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t <br /> ' NT OFTma <br /> PIRNI <br /> Th <br /> A United States Department of the Interior <br /> Ito BUREAU OF LAND MANAGEMENT <br /> ^�,h 3 e'4 GRAND JUNCTION RESOURCE AREA <br /> 764 HORIZON DRIVE 3600 <br /> GRAND JUNCTION, COLORADO 81506 (7-161) <br /> MAR 18 1991 <br /> RECEIVED <br /> Mr. Fred R. Banta <br /> Division Director <br /> Mined Land Reclamation Division <br /> QR lg� <br /> Department of Natural Resources Mined Land <br /> 1313 Sherman Street, Room 215 f�!? ��HrilatlOtl DivisionDenver, Colorado 80203 <br /> Dear Mr. Banta: <br /> As you requested of the participants of the March 8, 1991 meeting, held to <br /> identify regulatory agency concerns regarding the recent cessation of <br /> operations at Mid-Continent Resources (MCR) Coal Basin Mines, the following is <br /> a brief summary of the status of the operation from BLM's regulatory viewpoint. <br /> MCR is the lessee for nine Federal coal leases in the Coal Basin area, eight of <br /> which are completely within their present permitted mine operations boundary. <br /> Historically the Coal Basin Mines have obtained the vast majority of their <br /> production from MCR's fee coal holdings, and those holdings are now nearly <br /> exhausted. BLM estimates that the remaining fee reserve base accounts for less <br /> than 10% of MCR's total reserve base, the remainder being contained in the <br /> Federal lease areas. Continued operations from the Coal Basin Mines Complex, <br /> by MCR or another operator, will require the continuance of the rights <br /> associated with the Federal coal leases. As the principal Federal agency <br /> responsible for the leasing and appropriate extraction of coal reserves within <br /> the public domain, BLM is necessarily working with MCR to avoid any loss or <br /> damage to the Federal coal reserves they hold. <br /> MCR's ability to continue holding their Federal leases is controlled by various <br /> requirements of the Federal Coal Leasing Amendment Act of 1976 (FCLAA). The <br /> most demanding of these requirements are those of diligent development and <br /> continued operations. Coal leases made subject to FCLAA (all of the <br /> Mid-Continent leases have been through lease readjustments) have 10 years to <br /> produce in commercial quantities, defined as 1% of the recoverable reserve <br /> base, or the lease must be terminated. Once the lease has met diligence by <br /> production of commercial quantities, production must continue (continued <br /> operations) at the 1% per annum rate or advanced royalties paid in lieu of <br /> production. Because the requirements of diligent development and continued <br /> operations, which are lease specific, can run contrary to the mining sequencing <br /> feasible for mine development, the law also allows for the lessee/operator to <br /> lump diligence and continued operations requirements for any of their <br />