_GENERAL DOCUMENTS - C1981017 (228)

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Mr. Michael Mechau 2 Notwithstanding the propriety of the original bond arrangement, the evidence suggests that the bond forfeiture monies secured by the DMG will ultimately be insufficient to fully reclaim the Coal Basin site. Nonetheless, in accordance with Colorado Rule 3.04.2(6), MCR remains liable for any outstanding balance required to complete necessary reclamation. Following MCR's petition for Chapter 11 bankruptcy protection in 1992, the bankruptcy court confirmed a liquidation plan in April of 1994. Under the terms of that plan, the DMG receives 69 percent of all monies generated by MCR's liquidation of its assets. A cap of three million dollars in cash and services is written into the plan and as MCR's assets are liquidated,reclamation funds are delivered to the DMG. Correspondence from the DMG to OSM indicates that it is in the process of completing necessary reclamation to the extent forfeited bond funds permit. Indeed, the CVEPA acknowledges in a letter to the DMG dated of March 2, 1997, that "we have been monitoring the work that the Division has been doing under the supervision of[Project Manager] Steve Renner, who is trying to do as much as possible with the limited funds available through the bankruptcy proceedings." In 1993, the DMG initiated a civil proceeding in the form of a personal liability suit against the principals of MCR. That proceeding was dismissed in 1995 by the District Court of Pitkin County, Colorado. In doing so, the Court reasoned that the DMG had taken over the reclamation project and had access to all the reclamation funds which were made available through the bankruptcy court. Moreover, the Court found that by its previous conduct with respect to the Mid-Continent Minerals Corporation, the Delaney's and Reeves (the defendants), the DMG had represented that it would seek only a total of three million dollars for reclamation costs. The defendants relied on such representation by ordering their affairs with a view towards three million dollars in total liability for reclamation costs, to their detriment. The Court further stated that the defendants had expended additional funds for attorney's fees in disputing the larger amount the DMG was seeking. As such, the Court held that the DMG was estopped from asserting a claim against the defendants for more than three million dollars. The DMG subsequently appealed that portion of the District Court's order which held that it was estopped from seeking a recovery in excess of three million dollars for reclamation, the amount of the DMG's bankruptcy claim. The DMG's appeal was ultimately dismissed as being moot under the doctrine of equitable estoppel. However, the Colorado Court of Appeals ruling left open the possibility for the DMG to pursue additional reclamation funds, should funds secured through the liquidation plan prove to be insufficient to complete necessary reclamation. Specifically, the Appeals Court did not agree with the DMG's argument that the District Court's ruling would preclude it from exercising its regulatory authority to seek recovery of that full amount as permitted by Colorado Rule 3.04.2(6). As a result, the DMG has indicated that when it can prove that funds secured through the bankruptcy liquidation plan have been exhausted and are insufficient to complete satisfactory reclamation, it will consider all available options in pursuing the collection of additional monies required to finish the project.