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? •, • ~ , The Honorable Richard D. Lamm ,`~, April 15,1981 Page 2 to give, Kerr announced a drastic cutback in employment and production on April 8, 1981. The reduction was made effective April 11, 1981, and resulted in the termination of 80 employees, leaving Kerr with a work force of only 35 people. Additional employment cutbacks will be forthcoming unless we are able to alleviate the federal and state regulatory impacts that have gradually removed any trace of economic viability in the mining operation. All of the coal produced by Kerr from the inception of operations in 1974 to the present has been recovered from the original 720-acre parcel of private ground. Because of the limited private coal reserves at the Marr Mine, Kerr, as early as 1975, sought to acquire approximately 770 acres of contiguous federal coal reserves through a federal coal lease application. The Sudduth coal seam, which has been the producing seam at the Marr Mine, strikes north and continues onto the federal parcel. The federal coal lease application was identified as Federal Lease No. C-22777 (the "Federal Lease"). Because of the moratorium imposed on the leasing of federal coal in 1971, the subsequent federal leasing fiasco under the EbIARS program and finally the roadblock imposed by NRDC vs. Huqhes, Kerr was unable to extend and continue its operations through a logical extension of mining onto the Federal Lease. Finally, in July of 1479, with the promulgation of the permanent federal coal leasing regulations, Kerr became entitled to apply for federal coal reserves under the "emergency leasing criteria." Less than three weeks after the new regulations were promulgated, Kerr resubmitted Federal Lease Application No. C-22777 under the emergency criteria. Ultimately, Kerr received the federal lease in late June 1980 with an effective date of July 1, 1980. The Federal Lease is subject to a 12'~~ royalty which was substantially higher than historical royalties on western coal properties. Thus, by extending the mining operations from the royalty-free private ground onto the Federal Lease, Kerr was facing an initial mining cost increase of at least $2.50 per ton, solely because of federal royalties. Since the Federal Lease was "sprung from the loins" of an emergency situation, Kerr launched a crash-basis task force program to prepare and file a mining permit application with the federal government's Office of Surface Mining ("OSM") and the State of Colorado's Mined Land Reclamation Division ("NERD") at the earliest practicable date. Within one month of the effective date of the Federal Lease, the application was completed and filed with both agencies on July 31, 1980, with an urgent request for approvals by February 1981. The