QuickLinks
 -- Click here to rapidly navigate through this document











 



 
 

Exhibit 10.3    
    


Serial
Number

WYW0321780

Date Lease Issued

December 1, 1966 


United
States Department of the Interior

Bureau of Land Management

Wyoming State Office 


Coal Lease Readjustment



PART I: LEASE RIGHTS GRANTED  


This
lease, entered into by and between the United States of America, hereinafter called the lessor, through the Bureau of Management, and (Name and
Address)






Antelope
Coal Company

Caller Box 3008

Gillette, Wyoming 82717-3008 







hereinafter
called the lessee, is readjusted, effective (Date) December 1, 2006, for a period of 10 years and for so long thereafter as
coal is produced in commercial quantities from the leased lands, subject to readjustment of lease terms at the end of each 10-year period. 


Sec.
1. This lease readjustment is subject to the terms and provisions of the: 



	ý
	Mineral
Lands Leasing Act of 1920, Act of February 25, 1920, as amended, 41 Stat. 437,
30 U.S.C. 181-287, hereinafter referred to as the Act;



	o
	Mineral
Leasing Act for Acquired Lands, Act of August 7, 1947, 61 Stat. 913,
30 U.S.C. 351-359; 




and to the regulations and formal orders of the Secretary of the Interior which are now or hereafter in force, when not inconsistent with the express and specific provisions
herein. 


Sec.
2. Lessor, in consideration of any rents and royalties to be paid, and the conditions and covenants to be observed as herein set forth, hereby grants to lessee the exclusive right and privilege
to drill for, mine, extract, remove or otherwise process and dispose of the coal deposits in, upon, or under the following described lands: in Converse County, Wyoming: 


T. 40 N., R. 71 W., 6th P.M., Wyoming

Sec. 1: Lot 17;

Sec. 2: Lots 8, 9, 16, 17, 19, 20;

Sec. 3: Lots 5-14, 19, 20;

Sec. 10: Lots 1, 2, 7-10, 15, 16;

Sec. 11: Lots 1-16;

Sec. 12: Lots 4, 5, 12, 13;

Sec. 14: Lots 1-8, 10-12;

Sec. 15: Lots 1, 8, 9; 


T. 41 N., R. 71 W., 6th P.M., Wyoming

Sec. 27: Lots 4, 15;

Sec. 34: Lots 2-6, 11-15. 


containing
2,760.42 acres, more or less, together with the right to construct such works, buildings, plants, structures, equipment and appliances and the right to use such on-lease
rights-of way which may be necessary and convenient to the excercise of the rights and privileges granted, subject to the conditions herein provided. 







 

PART II: TERMS AND CONDITIONS  


Sec.
1. (a) RENTAL RATE - Lessee shall pay lessor rental annually and in advance for each acre or fraction thereof during the continuance of the lease at the rate of $3.00 for each lease year. 


(b)
RENTAL CREDITS - Rental shall not be credited against either production or advance royalties for any year. 



Sec.
2 (a) PRODUCTION ROYALTIES - The royalty shall be 121/2 per cent of the value of the coal produced by strip or auger methods and 8 per cent of the value of the
coal produced by underground mining methods. The value of the coal shall be determined as set forth in 43 CFR 3480. Royalties are due to lessor the final day of the month succeeding the calendar month
in which the royalty obligation accrues. 


(b)
ADVANCE ROYALTIES - Upon request by lessee, the authorized officer may accept, for a total of not more than 10 years, the payment of advance royalties in lieu of continued operation;
consistent with the regulations. The advance royalty shall be based on a percent of the value of a minimum number of tons determined in the manner established by the advance royalty regulations in
effect at the time the lessee requests approval to pay advance royalties in lieu of continued operation. 


Sec.3.
BONDS - Lessee shall maintain in the proper office a lease bond in the amount of $1,826,000.00. The authorized officer may require an increase in this amount when additional coverage is
determined appropriate. 


Sec.
4. DILIGENCE - This lease is subject to the conditions of diligent development and continued operation, except that these conditions are excused when operations under the lease are interrupted by
strikes, the elements, or casualties not attributable to the lessee. The lessor, in the public interest, may suspend the condition of continued operation upon payment of advance royalties in
accordance with the regulations in existence at the time of the suspension. Lessee's failure to produce coal in commercial quantities at the end of the 10 years shall terminate the lease. If
not submitted already, lessee shall submit an operation and reclamation plan pursuant to Section 7 of the Act no later than 3 years after the effective date of this lease readjustment. 


The
lessor reserves the power to assent to or order the suspension of the terms and conditions of this lease in accordance with, inter alia, Section 39 of the Mineral Leasing Act,
30 U.S.C. 209. 


Sec.
5. LOGICAL MINING UNIT (LMU) - Either upon approval by the lessor of the lessee's application or at the direction of the lessor, this lease shall become an LMU or part of an LMU, subject to the
provisions set forth in the regulations. 


The
stipulations established in an LMU approval in effect at the time of LMU approval will supersede the relevant inconsistent terms of this lease so long as the lease remains committed to the LMU. If
the LMU of which this lease is a part is dissolved, the lease shall then be subject to the lease terms which would have been applied if the lease had not been included in an LMU. 


Sec.
6. DOCUMENTS, EVIDENCE AND INSPECTION-At such times and in such form as lessor may prescribe, lessee shall furnish detailed statements showing the amounts and quality of all products
removed and sold from the lease, the proceeds therefrom, and the amount used for production purposes or unavoidably lost. 



Lessee
shall keep open at all reasonable times for the inspection of any duly authorized officer of lessor, the leased premises and all surface and underground improvements, works, machinery, ore
stockpits, equipment, and all books, accounts, maps, and records relative to operations, surveys, or investigations on or under the leased lands. 


Lessee
shall allow lessor access to and copying of documents reasonably necessary to verify lessee compliance with terms and conditions of the lease. 


2







 

While
this lease remains in effect, information obtained under this section shall be closed to inspection by the public in accordance with the Freedom of Information Act (5 U.S.C. 552). 


Sec.
7. DAMAGES TO PROPERTY AND CONDUCT OF OPERATIONS - Lessee shall comply at its own expense with all reasonable orders of the Secretary, respecting diligent operations, prevention of waste, and
protection of other resources. 


Lessee
shall not conduct exploration operations, other than casual use, without an approved exploration plan. All exploration plans prior to the commencement of mining operations within an approved
mining permit area shall be submitted to the authorized officer. 


Lessee
shall carry on all operations in accordance with approved methods and practices as provided in the operating regulations, having due regard for the prevention of injury to life, health, or
property, and prevention of waste, damage, or degradation to any land, air, water, cultural, biological, visual, and other resources, including mineral deposits and formations of mineral deposits not
leased hereunder, and to other land uses or users. Lessee shall take measures deemed necessary by lessor to accomplish the intent of this lease term. Such measures may include, but are not limited to,
modification to proposed siting or design of facilities, timing of operations and specification of interim and final reclamation procedures. Lessor reserves to itself the right to lease, sell or
otherwise dispose of the surface or other mineral deposits in the lands and the right to continue existing uses and to authorize future uses upon or in the leased lands, including issuing leases for
mineral deposits not covered hereunder, and approving easements or rights-of-way. Lessor shall condition such uses to prevent unnecessary or unreasonable interference with
rights of lessee as may be consistent with concepts of multiple use and multiple mineral development. 


Sec.
8. PROTECTION OF DIVERSE INTERESTS, AND EQUAL OPPORTUNITY - Lessee shall: pay when due all taxes legally assessed and levied under the laws of the State or the United States; accord all employees
complete freedom of purchase; pay all wages at least twice each month in lawful money of the United States; maintain a safe working environment in accordance with standard industry practices; restrict
the workday to not more than 8 hours in any one day for underground workers except in emergencies; and take measures necessary to protect the health and safety of the public. No person under
the age of 16 years shall be employed in any mine below the surface. To the extent that laws of the State in which the lands are situated are more restrictive than the provisions in this
paragraph, then the State laws apply. 


Lessee
will comply with all provisions of Executive Order No. 11246 of September 24, 1965, as amended, and the rules, regulations, and relevant orders of the Secretary of Labor. Neither
lessee nor lessee's subcontractors shall maintain segregated facilities. 



Sec.
9. (a) TRANSFERS 


	ý
	This
lease may be transferred in whole or in part to any person, association or corporation qualified to hold such lease interest.



	o
	This
lease may be transferred in whole or in part to another public body, or to a person who will mine the coal on behalf of, and for the
use of, the public body or to a person who for the limited purpose of creating a security interest in favor of a lender agrees to be obligated to mine the coal on behalf of the public body. 




Sec. 9. (a) TRANSFERS (cont'd) 


	o
	This
lease may only be transferred in whole or in part to another small business qualified under 13 CFR 121. 



Transfers of record title, working or royalty interest must be approved in accordance with the regulations. 


3







 

(b)
RELINQUISHMENT - The lessee may relinquish in writing at any time all rights under this lease. or any portion thereof as provided in the regulations. Upon lessor's acceptance of the
relinquishment, lessee shall be relieved of all future obligations under the lease or the relinquished portion thereof, whichever is applicable. 


Sec.10.
DELIVERY OF PREMISES, REMOVAL OF MACHINERY, EQUIPMENT, ETC. - At such time as all portions of this lease are returned to lessor, lessee shall deliver up to lessor the land leased, underground
timbering, and such other supports and structures necessary for the preservation of the mine workings on the leased premises or deposits and place all workings in condition for suspension or
abandonment. Within 180 days thereof, lessee shall remove from the premises all other structures, machinery, equipment, tools, and materials that it elects to or as required by the authorized
officer. Any such structures, machinery, equipment, tools and materials remaining on the leased lands beyond 180 days or approved extension thereof, shall become the property of the lessor, but
lessee shall either remove any or all such property or shall continue to be liable for the cost of removal and disposal in the amount actually incurred by the lessor. If the surface is owned by third
parties, lessor shall waive the requirement for removal, provided the third parties do not object to such waiver. Lessee shall, prior to the termination of bond liability or at any other time when
required and in accordance with all applicable laws and regulations, reclaim all lands the surface of which has been disturbed, dispose of all debris or solid waste, repair the offsite and onsite
damage caused by lessee's activity or activities incidental thereto, and reclaim access roads or trails. 


Sec.
11. PROCEEDINGS IN CASE OF DEFAULT - If lessee fails to comply with applicable laws, existing regulations, or the terms, conditions and stipulations of this lease, and the noncompliance continues
for 30 days after written notice thereof, this lease shall be subject to cancellation by the lessor only by judicial proceedings. This provision shall not be construed to prevent the exercise
by lessor of any other legal and equitable remedy, including waiver of the default. Any such remedy or waiver shall not prevent later cancellation for the same default occurring at any other time. 


Sec.
12. HEIRS AND SUCCESSORS-IN-INTEREST - Each obligation of this lease shall extend to and be binding upon, and every benefit hereof shall inure to, the heirs, executors,
administrators, successors, or assigns of the respective parties hereto. 


Sec.
13. INDEMNIFICATION - Lessee shall indemnify and hold harmless the United States from any and all claims arising out of the lessee's activities and operations under this lease. 



Sec.
14. SPECIAL STATUTES - This lease is subject to the Federal Water Pollution Control Act (33 U.S.C. 1151-1175), the Clean Air Act (42 U.S.C. 1857 et. seq.),
and to all other applicable laws pertaining to exploration activities, mining operations and reclamation, including the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. 1201
et. seq.). 


SEC.
15. SPECIAL STIPULATIONS - In addition to observing the general obligations and standards of performance set out in the current regulations, the lessee shall comply with and be bound by the
following special stipulations. These stipulations are also imposed upon the lessee's agents and employees. The failure or refusal of any of these persons to comply with these stipulations shall be
deemed a failure of the lessee to comply with the terms of the lease. The lessee shall require his agents, contractors and subcontractors involved in activities concerning this lease to include these
stipulations in the contracts between and among them. These stipulations may be revised or amended, in writing, by the mutual consent of the lessor and the lessee at any time to adjust to changed
conditions or to correct an oversight. 


(a)
CULTURAL RESOURCES - 


(1)
Before undertaking any activities that may disturb the surface of the leased lands, the lessee shall conduct a cultural resource intensive field inventory in a manner specified by the Authorized
Officer of the BLM or of the surface managing agency, if different, on portions of the mine plan area and 


4







 



adjacent
areas, or exploration plan area, that may be adversely affected by lease-related activities and which were not previously inventoried at such a level of intensity. The inventory shall be
conducted by a qualified professional cultural resource specialist (i.e., archeologist, historian, historical architect, as appropriate), approved by the Authorized Officer of the surface
managing agency (BLM, if the surface is privately owned), and a report of the inventory and recommendations for protecting any cultural resources identified shall be submitted to the Regional Director
of the Western Region of the Office of Surface Mining (the Western Regional Director), the Authorized Officer of the BLM, if activities are associated with coal exploration outside an approved mining
permit area (hereinafter called Authorized Officer), and the Authorized Officer of the surface managing agency, if different. The lessee shall undertake measures, in accordance with instructions from
the Western Regional Director, or Authorized Officer, to protect cultural resources on the leased lands. The lessee shall not commence the surface disturbing activities until permission to proceed is
given by the Western Regional Director or Authorized Officer. 


(2)
The lessee shall protect all cultural properties that have been determined eligible to the National Register of Historic Places within the lease area from lease-related activities until the
cultural resource mitigation measures can be implemented as part of an approved mining and reclamation or exploration plan unless modified by mutual agreement in consultation with the State Historic
Preservation Officer. 


(3)
The cost of conducting the inventory, preparing reports, and carrying out mitigation measures shall be borne by the lessee. 


(4)
If cultural resources are discovered during operations under this lease, the lessee shall immediately bring them to the attention of the Western Regional Director or Authorized Officer, or the
Authorized Officer of the surface managing agency, if the Western Regional Director is not available. The lessee shall not disturb such resources except as may be subsequently authorized by the
Western Regional Director or Authorized Officer. 


Within
two (2) working days of notification, the Assistant Director or Authorized Officer will evaluate or have evaluated any cultural resources discovered and will determine if any action may
be required to protect or preserve such discoveries. The cost of data recovery for cultural resources discovered during lease operations shall be borne by the lessee unless otherwise specified by the
Authorized Officer of the BLM or of the surface managing agency, if different. 


(5)
All cultural resources shall remain under the jurisdiction of the United States until ownership is determined under applicable law. 


(b)
PALEONTOLOGICAL RESOURCES - If paleontological resources, either large and conspicuous, and/or of significant scientific value are discovered during
surface disturbing activities, the find will be reported to the Authorized Officer immediately. Surface disturbing activities will be suspended within 250 feet of said find. An evaluation of the
paleontological discovery will be made by a BLM approved professional paleontologist within five (5) working days, weather permitting, to determine the appropriate action(s) to prevent the
potential loss of any significant paleontological value. Operations within 250 feet of such discovery will not be resumed until written authorization to proceed is issued by the Authorized Officer.
The lessee will bear the cost of any required paleontological appraisals, surface collection of fossils, or salvage of any large conspicuous fossils of significant scientific interest discovered
during the operations; 


(c)  MULTIPLE MINERAL DEVELOPMENT - Operations will not be approved which, in the opinion of the Authorized Officer, would unreasonably interfere with
the orderly development and/or production from a valid existing mineral lease issued prior to this one for the same lands. 


(d)
OIL AND GAS/COAL RESOURCES - The BLM realizes that coal mining operations conducted on Federal coal leases issued within producing oil and gas
fields may interfere with the economic recovery of oil and gas; just as Federal oil and gas leases issued in a Federal coal lease area may inhibit coal 


5







 



recovery.
BLM retains the authority to alter and/or modify the resource recovery and protection plans for coal operations and/or oil and gas operations on those lands covered by Federal mineral leases
so as to obtain maximum resource recovery. 


(e)
RESOURCE RECOVERY AND PROTECTION - Not-withstanding the approval of a resource recovery and protection plan (R2P2) by the BLM, lessor
reserves the right to seek damages against the operator/lessee in the event (i) the operator/lessee fails to achieve maximum economic recovery (MER) (as defined at
43 CFR 3480.0-5(21)) of the recoverable coal reserves or (ii) the operator/lessee is determined to have caused a wasting of recoverable coal reserves. Damages shall be
measured on the basis of royalty that would have been payable on the wasted or unrecovered coal. 


The
parties recognize that under an approved R2P2, conditions may require a modification by the operator/lessee of that plan. In the event a coal bed or portion thereof is not to be mined or is
rendered unmineable by the operation, the operator/lessee shall submit appropriate justification to obtain approval by the authorized officer (AO) to leave such reserves unmined. Upon approval by the
AO, such coal beds or portions thereof shall not be subject to damages as described above. Further,
nothing in this section shall prevent the operator/lessee from exercising its right to relinquish all or portion of the lease as authorized by statute and regulation. 


In
the event the AO determines that the R2P2, as approved, will not attain MER as the result of changed conditions, the AO will give proper notice to the operator/lessee as required under applicable
regulations. The AO will order a modification, if necessary, identifying additional reserves to be mined in order to attain MER. Upon a final administrative or judicial ruling upholding such an
ordered modification, any reserves left unmined (wasted) under that plan will be subject to damages as described in the first paragraph under this section. 



Subject
to the right to appeal hereinafter set forth, payment of the value of the royalty on such unmined recoverable coal reserves shall become due and payable upon determination by the AO that the
coal reserves have been rendered unmineable or at such time that the operator/lessee has demonstrated an unwillingness to extract the coal. 


The
BLM may enforce this provision either by issuing a written decision requiring payment of the MMS demand for such royalties, or by issuing a notice of noncompliance. A decision or notice of
noncompliance issued by the lessor that payment is due under this stipulation is appealable as allowed by law. 


(f)
PUBLIC LAND SURVEY PROTECTION - The lessee will protect all survey monuments, witness corners, reference monuments, and bearing trees against
destruction, obliteration, or damage during operations on the lease areas. If any monuments, corners or accessories are destroyed, obliterated, or damaged by this operation, the lessee will hire an
appropriate county surveyor or registered land surveyor to reestablish or restore the monuments, corners, or accessories at the same location, using surveying procedures in accordance with the  "Manual of Surveying Instructions
for the Survey of the Public Lands of the United States." The survey will be recorded in the appropriate county
records, with a copy sent to the Authorized Officer. 


(g)
THREATENED AND ENDANGERED SPECIES - The lease area may now or hereafter contain plants, animals, or their habitats determined to be threatened or
endangered under the Endangered Species Act of 1973, as amended, 16 U.S.C. 1531 et seq., or that have other special status. The Authorized
Officer may recommend modifications to exploration and development proposals to further conservation and management objectives or to avoid activity that will contribute to a need to list such species
or their habitat or to comply with any biological opinion issued by the Fish and Wildlife Service for the proposed action. The Authorized Officer will not approve any ground-disturbing activity that
may affect any such species or critical habitat until it completes its obligations under applicable requirements of the Endangered Species Act. The Authorized Officer may require modifications to, or 


6







 



disapprove
a proposed activity that is likely to result in jeopardy to the continued existence of a proposed or listed threatened or endangered species, or result in the destruction or adverse
modification of designated or proposed critical habitat. 


The
lessee shall comply with instructions from the Authorized Officer of the surface managing agency (BLM, if the surface is private) for ground disturbing activities associated with coal exploration
on federal coal leases prior to approval of a mining and reclamation permit or outside an approved mining and reclamation permit area. The lessee shall comply with instructions from the Authorized
Officer of the Office of Surface Mining Reclamation and Enforcement, or his designated representative, for all ground-disturbing activities taking place within an approved mining and reclamation
permit area or associated with such a permit. 


7











QuickLinks



Exhibit 10.3