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  Exhibit 10.12    
    

					
	 	 	 	 	FORM APPROVED

OMB NO. 1004-0073

Expires: October 31,2000
	

 	
 	

 	
 	
 Serial Number
	 	 	 	 	    MTM 88405
	
 Form 3400-12

(November 1998)	
 	
 UNITED STATES

DEPARTMENT OF THE INTERIOR

BUREAU OF LAND MANAGEMENT	
 	
 
	

 	
 	
 COAL LEASE	
 	

 

PART I. LEASE RIGHTS GRANTED 

This
lease, entered into by and between the UNITED STATES OF AMERICA, hereinafter called lessor, through the Bureau of Land Management, and  (Name and Address)

Spring
Creek Coal Company

P.O. Box 67

Decker, Montana 59025 

hereinafter
called lessee, is effective April 1, 2001, 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: 

	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 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. B S., R. 39 E., P.M.M.

 

	 	 	Sec. 13:	 	 SW1/4SW1/4SW1/4 SW1/4,
SW1/4SW1/4SW1/4
	 	 	Sec. 14:	 	 S1/2SW1/4NE1/4SE1/4,
S1/2NE1/4SE1/4SE1/4, NWNE1/4SE1/4SE1/4,
S1/2SE1/4SE1/4, NW1/4SE1/4SE1/4
	 	 	Sec. 23:	 	 NE1/4NE1/4, SE1/4SW1/4NW1/4NE1/4,
NW1/4SW1/4NW1/4NE1/4, E1/4NW1/4NE1/4,
	 	 	Sec. 24:	 	 NW1/4SE1/4NW1/4NW1/4,
N1/2SW1/4NW1/4NW1/4, N1/2NW1/4NW1/4
	

Big Horn County, Montana

containing
150.00 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 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 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 office a lease bond in the amount of $5,000.00*. The authorized officer may require an increase in this amount when additional
coverage is determined appropriate. 

	*
	plus
deferred bonus balance 

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 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. 

See
"Exhibit A" attached (4 pages). 

The
Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.) requires us to inform you that: 

This
information is being collected to authorize and evaluate proposed exploration and mining operation on public lands. 

Response
to the provisions of this lease form is mandatory for the types of activities specified. 

BLM
would like you to know that you do not have to respond to this or any other federal agency-sponsored information collection unless it displays a currently valid OMB control number. 

2

 
BURDEN HOURS STATEMENT 

Public
reporting burden for this is one hour. This includes reading the instructions and previsions, completion and signing the lease form to BLM. Direct comments regarding the burden estimate or any
other aspect of this form to: U.S. Department of the Interior, Bureau of Land Management, Information Clearance Officer (WO-630), Mail Stop 401 LS, Washington, D.C. 20240, and the
Office of Management and Budget, Office of Information and Regulatory Affairs, Interior Desk Officer (1004-0073), Washington, D.C. 2050 

					
	 	 	THE UNITED STATES OF AMERICA
	
Spring Creek Coal Company

 Company or Lessee Name	
 	
 By	
 	
 /s/ RANDY D. HEUSHCER

 
	
Curtis W. Weittenhiller

 	
 	
Randy D. Heushcer

 
	(Signature of Lessee)	 	 (Signing Officer)
	
General Manager Spring Creek Coal

 	
 	
Chief, Branch of Solid Minerals Montana State Office

 
	Title	 	 Title
	
February 23, 2001

 	
 	
March 6, 2001

 
	(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 representation as to any matter within its jurisdiction. 

3

 

 
Serial No. MTM 88405 

 EXHIBIT A  

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 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. 

 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 (hereinafter referred to as the Authorized Officer) on portions of the mine plan area, 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. Cultural resources are defined as a broad, general term meaning any cultural property or any traditional lifeway value, as defined below: 

Cultural
property: a definite location of past human activity, occupation, or use identifiable through field inventory (survey), historical documentation, or oral evidence. The term includes
archaeological, historic, or architectural sites, structure, or places with important public and scientific uses, and may include traditional cultural or religious importance to specified social
and/or cultural groups. Cultural properties are concrete, material places, and things that are classified, ranked, and managed through the system of inventory, evaluation, planning, protection, and
utilization. 

Traditional
lifeway value: the quality of being useful in or important to the maintenance of a specified social and/or cultural group's traditional systems of (a) religious belief,
(b) cultural practice, or (c) social interaction, not closely identified with definite locations. Another group's shared values are abstract, nonmaterial, ascribed ideas that one cannot
know about without being told. Traditional lifeway values are taken into account through public participation during planning and environmental analysis. 

The
cultural resources inventory shall be conducted by a qualified professional cultural resource specialist; i.e., archaeologist, anthropologist, historian, or historical architect, as
appropriate and necessary, and approved by the Authorized Officer (BLM if the surface is privately owned). A report of the inventory and recommendations for protection of any cultural resources
identified shall be submitted to the Assistant Director of the Western Support Center of the Office of Surface Mining (hereinafter referred to as the Assistant Director) by the Authorized Officer.
Prior to any on-the-ground cultural resource inventory, the selected professional cultural resource specialist shall consult with the BLM, the Northern Cheyenne Cultural
Protection Board, and the Crow Historic and Cultural Committee. The purpose of this consultation will be to guide the work to be performed and to identify cultural properties or traditional lifeway
values within the immediate and surrounding mine plan area. The lessee shall undertake measures, in accordance with instructions from the Assistant Director 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 Assistant Director in consultation with the Authorized Officer. 

1

 

(2)
The lessee shall protect all cultural resource properties 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 plan or exploration plan. 

(3)
The cost of carrying out the approved site 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 Assistant Director, or the Authorized Officer if the
Assistant Director is not available. The lessee shall not disturb such resources except as may be subsequently authorized by the Assistant Director. Within two (2) working days of notification,
the Assistant Director 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 surface managing agency unless otherwise specified by the Authorized Officer. 

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

 PALEONTOLOGICAL RESOURCES—  

If
a paleontological resource, either large and conspicuous, and/or of significant scientific value is discovered during construction, the find will be reported to the authorized officer immediately.
Construction 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 interest discovered during the operation. 

 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 locations, using surveying procedures in accordance with the "Manual of Surveying Instructions for the Survey of Public Lands of the United States." The survey will
be recorded in the appropriate county records, with a copy sent to the authorized officer. 

 RESOURCE RECOVERY AND PROTECTION PLAN (R2P2)—  

Notwithstanding
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 recorvery (MER) [as defined at 43 CFR 3480.0-5.2(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 the 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 shall submit appropriate justification to obtain approval by the authorized officer to leave such reserves unmined. Upon approval by the 

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authorized
officer, 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 a portion of the lease as authorized by statute and regulation. 

In
the event the authorized officer determines that the R2P2 as approved will not attain MER as the result of changed conditions, the authorized officer will give proper notice to the operator/lessee
as required under applicable regulations. The authorized officer 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 authorized
officer that the coal reserves have been rendered unmineable or at such time that the 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 non-compliance. A decision or
notice of non-compliance issued by the lessor that payment is due under this stipulation is appealable as allowed by law. 

 MITIGATION  

(1)
All disturbed land must be restored to the approximate original contour and vegetated to restore mule deer and grouse habitat. 

(2)
A buffer zone of 1,200 feet will be established around the known prairie falcon nesting site and designated as "unsuitable for mining without exception." In addition, activities associated with
the preliminary development of the mine will only be allowed within the buffer zone from July 15 to March 1 in any given year to reduce disturbance during the nesting season. The buffer
zone around the prairie falcon eyrie will also serve to protect a rock art site. 

(3)
The lessee will provide monetary compensation to help establish an off-site mitigation area equal in value to the block management and rest rotation grazing mitigation currently in
place. The off-site property would be located in the general area and established via a conservation easement obtained from private landowners. The conservation easement will be issued to,
and administered by, the Montana Department of Fish, Wildlife and Parks (MFWP) and will be managed to conserve wildlife habitat values and provide hunting block management opportunities. This
mitigation will replace the existing block management and rest rotation grazing. The off-site mitigation compensation plan will be formalized in an agreement signed by the lessee, MFWP and
BLM. In the event that the mitigation agreement is not signed, the existing rest rotation grazing and hunter block management mitigation will remain in effect. 

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  MITIGATION AGREEMENT 

        This
Agreement, made and entered into this 16th day of November, 2000, by and between Spring Creek Coal Company, a Montana corporation, ("Spring
Creek"), the United States of America, by and through the Department of the Interior, Bureau of Land Management ("BLM") and the State of Montana Department of Fish, Wildlife & Parks ("MDFWP"). 

        WITNESSETH:

        Whereas,
Spring Creek owns and operates a coal surface mine in Big Horn County, Montana, ("the Mine"); 

        Whereas,
for expansion and development of the Mine, Spring Creek has filed a lease by application with the State of Montana to acquire state coal leases covering certain tracts of coal
located in Big Horn County, Montana, commonly known as the Carbone LBA Reserve Tract, as set forth and shown on Exhibit A attached hereto, (such coal leases hereinafter called "the State
Leases"); 

        Whereas,
Spring Creek's development of the Carbone LBA Reserve Tract will disturb a part of that certain 4,351 acre tract of land located in Big Horn County, Montana, ("the Block
Management Area"), as set forth and shown on Exhibits B and C attached hereto; 

        Whereas,
the parties hereto have agreed that in the event Spring Creek acquires the State Leases, Spring Creek will provide $175,000 to help establish an off-site mitigation
area equal in
value to the Block Management Area currently in place at the Mine, that BLM and MDFWP would acquire an alternative wildlife management area, and that the Block Management Area would be released from
its designation as a wildlife management and grazing area; 

        Now,
Therefore, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows: 

        Section 1.    Payment of Funds by Spring Creek.    

        (a).  As
a financial guarantee for faithful performance of the financial obligation set forth in subparagraph (b) below, within thirty (30) days after Spring
Creek acquires the State Leases from the State of Montana, Spring Creek shall arrange with First Security Bank, Salt Lake City, Utah to establish an irrevocable Letter of Credit in the amount of
$175,000 to remain in effect for a period of five years. The irrevocable Letter of Credit will be held by BLM for and on behalf of the MDFWP to insure that Spring Creek performs the conditions set
forth in this mitigation agreement. Upon payment of the mitigation funding to the landowner for the conservation easement pursuant to subparagraph (b) below, the BLM would release Spring Creek
from the purchase obligation for the off-site mitigation and return the Letter of Credit to Spring Creek. 

        (b).  If
Spring Creek acquires the State Leases, Spring Creek will provide $175,000 to help establish an off-site mitigation area equal in value to the Block
Management Area currently in place at the Mine. The off-site property would be located in the general area and established via a conservation easement issued to, and administered by, the
MDFWP, and will be managed to conserve wildlife values and provide hunting block management opportunities. This mitigation will replace the Block Management Area currently in effect at the Mine. The
MDFWP will be responsible for all negotiations, discussions, documentation and involvement in acquisition of the new conservation easement. Spring Creek will be responsible only for paying the agreed
upon mitigation funding ($175,000) directly to the owner of the property for which the new conservation easement would be issued. Spring Creek shall have no right or title in the conservation
easement, except as provided in Section 2 herein below. 

1

 

        (c).  In
the event that the conservation easement is less than $175,000, the remaining funding will be paid to MDFWP who will place it into the Fish and Wildlife Mitigation
Trust Fund as provided for in section 87-1-611 through 615, MCA. In addition, if MDFWP has not obtained an off-site conservation easement at the end of five
years, then Spring Creek will pay to MDFWP the mitigation funding ($175,000) which MDFWP will place into the above-referenced Fish and Wildlife Mitigation Trust Fund. 

        (d).  If
Spring Creek does not acquire the State Leases, then this Agreement and all rights and obligations arising hereunder, shall immediately and automatically cease and
terminate. 

        Section 2.    Use of the Funds.    The Funds shall be used by
BLM and MDFWP to secure a new conservation project located within the Tongue River drainage system ("the New Project"). The nature and location of the New Project shall be within the sole discretion
of BLM and MDFWP; provided, however, the location of the New Project shall be off of the present or future Mine site; and, provided, further, that if the New Project is located further than one
hundred and fifty (150) miles from the Mine, then the written consent of Spring Creek must be first obtained. Spring Creek's consent shall not be unreasonably withheld. The ability of BLM and
MDFWP to successfully negotiate and acquire the New Project shall in no manner affect the validity of any other provision of this Agreement, including but not limited to the provision of
Section 3 hereof. In the event that Spring Creek defaults on the terms set forth in this Agreement, BLM will draw on the irrevocable Letter of Credit to provide the agreed upon mitigation
funding for the New Project. 

        Section 3.    Area Designations.    Immediately and
automatically upon Spring Creek's delivery of the irrevocable Letter of Credit to BLM the Block Management Area shall cease to be designated and classified as a habitat and grazing area, and Spring
Creek shall be allowed to disturb the Block Management Area as part of the surface coal mining operations area of the Mine. Notwithstanding the foregoing sentence, that part of the Block Management
Area that has been designated as the Prairie Falcon Aerie Site shall continue with such designation and classification. Furthermore, Spring Creek, upon delivery of the irrevocable Letter of Credit to
the BLM, would satisfy future mitigation requirements where federal lands designated as suitable for leasing with stipulations or unsuitable for leasing with exceptions would be leased. 

        Section 4.    Signs and Public Announcements.    BLM and MDFWP
will erect a permanent sign to be located upon the New Project that recognizes Spring Creek as an important and significant contributor to the acquisition and development of the New Project. Any
public announcements related to this Agreement or the New Project must first be approved in writing by all parties to this Agreement: 

        Section 5.    Prior Agreements.    This Agreement supercedes
and replaces any and all prior agreements, conditions or stipulations with respect to the Spring Creek's obligations regarding the Block Management Area and any limitations regarding the right to
disturb the Block Management Area with surface coal mining operations. 

        Section 6.    Notices.    All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered, if 

2

 

delivered
personally, or as of the date posted, if mailed by certified mail, postage prepaid, return receipt requested, at the addresses set forth below. 

					
	        If to BLM	 	 	 	 
	

 	
 	
U.S. Department of Interior

Bureau of Land Management

111 Garryowen Road

Miles City, MT 59301	
 	

 
	
        If to MDFWP	
 	

 	
 	

 
	 	 	Montana Fish, Wildlife and Parks

Region Seven Headquarters

P.O. Box 1630

Miles City, MT 59301	 	 
	
        If to Spring Creek	
 	

 	
 	

 
	 	 	Spring Creek Coal Company

C/O General Manager

P.O. Box 67

Decker, MT 59025	 	 

        Section 7.    Headings.    The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 

        Section 8.    Severability.    If any term or provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and
effect. 

        Section 9.    Entire Agreement.    This Agreement, including
all exhibits hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between
the parties relating to the subject matter hereof. 

        Section 10.    Assignment.    This Agreement, together with the
obligations of any party hereunder, shall be freely assignable; provided, however, that any assignee of any party shall be required to assume in writing all of the obligations hereunder of the
assigning party. 

        Section 11.    Amendment; Waiver.    This Agreement may not be
amended or modified except by an instrument in writing signed by all parties hereto or their successors and assigns. Waiver of any term or condition of this Agreement shall only be effective if in
writing and shall not be construed as a waiver of any subsequent breach or waiver of the same term and condition or a waiver of any other term of this Agreement. 

        Section 12.    Governing Law.    This Agreement shall be
governed by and construed in accordance with the laws of the State of Montana applicable to contracts executed in and to be performed in Montana. 

        Section 13.    Construction.    The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by all parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. 

3

 

        IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives. 

					
	 	 	Spring Creek Coal Company
	

 	
 	
By:	
 	
Curtis W. Weittenhiller

 
	 	 	Its:	 	General Manager

 
	

 	
 	
State of Montana Department of

Fish, Wildlife & Parks
	

 	
 	
By:	
 	
Don Hyyppa

 
	 	 	Its:	 	Region 7 Supervisor

 
	

 	
 	
United States of America,

Bureau of Land Management
	

 	
 	
By:	
 	
Fred C. Fruall

 
	 	 	Its:	 	Assistant Field Manager Minerals

 

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 Exhibit 10.13  

Serial
No. MTM 069782 

Date
of Lease: July 1, 1965 

UNITED
STATES 

DEPARTMENT
OF THE INTERIOR

BUREAU OF LAND MANAGEMENT 

 
 

  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 Land Management, and 

Spring
Creek Coal Company

P.O. Box 67

Decker, Montana 59025 

hereinafter
called lessee, is readjusted, 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 lease period. 

Sec. 1.    This lease readjustment is subject to the terms and provisions of the Mineral Leasing Act of February 25, 1920, as amended,
41 Stat. 437, 30 U.S.C. 181-287, hereinafter referred to as the Act; 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 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: 

			
	Tract 1:	 	 T. 8 S., R. 39 E., P.M.M.

        Sec. 22: SE1/4SW1/4, E1/2SE1/4, SW1/4SE1/4

        Sec. 23: S1/2NE1/4, S1/2

        Sec. 24: SW1/2NW1/4, SW1/4, W1/2SE1/4,
SE1/4SE1/4

        Sec. 25: E1/2, E1/2W1/2, W1/2NW1/4,
NW1/4SW1/4

        Sec. 26: N1/2, NE1/4SE1/4

        Sec. 27: N1/2NE1/4, NE1/2NW1/4
 T. 8 S., R. 40 E.,
 P.M.M.

        Sec. 30: Lots 1-4, E1/2NW1/4, SE1/4SW1/4

        Sec. 31: N1/2NE1/4, NE1/2NW1/4

2346.760 acres, Big Horn County, Montana
	 	 	 
	Tract 2:	 	 T. 8 S., R. 40 E., P.M.M.

        Sec. 19: S1/2 of Lot 4

18.255 acres, Big Horn County, Montana
	 	 	 

1

 

			
	Tract 3:	 	 T. 8 S., R. 39 E., P.M.M.

        Sec. 22: S1/2NW1/4SE1/4

20.000 acres, Big Horn County, Montana
	 	 	 
	Tract 4:	 	 T. 8 S., R. 39 E., P.M.M.

        Sec. 22: S1/2SE1/4NW1/4SW1/4,
S1/2SW1/4NE1/4SW1/4

10.000 acres, Big Horn County, Montana
	 	 	 
	Tract 5:	 	 T. 8 S., R. 39 E., P.M.M.

        Sec. 22: S1/2SE1/4NE1/4SW1/4,
N1/2SW1/4NE1/4SW1/4,
N1/2SE1/4NW1/4SE1/4

15.000 acres, Big Horn County, Montana
	 	 	 
	Tract 6:	 	 T. 8 S., R. 39 E., P.M.M.

        Sec. 26: N1/2NW1/4SE1/4,
N1/2NE1/4NE1/4SW1/4

        Sec. 27: NE1/4SE1/4NE1/4,
N1/2NW1/4SE1/4NE1/4
 T. 8 S., R. 40 E., P.M.M.

        Sec. 30: N1/2N1/2NE1/4SW1/4,
S1/2NE1/4NE1/4SW1/4,
W1/2NW1/4NW1/4SE1/4

60.000 acres, Big Horn County, Montana
	 	 	 
	Tract 7:	 	 T. 8 S., R. 40 E., P.M.M.

        Sec. 30: S1/2NE1/4SW1/4,
S1/2NW1/4NE1/4SW1/4

25.000 acres, Big Horn County, Montana
	 	 	 
	Tract 8:	 	 T. 8 S., R. 39 E., P.M.M.

        Sec. 26: SE1/4NE1/4NE1/4SW1/4,
NE1/4NW1/4NE1/4SW1/4

        Sec. 27: SE1/4NW1/4SE1/4NE1/4,
NE1/4NE1/4SW1/4NE1/4

10.000 acres, Big Horn County, Montana

containing
2,505.015 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 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 12.5 percent of the value of the coal produced by
strip or auger methods and 8.0 percent of the value of the coal produced by underground mining methods 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. 

2

 

                (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 office a lease bond in the amount of $5,000.00. 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 10 years from July 1, 2005, shall terminate the lease, pursuant to Section 7 of the Act. 

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
this 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 amount 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
stockpiles, 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. 

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, 

3

 

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 AMD 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 1 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—This lease may be transferred in whole or in part to any person, association or corporation
qualified to hold such lease interest. 

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

                (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. 

4

 

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; and the Clean Air Act (42 U.S.C. 4247 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—See Exhibit A attached (3 pages). 

			
	The United States of America	 	 
	
 By

(Signature)	
 	

 
	
 /s/ Randy D. Heushcer

  Chief, Branch of Solid Minerals
 Montana State Office	
 	

 
	
 (Date) 12/14/04	
 	

 

5

  EXHIBIT A  

 COAL LEASE SPECIAL STIPULATIONS  

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 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 (herinafter referred to as the Authorized Officer) on portions of the mine plan area, 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. Cultural resources are defined as a broad, general term meaning any cultural property or any traditional lifeway value, as defined below: 

Cultural
property: a definite location of past human activity, occupation, or use identifiable through field inventory (survey), historical documentation, or oral evidence. The term includes
archaeological, historic, or architectural sites, structure, or places with important public and scientific uses, and may include traditional cultural or religious importance to specified social
and/or cultural groups. Cultural properties are concrete, material places, and things that are classified, ranked, and managed through the system of inventory, evaluation, planning, protection, and
utilization. 

Traditional
lifeway value: the quality of being useful in or important to the maintenance of a specified social and/or cultural group's traditional systems of (a) religious belief,
(b) cultural practice, or (c) social interaction, not closely identified with definite locations. Another group's shared values are abstract, nonmaterial, ascribed ideas that one cannot
know about without being told. Traditional lifeway values are taken into account through public participation during planning and environmental analysis. 

The
cultural resources inventory shall be conducted by a qualified professional cultural resource specialist; i.e., archaeologist, anthropologist, historian, or historical architect, as
appropriate and necessary, and approved by the Authorized Officer (BLM if the surface is privately owned). A report of the inventory and recommendations for protection of any cultural resources
identified shall be submitted to the Assistant Director of the Western Support Center of the Office of Surface Mining (hereinafter referred to as the Assistant Director) by the Authorized Officer.
Prior to any on-the-ground cultural resource inventory, the selected professional cultural resource specialist shall consult with the BLM, the Northern Cheyenne Cultural
Protection Board, and the Crow Historic and Cultural Committee. The purpose of this consultation will be to guide the work to be performed and to identify cultural properties or traditional lifeway
values within the immediate and surrounding mine plan area. The lessee shall undertake measures, in accordance with instructions from the Assistant Director 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 Assistant Director in consultation with the Authorized Officer. 

(2)
The lessee shall protect all cultural resource properties 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 plan or exploration plan. 

 

(3)
The cost of carrying out the approved site 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 Assistant Director, or the Authorized Officer if the
Assistant Director is not available. The lessee shall not disturb such resources except as may be subsequently authorized by the Assistant Director. Within two (2) working days of notification,
the Assistant Director 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 surface managing agency unless otherwise specified by the Authorized Officer. 

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

(b)   PALEONTOLOGICAL RESOURCES -  

If
a paleontological resource, either large and conspicuous, and/or of significant scientific value is discovered during construction, the find will be reported to the authorized officer immediately.
Construction 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 interest discovered during the operation. 

(c)   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 locations, using surveying procedures in accordance with the "Manual of Surveying Instructions for the Survey of Public Lands of the United States." The
survey will be recorded in the appropriate county records, with a copy sent to the authorized officer. 

(d)   RESOURCE RECOVERY AND PROTECTION PLAN (R2P2) -  

Notwithstanding
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 3480.0-5.2 (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 the 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 shall submit appropriate justification to obtain approval by the authorized officer to leave such reserves unmined. Upon approval by the authorized
officer, 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 a portion of the lease as authorized by statute and regulation. 

2

 

In
the event the authorized officer determines that the R2P2 as approved will not attain MER as the result of changed conditions, the authorized officer will give proper notice to the operator/lessee
as required under applicable regulations. The authorized officer 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 authorized
officer that the coal reserves have been rendered unmineable or at such time that the 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 non-compliance. A decision or
notice of non-compliance issued by the lessor that payment is due under this stipulation is appealable as allowed by law. 

(e)   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. 

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 recovery. BLM retains the authority to alter and/or modify the R2P2 for coal operations on those lands covered by Federal mineral
leases so as to obtain maximum resource recovery. 

3

 

  EXHIBIT A  

[Fish,
Wildlife & Parks Letterhead] 

			
	 	 	Route 1, Box

Miles City, Mt 59301

January 7, 1992

Sandy
Sacher

District Manager

Bureau Land Management

Miles City, Mt 59301 

Dear
Sandy: 

        Per
our letter of June 26, 1991, to you, representatives from this department have entered into negotiations with Spring Creek Coal Company to mitigate certain of their lands
designated as unsuitable for mining for the purpose of expanding their mining operations. 

        The
mitigation process involved a number of concerns which had to be resolved prior to reaching an acceptable agreement, but all issues have been resolved to the mutual satisfaction of
both parties. Spring Creek Coal Company has agreed to institute a rest-rotation grazing system and hunter access through a block management agreement on properties owned and controlled by
the Company. Through the permitting process with the Montana Department of State Lands and the Office of Surface Mining, Spring Creek Coal Company has also agreed to provide maps indicating the
location and extent of lands designated unsuitable for mining and the location and extent of disturbance within those lands. 

        They
have also agreed to a reclamation plan which will restore disturbed lands to their full potential as mule deer winter range. The reclamation plan calls for reestablishment of
vegetation communities on the regraded land surface that will provide wildlife habitat values commensurate with premining conditions. 

        All
mining and reclamation operations will be closely monitored by the Montana Department of State Lands and the Office of Surface Mining. Spring Creek Coal Company has also agreed to
monitor wildlife populations (and especially mule deer populations) on a regular basis to document any adverse effects on those populations due to mining disturbance. Wildlife populations will be
monitored after reclamation is complete to document reinvasion of disturbed areas. This monitoring will continue for a minimum of 10 years following completion of reclamation operations in the
area designated as unsuitable. Complete reports, of each year's monitoring results, will be submitted to our department on an annual basis. 

        As
part of its mitigation plan, Spring Creek Coal Company has agreed to institute a rest-rotation grazing system as outline by our department. They have also agreed to allow
public hunting on lands owned and controlled by them outside the active mine area. Implementation of these two programs should result in general improvement of wildlife habitat and will also provide
public hunting opportunities that have not existed in this area prior to our agreement. 

        Therefore,
the Montana Department of Fish, Wildlife and Parks Department recommends that portions of Sections 22, 23, 26 and 27 of Township 8 South, Range 39 East be redesigned
"suitable for mining with stipulations" based upon the following: 

	a)
	That
a rest-rotation grazing system be instituted on lands owned by Spring Creek Coal Company,

	b)
	That
Spring Creek Coal Company institute public hunter access through a block management agreement, 

1

 

	c)
	That
Spring Creek Coal Company follow the mining, reclamation, monitoring and reporting plans required and agreed to by the Montana Department of State Lands
and the Office of Surface Mining. 

        In
their letter of October 31, 1991, to John Mundinger, Spring Creek Coal Company outlined complete details of their program to meet the requirements for mitigation of the
unsuitability designation. The plan was reviewed by my staff and is acceptable. 

        As
per this comminque please be advised that an acceptable mitigation plan has been submitted by Spring Creek Coal Company. Our approval will allow the Bureau of Land Management to
complete their Environmental Assessment of the mining and reclamation plan proposed for the South Fork of Spring Creek. Therefore, we recommend that Bureau of Land Management change these lands from
unsuitable to suitable for mining with the above described stipulations. 

			
	 	 	Sincerely,
	

 	
 	
/s/ Dick Ellis

  Richard Ellis

Regional Supervisor

	cc:
	State
Lands

Spring Creek Coal Company

John Mundinger

Kerry Constan 

2

 

  EXHIBIT B  

					
	October 31, 1991	 	[SEAL]	 	[LOGO]

John
Mundinger

Montana Department of Fish, Wildlife and Parks

Helena, MT 59620  

	RE:
	Plans
to Mitigate Disturbance of Lands Designated Unsuitable for Mining 

Dear
John: 

In
an effort to mitigate the loss of lands designated as unsuitable for mining due to their classification as mule deer and pronghorn winter range. Spring Creek Coal Company (SCC) is proposing to
initiate two programs. One program involves hunter access (Block Management) on lands owned and controlled by SCC and the other program involves establishment of a rest rotation grazing system. 

These
programs are designed to 1) improve carrying capacity on undisturbed lands, and 2) improve hunter access to mule deer herds. Increased hunting pressure will help maintain deer
populations at levels commensurate with reduced availability of winter range. Together, the two programs should offset the temporary loss of habitat, improve hunter/landowner relations, maintain a
proper balance between big game populations and available forage, improve native range conditions, and decrease wind and water erosion. 

The
block management (hunter access) program, which will be initiated upon approval of this proposal, will open lands owned and controlled by SCC to public hunting. At present, SCC can make available
to resident and nonresident deer hunters a total of 4,206 acres contained in Pastures 1 and 2, and pastures leased by Young and Taylor (see enclosed map). Pasture 3, which lies south of the
mine permit area, will not be included at this time because carrying firearms through the Spring Creek and Decker mine permit areas is prohibited by both mining companies. 

Due
to the proximity of the explosives storage facility, hunting on some of the property will be limited to archery only this season. This restriction will be lifted next year by which time SCC will
have
provided additional protection to the explosive storage area. Federal regulations require that such facilities be protected against being struck by stray bullets, and at this time the area does not
have sufficient protection on all sides. A minor mine plan revision, approved by the Montana Department of State Lands, soil analyses, soil removal and earth moving are required to adequately protect
the area and provide compliance with appropriate State and Fedeal rules and regulations. 

Implementation
of the block management plan will follow the outline below: 

	1)
	the
security force will guide hunters to prevent accidental shooting toward personnel and equipment.

	2)
	hunter
will fill out an application to establish their preferred hunt date, time and group size.

	3)
	an
orientation will be provided to acquaint hunters with the mining operation, ownership boundaries, travel routes and proper conduct in the field, and

	4)
	SCC
will participate in hunter success data collection on forms provided by the Fish, Wildlife and Parks Department. 

SCC
believes that this program will help mitigate the loss of critical mule deer winter range by increasing the opportunities for hunters to manage local deer populations. 

The
second aspect of the mitigation program is SCC's commitment to institute a rest rotation grazing system on lands controlled outside the active mine permit area. The grazing system will better
manage native range, promote growth of native grasses, shrubs and forbs, promote the health of local big game 

1

 

and
game bird populations, reduce erosional processes due to wind and-water, and increase the
awareness of local landowners as to the benefits of this type of livestock operation. 

The
basic format of the rest rotation grazing system will be the three (3) pasture rotation scheme. Prior to initiation of the program, range condition and carrying capacity will be documented
by qualified personnel such as Soil Conservation Service personnel. Once this step has been completed, the 3 pasture rotation system will be instituted (see enclosed map). 

Additional
water improvements will be undertaken and some fencing changes may be made to lump pastures into 3 of equal carrying capacity. Since one adjacent landowner (Jim Hamilton) currently leases
the majority of lands controlled by SCC (Pastures 1, 2 and 3), implementation of this program should be relatively simple. 

Lands
leased to Young and Taylor will be rotated to fulfill the intent of rest rotation grazing by allowing grazing only during specified times. Such limitations should not pose any problems since
these parcels comprise minimal portions of their total respective operations. 

The
estimated rotational scheme for Pastures 1, 2 and 3, using the format presented by Joe Egan at the Miles City seminar, will be to graze Pastures 2 and 3 this year while resting Pasture 1. Pastures
1 and 2 will be grazed next year while resting Pasture 3. Pastures 1 and 3 will be grazed next year while resting Pasture 2. This is subject to modification pending documentation of current carrying
capacity, but generally the pastures do not vary considerably in available forage, so not much change is anticipated. 

After
mining and reclamation operations are complete, and permission is granted by the regulatory agencies, SCC will expand both programs into land currently reserved only for mining operations. The
block management (hunter access) and rest rotation grazing system will be maintained on lands owned and controlled by SCC until such time as the property is sold, transferred or otherwise relinquished
by the company. 

Photographic
documentation will be obtained so that a record of range condition improvement resulting from instituting the rest-rotation grazing system can be maintained. 

It
is SCC's intention to mitigate the loss of critical mule deer winter range by instituting the block management program and a rest rotation grazing system on lands owned and controlled by the
company. If the programs outlined above meet the requirements for mitigation of the unsuitability designation, SCC requests that the MFWP Department classify lands designated as unsuitable for mining
as suitable with stipulations, i.e., implementation of the mitigation plan proposed herein. A change in the designation from "Unsuitable for Mining" to "Suitable with Stipulations" will be
required from the Bureau of Land Management to proceed with proposed expansion of our mining operation. 

Please
advise if you have any questions or suggestions on institution of the proposed mitigation plan. 

Sincerely,

/s/ MICHAEL
HUMPHRIS 

Michael Humphris

Reclamation Supervisor 

	cc:
	Ron
Destefano, SCC

David Dearcorn, SCC

Dick Ellis, MFWP

Bill Mathews, BLM

Bonnie Lovelace, MDSL 

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