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JUL 08 '93 05:54PM HOLDEN & JESSOP P.3 <br /> Neil Wolf <br /> Stephen W. Seifert <br /> Frank R. Johnson <br /> July 8, 1993 <br /> Page 2 <br /> As I understand it, the State does not wish to carry <br /> out mine reclamation directly, and instead prefers to have <br /> Resources carry out the reclamation plan if Resources is capable <br /> of doing so. However, the State wants the funds allocated to <br /> reclamation to be treated as a forfeited bond rather than as a <br /> reclamation trust held be Resources as the reclamation "trustee, " <br /> arguing that this (i) would follow an existing regulatory <br /> framework rather than invent something new; (ii) would give the <br /> State custody of the reclamation funds; and (iii) would <br /> facilitate a transfer of reclamation activities to a substitute <br /> contractor if Resources , performance is unsatisfactory. <br /> Resources wants to carry out the reclamation plan and <br /> believes that this is the most cost-effective means to perform <br /> the plan, since outside contractors will want to make a rofit <br /> and will be less familiar with the mine and the reclamation <br /> requirements. Resources is agreeable to shifting away from a <br /> trust Concept and creating a mechanism that facilitates transfer <br /> of reclamation operations to a new contractor if Resources' <br /> performance is unsatisfactory to the State. Having said this, <br /> Resources believes there are some details that still need to be <br /> worked out. <br /> First, it may not be appropriate to treat the <br /> reclamation funds as a forfeited bond so long as Resources is <br /> going to be the party implementing the reclamation plan. C.R.S. <br /> S 34-33-124 (4) states that, following revocation of a mining <br /> permit (which has occurred here) , "the permittee . . . shall <br /> complete reclamation within a period specified by the board, or <br /> the board shall declare the performance bonds for the operation <br /> as forfeited. Proceeds of forfeited bonds shall be available to <br /> the division and shall be used by the division for reclamation of <br /> the area covered by the bond" (my emphasis) . <br /> The Plan thus does not appear to be consistent with the <br /> regulatory scheme, in that it treats the bond as forfeited when <br /> the parties apparently contemplate that Resources will be <br /> carrying out the reclamation plan. On a more pragmatic level, <br /> the Plan as currently drafted does not address how funds would be <br /> disbursed from the State to Resources as Resources incurs <br /> expenses of reclamation. <br /> A point which I forgot to address, and which needs to <br /> be added to the Plan, concerns cash collateral expended on <br />