2008-04-22_PERMIT FILE - C1981017 (2)

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App. II-B-1 A zone of pressure in the coal can only be relieved by destroying the structure of that coal, by causing it to fail before it fails of its own accord. It is important to understand that stress zones, where heavy stress threatens bumps, bounces and outbursts, are dynamic, and that unrelieved stresses compound, tending to cause even greater damage and danger later in uncontrolled outbursting and heaving. Consequently, the frequent requirement for stress relief dictates the rate and timing of mining. Because of the extreme depth of the coal beds in the Coal Basin mines and the nature of the surrounding rock, bumps, outbursts, and liberations of methane may not be completely eliminated. We have found they can be reduced and relatively controlled, however, with constant effort. In short, the key element in Mid-Continent's mine planning and projections for coal production remains flexibility. Geologic conditions which compel the adaptation of our mining operations and plans occur often, yet have proven difficult to predict. 2. Market Factors. The competitive and volatile nature of the present metallurgical coal market exercises signicant influence over the mining operation as well, and requires that the operator be readily adaptable to both heavy demand, and constrained demand, for coal. Market demand determines not only the volume of coal produced, but also the rate of production for each of the two coal beds being mined. Metallurgical coal, the primary product of Coal Basin, is not sold under long-term take-or-pay contracts. Our commitment to our customers is that we will supply them coal on an as-needed basis. Although the market was steady and demand relatively predictable for most of Mid-Continent's three decades of operation, a major economic downturn in the American steel industry has created uncertainties in the decade of the 1980s. Mid-Continent's production since 1980 has averaged approximately 800,000 tons per year; however, our market has been characterized by relative diversity. Kaiser Steel Co., one of our long-term customers, stopped primary steelmaking in 1981. We later began coal sales to Lone Star Steel, but those shipments stopped in 1986 as their furnaces were idled due to lack of demand for their primary products which supply the domestic oil exploration industry. It is expected that domestic oil exploration will begin again, thus creating a market for Lone Star, which in turn may buy additional coal from Mid-Continent. The Geneva Works of U.S. Steel, a major customer for Mid-Continent, were idled due to an unexpected steel strike in August of 1986. The plant has reopened again, 4 ,: