Selected Reclamation Projects for the Horizon Bankruptcy Solution

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ErMC2 worked with Lexington Coal Company (LCC) and the State Regulatory Authorities to develop the LCC budget and reclamation plan. While preparing this plan, ErMC2 utilized a provision in the funding agreement where the Surety could elect to use funds from its reclamation collateral account to undertake projects that it decided to perform directly. From the initial group of 200 permits, ten sites were selected for reclamation work.  These sites are listed below by job name and bond amount:

After selecting on each project, ErMC secured bids for the required reclamation work needed to get each site to a minimum Phase I bond release status.  The first two projects chosen were Beech Creek and Walkers Branch; estimated reclamation costs were approximately $2 million while achieving a bond release in the $5 to $6 million range.

A summary is provided for several of the projects that highlight the different avenues approached to achieve the required bond release:

• 17 West is a mining complex involving sixteen permits with more than 11,000 acres and all facets of mining including, but not limited to, surface, underground, prep plants, refuse, etc. Originally, ErMC2 reviewed all permit applications and met with mine officials on the ground to prepare reclamation plans, devise a plan to sell the property to a third part, and reduce LCC’s reclamation exposure significantly. After several conversations with local companies, the possible sale scenario did not materialize, and the LCC had to begin reclamation. This reclamation involved highwall elimination, reclaiming open walls, building hollow fills, removing or dipping ponds, demolition and removal of plant equipment, establishing drainage channels, and reclaiming and seeding thousand of acres of disturbed land. ErMC2 did not oversee this reclamation site daily but instead turned the reclamation plans over to LCC and monitored the reclamation through monthly inspections and periodic meetings.  ErMC also assisted in developing a methodology in determining unit costs.
• Beech Creek was a surface permit with over 1,300 acres of mining disturbance.  The required reclamation plan was to remove 20 ponds and restore drainage channels, grade and seed 350 acres, prepare area for reforestation, and remove and stabilize highwall. ErMC developing the contracting agreements, develop the bid package, selected the contractor, and oversaw the reclamation process. This area was reclaimed while working hand in hand with The University of Kentucky (UK), Office of Surface Mining (OSM), and Department of Surface Mining and Reclamation (DSMRE) to utilize a reforestation program by planting hardwood trees supplied by UK. The area was first ripped by D11 dozers with four-foot triple shanks to prepare the land for 118,000 hardwood tree saplings. ErMC also prepared and pursued to issuance a revision to the state surface mining permit to address a third-party disturbance.  The issuance of the revision allowed the granting of a Phase III bond release for a portion of the project that still had exposed highwall.  By working with the regulatory agencies at the beginning, ErMC2 reclaimed this permit for a Phase I bond release and established a timeline that the permittee needed to maintain the permit area and apply for a Phase II release with minimal work.
• Walkers Branch #2 was a surface permit with more than 900 acres of mining disturbance.  Originally ErMC2 reviewed all permit requirements and met with mine officials to prepare reclamation plans.  The reclamation required included removal of 15 ponds, regrading portions of 5 hollow fills, tree planting for approximately 25 acres, backfill regrading for approximately 30 acres, and various areas of spot seeding and grade work.  Bid packages were prepared to do all work necessary for final bond release.  ErMC2 prepared and submitted Phase I and II bond release applications for several increments.  ErMC2 worked with the local enforcement branch (DSMRE) to determine the extent of required plantings and grade work for final bond release.  ErMC2 met with potential contractors to review the scope of work and initiate the reclamation process.
• Big Brush Creek Mine #1 and #2 are two surface permits totaling 3,000 acres adjacent to a third surface permit.  These permits involve previously mined dragline pits that produced a high amount of manganese leaving the permit areas.  In order to resolve the AMD situation, it was determined that two wetlands would be constructed:  one new wetland and converting an existing sediment structure into a wetland.  ErMC2, on behalf of it client, AIG, hired the contractor to construct the wetlands, approved invoicing and change orders, and provided direct construction oversight.  Upon completion of the wetland areas, LCC was able to pursue a redistribution of these permitted areas, thereby facilitating future bond releases.
• Briar Fork was a surface operation totaling over 500 acres near Hazard, KY.  After filing for Phase I and II bond release on 75% of the entire permit, ErMC2 began formulating a strategy to reclaim the remaining portion of the permit as well continue bond release.  Reclamation process included removing eight sediment ponds and spot seeding various areas.  Third party disturbance prevented one increment from bond release.  Contact was made by local officials to acquire the permit for use by the city.
• Little Willard was a small surface operation totaling more than 200 acres near Hazard, KY.  ErMC2 reviewed the state permit application to determine the post mining requirements for sediment structures and land use.  After review, ErMC2 contracted a local construction company to remove the remaining three embankment structures.  Several areas were regraded and seeded per post mining configuration.  The remaining dugout structures were also removed, and applications were submitted for Phase I and II bond release.  Through interaction with local enforcement personnel, ErMC2 successfully eliminated reclamation liability and initiated the bond release process.