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Fred Banta - 2 - March 4, 1987 Somerset Mine 1. Reclamation Bond (increase from $575,000 to $1,500,000-1,700,000) Currently we hold a reclamation bond from U.S. Steel Mining Corporation for $575,000. Kaiser Coal Corporation purchased the Somerset Mine from U. S. Steel in December, 1985. Since then, Kaiser Coal has tried (unsuccessfully) to produce a satisfactory letter of credit for $575,000. The attached letter dated October 17, 1986 from Diana Knode lists the deficiencies in Kaiser Coal Corporation's Letter of Credit. We are very close to determining a final amount for an appropriate reclamation bond for the entire Somerset Mine, which includes facilities in three major drainages: Elk Creek, Bear Creek, and Hubbard Creek. The calculated reclamation bond will range from 1.5 to 1.7 million dollars. This amount represents an increase of approximately 1.0 to 1.2 million. Since Kaiser Coal Company has filed for Chapter 11 Bankruptcy, we need to determine where or who the additional 1.0 to 1.2 million will come from (Kaiser, or U.S. Steel, or Both). U.S. Steel is still the permittee because the transfer has not yet been completed, due to an unacceptable letter of credit from Kaiser Coal Corporation. Reclamation Liability (Kaiser Coal's commitment or U.S. Steel's commitment)? The Somerset Mine went into temporary cessation in February, 1986. Kaiser Coal Corporation has made a commitment, as part of a minor revision to the permit, to conduct permanent reclamation activities at the Eear Creek and Hubbard Creek facilities during the 1987 reclamation field season (May 15-Octoberl). However, U.S. Steel Mining Corporation is still the permittee. U.S. Steel submitted the original permit in 1981 and made a commitment to conduct permanent reclamation within 3 years after abandonment. Because of all the confusion right now with reclamation liability, we need to determine if U.S. Steel's 3-year time frame should be adhered to. In my opinion, there is no urgency to reclaim the Bear Creek and Hubbard Creek facilities during the summer of 1987. If we hold U.S. Steel responsible for reclamation they wi// need to begin reclamation during the summer of 1989. As long as the pennittee ensures that the drainage controls and sedimentation ponds are being maintained, no significant environmental damage will be incurred during the 3-year grace period. On the other hand, if we decide that the permittee be required to begin reclamation during 1987, then we should encourage them to prepare for those activities and plan their schedules accordingly. 3. Reclamation Plan (the current reclamation plan for the Somerset Mine has many serious deficiencies and should be amended prior to permanent reclamation).