2008-07-16_REVISION - C1980007 (3)

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mu 200'7-213 compensation by terms of the private agreement, presumably to recover its investment in the vertical wells. The arrangement appears to be unique in BLM's experience in managing Federal coal leases; the parties agree that, if not unique, the gob gas recovery operation is highly unusual. By letter dated April 5, 2006, Oso contacted the Utah State Office, BLM, on behalf of UAE and Oso, regarding "our proposed gob gas capture project in Carbon County, Utah" Oso explained the project's background and requested that it-be- given a licence '" issued. under the broad Secretarial powers -granted to' the BLM under.. the Federal .Land Policy and Managerrient Act C FLP1V1A"l to capture the federal portion of ..the:.gob::gas that would otherwise be vented into the atmosphere from the Andalex verdca.I gob, g4. ventilation program:" Vessels Ex. F, Apr. 5, 2006, letter from Oso to BLM, "Request for Compensatory Royalty Agreement to Capture and Market Vented Gob Gas," at 2. Oso stated that it had entered into an agreement with UAE by which "Oso was responsible to obtain leases from the private oil and gas owners [of lands associated with the mine], Oso has done this and the owners are unanimous in their desire to stop the waste of their resources and to collect royalties, to the extent possible, from Oso." . Oso explained that UAE was mining in a direction that would soon mine coal and vent gas from GHV #4 in the gob area of panel #6, which is located on Federal minerals and private fee surface, Id. Oso explained that the Federal mineral estate was "currently not under oil and gas lease in accordance with the policy of the BLM to not issue leases for oil and gas within a known coal mining area." IrL Oso also noted that in other areas UAE intended to mine, "there are both leased and unleased oil and gas interests managed by BLM_" Id at 3. Oso described the processing and gathering system and proffered a return, which it called a compensatory royalty, equal to the standard 12,59/o oil and gas royalty on coalbed methane found in Federal oil and gas leases issued pursuant to the MLA. Id, at 2. The main impediment to moving forward was that the situation was new to BLM's experience; consequently, BLM employees were unsure of the proper legal authority for Oso's proposal. BLM employees explained that the situation was unique and required "a new kind of agreement." Apr. 28, 2006, Briefing Paper for Utah State Director prepared by Cook, BLM, BLM considered permits and a `hew form of 4-a unique legal arrangement and an urgency based on the opportunity to stop the venting of methane into the environment. For example, in his August 21, 2006, e-mail, Cook, BLM, explained to Spisak, BLM, that "there really is no precedent (I am familiar with a couple other attempts to do something similar, but they really didn't get off the ground) and we may be building on sand. The quicker we get an approvable document the beeter, because considerable gas volumes are being vented daily." Later, the two discussed athu fact that "the gob gas only lasts until the mining 175 IB.LA 13 l Z/4 'd £££L 'ON vlf l 101H W0:1[ S?1nZ -47 Nn1% ??.. ...... rm. ....., •pRR VRS CC : CT Q"(%7 / / 7 /Qn