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DIVISION OF RECLAMATION, MINING AND SAFETY <br />Department of Natural Resources <br />1313 Sherman St., Room 215 <br />Denver, Colorado 80203 <br />Phone: (303) 866 -3567 <br />FAX: (303) 832 -8106 <br />Mined Land Reclamation <br />INTEROFFICE <br />MEMORANDUM <br />Jason Musick <br />TO: <br />FROM: Jim Stark <br />SUBJECT: Foidel Creek Mine (C- 1982 -056) <br />Conference Call with Jerry Nettleton Regarding Indirect Costs <br />DATE: 22 August 2011 <br />STATE OF COLORADO <br />Mike King <br />Executive Director <br />Loretta E. Pineda <br />Director <br />On 7 August 2011, at 9:00 am, I sat in on the conference call with you, Dan Hernandez <br />and Jerry Nettleton of the Twentymile Coal, LLC. The purpose of the call was to discuss <br />the Division's calculation of indirect costs on the 2010 Midterm Review cost estimate for <br />the Foidel Creek Mine (MT -06). More specifically, Jerry had called into question the <br />Division's practice of adding the Engineering Work/Bid Preparation and Reclamation <br />Management/Administration costs to the estimate based on the contract amount rather <br />than the direct cost amount. Based on the information provided by Jerry, I have <br />researched several sources and have come to the conclusion that the Division does, in <br />fact, add the indirect costs for Engineering Work/Bid Preparation and Reclamation <br />Management/Administration correctly. My rational, along with a brief discussion of how <br />the Division derives it costs (both direct and indirect) is provided below. <br />The Division derives its costs for reclamation cost estimates from four main sources, the <br />Cost Reference Guide for Construction Equipment (CRG), the Colorado Department of <br />Transportation, US Department of Labor, Davis Bacon Minimum Wages, Colorado <br />(CDOT), the Caterpillar Performance Handbook (CAT Handbook) and the RS Means <br />Building Construction Cost Data and Site Work and Landscape Cost Data (Means). The <br />Division also uses additional data sources such as published seed prices (Pawnee Buttes <br />Seed, Arkansas Valley Seeds, etc.) and the Division's Inactive Mine Reclamation <br />Program (IMP). Data from these sources is entered into the Division's proprietary <br />software, the Colorado Integrated Reclamation Cost Estimating System (CIRCES), and <br />used to calculate reclamation cost estimates. <br />All of the hourly equipment costs for earthmoving tasks are derived from the CRG and <br />CDOT. The Division inputs hourly ownership and operating costs from the CRG into <br />CIRCES to provide a raw cost for the specific piece of equipment. The Division then <br />COLORADO <br />D I V I S I O N O F <br />RECLAMATION <br />MINING <br />—&— <br />SAF ETY <br />John W. Hickenlooper <br />Governor <br />Office of Office of <br />Denver • Grand Junction • Durango Active and inactive Mines <br />