Annual Evaluation Summary Report

Program

Administered by the Public Service Commission

of the State of

NORTH DAKOTA

for

Evaluation Year 1998

(October 1, 1997 to September 30, 1998)

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. Overview of Coal Mining Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

III. Overview of Public Participation in the Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

IV. Major Accomplishments/Issues/Innovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

V. Success in Achieving the Purposes of SMCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

A. Off-site Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

B. Reclamation Success. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

C. Customer Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

VI. OSM Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

VII. General Oversight Topic Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

A. On-the-ground Reclamation Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

B. Contemporaneous Reclamation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

C. Inspection & Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

D. Bonding Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 E. Grants Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Appendix A: Tabular Summary of Core Data to Characterize the Program

Table 1 Coal Production . . . . . . . . . . . . . . . . . . . T-23

Table 2 Inspectable Units . . . . . . . . . . . . . . . . . . . . . . . . . T-24

Table 3 State Permitting Activity . . . . . . . . . . . . . . . . . . . . . . T-25

Table 4 Off-Site Impacts . . . . . . . . . . . . . . . . . . . . . . T-26

Table 5 Annual State Mining and Reclamation Results . . . . . . . . . . . . . . T-27

Table 6 Reclamation Status as of January 1, 1998 . . . . . . . . . . . . . . . . . . . T-28, T-29 & T-30

Table 7 State Bond Forfeiture Activity . . . . . . . . . . . . . . . . . . . . . T-31

Table 8 State Regulatory Program Staffing . . . . . . . . . . . . . . . . . . . . T-32

Table 9 Regulatory Funds Granted to State by OSM . . . . . . . . . . . . . . . T-33

I. Introduction

The Surface Mining Control and Reclamation Act of 1977 (SMCRA) created the Office of Surface Mining Reclamation and Enforcement (OSM) in the Department of the Interior. SMCRA provides authority to OSM to oversee the implementation of and provide Federal funding for State regulatory programs that have been approved by OSM as meeting the minimum standards specified by SMCRA. This report contains summary information regarding the North Dakota Program and the effectiveness of the North Dakota program in meeting the applicable purposes of SMCRA as specified in Section 102. This report covers the period of October 1, 1997 to September 30, 1998. Detailed background information and comprehensive reports for the program elements evaluated during the period are available for review and copying at the Casper Field Office.

Comments regarding the oversight process, recommendations for additional review topics, and suggestions for improvement of future reports are encouraged and should be submitted to the Director of the Casper Field Office.

The following list of acronyms are used in this report:

AML Abandoned Mine Land

AMLR Abandoned Mine Land Reclamation

AVS Applicant Violator System

BTTI Branch of Technical Training and Information

CFO Casper Field Office

CO Cessation Order

EY Evaluation Year

MOU Memorandum of Understanding

NDAC North Dakota Administrative Code

NDCC North Dakota Century Code

NOV Notice of Violation

PSC Public Service Commission, Reclamation Division

OSM Office of Surface Mining Reclamation and Enforcement

RSI Random Sample Inspections

SHPO State Historic Preservation Office

SMCRA Surface Mining Control and Reclamation Act of 1977

SPATS State Program Amendment Tracking System

TDN Ten Day Notice

TIPS Technical Information Process System

II. Overview of the North Dakota Coal Mining Industry

The coal fields in North Dakota are located in the Williston Basin, which is part of the Great Plains Coal Province. They underlie approximately 40 percent of the State's surface area. Most of the coal is produced commercially from two mining districts located in the western part of the State: (1) Beulah-Zap and (2) Hagel. Recoverable coal reserves in North Dakota are generally classified as lignite, which is characterized by low heating value (6,600 BTU), average high moisture content (40 per cent) and low sulfur (less than 1.0 per cent). The minable beds in the Williston Basin vary in thickness from three to 30 feet; economic stripping ratios range from 1.5:1 to 11:1. All active mines in North Dakota are large-scale surface mines that provide coal for mine-mouth or regional electrical generation facilities and a coal gasification facility located nearby.

The first commercial mine in North Dakota opened in Morton County in 1873. As the railroad developed across the State, demand for coal increased and was supplied by underground mines. North Dakota was one of the first states to shift from underground to large-scale commercial surface mining. By 1927, 40 per cent of the State's production was by surface mining methods, compared with 2 per cent for the nation. In 1959, 86 per cent of North Dakota's coal production was from surface mines, and since 1966, the State's total production has been from this mining method. In 1884, North Dakota produced 35 thousand tons of lignite; in 1997 it produced 29.4 million tons.

In 1969, North Dakota enacted its first reclamation law and followed in 1973 and 1975 with major revisions to this law. A new law was enacted in 1979 that is consistent with SMCRA. Coal mining in North Dakota is concentrated around the western half of the State. This area consists of approximately 28,000 square miles, and has an estimated total resource of 350 billion tons, or about two-thirds of the total lignite reserves of the United States. North Dakota has a demonstrated recoverable coal reserve base of 35 billion tons.

North Dakota mines provide employment for approximately 1,200 people in five counties. However, the coal industry's impact on the State's people and economy has secondary effects since most of the coal production fuels electric power generation plants within the State.

III. Opportunities for Public Participation

The North Dakota coal reclamation and enforcement program allows for public input and participation throughout its program. CFO reviewed these opportunities for public participation and assessed the level of participation.

Allowances for Public Participation

North Dakota statute and regulation require that applicants for new coal mine permits, renewals, and significant revisions to publish notices in specific newspapers for a specific number of weeks the actions being proposed in their application. This entails submitting verification to the PSC that these public notices contained the proper information and were published in the local newspapers timely. In these notices, the public is informed of the right to an informal conference regarding the proposed actions. Any public comments are sent to the PSC.

Upon receiving a new application, a revision or a renewal which is administratively complete, the PSC is required to send all surface owners notice of the proposed action by certified mail and to send by regular mail notice to pertinent local, state and Federal agencies. There is a set time frame for comment. The PSC is required to notify (by mail)

all commentators of their decision.

Public participation is required for bond release as well. For each of the four phases of bond release, the applicant must publish a public notice in the local newspaper(s). In addition the applicant must notify surface and subsurface owners and pertinent governmental agencies of the request for release and their right to comment. The PSC, in turn, notifies all surface owners of the date, time and location of the bond release inspection. These parties are invited to participate in the inspection.

Once applications for new permits and significant revisions are approved, the PSC is required to publish in specific newspapers notices of approval and the public's right to request a formal hearing regarding the decision. The PSC is also required to send letters to those who commented during the original application phase. Once any phase of bond release is approved, the PSC must send a letter of notification to the county commissioners, mayors and anyone who participated in the inspection or who provided comments. Notices provide an opportunity to request a formal hearing.

The State program allows public input for permit transfers and for designating lands unsuitable.

Any person seeking a transfer of a coal permit must provide notice of the proposed action in local newspapers. Persons adversely affected, including governmental entities, may submit written comments to the PSC under specific procedures.

Under North Dakota's coal regulations, the public has the right to petition to designate land as unsuitable for mining operations. Hearings are required to allow comment from persons advocating lands to be designated to be unsuitable or persons wishing to have such designation terminated.

In addition, the North Dakota statute and regulations allow for public hearings when mining operators request a waiver from the prohibition of mining within 100 feet of a public road.

The PSC holds public hearings for rule making. Persons or governmental entities may petition the PSC to adopt, amend, or repeal any rule. Public notice must be published in the appropriate newspapers (and filed with the legislative council at least 30 days before the hearing). The PSC considers all written comments and oral testimony before adopting, amendmending or repealing a regulation.

Also, the North Dakota program allows for citizen complaints and a formal process in reviewing that complaint. The regulatory authority is required to schedule an inspection and the State must notify the complainant of the inspection. By regulation, the complainant may accompany the State on the inspection.

IV. Major Accomplishments / Issues / Innovations

The North Dakota Public Service Commission (PSC) is very effective and successful in implementing its regulatory program as set forth in Section 102 of the Surface Mining Control and Reclamation Act of 1977. The North Dakota's permanent regulatory program is now in its eighteenth year of implementation.

The North Dakota program operates very efficiently and effectively considering the number of mines, tonnage of coal produced, and acreages disturbed and reclaimed each year. The PSC carries out its required functions and other work using the appropriate technical expertise and professionalism. Any concerns and problems are resolved in a fair, straight-forward and cooperative manner. This includes working with all interested parties, including industry, landowners and citizen groups. An example of this effort was the PSC's recent work with all interested parties in developing a rule defining "replacement of water supply" that was finally acceptable to all parties. The cooperative effort is also reflected in the high quality of reclamation and the low number of violations that occur each year in North Dakota. Most of the violations that are issued have not been serious and with very little environmental damage. One of the most noteworthy aspects of the North Dakota Regulatory program has been the pattern of excellence in mine land reclamation.

The high quality of reclamation work carried out is reflected in the number of national Excellence in Surface Mining and Reclamation awards that North Dakota mines have received. Since the OSM started the Excellence in Surface Coal Mining and Reclamation Award program in 1986, North Dakota mines have received nine national awards. Most recently, the Coteau Properties Company's Freedom Mine and Bellaire Corporation's Indian Head Mine received four awards in 1997. The Freedom Mine received the 1997 Director's Award for exemplary reclamation. That year the Bellaire Corporation's Indian Head Mine received the Best of the Best Award for cropland and native grassland reclamation efforts, an award for bond release activity associated with completed reclamation work, and a hall-of-fame award for the preservation of natural wooded draws enhancing wildlife habitat.

The PSC is experiencing an increased workload due to bond release applications as reclaimed land becomes eligible for final bond release. The PSC was one of the first western states (with the ten-year revegetation liability period) to adopt detailed revegetation standards and sampling procedures for proving reclamation success on reclaimed lands. These guidelines were initially adopted in 1987 and revised in 1992 and 1995. As more final bond release applications are evaluated, these guidelines will be further refined as necessary. The PSC has been encouraging mining companies to file bond release applications as land becomes eligible for release for partial or final bond release.

The PSC, with assistance from OSM, has been working on an electronic permitting initiative. Although numerous data sets are currently in the electronic format as well as on paper, a near-term goal is to have an entire permit revision submitted in the electronic format. Later, it is envisioned that an entire permit application will be in the electronic format on a compact disk. Another longer term goal of this initiative is to have permit documents on file at county offices in the electronic format. This will eliminate storage problems at the county offices and make specific searches easier.

Through effective implementation of permitting, inspection, and enforcement, the PSC has been very successful in achieving compliance with SMCRA's intent. The State administers an excellent regulatory program using appropriate technical expertise, a high level of professionalism, and dedicated fairness.

V. Success in Achieving the Purposes of SMCRA

A. Off-site Impacts

For the purpose of oversight, an off-site impact is defined as anything resulting from a surface coal mining and reclamation activity or operation that causes a negative effect on people, land, water, or structures. The State program must regulate or control the mining or reclamation activity or result of the activity causing an off-site impact. In addition, the impact on the resource must be substantiated as being related to a mining and reclamation activity, and must be outside the area authorized by the permit for conducting mining and reclamation activities.

1. North Dakota conducted 179 complete inspections and 692 partial inspections, The Casper Field Office conducted 13 complete random sample inspections and no partial / focused inspections of coal mining operations in North Dakota.

The PSC issued no Notices of Violation or Cessation Orders during this evaluation period. No pattern of violation exists. No show cause hearings or alternative enforcement actions were initiate during this evaluation period.

The CFO did not issue any enforcement actions (TDN, NOV, CO) during this review period.

A review of these inspections and enforcement actions indicate no negative off- site impacts were observed.

2. A review of the ground water monitoring records for the JK Ranch Mine and Falkirk Mine (Underwood Field) show that a drawdown of water levels due to water withdrawals from the open mine pits is the only significant groundwater impact within the permit area and in adjacent areas. There is no way to prevent this effect because the open mine pits function as a large well into which groundwater from the aquifers penetrated by mining flow. This drawdown of water levels is a temporary effect. Recovery of water levels follows with the backfilling and grading of the open pit and final reclamation. Recovery of water levels will occur over a number of years once mining has ceased and the mine area is reclaimed. Recovery depends on the rate of recharge and transmissivity. This drawdown effect will shift from one area to another as the mining operation moves from one area to another. Groundwater monitoring data to date has confirmed this temporary off-site impact as well as it mitigation. Also, it has shown no impact on the quality of the groundwater in the adjacent areas.

3. Downstream landowners have expressed concerns in the past on the impacts of sedimentation pond discharges on farming activities in downstream fields. A review of some downstream fields was planned during the spring planting and fall harvest seasons. However, due to the dry spring and fall conditions and the resulting lack of water being discharged from the active mining operations, a review of any adverse impacts on downstream offsite cropland was not possible. This review has been included in the 1999 oversight plan.

B. Reclamation Success

OSM evaluated the effectiveness of the State program based on the number of acres that have received bond release (Table 5). The CFO believes this measure while valuable does not capture the total effectiveness of the State program due to the type of mining operations, size of mining operation and company policy (not to apply for release until large tracts are eligible for final bond release). The CFO determined that the State program is effective in its goal of having all disturbed lands reclaimed to their approved postmining land use, however, there is little motivation for the companies to seek bond release. Although the number of acres released from bond is relatively small, a substantial amount of reclamation has and is occurring in North Dakota. Tables 5 and 6 indicate that while the acreage of land released from bond is much less when released compared to the number of acres being actively reclaimed in any given year, there is significant acreage that qualifies for bond release application particularly Phase I and II.

Knife River, Gascoyne Mine: Mining completed and under final reclamation.

C. Customer Service

Review of Activities and Public Participation

CFO reviewed whether the PSC and the applicant are adhering to the State's policies and procedures regarding solicitation of public input during regulatory activities occurring during the evaluation period.

[Photo in printed copy]

One new permit, two permit renewals, six significant revisions and three bond releases were reviewed by the CFO for this evaluation. There were no requests for transfer of a permit or a lands unsuitable petition. There was one application for conducting mining activities within 100 feet of a public road. Two hearings were held on a rulemaking case that occurred during the evaluation period.

Some actions continue to be pending, a new permit application, significant revisions, and bond releases. However, in all cases the applicant's notice in the specific newspapers have been made, as well as, the PSC's notice to the affected landowners (by certified mail), and the notification to the interested or affected governmental agencies by regular mail. While only one approval of a significant revision had occurred at the time the review was conducted, the necessary newspaper notices and letters to agencies have been sent offering them the right to a formal hearing.

For bond release applications, the applicant's required newspaper notices were published appropriately, as well as the required letters mailed to surface and subsurface owners and appropriate agencies. The PSC has appropriately sent letters to surface owners and agencies informing them of the right to participate in field inspection. Only one bond release had been granted at the time of this review. Appropriate letters were sent by the PSC informing required parties of the decision (approval) and right to a formal hearing.

There was one application for a waiver by a mine operator to mine within 100 feet of a public road. The notice offering a public hearing by the PSC was advertised appropriately. There was no request for a public hearing.

One hearing regarding rulemaking was advertised and held in October 1997. Eighteen persons attended the hearing. Numerous written comments were submitted and testimony was given. A second hearing was held on June 18, 1997 due to a newspaper publication error for the October 1997 hearing. This was noted during the review of the rule making case by the North Dakota's Attorney Generals office.

One verbal citizen complaint was received during the evaluation period. The complaint was investigated. There was no violation observed. The complainant was informed of the findings and was provided the opportunity to file a written complaint and was advised of his appeal rights.

VI. OSM Assistance

OSM provided various types of assistance to North Dakota during EY-98. This assistance represented nearly $520,000 in direct monetary assistance as well as other technical assistance.

The State received approximately $490,000 in support of permitting, inspection and enforcement and administration of their permanent program through a grant, representing sixty-five percent of the total cost of the North Dakota program.

Five North Dakota Public Service Commission employees received reclamation and enforcement training from OSM's Office of Technical Training for a support cost of approximately $3,600 or 140 man hours of training. In addition, eight PSC employees received software computer training from OSM's Technical Information Processing Systems for an approximate cost of $6,000 and approximately 400 man hours of training.

OSM assisted North Dakota with their newly initiated electronic permitting effort. OSM made available Federally owned computer equipment to North Dakota valued at approximately $18,600.

VII. General Oversight Topic Reviews

A. On-the-ground Reclamation Results

[Photo in printed copy]

Coteau Properties' Freedom Mine: An area is being reclaimed to a recreational land use for camping, fishing and hunting. Surface ownership will be transferred to the North Dakota Game and Fish Department to guarantee public access.

In this review the CFO and the PSC attempted to evaluate specific areas of the reclamation process to determine if the reclaimed lands are capable of supporting the postmining land uses approved in the permit.

1. The CFO and PSC reviewed the permits for the Freedom, Falkirk, Beulah and Center Mines and have identified those areas where a water supply that existed prior to mining and have been or will be destroyed by mining and a replacement supply must be provided. A general inventory is as follows:

Freedom Mine 13 replacement supplies identified as needed based on the approved postmining land use.

Falkirk Mine 2 replacement supplies identified as needed based on the approved postmining land use.

Beulah Mine 1 replacement supplies identified as needed based on the approved postmining land use.

Center Mine 3 replacement supplies identified as needed based on the approved postmining land use.

In the 1999 oversight the CFO and PSC will be reviewing those specific permits where replacement is required to determine if those permits contain a specific plan for replacement.

[Photo in printed copy]

2. The CFO and PSC had planned to evaluate the extent of differential settling on reclaimed lands and how it interferes with the achievement of the approved postmining land use. An overflight was conducted in 1998 to identify areas of settlement for further review / inspection to determine if they interfere with the approved postmining land use. However, due to dry conditions in the spring and the resulting lack of surface runoff this review was rescheduled for the 1999 oversight.

B. Contemporaneous Reclamation

Knife River, Beulah Mine

[Photos in printed copy]

BNI, Center Mine

[Photo in orginal copy]

In this review the CFO and the PSC attempted to develop criteria to be reviewed

annually for comparing of the acres disturbed to the acres reclaimed on a state-wide basis. A mine site specific summary is contained in Table 6. Reclamation in North Dakota is occurring as contemporaneously as practicable. The CFO does not plan to continue this specific review, however, the CFO will continue to report "Reclamation Success" and inventory the status of disturbed lands for (Table 6) in 1999.

* Jan. 1 to Dec. 31*

D. Inspection & Enforcement

The North Dakota Public Service Commission continues to conduct frequent and thorough inspections. North Dakota conducted 179 complete inspections and 692 partial inspections, exceeding the required number of inspections on all permits during the evaluation year. The Casper Field Office conducted 13 complete random sample inspections and no partial / focused inspections of coal mining operations in North Dakota.

North Dakota inspection reports are complete, accurately document site conditions and mine activity, give the status of any violations. They have continuity with previous reports. All performance standards were reviewed and documented during complete inspections and the reports contain a discussion of the current mine status. Each partial inspection report documents mining and reclamation activities, performance standards and permit requirements reviewed, as well as the portions of the mine site inspected.

The PSC maintains an inspectable units list and an inspection data base sufficient to meet its program requirements.

The PSC did not issue any Notices of Violation or Cessation Orders during this evaluation period. No pattern of violation exists. No show cause hearings or alternative enforcement actions were initiated during this evaluation period.

The CFO did not issue any enforcement actions (TDN, NOV, CO) during this review period.

Also, the CFO conducted a review and comparison of the inspection and enforcement activity of the CFO and the PSC for the past ten years as reported in the table below.

There is no discernable correlation between the CFO inspection and enforcement activity and the PSC's.

OSM / CFO and ND / PSC INSPECTION & ENFORCEMENT DATA

* Jan. 1 to Dec. 31*

D. Bonding Practices

The CFO reviewed the bonding practices in North Dakota. This review is ongoing and will be continued during subsequent evaluations. SMCRA, the Federal regulations and the North Dakota program do not allow bonds to be reduced on disturbed lands unless all applicable bond release requirements are met. Any reduction in bond for reclamation work performed can only be through the formal bond release process.

The current bonding provisions in North Dakota's reclamation law and rules are approved by OSM as being as stringent as and as effective as the counterpart provisions in federal law and regulations. North Dakota does not use an alternate bonding system as allowed by Section 509(c) of SMCRA.

Bond amounts are calculated according to the guidelines in Policy Memorandum No. 16 to Mine Operators which allows the bond amount to be determined on the worst- case reclamation condition that is expected to occur within the permit area. This policy document was issued by the Public Service Commission (PSC) in 1985 and was reviewed by OSM and approved by the Director of the Casper Field Office. Some minor revisions to the original policy have since been made and the PSC has recently adopted other changes that incorporate the use of a loader/end dump truck fleet for long haul distances since such equipment is now commonly used at the mines and for other large earth moving projects.

The reclamation cost estimates are usually prepared by mining companies and PSC reviews the estimates to ensure all worst-case reclamation costs are included in the estimate. Any concerns or deficiencies are listed in a technical deficiency letter on the applicable application. Once all concerns are satisfactorily addressed, a bond determination letter is sent to the company.

Bonds in North Dakota are for specific areas. A legal description and a map of the bond area are attachment to the bond document. The acreage covered by a particular bond can be increased or decreased by the filing of a stipulation of bond increase or decrease. When this occurs, the legal description and map of the bond area are updated as well. Language in the PSC bond documents states that the bond is payable to the United States only to the extent that they cover Federal lands parcels. Any Federal parcels are clearly identified by a separate legal description and maps that are attached to the bond documents.

The PSC reviews each bond as part of the midterm permit review as required by NDAC 69-05.2-11-01 and notifies mining companies of bond adjustments when bond increases are needed. Such increases are usually a result of changes to the variable cost items in Policy Memo 16 that are updated annually. The PSC also reevaluates bond amounts as part of permit renewal and revision reviews and requires bond increases as appropriate.

Bond reductions by adjustment are possible if an operator request and demonstrates that there has been a reduction in the proposed mine disturbance or if the operator's method of operation or other circumstances reduces the cost estimate for completing reclamation by a third party. Such a request and justification must be filed by the permittee pursuant to subsection 4 of NDAC 69-05.2-12-08.

If a reduction request is for reclamation work performed, the request would be rejected and the permittee will be informed that a bond release application must be filed in order to reduce the bond amount. For example, assume the worst-case reclamation condition for a mine was based on a pit that is two miles long in 1995 and the worst case reclamation cost estimate for that permit is $5,000,000. Then assume the pit length was shortened to one and one-half miles in 1996 with all reclamation work completed on the half mile of final pit in 1998. Following the completion of that reclamation work, the company prepares a new worst-case reclamation cost estimate showing a cost of $4,000,000. The PSC would not approve a bond reduction under NDAC 69-05.2-12-08 as a result of this change in pit length and the reclamation work performed. Instead, the company would have to apply for a bond release to reduce the bond.

Actual bond reductions are processed after a bond release becomes effective. The permittee will file a stipulation to reduce the bond amount to reflect the amount approved by the bond release. If final bond release has been granted, the bond stipulation can be used to reduce the bond acreage as well as the amount. A new legal description and map of the remaining permitted acreage must be attached to the stipulation to reduce bond. For Federal lands permits that contain a "checker board" mixture of Federal parcels and non-Federal parcels where bonds are issued to both the United States and North Dakota, OSM concurrence is only required for the Federal parcels. The PSC does not require the participation and concurrence of OSM for bond release for the non-Federal parcels in a Federal lands permit. The Cooperative Agreement North Dakota has with the Department of the Interior does not require OSM concurrence for releases that involve only the non-federal parcels. Language in PSC bond documents clearly states that the bond is payable to the United States only to the extent that they cover federal parcels. As noted above, any Federal parcels are clearly identified by a separate legal description that is attached to the bond documents.

The PSC has approved a policy (Policy Memorandum No. 18 to Mine Operators adopted in 1987) which allows the consolidation of bonds into a single bond area for a mine with multiple permits. Although not specifically addressed in PSC rules, there are no statutory or regulatory provisions that prohibit consolidated bond areas (covering more than one permit). The rules require that the performance bond cover the entire permit area and, for these purposes the PSC believes the term "permit area" can mean lands covered by more than one permit for a particular mine. The consolidation of bonds for a particular mine takes into account the fact that, if a bond forfeiture occurs, mining will cease in all permits for that mine. Therefore, the worst- case condition for a consolidated bond area is calculated based on the maximum disturbances that are anticipated to occur up to the latest expiration date of the permits covered by the consolidated bond.

The CFO reviewed the bonding history of the Coteau Properties, Freedom Mine as a sample of how the bonding provisions of the North Dakota program were being applied "in the field." Bonds for individual permits at the Freedom mine have been combined and as a result the total amount of bond for the mine area was reduced due to the change in method for calculating the bond amount. Also, as a result of this review the CFO determined that where bonds are issued to both the United States and North Dakota (Federal Lands Permits) containing undivided and checker board mixtures of Federal and non-Federal lands, North Dakota is not required to obtain OSM concurrence for bond release on the non-Federal lands.

E. Grants Management

North Dakota submitted all Administration and Enforcement financial reports on a timely basis. All reports were complete.

North Dakota agreed to report any overdraws from the U. S. Treasury or any instances where excess cash was held as a result of drawdowns from Administration and Enforcement grants. CFO conducted a drawdown analysis, sampling drawdowns occurring during the evaluation period. In all cases, expenditures occurred before the drawdown and the amount of the draw coincided with the amount of the expenditure. No problems were found.

During the last evaluation year State auditors had reported in an A-128 audit that the PSC had made OSM grant expenditures that were unallowable. The PSC has since reimbursed OSM. This audit was for two years ending June 30, 1996. The next two- year A-133 Audit will be completed during the Spring of 1999.

Other financial systems were reviewed. CFO looked at payroll, procurement and travel system to ensure that the PSC was following their own policies and procedures. No problems were found.

APPENDIX A

Tabular Summaries of Data Pertaining to Mining, Reclamation and Program Administration

These tables present data pertinent to mining operations, State and Federal regulatory activities within North Dakota. They also summarize funds provided by OSM and the North Dakota staffing. Unless otherwise specified, the reporting period for the data contained in all tables is the 1998 evaluation year (October 1, 1997 - September 30, 1998). Additional data used by OSM in its evaluation of North Dakota performance is available for review in the evaluation files maintained by the Casper Field Office.

^A Coal production as reported in this table is the gross tonnage which includes coal that is sold, used or transferred as reported to OSM by each mining company on form OSM-1 line 8(a). Gross tonnage does not provide for a moisture reduction. OSM verifies tonnage reported through routine auditing of mining companies. This production may vary from that reported by States or other sources due to varying methods of determining and reporting coal production.

TABLE 3

TABLE 4

OFF-SITE IMPACTS
RESOURCES AFFECTED			People			Land			Water			Structures
DEGREE OF IMPACT			minor	moderate	major	minor	moderate	major	minor	moderate	major	minor	moderate	major
TYPE OF IMPACT AND TOTAL NUMBER OF EACH TYPE	Blasting	0	0	0	0	0	0	0	0	0	0	0	0	0
	Land Stability	0	0	0	0	0	0	0	0	0	0	0	0	0
	Hydrology	0	0	0	0	0	0	0	0	0	0	0	0	0
	Encroachment	0	0	0	0	0	0	0	0	0	0	0	0	0
	Other	0	0	0	0	0	0	0	0	0	0	0	0	0
	Total	0	0	0	0	0	0	0	0	0	0	0	0	0
OFF-SITE IMPACTS ON BOND FORFEITURE SITES
RESOURCES AFFECTED			People			Land			Water			Structures
DEGREE OF IMPACT			minor	moderate	major	minor	moderate	major	minor	moderate	major	minor	moderate	major
TYPE OF IMPACT AND TOTAL NUMBER OF EACH TYPE	Blasting	0	0	0	0	0	0	0	0	0	0	0	0	0
	Land Stability	0	0	0	0	0	0	0	0	0	0	0	0	0
	Hydrology	0	0	0	0	0	0	0	0	0	0	0	0	0
	Encroachment	0	0	0	0	0	0	0	0	0	0	0	0	0
	Other	0	0	0	0	0	0	0	0	0	0	0	0	0
	Total	0	0	0	0	0	0	0	0	0	0	0	0	0