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' 3. Telluride Gral, Inc. is anxious to accompli the above specified <br />.~ rehabilitation work at the earliest possible date. However, it was agreed <br />that said rehabilitation work will not begin until there has been a <br />determination that it will not conflict with stabilization of the San <br />Miguel River. <br />This agreement is based on the the following considerations: <br />Rovalty Loss <br />Volume Calculations - Three separate calculations of volume of gravel <br />removed from the site were obtained. The first calculation, 103,500 cubic <br />yards, was obtained by the Forest Service from Foley and Associates, Inc. <br />Telluride Gravel, Inc, obtained a survey from Foley and performed its own <br />volume calculation resulting in 86,200 cubic yards. This second volume <br />figure was based on a more accurate method of calculation than Foley's <br />first effort, but was also based on inaccurate property boundary <br />locations. A third calculation of 90,000 cubic yards was obtained by the <br />Forest Service from Registered Land Surveyor, Kenneth Scott Thompson. <br />Thompson's method of calculation was essentially the same as Foley's <br />second calculation, but based on accurate property boundary locations. It <br />was agreed that Thompson's volume determination of 90,000 cubic yards be <br />accepted by all parties. <br />Swell Factor and Volume/Weight Conversion <br />A swell factor of 168 was used by John Dersch, Forest Service Geologist, <br />in his initial calculation of royalty loss dated June 16, 1994. Since all <br />unconsolidated material will swell, this factor is used when material is <br />removed from the ground and later sold in a loose form. The swell factor <br />multiplicant has been dropped from the calculations because Telluride <br />Gravel, Inc. sells its product on the basis of weight rather than volume. <br />Since the material was sold on a tonnage basis, Dersch calculated on the <br />basis of 3380 pounds per cubic yard. Since no on-site weight records are <br />available from Telluride Gravel, Inc., he recommended a compromise 'of a <br />weight value somewhere between the wet and dry cubic yard vales of 3380 <br />pounds per cubic yard and 2920 pounds per cubic yard, respectively. <br />The volume of material removed from this site is based on cubic yards. <br />The royalty payments are based on weight. Therefore, a conversion factor <br />is required to change cubic yards to tons. <br />The Bureau of Land Management Handbook for Mineral Examiners specifies <br />that the weight for a cubic yard of loose sand and gravel dry is 2920 <br />pounds, while the weight for a cubic yard of the same material wet is 3380 <br />pounds. In the absence of on-site records, all parties agreed on 3000 <br />pounds as a negotiated weight per cubic yard of material removed from the <br />site. The conversion factor from yards to tons would be 1.5. Additional <br />considerations for this negotiated conclusion are discussed below. <br />Royalty per Ton <br />The original Dersch calculation of Royalty per Ton was based on <br />information provided by Kirk Alexander. The royalty figure provided was <br />$.50/ton, loaded on the truck. In its letter of March 27, 1995, Telluride <br />Gravel, Inc. stated that the $.50/ton figure includes an actual royalty <br />payment of $.25/ton and a Land rental payment to Kirk Alexander of <br />