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DIVISION OF RECLAMATION, MINING AND SAFETY
<br />Department of Natural Resources
<br />1313 Sherman St., Room 215
<br />Denver, Colorado 80203
<br />Phone: (303) 866 -3567
<br />FAX: (303) 832 -8106
<br />STATE OF COLORADO
<br />COLORADO
<br />D I V I S I ON OF
<br />RECLAMATION
<br />MINING
<br />SAFETY
<br />Re: Colowyo Mine, Permit No. C- 1981 -019, TR -98 reclamation cost estimate (RCE)
<br />Dear Mr. Tennyson:
<br />Based on Colowyo's comment letter for the TR -98 RCE, dated January 31, 2013, the Division has recalculated the
<br />liability associated with TR 98. The liability increase for TR -98 is $10,666,896.00. This revised liability
<br />represents the Division's estimate to load, haul, dump and spread an additional 8,259,120 LCY of overburden
<br />material from the West Taylor Fill temporary overburden stockpile to the final South Taylor Pit. Below are the
<br />Division's responses to Colowyo's questions and comments from the January 31, 2013 letter (numbering follows
<br />numbering in original letter).
<br />1. When the Division creates an RCE for a revision (PR, TR, MR or SL) it is necessary to include all indirect
<br />costs since these estimates are basically stand alone estimates. The revision estimates are not incorporated into
<br />the "main" estimate nor are they included on the "main" summary sheet until midterm review or permit renewal
<br />time. At that point all revisions are incorporated into the "main" cost estimate. If the Division did not include the
<br />indirect costs at the time of the revision, there would be an underestimation of these costs as a whole. This would
<br />lead to a deficiency in the bond held. Since each of the indirect costs is a percentage of the direct costs (for
<br />example, liability insurance is 2.02% of the direct costs), the overall indirect costs are the same regardless of
<br />whether they are added into the estimate for one task or two tasks that split up the one task. The following
<br />simplified example will illustrate this point.
<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 charged.
<br />2. The reasoning for including support equipment in each task is similar to the discussion in question 1 above. In
<br />an estimate each task can be looked at as a stand alone task. While they are, obviously, related in the big picture
<br />of reclamation, if one task is deleted it will have no bearing on the costs in any other task. Since this task was not
<br />included in the "main" estimate, the support equipment needed for this task (the loading, hauling and spreading of
<br />the additional spoil) is not accounted for in that estimate. That said, each task must include its own support
<br />equipment. The alternative way to do this would be to have an additional task(s) that was only for support
<br />equipment and include that in each estimate. Since the support equipment cost is based on the total task hours, the
<br />total cost for the estimate would end up being the same.
<br />3. The Division agrees with Colowyo that the material weight should be decreased from 2,900 pounds /LCY to
<br />2,572 pounds /LCY. The study data that Colowyo has provided is exactly the kind of site - specific information the
<br />Division can incorporate into an estimate. This change has been made on Task 13a. Since a material weight of
<br />2,900 pounds /LCY was used throughout the Permit Renewal 06 estimate, it will be changed as well. This change
<br />Office of Office of
<br />Mined Land Reclamation Denver • Grand Junction • Durango Active and Inactive Mines
<br />John W. Hickenlooper
<br />Governor
<br />February 8, 2013
<br />Mike King
<br />Executive Director
<br />Mr. Tony Tennyson
<br />Loretta E. Pineda
<br />Colowyo Coal Company
<br />Director
<br />5731 State Highway 13
<br />Meeker, CO 81641
<br />Re: Colowyo Mine, Permit No. C- 1981 -019, TR -98 reclamation cost estimate (RCE)
<br />Dear Mr. Tennyson:
<br />Based on Colowyo's comment letter for the TR -98 RCE, dated January 31, 2013, the Division has recalculated the
<br />liability associated with TR 98. The liability increase for TR -98 is $10,666,896.00. This revised liability
<br />represents the Division's estimate to load, haul, dump and spread an additional 8,259,120 LCY of overburden
<br />material from the West Taylor Fill temporary overburden stockpile to the final South Taylor Pit. Below are the
<br />Division's responses to Colowyo's questions and comments from the January 31, 2013 letter (numbering follows
<br />numbering in original letter).
<br />1. When the Division creates an RCE for a revision (PR, TR, MR or SL) it is necessary to include all indirect
<br />costs since these estimates are basically stand alone estimates. The revision estimates are not incorporated into
<br />the "main" estimate nor are they included on the "main" summary sheet until midterm review or permit renewal
<br />time. At that point all revisions are incorporated into the "main" cost estimate. If the Division did not include the
<br />indirect costs at the time of the revision, there would be an underestimation of these costs as a whole. This would
<br />lead to a deficiency in the bond held. Since each of the indirect costs is a percentage of the direct costs (for
<br />example, liability insurance is 2.02% of the direct costs), the overall indirect costs are the same regardless of
<br />whether they are added into the estimate for one task or two tasks that split up the one task. The following
<br />simplified example will illustrate this point.
<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 charged.
<br />2. The reasoning for including support equipment in each task is similar to the discussion in question 1 above. In
<br />an estimate each task can be looked at as a stand alone task. While they are, obviously, related in the big picture
<br />of reclamation, if one task is deleted it will have no bearing on the costs in any other task. Since this task was not
<br />included in the "main" estimate, the support equipment needed for this task (the loading, hauling and spreading of
<br />the additional spoil) is not accounted for in that estimate. That said, each task must include its own support
<br />equipment. The alternative way to do this would be to have an additional task(s) that was only for support
<br />equipment and include that in each estimate. Since the support equipment cost is based on the total task hours, the
<br />total cost for the estimate would end up being the same.
<br />3. The Division agrees with Colowyo that the material weight should be decreased from 2,900 pounds /LCY to
<br />2,572 pounds /LCY. The study data that Colowyo has provided is exactly the kind of site - specific information the
<br />Division can incorporate into an estimate. This change has been made on Task 13a. Since a material weight of
<br />2,900 pounds /LCY was used throughout the Permit Renewal 06 estimate, it will be changed as well. This change
<br />Office of Office of
<br />Mined Land Reclamation Denver • Grand Junction • Durango Active and Inactive Mines
<br />
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