1992-09-24_GENERAL DOCUMENTS - C1981017

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September 22, 1992 Page 3 reasonable efforts to coordinate its salvage activities with reclamation activities conforming to requirements of the Division. Resources and the Division have initiated discussions regarding amendments to the existing reclamation plan which would better address the timing and scope of reclamation activities. The funding of such activities is a' critical element of these discussions. While the precise scope and cost of reclamation will not be known for some time, it is clear that the cost exceeds the value of the rockdust property which is pledged to secure reclamation performance. The Creditors' Committee has suggested that, after application of proceeds from the Division's collateral, the Division's reclamation claim should be treated as a general unsecured claim, on the theory that the reclamation obligation and the mining activity giving rise to the geed to reclaim all took place prior to bankruptcy. While there is some legal support for this view, which was cited in the Second Status Report, I tend to view the Division's claim as an administrative priority. However, there is uncertainty on this point. The situation also is muddied by the potential for surcharging reclamation costs as a cost of disposing of the mine site, under Section 506(c) of the Code. As a practical matter, it is highly unlikely that anyone will buy the mine site until substantial progress has been made on mine reclamation. As an alternative to litigation over the Division's priority relative to either Sanwa or the general unsecured creditors, I suggest that the Division's collateral be enhanced in exchange for a waiver of claims against the estate, including surcharge and priority claims, and a waiver of claims against Resources' corporate affiliates. Prior discussions between Sanwa and the Creditors ' Committee called for a percentage split between Sanwa and- the Committee of every liquidation dollar, rather than allocating certain assets to one creditor or the other. Without questioning that general principle, we think any sharing of liquidation proceeds with the Division is different, because of the Division's senior lien on the rockdust property, and because the rockdust property is best marketed as an operating facility in conjunction with certain related assets. We therefore suggest that the Division's lien position be enhanced with assets related to the rockdust property. Specifically, we suggest that the Division receive the proceeds of the rockdust plant site and improvements (which is ti'd dOSS3f 18 M3aIOH Wd00:EO 26, 22 d3S