Notice of Competitive Coal Lease Sale, Wyoming

AGENCY:

Bureau of Land Management, Interior.

ACTION:

Notice of competitive coal lease sale.

SUMMARY:

Notice is hereby given that certain coal resources in the Caballo West Coal Tract described below in Campbell County, Wyoming, will be offered for competitive lease by sealed bid in accordance with the provisions of the Mineral Leasing Act of 1920, as amended.

DATES:

The lease sale will be held at 10 a.m. on Wednesday, August 17, 2011. Sealed bids must be submitted on or before 4 p.m. on Tuesday, August 16, 2011.

ADDRESSES:

The lease sale will be held in the First Floor Conference Room (Room 107), of the Bureau of Land Management (BLM) Wyoming State Office, 5353 Yellowstone Road, P.O. Box 1828, Cheyenne, Wyoming 82003. Sealed bids must be submitted to the Cashier, BLM Wyoming State Office, at the address given above.

FOR FURTHER INFORMATION CONTACT:

Mavis Love, Land Law Examiner, or Kathy Muller Ogle, Coal Coordinator, at 307-775-6258, and 307-775-6206, respectively.

SUPPLEMENTARY INFORMATION:

This coal lease sale is being held in response to a lease by application (LBA) filed by BTU Western Resources, Inc. (successor to Caballo Coal Company), Gillette, Wyoming. The coal resource to be offered consists of all reserves recoverable by surface mining methods in the following-described lands located approximately 8 miles south-southeast of Gillette, Wyoming and east of State Highway 59.

T. 48 N., R. 71 W., 6th Principal Meridian

Sec. 7, lots 12 and 19;

Sec. 8, lot 10;

Sec. 17, lots 1 through 12 inclusive and lots 15 and 16;

Sec. 18, lots 5, 12, and 13;

Sec. 20, lots 1, 2, and 8; and

Sec. 21, lots 11 and 12.

Containing 1,023.99 acres, more or less, in Campbell County, Wyoming.

The LBA tract is adjacent to Federal, private, and State of Wyoming leases along the western lease boundary of the Caballo mine and to the Belle Ayr North LBA along the south. It is adjacent to additional unleased Federal coal to the west. The tract is crossed by Bishop Road along its southern boundary.

All of the acreage offered has been determined to be suitable for mining. Features such as Bishop Road, utilities, and pipelines can be moved to permit coal recovery. In addition, several producing coal bed natural gas wells have been drilled on the tract. The estimate of the bonus value of the coal lease will include consideration of the future production from these wells. An economic analysis of the future income stream from coal mining will consider reasonable compensation to the gas lessee for lost production of the natural gas when the wells are bought out by the coal lessee. The surface estate of the tract is owned by Alpha Coal West, Inc., as well as private individuals and entities.

The tract contains surface mineable coal reserves in the Wyodak-Anderson coal zone currently being recovered in the adjacent, existing mine. On the LBA tract, there is one recoverable seam, the Wyodak, which averages approximately 75 feet thick and is continuous over the entire tract with no outcrops or subcrops. Overburden depths to this seam average approximately 285 feet on the LBA.

The tract contains an estimated 130,196,000 tons of mineable coal. This estimate of mineable reserves includes the main seam mentioned above but does not include any tonnage from localized seams or splits that are less than 5 feet of coal. Also, it does not include the adjacent private and State of Wyoming leases although these leases are expected to be mined in conjunction with the LBA tract. The total mineable stripping ratio of the coal in bank cubic yards per ton is approximately 4.2:1. Potential bidders for the LBA tract should consider the recovery rate expected from thick seam coal mining. The Caballo West LBA coal is ranked as subbituminous C. The overall average quality on an as-received basis is 8,501 British Thermal Units per pound containing about 0.33 percent sulfur. This quality places these coal reserves in the lower part of the range of coal quality currently being mined in the Wyoming portion of the Powder River Basin.

The tract in this lease offering contains split estate lands. There are qualified surface owners as defined in the regulations at 43 CFR 3400.0-5. Consent granted by the qualified surface owners has been filed with and verified by the BLM. The LBA tract lands included in the consent are:

T. 48 N., R. 71 W., 6th Principal Meridian

Sec. 7, lots 12 and 19; and

Sec. 18, lot 5.

Containing 123.77 acres, more or less, in Campbell County, Wyoming.

The purchase price of the consent as stated in the consent document is “* * * a royalty of ten cents ($.10) per ton (2,000 pounds) of merchantable coal or one percent (1%) of the gross sale price of such coal F.O.B. the mine, whichever is greater.”

The tract will be leased to the qualified bidder of the highest cash amount provided that the high bid meets or exceeds the BLM's estimate of the fair market value (FMV) of the tract. The minimum bid for the tract is $100 per acre or fraction thereof. No bid that is less than $100 per acre, or fraction thereof, will be considered. The bids should be sent by certified mail, return receipt requested, or be hand delivered. The BLM Wyoming State Office Cashier will issue a receipt for each hand-delivered bid. Bids received after 4 p.m. local time on Tuesday, August 16, 2011, will not be considered. The minimum bid is not intended to represent FMV. The FMV of the tract will be determined by the Authorized Officer after the sale. The lease that may be issued as a result of this offering will provide for payment of an annual rental of $3 per acre, or fraction thereof, and a royalty payment to the United States of 12.5 percent of the value of coal produced by surface mining methods and 8 percent of the value of the coal produced by underground mining methods. The value of the coal will be determined in accordance with 30 CFR 206.250.

Pursuant to the regulation at 43 CFR 3473.2(f), the applicant for the Caballo West Tract, BTU Western Resources, Inc., has paid a total case-by-case cost recovery processing fee in the amount of $78,660. The successful bidder for the Caballo West Tract, if someone other than the applicant, must pay to the BLM the $78,660 previously paid by BTU Western Resources, Inc. Additionally, the successful bidder must pay all processing costs the BLM will incur after the date this sale notice is published in the Federal Register, which are estimated to be $17,400.

Bidding instructions for the LBA tract offered and the terms and conditions of the proposed coal lease are available from the BLM Wyoming State Office at the address above. Case file documents, WYW172657, are available for inspection at the BLM Wyoming State Office.