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.. ' ... , • 1~'Y x_ .. ~' ~ 'r The Honorable Richard D. Lamm April 15, 1981 _.~ Page 5 comments, i.e., "Why does Kerr need everything yesterday?" We are somewhat sympathetic with that position, yet we are trying to satisfy regulatory requirements which we did not create. More importantly, we are striving to fulfill an energy requirement, provide jobs and maintain a viable coal operation under conditions that are beyond our control. To accommodate the pressure, we will do all in our power to make complete, accurate and timely presentations and will be prepared to assist the agencies in any way we can. To the extent that we can approach this program with a positive attitude on both sides, we can do much to bring this matter to an early and satisfactory conclusion. One further thought--the regulations prescribed by the MLRD and OSM were not designed to deal with the peculiar geometry of the coal deposit (the Sudduth seam) at the Marr Mine. Unlike most surface mines, which expose flat or gently dipping coal seams beneath the surface, the Sudduth coal seam is standing almost vertically in the ground which requires that we lay back the adjoining highwalls at substantial distances from the seam to expose the coal. The resulting overburden must be stockpiled temporarily rather than returned to the ~ disturbed area. Kerr is precluded, because of the "approximate ' original contour standard," from creating permanent impoundments and fills. This creates an unnecessarily high stripping cos+; does nothing to enhance resource recovery; and is not required to assure responsible reclamation, 2. Reduction of the Federal Royalty. Our legal, financial and engineering people are now working on an application to reduce the royalty on the Federal Lease. We realize that this is beyond your direct control since the discretionary authority to reduce royalties rests with the Denver office of the United States Geological Survey ("USGS"). Nevertheless, your support of this endeavor could be instrumental. We feel that we have compelling arguments to justify a substantial reduction in the federal royalty. Again, the 12;~ rate is simply an arbitrary rate c;:nsen irrespective of the economic and technical conditions peculiar to Kerr's operation. Furthermore, the percentage rate, as now applied, shrikes at the full purchase price paid by the customers and not the net sales price received by the producer. For example, if the price of coal is increased by an amount to accommodate a severance tax or the black'lut,g tax, the federal royalty provisions make our customers pay those taxes as part of the purchase price plus another 12'8 on top of that simply because the taxes are included in the purchase price. In short, the federal royalty system is a classic example of a tax on a tax',