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• 2 <br /> contiguous leases by formation of a logical mining unit (LMU) . The LMU can <br /> also include fee lands. Once leases are made part of an LMU, the requirements <br /> of the LMU (which are parallel to those of the leases) supercede the lease <br /> specific requirements. Since it was impossible from the mine sequencing <br /> standpoint for MCR to meet their lease specific diligence deadlines and/or <br /> continued operations requirements, MCR applied for and received effective June <br /> 1988 an LMU covering the lands within their present permit boundary. This <br /> includes their eight contiguous Federal leases and certain fee lands. The LMU <br /> achieved diligent development by August 1988, and is now in continued <br /> operations. <br /> While under normal mine production goals MCR would have no trouble meeting the <br /> LMU continued operations requirements, the recent mine fire and mine cessation <br /> make continued operations through production impossible. Given MCR's <br /> distressed financial situation, the payment of advance royalty in lieu of <br /> actual production is infeasible. The law allows temporary suspension of the <br /> continued operations if certain qualifications can be met. MCR has recently <br /> applied for such a suspension on the basis of the mine fire and its effect on <br /> MCR's ability to maintain financial solvency and continued production. BLM is <br /> likely to grant this suspension, as it appears to meet our regulatory <br /> guidelines for approval of a force-majeure suspension, and in any case could be <br /> granted under Secretarial authority in the interest of conservation. The <br /> suspension would only apply to the lease or LMU specific requirements under BLM <br /> regulatory authority and would have no effect on MCR's responsibilities to <br /> other regulatory authorities. BLM's primary stipulation in granting the <br /> suspension will be that MCR maintain the present access to the mine workings. <br /> In summary, it is BLM's primary concern that the existing capital improvements <br /> and access to the coal reserves in Coal Basin be maintained as long as possible <br /> to allow MCR or another operator to resume operations. We do not believe it <br /> will be economically feasible to replace these facilities and access, within <br /> the foreseeable future, if MCR is forced to take action to permanently reclaim <br /> the site. Historical mine operations by MCR in Coal Basin through the Dutch <br /> Creek Nos. 1 and 2, the L.S. Wood No. 3, the Bear Creek No. 4, and Coal Basin <br /> Mines have recovered most of the reserve base that could be considered "easily" <br /> extracted and accessible. Present and future mine conditions require all the <br /> capital investments already made by MCR on the property and will probably <br /> dictate ongoing additional large investments. The remaining Federal reserves <br /> within the Coal Basin Mines permit area represent in excess of $100 million in <br /> future Federal royalties, if the mine operations can continue, either through <br /> MCR or another operator. <br /> We appreciate your interest in our perspective to the cessation of the Coal <br /> Basin operations; please feel free to contact Ed Ginouves, at this office, at <br /> (303) 243-6561 should you require additional details or updates of BLM's <br /> regulatory role with MCR. <br /> Sincerely, <br /> John 0. Singlaub <br /> Area Manager <br />