease over time. His <br />understanding of "recoverable reserves" is that which can be <br />extracted considering the current technical capabilities and <br />economic conditions. <br />22. His estimate of the economic life of the mine was <br />definitely 5 years, and based on the reserves currently controlled <br />by the company, the market demand projections, and the current <br />favorable transportation availability, approximately 10 to 15 <br />years. <br />23. Under cross examination, Mr. Calarco testified that the <br />production is projected to be 133 million tons through the year <br />2009. Cross examination revealed that in reporting documents to <br />the Securities Exchange Commission (SEC), the reserves were <br />reported to be 156 million tons. <br />24. In order to clear up the reporting discrepancies, Mr. <br />Baer was recalled to the stand. He testified that he was unaware <br />of the reporting differences until the depositions. Since that <br />time, he had discovered that reserves from a second, non- <br />contiguous, non-permitted seam of coal, the Wolf Creek seam, had <br />been included in the report to the SEC. <br />25. The Petitioner contends that the recoverable reserves <br />reported to the Assessor are incorrect and that only those reserves <br />within the permitted area should be used in the calculation of <br />assessed value. Further, they contend that the Assessor <br />incorrectly used a physical life of 22 years instead of an economic <br />life of 15 years. <br />26. Respondent's witness, Lawrence F. Metzroth, senior <br />economist for Resource Data International, testified concerning the <br />anticipated market demand for the coal produced by the subject <br />mine, and transportation of same to viable buyers. <br />27. Toward the economic life issue, Mr. Metzroth testified <br />that the demand for the coal in the subject mine was projected to <br />be very good. It produces coal which is low in sulphur and <br />therefore burns cleaner. As concerns about air quality and demands <br />for more energy increase, the demand for this type of coal should <br />increase. His information shows the subject mine to be one of the <br />lowest cost underground coal producers in the United States. The <br />company's willingness to invest capital and the increased <br />production schedule indicates their anticipation of a rapidly <br />expanding market for 5 to 6 years. The economic outlook is <br />enhanced by cheaper transportation created by the Southern Pacific <br />Railroad's "back haul" rates which are $3.00-$5.00 per ton less <br />than their regular rates. <br />UA/A27512 <br />5 <br />