Exhibit 10.2
SETTLEMENT AGREEMENT AND MUTUAL
RELEASE
This
Settlement Agreement and Mutual Release (Settlement Agreement) is
made between Western Energy Company (Western), and the United
States Department of the Interior (Department), through the
Minerals Management Service (MMS). The above parties may be
referred to individually as a “Party” or collectively
as “Parties”.
RECITALS
A. Western owns interests in
Lease Nos. M18-054712-0, M18-073109-0, M18-080697-0, and
M18-0821860 (Leases) located in the Rosebud Mine in Rosebud County,
Montana.
B. On April 29, 2004,
MMS, through its Solid Minerals and Geothermal Compliance office
(S&G CAM) issued an “Order to Pay Additional
Royalties” (Order) directing Western to pay additional
royalties of $1,063,211.77 for royalty underpayments due to an
excessive price reduction for coal produced and sold to Puget Sound
Energy, Inc. for the period of January 1, 1996, through
December 31, 2001 (Audit Period). At the time the Order was
issued, MMS had a policy paper in place limiting royalty
collections actions to 7 years prior to the date any order was
issued (7-year policy paper). Therefore, the amount of the Order
did not seek additional royalties for the period January 1,
1996, through March 31, 1997, to adhere to the 7-year policy
paper requirements.
C. Western timely appealed
the Order, docketed as MMS-04-0028-COAL, on June 1, 2004
(Appeal).
D. On November 17,
2007, the MMS Director rescinded the 7-year policy
paper.
E. By decision dated
August 26, 2008, the MMS Associate Director for Policy and
Appeals denied Western’s Appeal (Appeal Decision) and added
the additional royalties owed for the period January 1996
through March 31, 1997, that was excluded under the Order. The
revised amount assessed under the Appeal Decision was
$1,132,789.65.
F. On September 30,
2008, MMS received notice that Western had appealed the Appeal
Decision to the Interior Board of Land Appeals. That appeal is
still pending and is docketed as IBLA 2009-28 (IBLA
Appeal).
G. Western and the
Department desire to reach full and final settlement of the Order
and associated interest for the Audit Period.
AGREEMENT
THEREFORE, in consideration of the mutual
promises and covenants set forth herein and other valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties to this Settlement Agreement hereby
incorporate by reference and agree to the accuracy of the above
recitals and further agree as follows:
10
Exhibit 10.2
2. Payment : Western
will pay MMS $1,344,821.94 within 10 days of Western’s
receipt of a fully executed copy of this Settlement Agreement. If
Western does not pay the $1,344,821.94 to MMS within 10 days
of Western’s receipt of a fully executed copy of this
Settlement Agreement, Western will pay late payment charges on the
untimely payment at the rate established at 30 CFR § 218.54
(2008). Interest will start accruing on the 11
th day after Western received a fully executed copy
of this Settlement Agreement, until the payment of $1,344,821.94 is
made.
3. Appeal : Western
agrees to withdraw its IBLA Appeal, with prejudice, within
10 days of its receipt of a fully executed copy of this
Settlement Agreement.
4. No Further
Proceedings : Each Party agrees that it will not institute any
legal or other proceedings to litigate, arbitrate, appeal, or
attack in any fashion any demand or issue described herein and
covered by this Settlement Agreement.
5. Reporting
Requirements : Western shall have no obligation to submit or
revise a Solid Minerals Production and Royalty Report, Form
MMS-4430 with respect to the payment referenced in
Paragraph 1. After MMS receives the payment referenced in
Paragraph 1, MMS will prepare and file a Form MMS-4430
documenting receipt of that payment.
5. Record Retention
: Subject to the record retention requirements at 30 CFR §
212.200, Western is otherwise released from any record maintenance
requirements for the issues described in the Order and settled
herein.
6. General Mutual
Release from Liability : The Department hereby releases and
forever discharges Western together with all officers, directors,
and employ
