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2/22/13 <br />Tate <br />Of <br />„ loDfad <br />Re: TR -98 RCE <br />State.co.us Executive Branch Mail - Re: TR -98 RCE <br />Stark - DNR, Jim <jim.stark @state.co.us> Fri, Feb 8, 2013 at 9:56 AM <br />To: "Zuber - DNR, Rob" <rob.zuber @state.co.us> <br />Cc: Alysha Hernandez - DNR <alysha.hernandez @ state.co.us>, Mary Rodriguez - DNR <br /><mary.rodriguez @state.co.us> <br />-.. <br />The following is my cut and paste response (you may need to do some editing of the formatting, sorry) to the 31 <br />January 2013 letter from Colowyo regarding the Technical Revision 98 reclamation cost estimate (attached). <br />Please review what I have written and let me know if you have any questions. I think it would be acceptable to <br />send an e -mail copy of these responses and the revised RCE to Tony and get his "approval" today. (Of course <br />we will follow -up the e -mail with hard copies.) We could then propose a decision today as well. We also need to <br />let Tony know that no bond monies will be requested as a result of this revision, that will happen when we <br />propose a decision on RN -06. Additionally, the volume used in Task 13a (in TR -98) will be added to the volume in <br />task 013 in the RN -06 RCE (and task 13a will be "deleted) so the TR -98 estimate is really a bookkeeping <br />exercise. <br />Based on Colowyo's comment letter for the Technical Revision 98 reclamation cost estimate, dated 31 January <br />2013, the Division has recalculated the liability associated with TR -98. The liability increase for TR -98 is <br />$10,666,896.00. This revised liability represents the Division's estimate to load, haul, dump and spread an <br />additional 8,259,120 LCY of overburden material from the West Taylor Fill temporary overburden stockpile to the <br />final South Taylor Pit. Below are the Division's responses to Colowyo's questions and comments from the 31 <br />January 2013 letter (numbering follows numbering in original letter). <br />1. When the Division creates a reclamation cost estimate for a revision (PR, TR, MR or SL) it is necessary to <br />include all indirect costs since these estimates are basically stand alone estimates. The revision estimates are <br />not incorporated into the "main" estimate nor are they included on the "main" summary sheet until midterm <br />review or permit renewal time. At that point all revisions are incorporated into the "main" cost estimate. If the <br />Division did not include the indirect costs at the time of the revision, there would be an underestimation of these <br />costs as a whole. This would lead to a deficiency in the bond held. Since each of the indirect costs is a <br />percentage of the direct costs (for example, liability insurance is 2.02% of the direct costs), the overall indirect <br />costs are the same regardless of whether they are added into estimate for one task or two tasks that split up the <br />one task. The following simplified example will illustrate this point. <br />If a mine had a total direct cost liability of $10,000,000.00, the liability for insurance (at 2.02% of direct costs) <br />would be $202,000.00 (for a total liability of $10,202,000.00). The mine then has a revision that increases the <br />direct costs by $1,000,000.00. The indirect cost for the insurance liability would be $20,200.00 (for a total <br />revision liability of $1,020,200.00). The mine's total liability, following the revision, would be $11,222,200.00. This <br />is the same liability as taking the total direct liability (of $11,000,000.00) and adding the total indirect liability for <br />insurance (of $222,200.00). If the Division does not add the indirect costs to each revision estimate, there would <br />be a deficiency of $20,200.00 in the mine's liability. Since total indirect costs run on the order of 20 %, this error <br />can get very large very quickly. <br />As a quick aside to this discussion, individual revision estimates do not include equipment mobilization and <br />demobilization because the reclamation equipment is already being mobilized to the site in the "main" estimate. <br />This is a case where, if these costs were included in the revision estimate, the operator would be double <br />charged. <br />https: / /mail.google.conV mail / ?ui= 2 &ik= 454642la5a &view--pt &cat =DH Team %2FJimStark&search = cat &th= 13cbabcb9af53eb0 1/4 <br />