_GENERAL DOCUMENTS - C1981017 (254)

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Mr. Robert Hagen -2- March 15, 1994 Office of Surface Mining with either a bankrupt surety or where permittee bankruptcy has rendered the reclamation bond under valued be adopted: * Permit must be Revoked; * Bond must be administratively forfeited,- Primary bond obligee must file and maintain an active bankruptcy hearing status; * Alternative judicial mechanisms to collect reclamation monies must be employed. These steps follow closely the requirements of previous OSM directives, with some modification being implemented to account for the unique bankruptcy scenario. Colorado has completed each of the foregoing steps, and has additionally attempted to secure on-going site maintenance by the permittee pending funding of a reclamation plan. A brief history of the permit, bond and State actions to obtain reclamation funding follows. The State of Colorado determined that a Pattern of Violations had existed at the Coal Basin Mine. Therefore, the mining permit was revoked in August 1992, and the performance bond was forfeited in September 1993 by the Colorado Mined Land Reclamation Board (Board). In February 1992, Mid-Continent Resources filed for Chapter 11 bankruptcy protection. The Board filed suit in September of 1993 against the individual agents of Mid-Continent Resources, the corporate permittee, to compel site reclamation or to provide funds sufficient for the State to accomplish reclamation through a third-party contractor. Individuals and a corporate affiliate were named as defendants to the suit. The property to which the State (and the OSM as co-obligee) hold first lien is subject to the bankruptcy provisions as it is titled to Mid-Continent Resources. As such, its disposition is subject to court approval, and will not be made available to the State or OSM until a liquidating plan is confirmed by the court and funded to the requirements of the court. Because the property is subject to court oversight, it is also addressed in a proposed, but not yet confirmed, liquidating plan. It is through the liquidating plan that reclamation is proposed to be funded by Mid-Continent. The State has considered obtaining reclamation funding by petitioning the court for relief from the automatic stay in order to accomplish foreclosure proceedings. However, there are two problems which prohibit proceeding in this vein. First, opposing counsel advises that there are many (about 30) junior lien holders to the real property which acts as the reclamation bond. In order to obtain free and clear title to the site prior to a sale, the State would need to address the concerns of these junior lien holders in court. Further, each of these junior lien holders is entitled to a redemption period. The exercise of these redemption periods could unjustifiably delay collection of the proceeds of a sale. This judicial process is likely to be very time consuming, and will further draw down an already stretched legal budget.