EX-10.20
2
c11428exv10w20.htm
STATE COAL LEASE
Exhibit 10.20
GRANT: Multiple
UTAH STATE LEASE FOR COAL
ML 49443-OBA
THIS
COAL MINING LEASE AND AGREEMENT (the “Lease”) is entered into and executed in
duplicate as of October 1, 2004 (the “Effective Date”) by and between the STATE OF
UTAH, acting by
and through the SCHOOL AND INSTITUTIONAL TRUST LANDS ADMINISTRATION, ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇. ▇▇▇▇ ▇▇▇▇▇ (“Lessor”), and
ARK LAND COMPANY AND ARCH COAL INC.
▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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 only the coal of
the Upper Hiawatha Coal Zone within the Blackhawk Formation, located within the boundaries
of the following-described tract of land (the “Leased Premises”) located in ▇▇▇▇▇▇ County, State of
Utah:
T21S, R5E, SLB&M
Sec. 4: ▇▇▇▇ ▇, ▇, ▇, ▇, ▇ ▇/▇ ▇ ▇/▇
▇▇▇. ▇: ▇▇▇▇ ▇, ▇, ▇, ▇, ▇ ▇/▇ ▇ ▇/▇
▇▇▇. ▇: ▇▇▇▇ ▇, ▇, ▇, ▇ ▇/▇ ▇▇▇/▇, ▇▇▇
Sec. 8: All
Sec. 9: All
Containing 2,134.19 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, hut 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.
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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. |
| |
| | 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. in
the event that Lessor does not own coalbed methane within the Leased Premises, Lessee
must obtain the consent of the owner of such coalbed methane prior to removal or
capture of such gas. 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): |
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| | 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. |
| 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 |
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ML 49443-OBA
| | | | (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, 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 often (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 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 are 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 |
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ML 49443-OBA
| | | | 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 Four
Million, Three Hundred and Twenty Thousand Dollars ($4,320,000.00) as partial consideration
for Lessor’s issuance of this Lease, payable in seven equal annual installments of
$617,142.86 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 bonus bid may not be credited against any other bonus
payments, annual rentals or royalties accruing under the lease. |
| |
| 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. |
| | 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 |
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ML 49443-OBA
| | | | 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. |
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| | 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 he 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 maybe 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. |
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| | 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 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 sonic
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. |
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| | 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 he 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. |
| |
| | 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. 9601(14) 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. |
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| | 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 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 he in addition to any other
disclosure required by law or agreement. |
| | 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(s) 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 bonus
bids, rentals and 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 |
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ML 49443-OBA
| | | | discretion, determine that the bond filed with UDOGM 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
he released no later than the time of final bond release by UDOGM with respect to the
Leased Premises. |
| | 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 he
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 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 he determined by a court of competent jurisdiction. Conveyance of any water right
pursuant to this paragraph shall he 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. |
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ML 49443-OBA
| | 12.2 | | Binding Effect. All of the terms and provisions of this Lease shall he
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. |
| | 13.1 | | Permitting. Before Lessee commences exploration, drilling, or mining
operations on the Leased Premises, it shall have obtained such permits and posted such
bonds as maybe 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. |
| |
| | 13.3 | | Plan of Operation 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 he 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 he 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. |
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ML 49443-OBA
| | 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 in Lessor’s reasonable discretion to 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. |
| |
| | 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 ▇▇▇▇▇ 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. |
| | 15.1 | | 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 |
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ML 49443-OBA
| | | | 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 maybe 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 he 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 for
death, 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 he suspended during the continuance of such acts which prevent
performance, excepting any payments due and owing to Lessor. |
| |
| | 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 he 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. |
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ML 49443-OBA
| | 16.5 | | No Waiver. No waiver of the breach of any provision of this Lease shall
he 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 | | Special Stipulations. The special stipulations set forth in Exhibit “A”
to this Lease are hereby incorporated into and made an integral part of this Lease. |
| |
| | 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 he binding
upon Lessor and Lessee unless in writing and signed by each of them. |
IN WITNESS WHEREOF, the parties have executed this Lease as of the date hereinabove first
written.
| | | | | | | | | |
| APPROVED AS TO FORM:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
ATTORNEY GENERAL | | | | THE STATE OF UTAH, acting by and
through the SCHOOL AND INSTITUTIONAL
TRUST LANDS ADMINISTRATION,
LESSOR ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, DIRECTOR |
|
| | | | | | | | |
|
| | | | | | | | |
| By
| | /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
| |
| | By
| | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
|
| |
| | | | | | |
|
| | | | | | | | |
|
| | | | | | | | |
| | | | | | | ARK LAND COMPANY |
|
| | | | | | | | |
|
| | | | | | By:
| | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
|
| | | | | | | | |
|
| | | | | | | | |
|
| | | | | | Its:
| | President |
|
| | | | | | | | |
|
| | | | | | | | |
|
| | | | | | | | |
| | | | | | | ARCH COAL INC. |
|
| | | | | | | | |
|
| | | | | | By:
| | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ |
|
| | | | | | | | |
|
| | | | | | | | |
|
| | | | | | Its:
| | Vice President |
|
| | | | | | | | |
-15-
EXHIBIT A
SPECIAL STIPULATIONS pursuant to 1) Section 10 of the Utah Schools and Land Exchange Act of 1998,
Pub. L. No. 105-335, 112 Stat. 3139, which ratified the May 8, 1998 “Agreement to Exchange Utah
School Trust Lands Between the State of Utah and the United States of America” entered into between
the State of Utah and the United States of America (“the Agreement”); and 2) the 1999 “Memorandum
of Understanding Between the Utah School and Institutional Trust Lands Administration, The United
States Department of Agriculture, and the United States Department of the Interior” entered into
between the parties to facilitate the implementation of the Agreement:
Section 10 of the Agreement calls for the development of any mineral interests transferred to
the State of Utah where the United States retains ownership interests in the land to be subject
to all laws, rules, and regulations applicable to such development within the National Forest
System. The Regulations of the Secretary of Agriculture at Title 36, Code of Federal Regulations
(“C.F.R.”), section 251.50 will apply to the occupancy of the surface estate of National Forest
System lands for the development of the conveyed coal estate. However, mining induced subsidence
need not he permitted separately where the State of Utah has authorized mining in accordance
with 30 C.F.R, section 994.30, Article VI, B,5, to the extent provided by law, in surface
occupancy permits and conditions of concurrence to mining permits, the USDA-Forest Service will
abide by the standards and quidelines contained in the Land and Resource Management Plan for the
Manti-La ▇▇▇ National Forest which were in effect on May 8, 1998. Subject to reasonable terms
and conditions for the protection of the surface estate consistent with the Forest Plan, any
permit requirement may not prohibit reasonable economic development of the conveyed coal estate.
-▇▇-
▇▇ ▇▇▇▇▇-▇▇▇
| | | | | | | |
| ▇▇▇▇▇ ▇▇ ▇▇▇▇
| | | ) | | | |
|
| | | : | | | SS. |
| COUNTY OF SALT LAKE
| | | ) | | | |
On the 18th day of October, 2004, personally appeared
before me ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ who being by me duly sworn did say that he is the
Assistant Director/Minerals of the School and Institutional Trust Lands Administration
of the State of Utah and the signer of the above instrument, who duly acknowledged
that he executed the same.
Given under my hand and seal this 18th day of October, 2004.
| | | | | |
| | | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ |
| | | |
| | | Notary Public |
|
| | Residing at:
| | Salt Lake City, Utah |
|
| | | | |
My commission expires: September 4, ▇▇▇▇
| | | | | | | |
| ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
| | | ) | | | |
|
| | | : | | | SS. |
| COUNTY OF ST. LOUIS
| | | ) | | | |
On the 11th day of October, 2004, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ personally appeared
before me as President, who being duly sworn did say that he is an officer of Ark Land Company and
that said instrument was signed on 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 11th day of October, 2004.
| | | | | | | |
| | | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | | |
| | | | | |
| | | Notary Public | | |
|
| | Residing at:
| | St. Louis, Missouri | | |
|
| | | | | | |
| | | |
| My commission expires: |
|
| | |
| September 14, ▇▇▇▇ | | |
| | | |
-▇▇-
| | | | | | | |
| ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
| | | ) | | | |
|
| | | : | | | SS. |
| COUNTY OF ST. LOUIS
| | | ) | | | |
On the 11th day of October, 2004, ▇▇▇▇▇ ▇. ▇▇▇▇▇ personally appeared
before me as Vice President, who being duly sworn did say that he is an officer of Arch Coal, Inc.
and that said instrument was signed on 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 11th day of October, 2004.
| | | | | | | |
| | | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | | |
| | | | | |
| | | Notary Public | | |
|
| | Residing at:
| | St. Louis, Missouri | | |
|
| | | | | | |
| | | |
| My commission expires: |
|
| | |
| September 14, 2007 | | |
| | | |