2000-09-13_REVISION - M1977493 (3)

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Petition for Partial Relec fFinancial Warranty Climax Molybdenum Co..,-ny Permit #M-77 493 September 1, 1999 1998. Serious discussions and negotiations between DMG, CMC, and Climax over the warranty amount began once again in 1998, culminating in a meeting on December 2, 1998, where Climax agreed to update the closure/reclamation cost estimates and increase the financial warranty. Climax submitted a revised cost estimate and an insurance surety rider, increasing the financial warranty to DMG on February 8, 1999. The warranty was increased from the existing $22,721,972 total to $52,365,000. While formal approval of this amount has yet to be received from DMG, the Department accepted the Surety Rider increase and presently holds the bond for the plus $52 million amount. 2.0 RATIONALE AND SCOPE FOR PETITION FOR REDUCTION Through the permit process, DMG requires periodic review of financial warranties, requiring adjustments either upward or downward as conditions merit. Likewise, the Rules allow an operator to submit an increase or request a reduction in a warranty. Computer spreadsheet cost calculation models such as those employed by both DMG and Climax incorporate data of such detail, and have such flexibility, that increases or reductions in warranty for specific closure/reclamation components at specific facilities is a fairly seamless process. For example, the process allows for a reduction in the warranty amount specific to grading of a site if that grading meets the requirements of the permit and is approved by DMG through site inspection. A significant amount of closure and reclamation work occurred at Climax during the 5-6 year period that the overall financial warranty was under scrutiny and review by both Climax and DMG. A number of tasks, particularly grading and cover placements, were completed during this time that were included in the warranty calculations of both Climax and DMG. Cost estimates for these tasks were not excluded when the warranty recalculations and surety rider were submitted to DMG on February 8, 1999. However, this situation was acknowledged by Climax at the time of submittal. In its cover letter dated February 8, 1999 to Mr. Mike Long of the DMG, Climax stated (page 2, para. 1), "Some areas where reclamation has been completed are included in the Climax cost estimate. Specifically, these areas are described in DMG tasks 25, 54, 56, 57, and 63 (E-Dump grading and 3-Dam cover). An application for surety reduction for these items will be submitted in the future." The rationale for this petition for reduction in the present financial warranty is premised on the fact that, as stated in the February 8, 1999 cover letter, a number of closure/reclamation tasks at various sites around Climax have been completed to the specifications of the permit. Climax desires to reduce the warranty, and thus, their insurance premium, to accurately reflect closure/reclamation accomplishments at the property. This petition. SR-003, incorporates the February 8, 1999, warranty submittal by reference, and specifically addresses the following closure/reclamation areas (as listed in the Table of Contents of that document): 100419/Climax/Report.doc 3