Summary of the Coal Resources of Kaiparowits Plateau and Its Value

1) COAL RESOURCE OF KAIPAROWITS PLATEAU

On the basis of a preliminary report recently released by the U.S. Geological Survey (USGS), there are 62.3 billion tons of in-place coal resource in Kaiparowits Plateau coal field. Of this resource USGS indicates that there are 30 billion tons of minable coal in various beds. According to the USGS report "These beds of coal are in areas where overburden is less than 3,000 feet thick and strata dip less than 12 . The coal tonnage is estimated for all beds of coal that are more than 3.5 feet thick, and coal tonnages in beds that are thicker than 14 feet thick are calculated as if they are only 14 feet thick." They also estimate that the total tonnage in beds of 3.5 feet to 7.4 feet is 15 billion tons. Using Utah Geological Survey figures, we estimate that 7.25 billion tons of coal are in seams of 3.5 feet to 6.0 feet which are considered uneconomical to mine in Utah. Removing this thin coal from the 30 billion tons estimated leaves 22.75 billion tons of minable coal. Applying a 50 percent recovery factor means the Kaiparowits Plateau contains an estimated 11.375 billion tons of recoverable coal.

2) ESTIMATED ECONOMIC VALUE (Bonus bid and Royalty)

The potential value of the Kaiparowits Plateau coal is calculated on the basis of 11 cents per ton of minable coal (22 cents per recoverable) plus the royalty on the basis of eight percent of the value of the total recoverable coal, which is shown in Table 1.

Table 1. Coal ownership and potential revenue.

DESCRIPTION UNITS TOTAL FEDERAL STATE SITLA*

Coal Resources Billion Tons 62.310(a) 57.200 4.800

Minable Coal Billion Tons 22.750(a) 20.884 1.753

Leases held by Andalex Billion Tons 0.880(a) 0.739 0.141

Unleased Minable Coal Billion Tons 21.870(a) 20.145 1.612

Bonus Bid @ 11/ton Million $ 2,405.700(a)(b) 1,107.980(c) 1,107.980(c) 177.290

Recoverable Coal (Minable x 0.5) Billion Tons 11.375 10.442 0.876

Royalty @ 8% & $19.50/ton Million $ 17,745.000(a)(b) 8,144.872(c) 8,144.872(c) 1,366.972

Total Bonus Bid + Royalty Million $ 20,150.700(a)(b) 9,252.852(c) 9,252.852(c) 1,544.262

*School and Institutional Trust Lands Administration.
(a)The total also includes a small amount on private land.
(b)This is a point-in-time estimate of the potential value of the coal reserve.
(c)The bonus bid and royalty receipts by federal government are shared on a 50-50 basis with the state of Utah, less a small percent for administration expense, which was 5.9 percent in 1995.

3) POTENTIAL ECONOMIC BENEFIT OF ANDALEX'S SMOKEY HOLLOW MINE PROJECT

In Table 2, Andalex's mining plan for the Smokey Hollow mine, as described in the Governor's Office of Planning and Budget report dated October 1993, for the next 30 years and estimated income to each government entity is shown.

Table 2. Income derived from Andalex's mining activity.

DESCRIPTION UNITS TOTAL FEDERAL STATE SITLA

Coal Mined* Million Tons 72.001 60.481(a) 11.520(a)

Value of the Coal Mined (@ $19.50/ton) Million $ 1,404.014 1,179.372 224.642

Royalty Paid (@ 8% rate) Million $ 112.321 47.175 47.175 17.971

Annual Royalty Received Million $ 3.900 1.638 1.638 0.624

*Coal mined would be at 421,179 tons the first year plus 1,562,308 tons the second year plus 2,500,615 tons the following 28 years.
(a)Andalex requested to increase its mining area from 10,000 acres to 25,000 acres in 1995. Should this result in an increase in the amount of coal mined, royalty income to the federal and state government and SITLA would also increase.

Compiled by the Office of Energy and Resource Planning October 9, 1996