Exhibit 10.1





10.1




SETTLEMENT AGREEMENT AND MUTUAL RELEASE

CONCERNING RECLAMATION DISPUTES




Avista Corporation, NorthWestern Corporation, dba NorthWestern Energy, PacifiCorp, Portland
General Electric Company, PPL Montana, LLC and Puget Sound Energy, Inc (collectively, the
“Buyers”), on the one hand, and Western Energy Company (“Western”), on the other hand, enter into
this Settlement Agreement and Mutual Release Concerning Reclamation Disputes (“Settlement
Agreement”) effective March 30, 2010. The Buyers and Western are referred to individually as
“Party” and collectively as the “Parties.”



Recitals




Western is the seller and the Buyers are purchasers of coal pursuant to the Amended and
Restated Coal Supply Agreement (the “ARCSA”) dated August 24, 1998. Disputes have arisen between
the Parties concerning reclamation and associated costs in Area C of the Rosebud Mine including (i)
a dispute concerning what constitutes a “mining pit” and/or a “final pit” as those terms are used
in section 15 of the ARCSA, (ii) a related dispute concerning charges by Western to the Buyers for
reclamation costs previously incurred in Area C North of the Rosebud Mine and associated areas of
Area C Central and (iii) a related dispute concerning where final reclamation, as that term is used
in section 15 of the ARCSA, will occur in the remaining mining areas of Area C of the Rosebud Mine.
The term “final reclamation” as used in this Settlement Agreement refers to that term as used in
all subparagraphs of section 15 of the ARCSA. The Parties have resolved these disputes on the
terms stated in this Settlement Agreement.



Terms and Conditions




1. Payment. Western shall pay to the Buyers as a group $6,500,000 in two installments. The
first installment of $4,664,000 shall be paid no later than 14 calendar days after execution of
this Settlement Agreement and shall be made by wire transfer to the accounts and in the shares set
forth in Exhibit 1. The second installment of $1,836,000 shall be paid by September 15, 2011 and
shall be made by wire transfer to the accounts and in the shares set forth in Exhibit 1. This
$6,500,000 payment is made to resolve all disputes between the Parties concerning responsibility
for reclamation costs incurred in or concerning Area C North of the Rosebud Mine and associated
areas of Area C Central. This payment is a refund of payments for reclamation work that the
Parties agree is to be treated as final reclamation work under section 15 of the ARCSA.



It is understood that an overpayment occurred during the calendar year 2007 and that Western
will seek a refund of the royalties and production taxes paid on this overpayment, provided,
however, that neither of Western’s installments under this Settlement Agreement shall be contingent
on its receipt of any such refund.



2. Mutual Releases. The Parties mutually release each other, as well as their respective
parents, subsidiaries, affiliates, successors and assigns and the managers, officers, directors and
employees of all such entities, from any and all claims for costs associated with reclamation costs
performed prior to the date of this Settlement Agreement in Area C North of the Rosebud Mine and
associated areas of Area C Central, provided, however, that nothing in this paragraph is intended
to or shall release the Parties of their contractual obligations under the ARCSA or this Settlement
Agreement with respect to reclamation performed after the date of this Settlement Agreement.


 


 









 





3. Agreements Concerning Reclamation Expenses in Remaining Area C Mining Areas. To avoid
future disputes concerning the responsibility of the Parties for reclamation costs under the ARCSA
in and associated with the remaining mining areas in Area C (Areas C West, C Central, C East and C
South) of the Rosebud Mine, the Parties agree as follows:




A. Identification of Final Pits Under Life of Mine Plan and Attached Map. Attached as
Exhibit 2 is a Life of Mine Plan map, on which the Parties have cross-hatched the agreed
location of the final pits (the “Final Pits”) that will be the subject of final reclamation
in the remaining mining areas of Area C as specified below. The Parties agree that final
reclamation costs for purposes of subsections 15.2 and 15.3 of the ARCSA shall include
reclamation costs associated with closure of the Final Pits shown on Exhibit 2, the cost of
associated final reclamation in the Final Reclamation Zones (as defined in section 3C,
below), as well as final reclamation in other locations as set forth in section 3D, below.




B. Identification of Final Pits if Mining Cannot Be Completed as Provided on Exhibit 2.
The location and highwall length of the Final Pits shown on Exhibit 2 is approximate
because the precise location and highwall length of these Final Pits may change to reflect
ultimate tonnages mined under the ARCSA and geologic and regulatory conditions as permits
are obtained or modified and mining progresses. Accordingly, the Parties agree that:




i. The location and highwall length of the Final Pits shown on Exhibit 2 may be
modified pursuant to either a written agreement between the Parties or pursuant to an
Annual Operating Plan (“AOP”) that is reviewed and approved or revised in accordance
with the provisions of the ARCSA. Any changes to the locations and highwall lengths
of the Final Pits made pursuant to the foregoing sentence shall be set forth in a
revised agreed-upon Life of Mine map similar to Exhibit 2.




ii. The location of the Final Pits shown in Exhibit 2 may also be modified by
Western without consent of the Buyers as necessary in the normal course of mining to
address changed geologic or regulatory conditions so long as such changes do not
either affect the highwall length of any Final Pit or Final Pits or otherwise
increase the Buyers’ reclamation obligations and Western advises the Buyers in
writing within 30 calendar days of encountering the conditions requiring the changes.




iii. If, due to changed geologic or regulatory conditions, it is not possible to
conduct mining in accordance with the Life of Mine Plan map in Exhibit 2 without
affecting the highwall length of any Final Pit or Final Pits and the Parties are
unable to resolve the issue in accordance with the procedures set forth in
subparagraph 3B(i), above, then Western shall be permitted to alter the location and
highwall length of the Final Pit or Final Pits as necessary in the normal course of
mining to address such changed geologic or regulatory conditions, provided that (a)
all pits that no longer advance and that have highwalls that are longer than 500 feet
in length shall be Final Pits and (b) Western shall conduct the mining in a manner
that is actually necessary to address the changed geologic or regulatory conditions
and that does not otherwise operate to reduce Western’s final reclamation obligations
(for example, by leaving areas of final highwall that are less than 500 feet in
length in dragline passes before the dragline pass creating one or more Final Pits
(i.e., tag ends)). In addition, Western shall provide the Buyers with a Life of
Mine



 


 









 






Plan map similar to Exhibit 2 showing any changes to the locations and highwall
lengths of
the Final Pits made pursuant to this subparagraph before commencing mining in
the area affected by the changes, provided that this obligation shall be deemed
satisfied if Western has already provided such a map showing the changes at issue
during negotiations pursuant to the procedures set forth in subparagraph 3B(i),
above.




iv. Any change in the location of the Final Pits from the location(s) depicted
on Exhibit 2 for any reason shall not modify the Parties’ reclamation obligations
associated with the Final Pits, notwithstanding their new location(s).




C. Final Reclamation Zone Work. The Final Reclamation Zone is the area including and
around a Final Pit, the spoil side grading to the third spoil peak between ramps, the spoil
side grading to the sixth spoil peak within the lateral extent of 500 feet on either side of
the centerline of a ramp, and the highwalls and endwalls reduced to slopes as dictated by
regulatory requirements to tie to the postmine topography approved at the time of closure.
The Parties understand that the precise location of a Final Reclamation Zone is potentially
subject to change, if the locations of a Final Pit or Final Pits change pursuant to section
3B, above. Nevertheless, except as provided below, the Parties agree that all reclamation
work within the boundaries of a Final Reclamation Zone shall be final reclamation, including
Final Pit highwall reduction and reclamation, Final Pit endwall reduction and reclamation,
Final Pit and ramp road closure and reclamation, spoil grading, soil application and related
revegetation, and associated general and administrative and other costs related to such
activities. In addition, except as provided below or unless otherwise agreed to in writing,
the Parties agree that work to move material into a Final Reclamation Zone from outside a
Final Reclamation Zone to achieve the approved post mine topography shall be considered
final reclamation. Work shall not be considered final reclamation if it is (i) incidental
work necessarily associated with the active removal of coal (as opposed to reclamation)
within a Final Reclamation Zone (such as pushing a service road through an existing spoil
pile), (ii) the movement of materials to a Final Reclamation Zone in a manner consistent
with “good mining practice” as defined in section 1.33 of the ARCSA as part of ongoing
mining operations and pursuant to an Approved AOP or (iii) work related to soil replacement
outside of the Final Reclamation Zone that constitutes Current Reclamation as that term is
used under the ARCSA.




D. Other Final Reclamation Work. Final reclamation also includes reclamation work
related to facilities decommissioning and site removal, including the decommissioning of
haul and access roads, regardless of where or when it occurs. Final reclamation also
includes revegetation, soil removal and/or application (except as provided in section 3C),
final ramp reclamation not otherwise covered under section 3C, environmental compliance and
monitoring activities and other postmining management, and associated general and
administrative and other costs related to such activities that either (i) relate to an
individual Final Pit and occur at or after the closure of that Final Pit, or (ii) occur at
or after the closure of a mining area within Area C (e.g., Area C East) or Area C as a
whole.




E. Definition of “Closure.” For the purposes of section 3D of this Settlement
Agreement, “closure” of a Final Pit shall occur when the last coal has been uncovered in the
Final Pit, and “closure” of a mining area within Area C or Area C as a whole shall occur
when the last coal has been uncovered in the last Final Pit in that mining area or Area C as
a whole, provided, however, that the timing of uncovering coal shall not be altered to
change Western’s final
reclamation obligations, or change the Buyers’ Current Reclamation obligations, under
the ARCSA as clarified by this Settlement Agreement.


 


 









 





4. Impact of Settlement Agreement on the ARCSA. This Settlement Agreement clarifies the
meaning of the terms “mining pit” and “final pit” as those terms are used in section 15 of the
ARCSA and the Parties’ respective related reclamation obligations. It does not otherwise amend or
modify the ARCSA, or the definition of final reclamation or current reclamation as used in section
15 of the ARCSA, and nothing in this Settlement Agreement shall be deemed otherwise to alter the
Parties’ contractual obligations, including their obligations with respect to current or final
reclamation, under the ARCSA.



5. Applicable Law. This Settlement Agreement shall be interpreted under the laws of the state
of New York as provided for in the ARCSA.



6. Entire Agreement. This Settlement Agreement represents and is the entire agreement of the
Parties, and it may be modified only by a written agreement of all Parties.




7. Counterparts. This Settlement Agreement may be executed in counterparts.



	 	 	 	 	 	 	 	 	 
	SO AGREED:

	 	 	 	 	 	 
	WESTERN ENERGY COMPANY	 	 	 	NORTHWESTERN CORPORATION, DBA NORTHWESTERN ENERGY
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Philip Kent Salitros
	 	 	 	By:
	 	/s/ David Gates
	 

	 	 
	 	 	 	 	 	 
	Its:

	 	President and GM
	 	 	 	Its:
	 	VP, Wholesale Operations
	 
	 	 	 	 	 	 	 	 
	AVISTA CORPORATION	 	 	 	PACIFICORP
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Richard L. Storro
	 	 	 	By:
	 	/s/ Cindy Crane
	 

	 	 
	 	 	 	 	 	 
	Its:

	 	VP of Energy Resources
	 	 	 	Its:
	 	Vice President
	 
	 	 	 	 	 	 	 	 
	PUGET SOUND ENERGY, INC	 	 	 	PPL MONTANA, LLC BY AND THROUGH ITS AGENT: PPL ENERGYPLUS, LLC
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Paul M. Wiegand
	 	 	 	By:
	 	/s/ Robert Gabbard
	 

	 	 
	 	 	 	 	 	 
	Its:

	 	Senior Vice President, Power Generation
	 	 	 	Its:
	 	President-PPL EnergyPlus, LLC
	 
	 	 	 	 	 	 	 	 
	PORTLAND GENERAL ELECTRIC COMPANY	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ James F. Lobdell	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Its:

	 	Vice President