Document:

exv10w21

 

Exhibit 10.21

     GRANT:     Multiple

UTAH STATE LEASE FOR COAL

ML 48435-OBA

     THIS
COAL MINING LEASE AND AGREEMENT (the “Lease”) is entered into and executed in
duplicate as of September 1, 2000 (the “Effective Date”) by and between the STATE OF UTAH, acting
by and through the SCHOOL AND INSTITUTIONAL TRUST LANDS ADMINISTRATION, 675 East 500 South, Suite
500, Salt Lake City, Utah 84102 (“Lessor”), and

CANYON FUEL COMPANY, LLC

6955 SOUTH UNION PARK CENTER, SUITE 540

MIDVALE, UT 84047

having a business address as shown above (“Lessee”).

WITNESSETH:

     That the State of Utah, as Lessor, in consideration of the rentals, royalties, and other
financial consideration paid or required to be paid by Lessee, and the covenants of Lessee set
forth below, does hereby GRANT AND LEASE to Lessee the exclusive right and privilege to explore
for, drill for, mine, remove, transport, convey, cross-haul, commingle, and sell the coal located
within the boundaries of the following-described tract of land (the “Leased Premises”) located in
Carbon County, State of Utah:

T.13 S., R. 13 E.. SLB&M

Sec. 17: SW/4, SW/4SE/4;

Sec. 19: NE/4SE/4, S/2SE/4;

Sec. 20: All;

Sec. 21: SW/4NW/4, SW/4;

Sec. 28: NW/4, N/2SW/4, SW/4SW/4;

Sec. 29: All;

Sec. 30: E/2, E/2W/2.

Containing 2,560.00 acres, more or less.

Together with the right and privilege to make use of the surface (but only to the extent owned by
Lessor) and subsurface of the Leased Premises for uses incident to the mining of coal by Lessee on
the Leased Premises or on other lands under the control of Lessee or mined in connection with
operations on the Leased Premises, including, but not limited to, conveying, storing, loading,
hauling, commingling, cross-hauling, and otherwise transporting coal; excavating; removing,
stockpiling, depositing and redepositing of surface materials; and the subsidence, mitigation,
restoration and reclamation of the surface.

     This Coal Mining Lease and Agreement is subject to, and Lessee hereby agrees to and
accepts, the following covenants, terms, and conditions:

     LEASED MINERALS.

	 	1.1	 	Coal. This mineral lease covers coal, which shall mean and include black or
brownish-black solid fossil fuels that have been subjected to the natural processes of
coalification, and which fall within the classification of coal by rank as anthracitic,
bituminous, sub-bituminous, or lignitic, together with closely associated substances
which include, but are not limited to other hydrocarbon substances physically contained
within the same geologic strata as the coal. In the event that minerals other than coal
are discovered during lease operations, Lessee shall promptly notify the Lessor.

 

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	 	1.2	 	Coalbed Methane. To the extent that Lessor owns gas, coalbed methane or
coal seam gas (collectively “coalbed methane”) within the Leased Premises, Lessee may
remove, vent, flare or capture such coalbed methane from the coal strata being mined
and any overlying formations if such removal is necessary for safety reasons in the
reasonable discretion of Lessee. If Lessee captures or uses such coalbed methane, it
shall pay Lessor royalties on the value of such coalbed methane at the prevailing state
royalty rate for natural gas, unless such royalties are expressly waived by Lessor.
Except as expressly granted herein, the right to extract gas, coalbed methane and coal
seam gas is not granted by this Lease.
	 
	 	1.3	 	No Warranty of Title. Lessor claims title to the mineral estate covered
by this Lease. Lessor does not warrant title nor represent that no one will dispute the
title asserted by Lessor. It is expressly agreed that Lessor shall not be liable to
Lessee for any alleged deficiency in title to the mineral estate, nor shall Lessee
become entitled to any refund for any rentals, bonuses, or royalties paid under this
Lease in the event of title failure.
	 
	 	1.4	 	Reversion of Leased Premises to United States. Pursuant to the May 8,
1998 “Agreement to Exchange Utah School Trust Lands Between the State of Utah and the
United States of America”, as ratified by Pub. L. No. 105-335, 112 Stat. 3139,
ownership of the Leased Premises shall revert to the United States when thirty-four
(34) million tons of coal have been produced from either or both the Leased Premises
and the Muddy Coal Tract. Upon reversion, the United States shall succeed the State of
Utah as Lessor.

	2.	 	RESERVATIONS TO LESSOR. Subject to the exclusive rights and privileges granted to
Lessee under this Lease, and further provided that Lessor shall refrain from taking actions
with respect to the Leased Premises that may unreasonably interfere with Lessee’s operations,
Lessor hereby excepts and reserves from the operation of this Lease the following rights and
privileges (to the extent that Lessor has the right to grant such rights and privileges):

	 	2.1	 	Rights-of-Way and Easements. Lessor reserves the right, following
consultation with the Lessee, to establish rights-of-way and easements upon, through or
over the Leased Premises, under terms and conditions that will not unreasonably
interfere with operations under this Lease, for roads, pipelines, electric transmission
lines, transportation and utility corridors, mineral access, and any other purpose
deemed reasonably necessary by Lessor.
	 
	 	2.2	 	Other Mineral Leases. Lessor reserves the right to enter into mineral
leases and agreements with third parties covering minerals other than coal, under terms
and conditions that will not unreasonably interfere with operations under this Lease in
accordance with Lessor’s regulations, if any, governing multiple mineral development.
	 
	 	2.3	 	Use and Disposal of Surface. To the extent that Lessor owns the surface
estate of the Leased Premises and subject to the rights granted to the Lessee pursuant
to this Lease, Lessor reserves the right to use, lease, sell, or otherwise dispose of
the surface estate or any part thereof. Lessor shall notify Lessee of any such sale,
lease, or other disposition of the surface estate.
	 
	 	2.4	 	Previously Authorized Improvements. If authorized improvements have
been placed upon the Leased Premises by a third party prior to the commencement of this
Lease, Lessee shall allow the owner of such improvements to remove them within ninety
(90) days after the Lease term commences. Nothing in this paragraph shall authorize
Lessee to remove surface improvements where Lessor does not own the surface estate.
	 
	 	2.5	 	Rights Not Expressly Granted. Lessor further reserves all rights and
privileges of every kind and nature, except as specifically granted in this Lease.

 

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	3.	 	TERM OF LEASE; READJUSTMENT.

	 	3.1	 	Primary Term. This Lease is granted for a “primary term” of ten (10) years
commencing on the Effective Date and for a “secondary term” of an additional ten (10)
years, subject to Lessee’s compliance with the requirements of paragraph 3.3, Diligent
Operations; Minimum Royalty.
	 
	 	3.2	 	Extension Beyond Secondary Term. Subject to Lessee’s compliance with
the other provisions of this Lease, this Lease shall remain in effect beyond the
secondary term and for as long thereafter as coal is produced in commercial quantities
from the Leased Premises, or from lands constituting either (i) a logical mining unit
approved by the Bureau of Land Management containing the Leased Premises, or (ii) a
mining unit, in which the recoverable coal reserves can be developed in an efficient,
economical and orderly manner as a unit with due regard to the conservation of
recoverable coal reserves. The second type of mining unit requires a determination by
the Lessor that the criteria set forth in item (ii) have been satisfied. The
satisfaction of either (i) or (ii) above shall mean that the Lease is contained within
an “approved mining unit.” For the purposes of this Lease, production of coal in
commercial quantities shall mean production during each lease year of at least one per
cent (1%) of the recoverable coal reserves within the Leased Premises or within lands
constituting an approved mining unit which includes the Leased Premises, as such
recoverable coal reserves are determined by Lessor after consultation with Lessee,
subject to adjustment from time to time based upon reasonable justification from the Lessee.
	 
	 	3.3	 	Diligent Operations; Minimum Royalty. In the absence of actual production
in commercial quantities as set forth in paragraph 3.2, Extension Beyond Secondary Term, this
Lease shall remain in effect beyond the primary term only if the Lessee is engaged in diligent
operations, exploration, research, or development activity (which development activity shall
include, but not be limited to, pursuit of required permits and approvals) which in Lessor’s
reasonable discretion is calculated to advance development or production of coal from the
Leased Premises or lands constituting an approved mining unit which includes the Leased
Premises, and Lessee pays an annual minimum royalty in advance on or before the anniversary
date of the Effective Date. The minimum royalty shall be calculated by determining the
production royalty that would be payable upon production of one per cent (1%) of the
recoverable coal reserves within the Leased Premises, as such recoverable coal reserves are
determined by Lessor after consultation with Lessee, subject to adjustment from time to time
based upon reasonable justification from the Lessee. The unit value of the recoverable coal
reserves for purposes of determining the minimum royalty shall be determined by Lessor using
the methodology set forth in 43 Code of Federal Regulations §3483.4(c)(l)-(3) (1998).
Minimum royalties paid by Lessee pursuant to this paragraph may be credited against production
royalties accruing during the term of this Lease.
	 
	 	3.4	 	Expiration: Cessation of Production, This Lease may not be
extended pursuant to paragraph 3.3, Diligent Operations; Minimum Royalty, beyond the
end of the twentieth year after the Effective Date except by the actual production of
coal in commercial quantities from the Leased Premises or from lands constituting an
approved mining unit which includes the Leased Premises. After expiration of the
secondary term, this Lease will expire of its own terms, without the necessity of any
notice or action by Lessor, if Lessee ceases production of coal in commercial
quantities for an entire lease year, unless the Lease is suspended pursuant to
paragraph 16.3, Suspension.
	 
	 	3.5	 	Readjustment. At the end of the primary term and at the end of each
period of ten (10) years thereafter, Lessor may readjust the terms and conditions of this Lease
(including without limitation rental rates, minimum royalties, royalty rates and
valuation methods, and provisions concerning reclamation). In the event that the
State as Lessor makes such readjustment prior to reversion, it shall not apply terms
and conditions more

 

ML48435-OBA-COAL

	 	 	 	economically disadvantageous than corresponding federal regulations and lease terms unless, based upon written findings after consultation with Lessee, it
determines that the individual term or condition imposing the economic disadvantage is
necessary to serve the best interests of the beneficiaries of the subject trust lands.
If within thirty (30) days after submission of the readjusted lease terms to the
Lessee, the Lessee determines that any or all of the proposed readjusted terms and
conditions arc unacceptable, then Lessee shall so notify Lessor in writing and the
parties shall attempt to resolve the objectionable term or condition. If the parties
are unable to resolve the matter and agree upon the readjusted terms and conditions
submitted by Lessor at the end of such ten (10) year period, Lessee shall forfeit any
right to the continued extension of this lease, and the lease shall automatically
terminate, provided that nothing herein shall be deemed to preclude Lessee from
appealing any readjustment by Lessor pursuant to applicable law.
	 
	 	3.6	 	Relinquishment. Lessee may relinquish all or portions of this Lease at
any time by filing a written notice of relinquishment with Lessor. Lessor may
disapprove any relinquishment if Lessee has failed to pay all rentals, royalties, and
other amounts due and owing to the Lessor, if the lease is otherwise not in good
standing, or if relinquishment would in Lessor’s reasonable determination cause waste
of economically recoverable coal, Lessee may not relinquish parcels smaller than a
quarter-quarter section or surveyed lot. Upon approval, relinquishment shall relieve
the Lessee of all future rental obligations as to the relinquished lands effective as
of the date of filing of the relinquishment, but shall not relieve Lessee from other
obligations to the extent provided in paragraph 15.2, Effect of Termination.

	4.	 	BONUS BID. Lessee agrees to pay Lessor, an initial bonus bid in the sum of One Million dollars ($1,000,000.00) as partial consideration for Lessor’s issuance of this Lease,
payable in four equal annual installments of $100,000.00 followed by five equal annual
installments of $120,000.00 commencing on the Effective Date. The unpaid balance of the
bonus bid shall not bear interest; provided, however, that if this Lease is relinquished or
otherwise terminated prior to the payment in full of the bonus bid, or if Lessee fails to
make any bonus bid payment when due, the entire unpaid balance of the bonus bid shall
immediately become due without regard to such relinquishment or termination, and such
balance shall thereafter bear interest as provided in paragraph 16.2, Interest. Lessor may
require Lessee to submit a bond or other sufficient surety to secure Lessee’s obligation to
pay the unpaid balance of the bonus bid. The initial bonus bid may not be credited against
any other bonus payments, annual rentals or royalties accruing under the lease.
	 
	 	 	In addition to the initial bonus bid of $1,000,000.00, Lessee agrees to pay Lessor a
deferred bonus equal to 1.5% of the value of all coal severed and removed from the Leased
Premises in excess of six million tons of coal. Lessee shall not be obligated to pay the
deferred bonus on the first six million tons of coal mined and removed from the Leased
Premises. The value of coal for the purposes of calculating deferred bonus payments shall be
determined pursuant to the provisions of Article 6, ROYALTIES. Lessee shall notify Lessor
when six million tons of coal have been severed and removed from the Leased Premises, and
thereafter shall submit deferred bonus payments at the time the production royalties are
submitted, clearly identified on royalty reporting documents as deferred bonus payments.
	 
	5.	 	RENTALS. Lessee agrees to pay Lessor an annual rental of three dollars ($3.00) for
each acre and fractional part thereof within the Leased Premises. Lessee shall promptly pay
annual rentals each year in advance on or before the anniversary date of the Effective Date. Lessee
may not credit rentals against production royalties or against minimum royalties payable pursuant to

paragraph 3.3, Diligent Operations; Minimum Royalty.
	 
	6.	 	ROYALTIES.

 

ML48435-OBA-COAL

	 	6.1	 	Production Royalties. Lessee shall pay Lessor a production royalty of eight
per cent (8%) of the value of all coal severed and removed from the Leased Premises.
For all coal sold pursuant to an arm’s-length contract, value shall be determined on
the basis of the gross proceeds received by Lessee from the sale or disposition of such
coal. Gross proceeds shall include all bonuses, allowances or other consideration of
any nature received by Lessee for coal actually produced. For any coal that is sold or
disposed of other than by an arms-length contract, or for coal that is used within the
mine permit area containing the Leased Premises for generation of electricity or for
gasification, liquefaction, in situ processing, or other method of extracting energy
from such coal, the value of such coal shall be determined by Lessor with reference to
(in order of priority): (i) comparable arms-length contracts or other dispositions of
like-quality coal produced in the same coal field; (ii) prices reported for that coal
to a public utility commission; (iii) prices reported to other governmental agencies;
or (iv) other relevant information.
	 
	 	6.2	 	Allowable Deductions. It is expressly understood and agreed that none
of Lessee’s mining or production costs, including but not limited to costs for
materials, labor, overhead, distribution, transportation within the mine permit area
prior to the point of sale, loading, crushing, sizing, screening, or general and
administrative activities, may be deducted in computing Lessor’s royalty. All such
costs shall be entirely borne by Lessee and are anticipated by the rate of royalty set
forth in this Lease. In the event that the point of sale for coal produced from this
Lease is located outside the mine permit area boundary, Lessee may deduct the
reasonable, actual costs of transportation of such coal from the mine permit area
boundary to the point of sale from gross proceeds in computing Lessor’s royalty;
provided, however, that transportation deductions for coal transported by Lessee,
Lessee’s affiliates, or by non-arm’s-length contract are subject to review and
modification by Lessor. Lessee shall be allowed to deduct its actual, reasonable
washing and treatment costs from gross proceeds in computing Lessor’s royalty;
provided, however, that, upon Lessor’s request Lessee shall provide to Lessor
appropriate justification to demonstrate that Lessee’s costs are reasonable.
	 
	 	6.3	 	Reference to Federal Regulations. It is the intent of Lessor and Lessee
that the calculation of the value of coal for royalty purposes be consistent with
federal coal regulations governing the valuation of coal, except where this Lease
expressly provides otherwise. In no event shall the value of coal used for calculation
of royalties under this Lease be less than the value which would be obtained were
federal royalty valuation regulations applied.
	 
	 	6.4	 	Royalty Payment. For all coal severed and removed from the
Leased Premises that is used, sold, transported or otherwise disposed of during a
particular month, Lessee shall pay royalties to Lessor on or before the end of the next
succeeding month. Royalty payments shall be accompanied by a verified statement, in a
form approved by Lessor, stating the amount of coal sold or otherwise disposed of, the
gross proceeds accruing to Lessee, the calculation of allowable deductions, and any
other information reasonably required by Lessor to verify production and disposition of
the coal or coal products. In the event that Lessee uses or disposes of coal pursuant
to a non-arm’s-length contract, or uses coal for generation of electricity or for
gasification, liquefaction, in situ processing, or other method of extracting energy
from such coal, Lessee shall notify Lessor of such use or disposal on or before the end
of the next succeeding month following such use or disposal, and shall pay royalties
upon Lessee’s good faith estimate of the value of such coal, subject to Lessor’s right
to determine the value of such coal pursuant to paragraph 6.1, Production Royalties.
After reversion of the Leased Premises to the United States pursuant to paragraph 1.4,
Reversion of Leased Premises to United States, Lessee shall report production and
royalties monthly in accordance with applicable federal regulations.

 

ML48435-OBA-COAL

	 	6.5	 	Royalty Valuation After Reversion. After reversion of the Leased Premises
to the United States, the Secretary of the Interior may establish the reasonable value
of post-reversion production for royalty purposes in the same manner and by the same
methods as the United States establishes value under coal leases issued by the United
States.
	 
	 	6.6	 	Suspension. Waiver or Reduction of Rents or Royalties. Lessor, to the
extent not prohibited by applicable law, is authorized to waive, suspend, or reduce the
rental or minimum royalty, or reduce the royalty applicable with respect to the entire
Lease, whenever in Lessor’s judgment it is necessary to do so in order to promote
development, or whenever in the Lessor’s judgment the Lease cannot be successfully
operated under the terms provided herein.

	7.	 	RECORDKEEPING; INSPECTION; AUDITS.

	 	7.1	 	Registered Agent: Records. Lessee shall maintain a registered agent within
the State of Utah to whom any and all notices may be sent by Lessor and upon whom
process may be served. Lessee shall also maintain an office within the State of Utah
containing originals or copies of all maps, engineering data, permitting materials,
books, records or contracts (whether such documents are in paper or electronic form)
generated by Lessee that pertain in any way to coal production, output and valuation;
mine operations; coal sales and dispositions; transportation costs; and calculation of
royalties from the Leased Premises. Lessee shall maintain such documents for at least
seven years after the date of the coal production to which the documents pertain.
	 
	 	7.2	 	Inspection. Lessor’s employees and authorized agents at Lessor’s sole
risk and expense shall have the right to enter the Leased Premises to check scales as
to their accuracy, and to go on any part of the Leased Premises to examine, inspect,
survey and take measurements for the purposes of verifying production amounts and
proper lease operations. Upon reasonable notice to Lessee, Lessor’s employees and
authorized agents shall further have the right to audit, examine and copy (at Lessor’s
expense) all documents described in paragraph 7.1, Registered Agent; Records, whether
such documents are located at the mine site or elsewhere. Lessee shall furnish all
conveniences necessary for said inspection, survey, or examination; provided, however,
that such inspections shall be conducted in a manner that is in conformance with all
applicable mine safety regulations and does not unreasonably interfere with Lessee’s
operations.
	 
	 	7.3	 	Federal Inspections. Lessee agrees that, prior to reversion of the
Leased Premises to the United States, employees and authorized agents of the Bureau of
Land Management (“BLM”) may conduct underground inspections of the Leased Premises,
both independently and in cooperation with the State in its capacity as Lessor. After
reversion, employees and authorized agents of BLM may conduct underground inspections
of the Leased Premises under the authority of applicable federal laws and regulations.
	 
	 	7.4	 	Geologic Information. In the event Lessee conducts core-drilling
operations or other geologic evaluation of the Leased Premises, Lessor may inspect core
samples, evaluations thereof, and proprietary geologic information concerning the
Leased Premises.
	 
	 	7.5	 	Confidentiality. Any and all documents and geologic data obtained by
Lessor through the exercise of its rights as set forth in paragraphs 7.2, Inspection.,
and 7.4, Geologic Information., may be declared confidential information by Lessee, in
which event Lessor and its authorized agents shall maintain such documents and geologic
data as protected records under the Utah (Governmental Records Access Management Act or
other applicable privacy statute including applicable federal law after reversion, and
shall not disclose the same to any third party without the written consent of Lessee,
the order of a court of competent jurisdiction requiring such disclosure, or upon termination of
this Lease. Following reversion of the Leased Premises to the United States, the
United States

 

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	 	 	 	as Lessor shall treat such information as confidential to the extent permitted by
federal law.

	8.	 	USE OF SURFACE ESTATE.

	 	8.1	 	Lessor-Owned Surface. If Lessor owns the surface estate of all or some
portion of the Leased Premises, by issuance of this Lease the Lessee has been granted
the right to make use of such lands to the extent reasonably necessary and expedient
for the economic operation of the leasehold. Lessee’s right to surface use of
Lessor-owned surface estate shall include the right to subside the surface. Such
surface uses shall be exercised subject to the rights reserved to Lessor as provided in
paragraph 2, RESERVATIONS TO LESSOR, and without unreasonable interference with the
rights of any prior or subsequent lessee of Lessor.
	 
	 	8.2	 	Split-Estate Lands. If Lessor does not own the surface estate of any
portion of the Leased Premises, Lessee’s access to and use of the surface of such lands
shall be determined by applicable law governing mineral development on split-estate
lands, including without limitation applicable statutes governing access by mineral
owners to split estate lands, and reclamation and bonding requirements. Lessee shall
indemnify, defend and hold Lessor harmless for all claims, causes of action, damages,
costs and expenses (including attorney’s fees and costs) arising out of or related to
damage caused by Lessee’s operations to surface lands or improvements owned by third
parties.

	9.	 	APPLICABLE LAWS AND REGULATIONS; HAZARDOUS SUBSTANCES

	 	9.1	 	Trust Lands Statute and Regulations. This Lease is issued pursuant to the
provisions of Title 53C, Utah Code Annotated, 1953, as amended, and Lessee is subject
to and shall comply with all current and future rules and regulations adopted by the
School and Institutional Trust Lands Administration and its successor agencies until
reversion of the Leased Premises to the United States pursuant to paragraph 1.4.
Reversion of Leased Premises to United States.
	 
	 	9.2	 	Regulation Upon Reversion. After reversion of the Leased Premises to the
United States pursuant to paragraph 1.4, Reversion of Leased Premises to United States,
Lessee will be subject to the requirements of the Mineral Leasing Act, 30 U.S.C. §~ 181
et seq. (the “MLA”), and to the royalty, operating, and administrative procedure rules
and regulations of the Department of Interior, the Minerals Management Service, and the
Bureau of Land Management, and to any other federal laws and regulations generally
applicable to coal leases issued under the MLA to the same extent as if the Lease were
a federally-issued lease. Notwithstanding the foregoing, to the extent that the State,
as Lessor, approves a significant operational decision prior to reversion, and Lessee
makes a substantial economic commitment based upon that approval, Lessee may continue
to rely upon that approval after reversion; provided, however, that no such approval
shall act to limit the liability of Lessee, if any, under CERCLA. RCRA, the Clean Water
Act, 33 U.S.C. § 1251 et seq or other applicable environmental law. Upon reversion,
nothing in this paragraph shall be deemed to require that the Leased Premises be
included in the calculation of acreage held by Lessee for the purposes of the acreage
limitation provisions of the MLA and associated regulations.

 

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	 	9.3	 	Other Applicable Laws and Regulations. Lessee shall comply with all
applicable federal, state and local statutes, regulations, and ordinances, including
without limitation the Utah Coal Mining and Reclamation Act, applicable statutes and
regulations relating to mine safety and health, and applicable statutes, regulations
and ordinances relating to public health, pollution control, management of hazardous substances and environmental protection.
	 
	 	9.4	 	Hazardous Substances. Lessee [or other occupant pursuant to any agreement
authorizing mining] shall not keep on or about the premises any hazardous substances,
as defined under 42 U.S.C. § 960104) or any other Federal environmental law, any
regulated substance contained in or released from any underground storage tank, as
defined by the Resource Conservation and Recovery Act, 42 U.S.C. § 6991, et seq. or any
substances defined and regulated as “hazardous” by applicable State law, (hereinafter,
for the purposes of this Lease, collectively referred to as “Hazardous Substances”)
unless such substances are reasonably necessary in Lessee’s mining operations, and the
use of such substances or tanks is noted and approved in the Lessee’s mining plan, and
unless Lessee fully complies with all Federal, State and local laws, regulations,
statutes, and ordinances, now in existence or as subsequently enacted or amended,
governing Hazardous Substances. Lessee shall immediately notify Lessor, the Bureau of
Land Management, the surface management agency, and any other Federal, State and local
agency with jurisdiction over the Leased Premises, or contamination thereon, of (i) all
reportable spills or releases of any Hazardous Substance affecting the Leased Premises,
(ii) all failures to comply with any applicable Federal, state or local law, regulation
or ordinance governing Hazardous Substances, as now enacted or as subsequently enacted
or amended, (iii) all inspections of the Leased Premises by, or any correspondence,
order, citations, or notifications from any regulatory entity concerning Hazardous
Substances affecting the Leased Premises, (iv) all regulatory orders or fines or all
response or interim cleanup actions taken by or proposed to be taken by any government
entity or private Party concerning the Leased Premises.
	 
	 	9.5	 	Hazardous Substances Indemnity. Lessee [or other occupant pursuant to
any agreement authorizing mining] shall indemnify, defend, and hold harmless Lessor and
the United States (as successor Lessor or owner pursuant to reversion or as owner of
surface estate) its agencies, employees, officers, and agents with respect to any and
all damages, costs, liabilities, fees (including attorneys’ fees and costs), penalties
(civil and criminal), and cleanup costs arising out of or in any way related to
Lessee’s use, disposal, transportation, generation, sale or location upon or affecting
the Leased Premises of Hazardous Substances, as defined in paragraph 9.4 of this Lease.
This indemnity shall extend to the actions of Lessee’s employees, agents assigns,
sublessees, contractors, subcontractors, licensees and invitees. Lessee shall further
indemnify, defend and hold harmless Lessor and the United States from any and all
damages, costs, liabilities, fees (including attorneys’ fees and costs), penalties
(civil and criminal), and cleanup costs arising out of or in any way related to any
breach of the provisions of this Lease concerning Hazardous Substances. This indemnity
is in addition to, and in no way limits, the general indemnity contained in paragraph
16.1 of this Lease.
	 
	 	9.6	 	Waste Certification. The Lessee shall provide upon abandonment,
transfer of operation, assignment of rights, sealing-off of a mined area, and prior to
lease relinquishment, certification to the Lessor and the Bureau of Land Management
that, based upon a complete search of all the operator’s records for the Lease, and
upon its knowledge of past operations, there have been no reportable quantities of
hazardous substances as defined in 40 Code of Federal Regulations §302.4, or used oil
as defined in Utah Administrative Code R315-15, discharged (as defined at 33 U.S.C.
§1321(a)(2)), deposited or released within the Leased Premises, either on the surface
or underground, and that all remedial actions necessary have been taken to protect
human health and the environment with respect to such substances. Lessee shall
additionally provide to Lessor and the Bureau of Land Management a complete

 

ML48435-OBA-COAL

	 	 	 	list of all hazardous substances, hazardous materials, and their respective Chemical
Abstracts Service Registry Numbers, and oil and petroleum products used or stored on, or
delivered to, the Leased Premises. Such disclosure will be in addition to any other
disclosure required by law or agreement.

	10.	 	BONDING.

	 	10.1	 	Lease Bond Required. At the time this Lease is executed, Lessee shall
execute and file with the Lessor a good and sufficient bond or other financial
guarantee acceptable to Lessor in order to:
	 
	 	 	 	(a) guarantee Lessee’s performance of all covenants and obligations under this Lease,
including Lessee’s obligation to pay royalties; and (b) ensure compensation for
damage, if any, to the surface estate and any surface improvements. The Lease Bond
shall meet all federal mineral lease bond requirements as described in 43 Code of
Federal Regulations Subpart 3474. The Lease Bond shall further provide that upon
forfeiture after reversion of the Leased Premises to the United States, the Lease
Bond shall be payable to the Secretary of the Interior.
	 
	 	10.2	 	Reclamation Bonding. The bond filed with the Utah Division of Oil, Gas
and Mining (“UDOGM”) in connection with the issuance of a mine permit which includes
the Leased Premises shall be deemed to satisfy Lessor’s bonding requirements with
respect to Lessee’s reclamation obligations under this Lease; provided, however, upon
notice to Lessee and a public hearing with respect to the basis for its decision, the
Lessor may, in its reasonable discretion, determine that the bond filed with UDOOM is
insufficient to protect Lessor’s interests. In such an event the Lessor shall enter
written findings as to the basis for its calculation of the perceived insufficiency and
enter an order establishing the amount of additional bonding required. Lessee shall
file any required additional bond with Lessor within thirty (30) days after demand by
Lessor. Lessor may increase or decrease the amount of any additional bond from time to
time in accordance with the same procedure.
	 
	 	10.3	 	Release of Additional Bond. Any additional bond required by Lessor
pursuant to 10.2, Reclamation Bonding, may be released by Lessor at any time and shall
be released no later than the time of final bond release by UDOGM with respect to the
Leased Premises.

	11.	 	WATER RIGHTS.

	 	11.1	 	Water Rights in Name of Lessor. If Lessee files to appropriate water for
coal mining operations on the Leased Premises, the filing for such water right shall be
made by Lessee in the name of Lessor at no cost to Lessor, and such water right shall
become an appurtenance to the Leased Premises, subject to Lessee’s right to use such
water right at no cost during the term of this Lease.
	 
	 	11.2	 	Option to Purchase. If Lessee purchases or acquires an existing water
right for coal mining operations on the Leased Premises, Lessor shall have the option
to acquire that portion of such water right as was used on the Leased Premises upon
expiration or termination of this Lease. The option price for such water right shall be
the fair market value of the water right as of the date of expiration or termination of
this Lease. Upon expiration or termination of this Lease, Lessee shall notify Lessor in
writing of all water rights purchased or acquired by Lessee for coal mining operations
on the Leased Premises and its estimate of the fair market value of such water right.
Lessor shall then have forty-five (45) days to exercise its option to acquire the water
by payment to Lessee of the estimated fair market value. If Lessor disagrees with
Lessee’s estimate of fair market value, Lessor shall notify Lessee of its disagreement
within the 45 day option exercise period. The fair market value of the water right
shall then be appraised by a single appraiser mutually

 

ML48435-OBA-COAL

	 	 	 	acceptable to both parties, which appraisal shall be final and not subject to
review or appeal. If the parties cannot agree upon the choice of an appraiser, the fair
market value of the water right shall be determined by a court of competent
jurisdiction. Conveyance of any water right pursuant to this paragraph shall be by quit
claim deed.
	 
	 	11.3	 	Reversion. Upon reversion of the Leased Premises to the United States,
the United States shall succeed to the interests of the State of Utah pursuant to this
article 11.

	12.	 	ASSIGNMENT OR SUBLEASE; OVERRIDING ROYALTIES.

	 	12.1	 	Consent Required. Lessee shall not assign or sublease this Lease in whole
or in part, or otherwise assign or convey any rights or privileges granted by this
Lease, including, without limitation, creation of overriding royalties or production
payments, without the prior written consent of Lessor. Any assignment, sublease or
other conveyance made without prior written consent of Lessor shall have no legal
effect unless and until approved in writing by Lessor. Exercise of any right with
respect to the Leased Premises in violation of this provision shall constitute a
default under this Lease.
	 
	 	12.2	 	Binding Effect. All of the terms and provisions of this Lease shall be
binding upon and shall inure to the benefit of their respective successors, assigns,
and sublessees.
	 
	 	12.3	 	Limitation on Overriding Royalties. Lessor reserves the right to
disapprove the creation of an overriding royalty or production payment that would, in
Lessor’s reasonable discretion, constitute an unreasonable economic burden upon
operation of the Lease, In exercising its discretion to disapprove the creation of an
overriding royalty, Lessor shall consult with Lessee and any third parties involved and
shall prepare findings to evidence the basis of its decision. Cumulative overriding
royalties of 2% or less shall be deemed presumptively reasonable unless special
circumstances are shown by Lessor to exist.

	13.	 	OPERATIONS.

	 	13.1	 	Permitting. Before Lessee commences exploration, drilling, or mining
operations on the Leased Premises, it shall have obtained such permits and posted such
bonds as may be required under applicable provisions of the Utah Coal Mining and
Reclamation Act, the Surface Mining Control and Reclamation Act, and associated
regulations, together with applicable regulations of the surface management agency.
Lessee shall maintain any required permits in place for the duration of mining
operations and reclamation. Upon request, Lessee shall provide Lessor with a copy of
all regulatory filings relating to permitting matters.
	 
	 	13.2	 	Plan of Operations. Prior to the commencement of any underground mining
operations on the Leased Premises, Lessee shall obtain Lessor’s approval of a plan of
operations for the Leased Premises. The plan of operations shall contain all
information required to be contained in a federal Resource Recovery and Protection
Plan, as described in 43 Code of Federal Regulations § 3482.1(b) and (c) (1998). Lessor may modify the proposed plan of operations as
is needed to insure that there is no waste of economically recoverable coal reserves
contained on the Leased Premises. In this context “waste” shall mean the inefficient
utilization of, or the excessive or improper loss of an otherwise economically
recoverable coal resource. Lessor shall notify Lessee in writing of its approval or
modifications of the plan of operations. The plan of operations submitted by Lessee
shall be deemed approved by Lessor if Lessor has not otherwise notified Lessee within
sixty (60) days of filing.

 

ML48435-OBA-COAL

	 	13.3	 	Plan of Operations — Modification. In the event that material changes
are required to the plan of operations during the course of mining, Lessee shall submit a
modification of the plan of operations to the Lessor. Routine adjustments to the plan of
operations based upon geologic circumstances encountered during day-to-day mining operations
do not require the submission of a modification. If the proposed changes require emergency
action by Lessor, then the Lessee shall so notify the Lessor at the time of submission of the
modification and the parties shall use their best efforts to meet the Lessee’s time schedule
regarding implementation of the changes. Non-emergency modifications will be reviewed promptly
by Lessor to insure that there is no waste of economically recoverable coal reserves pursuant
to the plan of operations, as modified, and Lessor shall notify lessee in writing of its
approval or modification of the proposed modification. Prior to reversion, modifications shall
be deemed approved by Lessor if Lessor has not otherwise notified Lessee within thirty (30)
days of filing. After reversion, modifications shall be approved in accordance with applicable
federal regulations.
	 
	 	13.4	 	Mine Maps. Lessee shall maintain at the mine office clear, accurate,
and detailed maps of all actual and planned operations prepared and maintained in the
manner prescribed by 43 Code of Federal Regulations § 3482.3 (1998). Lessee
shall provide copies of such maps to Lessor upon request.
	 
	 	13.5	 	Good Mining Practices. Lessee shall conduct exploration and mining
operations on the Leased Premises in accordance with standard industry operating
practices, and shall avoid waste of economically recoverable coal. Lessee shall comply
with all regulations and directives of the Mine Safety and Health Administration or
successor agencies for the health and safety of employees and workers. Lessee shall
further comply with the performance standards for underground resource recovery set
forth at 43 Code of Federal Regulations § 3484.1(c) (1998); provided, however, that
Lessor may waive such standards from time to time in its reasonable discretion, upon
request by Lessee. Coal shall be mined from this Lease by underground methods only.
	 
	 	13.6	 	Mining Units. Lessor may approve the inclusion of the Leased Premises
in a mining unit with federal, private or other non-state lands upon terms and
conditions that it deems necessary to protect the interests of the Lessor, including
without limitation segregation of production, accounting for commingled coal
production, and minimum production requirements or minimum royalties for the Leased
Premises.

	14.	 	EQUIPMENT; RESTORATION.

	 	14.1	 	Equipment. Upon termination of this Lease, Lessee shall remove, and shall
have the right to remove, all improvements, equipment, stockpiles, and dumps from the
Leased Premises within six (6) months; provided, however, that Lessor may, at Lessor’s
sole risk and expense, and subject to Lessee’s compliance with requirements imposed by
UDOGM and MSHA, require Lessee to retain in place underground timbering supports, shaft
linings, rails, and other installations reasonably necessary for future mining of the
Leased Premises. All improvements and equipment remaining on the Leased Premises after
six (6) months may be deemed forfeited to Lessor upon written notice of such forfeiture
to Lessee. Lessee may abandon underground improvements, equipment of any type,
stockpiles and dumps in place if such abandonment is in compliance with applicable law,
and further provided that Lessee provides Lessor with financial or other assurances
sufficient iii Lessor’s reasonable discretion Lu protect Lessor from future
environmental liability with respect to such abandonment or any associated hazardous
waste spills or releases. Lessee shall identify and locate on the mine map the location
of all equipment abandoned on the Lease Premises.

 

ML48435-OBA-COAL

	 	14.2	 	Restoration and Reclamation. Upon termination of this Lease, Lessee shall
reclaim the Leased Premises in accordance with the requirements of applicable law,
including mine permits and reclamation plans on file with UDOGM. Lessee shall further
abate any hazardous condition on or associated with the Leased Premises. Lessee and
representatives of all governmental agencies having jurisdiction shall have the right
to re-enter the Leased Premises for reclamation purposes for a reasonable period after
termination of the Lease.

	15.	 	DEFAULT

	 	15.1	 	Notice of Default; Termination. Upon Lessee’s violation of or failure to
comply with any of the terms, conditions or covenants set forth in this Lease, Lessor
shall notify Lessee of such default by registered or certified mail, return receipt
requested, at the last address for Lessee set forth in Lessor’s files. Lessee shall
then have thirty (30) days, or such longer period as may be granted in writing by
Lessor, to either cure the default or request a hearing pursuant to the Lessor’s
administrative adjudication rules. In the event Lessee fails to cure the default or
request a hearing within the specified time period, Lessor may cancel this Lease
without further notice to or appeal by Lessee.
	 
	 	15.2	 	Effect of Termination. The termination of this Lease for any reason,
whether through expiration, cancellation or relinquishment, shall not limit the rights
of the Lessor to recover any royalties and/or damages for which Lessee may be liable,
to recover on any bond on file, or to seek injunctive relief to enjoin continuing
violations of the Lease terms. No remedy or election under this Lease shall be deemed
exclusive, but shall, wherever possible, be cumulative with all other remedies
available under this Lease, at law, or in equity. Lessee shall surrender the Leased
Premises upon termination; however, the obligations of Lessee with respect to
reclamation, indemnification and other continuing covenants imposed by this Lease shall
survive the termination.

	16.	 	MISCELLANEOUS PROVISIONS.

	 	16.1	 	Indemnity. Except as limited by paragraph 7.2, Inspection, Lessee shall
indemnify and hold Lessor and the United States (as successor Lessor or owner pursuant
to reversion or as owner of surface estate) harmless for, from and against each and
every claim, demand, liability, loss, cost, damage and expense, including, without
limitation, attorneys’ fees and court costs, arising in any way out of Lessee’s
occupation and use of the Leased Premises, including without limitation claims
fordeath, personal injury, property damage, and unpaid wages and benefits. Lessee
further agrees to indemnify and hold Lessor harmless for, from and against all claims,
demands, liabilities, damages and penalties arising out of any failure of Lessee to
comply with any of Lessee’s obligations under this Lease, including without limitation
attorneys’ fees and court costs,
	 
	 	16.2	 	Interest. Except as set forth in paragraph 4, BONUS BID, interest shall
accrue and be payable on all obligations arising under this Lease at such rate as may
be set from time to time by rule enacted by Lessor. Interest shall accrue and be
payable, without necessity of demand, from the date each such obligation shall arise.
	 
	 	16.3	 	Suspension. In the event that Lessor in its reasonable discretion
determines that suspension is necessary in the interests of conservation of the coal
resource, or if Lessee has been prevented from performing any of its obligations or
responsibilities under this Lease or from conducting mining operations by labor
strikes, fires, floods, explosions, riots, any unusual mining casualties or conditions,
Acts of God, government restrictions or orders, severe weather conditions, or other
extraordinary events beyond its control, then the time for performance of this Lease by
Lessee shall be suspended during the continuance of such acts which prevent
performance, excepting any payments due and owing to Lessor.

 

ML48435-OBA-COAL

	 	16.4	 	Consent to Suit: Jurisdiction. Prior to reversion of the Leased Premises
to the United States: (i) this Lease shall be governed by the laws of the State of
Utah; (ii) Lessor and Lessee agree that all disputes arising out of this Lease shall be
litigated only in the Third Judicial District Court for Salt Lake County, Utah; (iii)
Lessee consents to the jurisdiction of such court; and (iv) Lessee shall not bring any
action against Lessor without exhaustion of available administrative remedies and
compliance with applicable requirements of the Utah Governmental Immunity Act.
Notwithstanding the foregoing, after reversion of the Leased Premises to the United States, any litigation between the United States as
Lessor and the Lessee shall be governed by the laws of the United States otherwise
applicable to federal coal leases.
	 
	 	16.5	 	No Waiver. No waiver of the breach of any provision of this
Lease shall be construed as a waiver of any preceding or succeeding breach of the same
or any other provision of this Lease, nor shall the acceptance of rentals or royalties
by Lessor during any period of time in which Lessee is in default be deemed to be a
waiver of such default.
	 
	 	16.6	 	Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the validity of
any other provision hereof.
	 
	 	16.7	 	[Deleted]
	 
	 	16.8	 	Entire Lease. This Lease, together with any attached stipulations, sets
forth the entire agreement between Lessor and Lessee with respect to the subject matter
of this Lease. No subsequent alteration or amendment to this Lease shall be binding
upon Lessor and Lessee unless in writing and signed by each of them.

 

ML 4843 5-OBA-COAL

     IN WITNESS WHEREOF, the parties have executed this Lease as of the date hereinabove
first written.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	THE STATE OF UTAH, acting by and 
through the SCHOOL AND 
INSTITUTIONAL TRUST LANDS
ADMINISTRATION (“LESSOR”)
	APPROVED AS TO FORM:
JAN GRAHAM
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	ACTING DIRECTOR
	ATTORNEY GENERAL	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By	 	 	 	/s/ Jan Graham	 	 	 	By	 	/s/ Kevin S. Carter
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Form Approved:	 	8/10/00	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	School & Institutional Trust Lands
Administration — LESSOR
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	CANYON FUEL COMPANY LLC
(“LESSEE”)
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	By:
	 	/s/ Richard D. Pick
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Its:
	 	President and CEO
	 	 	 	 	 	 	 	 	 	 	 	 	 

 

ML 48435-OBA-COAL

	 	 	 	 	 	 
	STATE OF UTAH

	 	 	)	 	 	 
	 

	 	 	:	 	SS.
	COUNTY OF SALT LAKE

	 	 	)	 	 	 

     On the 1st day of May, 2001, personally appeared before me
Kevin S. Carter who being by me duly sworn did say that he is Acting Director of the School
and Institutional Trust Lands Administration of the State acknowledged that he executed the same.

Given under my hand and seal this 1st  day of May 2001.

	 	 	 	 	 
	 	 	 
	 	                                          /s/ Becky Pritchett
 	 
	 	Notary Public 	 
	 	Residing at:	    Salt Lake City, Utah  	 
	 

	 
	My
commission expires:
 

	9-4-02

 

 

	 	 	 	 	 	 
	STATE OF UTAH

	 	 	)	 	 	 
	 

	 	 	:	 	
	COUNTY OF SALT LAKE

	 	 	)	 	 	 

     On the _____ day of ______________________, personally appeared before me ____________________
signer of the above instrument, who duly acknowledged to me that _____________ executed the same.

Given under my hand and seal this _______________ day of ____________________________, ____________________

	 	 	 	 	 
	 	 	 
	 	Notary Public 	 
	 	Residing at:	   	 
	 

	 
	My
commission expires:
 

	 

 

ML 48435-OBA-COAL

	 	 	 	 	 	 
	STATE OF UTAH

	 	 	)	 	 	 
	 

	 	 	:	 	
	COUNTY OF SALT LAKE

	 	 	)	 	 	 

     On the 21st day of August, 2000, personally appeared before me Richard D.
Pick, who being duly sworn did say that he is an officer of Canyon Fuel Company, LLC and that
said instrument was signed in behalf of said corporation by resolution of its Board of Directors,
and said that he acknowledged to me that said corporation executed the same.

Given under my hand and seal this 21st day of August, 2000.

	 	 	 	 	 
	 	 	 
	 	                                      /s/ Tavia Lynn Chiles
 	 
	 	Notary Public 	 
	 	Residing at:	    Salt Lake City, UT  	 
	 

	 
	My
commission expires:
 

	September 5, 2001exv10w22

 

Exhibit 10.22

UNITED STATES

DEPARTMENT OF THE INTERIOR

BUREAU OF LAND MANAGEMENT

This lease, entered into by and between the UNITED STATES OF AMERICA, hereinafter called
Lessor, through the Bureau of Land Management and

Coastal States Energy Company

175 East 400 South, Suite 800

Salt Lake City, UT 84111

hereinafter called lessee, is effective September 1, 1996 for a period of 20 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 the 20th lease year and each 10-year period thereafter.

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

	x  	 	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 bonuses, rents, and royalties to be paid, and the
conditions and covenants to be observed as herein set forth, hereby grants and leases 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:

T. 12 S., R. 6 E., SLM, Utah

Sec. 26, S2SE, SESW;

Sec. 34, lots 1—4, S2NE, SENW, E2SWNW, N2S2;

Sec. 35, all.

T. 13 S., R. 6 E., SLM, Utah

Sec. 2. all;

Sec. 3, all;

Sec. 10, lots 1—2, NE, E2NW;

Sec. 11, N2, N2S2.

containing 3,291 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 in the exercise 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/per acre 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 8 percent of the value of the coal as set forth in the regulations. 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 the 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 offices lease bond in the amount of $4,490,000.
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 10 years shall terminate the lease. Lessee
shall submit an operation and reclamation plan pursuant to Section 7 of the Act not later than 3
years after lease issuance.

The lessor reserves tire power to assent to 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.

 

 

SEE ATTACHED STIPULATIONS

	 	 	 	 	 
	 
	 	 	The United States of America
	 
	 	 	 	 
	Coastal States Energy Company

	 	By
	 	Bureau of Land Management
	 	 	 
	Company or Lessee Name
	 	 	 	 
	 
	 	 	 	 
	/s/ Vernal Mortinson	 	/s/ Christopher J. Merritt
	 	 	 
	(Signature of Lessee)

	 	 	 	(Signing Officer)
	 
	 	 	 	 
	Senior Vice President	 	Acting Group
Leader, Minerals Adjudication Groups
	 	 	 
	(Title)

	 	 	 	(Title)
	 
	 	 	 	 
	August 1, 1996	 	August 5, 1996
	 	 	 
	(Date)	 	(Date)

 

Title 18 U.S.C. Section 1001, makes it a crime for any person knowingly and willfully to make to
any department or agency of the United States any false, fictitious or fraudulent statements or representations as to any matter within its
jurisdiction.

 

This form does not constitute an information collection ad defined by 44 U.S.C. 3502 and therefore
does not require OMB approval.

 

 

 

1.       The Regulatory Authority shall mean the State Regulatory Authority pursuant to a
cooperative agreement approved under 30 CFR Part 745 or in the absence of a cooperative agreement,
Office of Surface Mining. The authorized officer shall mean the State Director, Bureau of Land
Management. The authorized officer of the Surface Management Agency shall mean the Forest
Supervisor, Forest Service. Surface Management Agency for private surface is the Bureau of Land
Management. For adjoining private lands with Federal minerals and which primarily involve National
Forest Service issues, the Forest Service will have the lead for environmental analysis and, when
necessary, documentation in an environmental assessment or environmental impact statement.

2.       The authorized officers, of the Bureau of Land Management, Office of Surface Mining (Regulatory
Authority), and the Surface Management Agency (Forest Service) respectively, shall coordinate, as
practical, regulation of mining operations and associated activities on the lease area.

3.       In accordance with Sec. 523(b) of the “Surface Mining Control and Reclamation Act of 1977,”
surface mining and reclamation operations conducted on this lease are to conform with the
requirements of this Act and are subject to compliance with Office of Surface Mining Regulations or
as applicable, a Utah program equivalent approved under cooperative agreement in accordance with
Sec. 523(c). The United States Government does not warrant that the entire tract will be
susceptible to mining.

4.       Federal Regulations 43 CFR 3400 pertaining to Coal Management make provisions for the Surface
Management Agency, the surface of which is under the jurisdiction of any Federal agency other than
the Department of Interior, to consent to leasing and to prescribe conditions to insure the use and
protection of the lands. All or part of this lease contain lands the surface of which are managed
by the United States Department of Agriculture, Forest Service Manti-LaSal National Forest.

The following stipulations pertain to the lessee responsibility for mining operations on the lease
area and on adjacent areas as may be specifically designated on National Forest System lands.

5.       Before undertaking activities that may disturb the surface of previously undisturbed leased
lands, the lessee may be required to conduct a cultural resource inventory and a paleontological
appraisal of the areas to be disturbed. These studies shall be conducted by qualified professional
cultural resource specialists or qualified paleontologists, as appropriate, and a report prepared
itemizing the findings. A plan will then be submitted making recommendations for the protection of,
or measures to be taken to mitigate impacts for identified cultural or paleontological resources.

If cultural resources or paleontological remains (fossils) of significant scientific interest are
discovered during operations under this lease, the lessee prior to disturbance shall, immediately
bring them to the attention of the appropriate authorities. Paleontological remains of significant
scientific interest do not include leaves, ferns, or dinosaur tracks commonly encountered during
underground mining operations.

The cost of conducting the inventory, preparing reports, and carrying out mitigating measures shall
be borne by the lessee.

6.       If there is reason to believe that threatened or endangered (T&E) species of plants or animals,
or migratory bird species of high Federal interest occur in the area the lessee shall be required
to conduct an intensive field inventory of the area to be disturbed and/or impacted. The inventory
shall be conducted by a qualified specialist and a report of findings will be prepared. A plan will
be prepared making recommendations for the protection of these species or action necessary to
mitigate the disturbance.

The cost of conducting the inventory, preparing reports, and carrying out mitigating measures shall
be borne by the lessee.

 

 

7.       The lessee shall be required to perform a study to secure adequate baseline data to quantify the
existing surface resources on and adjacent to the lease area. Existing data may be used if such
data is adequate for the intended purposes. The study shall be adequate to locate, quantify, and
demonstrate the inter-relationship of the geology, topography, surface hydrology, vegetation, and
wildlife. Baseline data will be established so that future programs of observation can be
incorporated at regular intervals for comparison.

8.       Powerlines used in conjunction with the mining of coal from this lease shall be constructed so
as to provide adequate protection for raptors and other large birds. When feasible, powerlines will
be located at least 100 yards from public roads.

9.       The limited area available for mine facilities at the coal outcrop, steep topography, adverse
winter weather, and physical limitations on the size and design of the access road, are factors
which will determine the ultimate size of the surface area utilized for the mine. A site specific
environmental analysis will be prepared for each new mine site development and for major
modifications to existing developments to examine alternatives and mitigate conflicts.

10.       Consideration will be given to site selection to reduce adverse visual impacts. Where
alternative sites are available, and each alternative is technically feasible, the alternative
involving the least damage to the scenery and other resources shall be selected. Permanent
structures and facilities will be designed, and screening techniques employed, to reduce visual
impacts, and where possible achieve a final landscape compatible with the natural surroundings. The
creation of unusual, objectionable, or unnatural land forms and vegetative landscape features will
be avoided.

11.       The lessee shall be required to establish a monitoring system to locate, measure, and quantify
the progressive and final effects of underground mining activities on the topographic surface,
underground and surface hydrology and vegetation. The monitoring system shall utilize techniques
which will provide a continuing record of change over time and an analytical method for location
and measurement of a number of points over the lease area. The monitoring shall incorporate and be
an extension of the baseline data.

12.       The lessee shall provide for the suppression and control of fugitive dust on haul roads and at
coal handling and storage facilities. On Forest Development Roads (FDR), lessees may perform their
share of road maintenance by a commensurate share agreement if a significant degree of traffic is
generated that is not related to their activities.

13.       Except at specifically approved locations, underground mining operations shall be conducted in
such a manner so as to prevent surface subsidence that would: (1) cause the creation of hazardous
conditions such as potential escarpment failure and landslides, (2) cause damage to existing
surface structures, or (3) damage or alter the flow of perennial streams. The lessee shall provide
specific measures for the protection of escarpments, and determine corrective measures to assure
that hazardous conditions are not created.

14.       In order to avoid surface disturbance on steep canyon slopes and to preclude the need for
surface access, all surface breakouts for ventilation tunnels shall be constructed from inside the
mine, except at specifically approved locations.

15.       If removal of timber is required for clearing of construction sites, etc., such timber shall be
removed in accordance with the regulations of the surface management agency.

16.       The coal contained within, and authorized for mining under this lease, shall be extracted only
by underground mining methods.

17.       Existing Forest Service owned or permitted surface improvements will need to be protected,
restored, or replaced to provide for the continuance of current land uses.

 

 

18.       In order to protect big game wintering areas, elk calving and deer fawning areas, sagegrouse
strutting areas, and other critical wildlife habitat and/or activities, specific surface uses
outside the mine development area may be curtailed during specific periods of the year.

19.       Support facilities, structures, equipment, and similar developments will be removed from the
lease area within 2 years after the final termination of use of such facilities. This provision
shall apply unless the requirement of Section 10 of the lease form is applicable. Disturbed areas
and those areas previously occupied by such facilities will be stabilized and rehabilitated,
drainages re-established, and the areas returned to a premining land use.

20.       The lessee at the conclusion of the mining operations, or at other times as surface disturbance
related to mining may occur, will replace all damaged, disturbed, or displaced corner monuments
(section corners, quarter corners, etc.) their accessories and appendages (witness trees, bearing
trees, etc.), or restore them to their original condition and location, or at other locations that
meet the requirements of the rectangular surveying system. This work shall be conducted at the
expense of the lessee, by a professional land surveyor registered in the State of Utah and to the
standards and guidelines found in the Manual of Surveying Instructions, U.S. Department of
Interior.

21.       The lessee at his expense will be responsible to replace any surface water identified for
protection, that may be lost or adversely affected by mining operations with water from an
alternate source in sufficient quantity and quality to maintain existing riparian habitat, fishery
habitat, livestock and wildlife use, or other land uses.

22.       The lessee must comply with all the rubs and regulations of the Secretary of Agriculture, set
forth at Title 36, Chapter II, of the Code of Federal Regulations governing the use an management
of the National Forest System (NFS) when not inconsistent with the rights granted by the Secretary
of the Interior in the lease. The Secretary of Agriculture’s rules and regulations must be
complied with for (1) all use and occupancy of the NFS prior to approval of a permit/operation plan
by the Secretary of Interior, (2) uses of all existing improvements, such as Forest Development
Roads, within and outside the area licensed, permitted or leased by the Secretary of Interior, and
(3) use and occupancy of the NFS not authorized by a permit/operation plan approved by the
Secretary of the Interior.

All matters related to this stipulation are to be addressed to:

Forest Supervisor

Manti-LaSal National Forest

599 West Price River Drive

Price, Utah 84501

Telephone No.: 801-637-2817

who is the authorized representative of the Secretary of Agriculture.

23.       The lessee shall be required to pay the value of the royalty on coal left unmined without the
authorized officer (AO) approval, which should have been recovered under the approval of a mine
plan (Resource Recovery and Protection Plan, [R2P2] and which would otherwise be lost or left
economically inaccessible.

24.       The unleased coal in this tract is included in the Utah Schools and Lands Improvement Act of
1993 (Public Law 103-93) as a Federal interest which the State of Utah may select to satisfy the
value of the exchange of State for Federal lands authorized in the Act. In accordance with the Act,
the Federal interest, i.e., the unleased coal, in this tract was offered to the State of Utah on
October 20,1993. Consummation of the exchange under the Act may, in the future, allow for the State
of Utah to succeed to some or all of the United States interest in the tract.

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