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Coal Lease - Department of the Interior and Powder River Coal Co.

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Form 3400-12                                                       Serial Number
(April 1986)                    UNITED STATES
                          DEPARTMENT OF THE INTERIOR
                           BUREAU OF LAND MANAGEMENT                   WYW136142

                                  COAL LEASE


This lease, entered into by and between the United States of America,
hereinafter called lessor, through the Bureau of Land Management, and (Name
and Address)

                  Powder River Coal Company
                  Caller Box 3034
                  Gillette, Wyoming  82717-3034

hereinafter called lessee, is effective (date)             , for a period of
20 years and for so long thereafter as coal is produced in commercial
quantities from the leased lands, subject to readjustment of lease terms at
the end of the 20th lease year and each 10-year period thereafter.

Sec. 1.  This lease is issued pursuant and subject to the terms and
provisions of the:

x     Mineral Lands Leasing Act of 1920, Act of February 25, 1920, as amended,
   41 Stat. 437, 30 U.S.C. 181-287, hereinafter referred to as the Act;

   Mineral Leasing Act for Acquired Lands, Act of August 7, 1947, 61 Stat.
   913, 30 U.S.C. 351-359;

and to the regulations and formal orders of the Secretary of the Interior
which are now or hereafter in force, when not inconsistent with the express
and specific provisions herein.

Sec. 2.  Lessor, in consideration of any bonuses, rents, and royalties to be
paid, and the conditions and covenants to be observed as herein set forth,
hereby grants and leases to lessee the exclusive right and privilege to drill
for, mine, extract, remove, or otherwise process and dispose of the coal
deposits in, upon, or under the following described lands:

T. 41 N., R. 70 W., 6th P.M., Wyoming
Sec.  6:  Lots 10 thru 13, 18 thru 21;
Sec.  7:  Lots 6, 11, 14, 19;
Sec. 18:  Lots 5, 12, 13, 20;
Sec. 19:  Lots 5, 12 (N2);
Sec. 20:  Lots 1 thru 4, 5 (N2), 6 (N2),
   7 (N2), 8 (N2);
Sec. 21:  Lots 4, 5 (N2);
T. 42 N., R. 70 W., 6th P.M., Wyoming
Sec. 31:  Lots 5 thru 20;
Sec. 32:  Lots 1 thru 16;
Sec. 33:  Lots 1 thru 16;

Sec. 34:  Lots 1 thru 16;
Sec. 35:  Lots 1 thru 16.

containing 4,224,225 acres, more or less, together with the right to
construct such works, buildings, plants, structures, equipment and appliances
and the right to use such on-lease rights-of-way which may be necessary and
convenient in the exercise of the rights and privileges granted, subject to
the conditions herein provided.


Sec. 1.  (a)  RENTAL RATE - Lessee shall pay lessor rental annually and in
advance for each acre or fraction thereof during the continuance of the lease
at the rate of $3.00 for each lease year.

(b)  RENTAL CREDITS - Rental shall not be credited against either production
or advance royalties for any year.

Sec. 2.  (a)  PRODUCTION ROYALTIES - The royalty shall be 12.5 percent of the
value of the coal as set forth in the regulations.  Royalties are due to
lessor the final day of the month succeeding the calendar month in which the
royalty obligation accrues.

(b)  ADVANCE ROYALTIES - Upon request by the lessee, the authorized officer
may accept, for a total of not more than 10 years, the payment of advance
royalties in lieu of continued operation, consistent with the regulations.
The advance royalty shall be based on a percent of the value of a minimum
number of tons determined in the manner established by the advance royalty
regulations in effect at the time the lessee requests approval to pay advance
royalties in lieu of continued operation.

Sec. 3.  BONDS - Lessee shall maintain in the proper office a lease bond in
the amount of $          .  The authorized officer may require an increase in
this amount when additional coverage is determined appropriate.

Sec. 4.  DILIGENCE - This lease is subject to the conditions of diligent
development and continued operation, except that these conditions are excused
when operations under the lease are interrupted by strikes, the elements, or
casualties not attributable to the lessee.  The lessor, in the public
interest, may suspend the condition of continued operation upon payment of
advance royalties in accordance with the regulations in existence at the time
of the suspension.  Lessee's failure to produce coal in commercial quantities
at the end of 10 years shall terminate the lease.  Lessee shall submit an
operation and reclamation plan pursuant to Section 7 of the Act not later
than 3 years after lease issuance.

The lessor reserves the power to assent to or order the suspension of the
terms and conditions of this lease in accordance with, inter alia, Section 39
of the Mineral Leasing Act, 30 U.S.C. 209.

Sec. 5.  LOGICAL MINING UNIT (LMU) - Either upon approval by the lessor of
the lessee's application or at the direction of the lessor, this lease shall
become an LMU or part of an LMU, subject to the provisions set forth in the

The stipulations established in an LMU approval in effect at the time of LMU
approval will supersede the relevant inconsistent terms of this lease so long

as the lease remains committed to the LMU.  If the LMU of which this lease is
a part is dissolved, the lease shall then be subject to the lease terms which
would have been applied if the lease had not been included in an LMU.

Sec. 6.  DOCUMENTS, EVIDENCE AND INSPECTION - At such times and in such form
as lessor may prescribe, lessee shall furnish detailed statements showing the
amounts and quality of all products removed and sold from the lease, the
proceeds therefrom, and the amount used for production purposes or
unavoidably lost.

Lessee shall keep open at all reasonable times for the inspection of any duly
authorized officer of lessor, the leased premises and all surface and
underground improvements, works, machinery, ore stockpiles, equipment, and
all books, accounts, maps, and records relative to operations, surveys, or
investigations on or under the leased lands.

Lessee shall allow lessor access to and copying of documents reasonably
necessary to verify lessee compliance with terms and conditions of the lease.

While this lease remains in effect, information obtained under this section
shall be closed to inspection by the public in accordance with the Freedom of
Information Act (5 U.S.C. 552).

at its own expense with all reasonable orders of the Secretary, respecting
diligent operations, prevention of waste, and protection of other resources.

Lessee shall not conduct exploration operations, other than casual use,
without an approved exploration plan.  All exploration plans prior to the
commencement of mining operations within an approved mining, permit area
shall be submitted to the authorized officer.

Lessee shall carry on all operations in accordance with approved methods and
practices as provided in the operating regulations, having due regard for the
prevention of injury to life, health, or property, and prevention of waste,
damage or degradation to any land, air, water, cultural, biological, visual,
and other resources, including mineral deposits and formations of mineral
deposits not leased hereunder, and to other land uses or users.  Lessee shall
take measures deemed necessary by lessor to accomplish the intent of this
lease term.  Such measures may include, but are not limited to, modification
to proposed siting or design of facilities, timing of operations, and
specification of interim and final reclamation procedures.  Lessor reserves
to itself the right to lease, sell, or otherwise dispose of the surface or
other mineral deposits in the lands and the right to continue existing uses
and to authorize future uses upon or in the leased lands, including issuing
leases for mineral deposits not covered hereunder and approving easements or
rights-of-way, Lessor shall condition such uses to prevent unnecessary or
unreasonable interference with rights of lessee as may be consistent with
concepts of multiple use and multiple mineral development.

shall: pay when due all taxes legally assessed and levied under the laws of
the State or the United States; accord all employees complete freedom of
purchase; pay all wages at least twice each month in lawful money of the
United States; maintain a safe working environment in accordance with
standard industry practices; restrict the workday to not more than 8 hours in
any one day for underground workers, except in emergencies; and take measures

necessary to protect the health and safety of the public.  No person under
the age of 16 years shall be employed in any mine below the surface.  To the
extent that laws of the State in which the lands are situated are more
restrictive than the provisions in this paragraph, then the State laws apply.

Lessee will comply with all provisions of Executive Order No. 11246 of
September 24, 1965, as amended, and the rules, regulations, and relevant
orders of the Secretary of Labor.  Neither lessee nor lessee's subcontractors
shall maintain segregated facilities.

Sec. 9.  (a)  TRANSFERS

x     This lease may be transferred in whole or in part to any person,
   association or corporation qualified to hold such lease interest.

   This lease may be transferred in whole or in part to another public body
   or to a person who will mine the coal on behalf of, and for the use of,
   the public body or to a person who for the limited purpose of creating a
   security interest in favor of a lender agrees to be obligated to mine
   the coal on behalf of the public body.

   This lease may only be transferred in whole or in part to another small
   business qualified under 13 CFR 121.

   Transfers of record title, working or royalty interest must be approved
   in accordance with the regulations.

(b)  RELINQUISHMENT - The lessee may relinquish in writing at any time all
rights under this lease or any portion thereof as provided in the
regulations.  Upon lessor's acceptance of the relinquishment, lessee shall be
relieved of all future obligations under the lease or the relinquished
portion thereof, whichever is applicable.

such time as all portions of this lease are returned to lessor, lessee shall
deliver up to lessor the land leased, underground timbering, and such other
supports and structures necessary for the preservation of the mine workings
on the leased premises or deposits and place all workings in condition for
suspension or abandonment.  Within 180 days thereof, lessee shall remove from
the premises all other structures, machinery, equipment, tools, and materials
that it elects to or as required by the authorized officer.  Any such
structures, machinery, equipment, tools, and materials remaining on the
leased lands beyond 180 days, or approved extension thereof, shall become the
property of the lessor, but lessee shall either remove any or all such
property or shall continue to be liable for the cost of removal and disposal
in the amount actually incurred by the lessor.  If the surface is owned by
third parties, lessor shall waive the requirement for removal, provided the
third parties do not object to such waiver.  Lessee shall, prior to the
termination of bond liability or at any other time when required and in
accordance with all applicable laws and regulations, reclaim all lands the
surface of which has been disturbed, dispose of all debris or solid waste,
repair the offsite and onsite damage caused by lessee's activity or
activities incidental thereto, and reclaim access roads or trails.

Sec. 11.  PROCEEDINGS IN CASE OF DEFAULT - If lessee fails to comply with
applicable laws, existing regulations, or the terms, conditions and

stipulations of this lease, and the noncompliance continues for 30 days after
written notice thereof, this lease shall be subject to cancellation by the
lessor only by judicial proceedings.  This provision shall not be construed
to prevent the exercise by lessor of any other legal and equitable remedy,
including waiver of the default.  Any such remedy or waiver shall not prevent
later cancellation for the same default occurring at any other time.

Sec. 12.  HEIRS AND SUCCESSORS-IN-INTEREST - Each obligation of this lease
shall extend to and be binding upon, and every benefit hereof shall inure to,
the heirs, executors, administrators, successors, or assigns of the
respective parties hereto.

Sec. 13.  INDEMNIFICATION - Lessee shall indemnify and hold harmless the
United States from any and all claims arising out of the lessee's activities
and operations under this lease.

Sec. 14.  SPECIAL STATUTES - This lease is subject to the Clean Water Act (33
U.S.C. 1252 et seq.), the Clean Air Act (42 U.S.C. 4274 et seq.), and to all
other applicable laws pertaining to exploration activities, mining operations
and reclamation, including the Surface Mining Control and Reclamation Act of
1977 (30 U.S.C. 1201, et seq.).


   See Attached Pages

Sec. 15.  SPECIAL STIPULATIONS (Cont'd.) -

Powder River Coal Company

Company or Lessee Name
/s/ Larry H. Fox
(Signature of Lessee)


August 4, 1998

          The United States of America


               (Signing Officer)



Title 18 U.S.C. Section 1001, makes it a crime for any person knowingly
and willfully to make to any department or agency of the United States
any false, fictitious or fraudulent statements or representations as
to any matter within its jurisdiction.

This form does not constitute an information collection as defined by 44
U.S.C. 3502 and therefore does not require OMB approval.


In addition to observing the general obligations and standards of performance
set out in the current regulations, the lessee shall comply with and be bound
by the following special stipulations.

These stipulations are also imposed upon the lessee's agents and employees.
The failure or refusal of any of these persons to comply with these
stipulations shall be deemed a failure of the lessee to comply with the terms
of the lease.  The lessee shall require his agents, contractors and
subcontractors involved in activities concerning this lease to include these
stipulations in the contracts between and among them.  These stipulations may
be revised or amended, in writing, by the mutual consent of the lessor and
the lessee at any time to adjust to changed conditions or to correct an


     (1) Before undertaking any activities that may disturb the surface of the
     leased lands, the lessee shall conduct a cultural resource intensive field
     inventory in a manner specified by the authorized officer of the BLM or of
     the surface managing agency, if different, on portions of the mine plan
     area and adjacent areas, or exploration plan area, that may be adversely
     affected by lease-related activities and which were not previously
     inventoried at such a level of intensity. The inventory shall be conducted
     by a qualified professional cultural resource specialist (i.e.,
     archeologist, historian, or historical architect, as appropriate), approved
     by the authorized officer of the surface managing agency (BLM, if the
     surface is privately owned), and a report of the inventory and
     recommendations for protecting any cultural resources identified shall be
     submitted to the Assistant Director of the Western Support Center of the
     Office of Surface Mining, the authorized officer of the BLM, if activities
     are associated with coal exploration outside an approved mining permit area
     (hereinafter called Authorized Officer), and the Authorized Officer of the
     surface managing agency, if different. The lessee shall undertake measures,
     in accordance with instructions from the Assistant Director, or Authorized
     Officer, to protect cultural resources on the leased lands. The lessee
     shall not commence the surface disturbing activities until permission to
     proceed is given by the Assistant Director or authorized officer.

     (2) The lessee shall protect all cultural resource properties within the
     lease area from lease-related activities until the cultural resource
     mitigation measures can be implemented as part of an approved mining and
     reclamation or exploration plan.

     (3) The cost of conducting the inventory, preparing reports, and carrying
     out mitigation measures shall be borne by the lessee.

     (4) If cultural resources are discovered during operations under this
     lease, the lessee shall immediately bring them to the attention of the
     Assistant Director or Authorized Officer, or the Authorized Officer of the
     surface managing agency, if the Assistant Director is not available. The
     lessee shall not disturb such resources except as may be subsequently
     authorized by the Assistant Director or Authorized Officer.

   Within two (2) working days of notification, the Assistant Director or
   Authorized Officer will evaluate or have evaluated any cultural
   resources discovered and will determine if any action may be required to
   protect or preserve such discoveries.  The cost of data recovery for
   cultural resources discovered during lease operations shall be borne by
   the surface managing agency unless otherwise specified by the Authorized
   Officer of the BLM or of the surface managing agency, if different.

   (5)  All cultural resources shall remain under the jurisdiction of the
   United States until ownership is determined under applicable law.

(b)  PALEONTOLOGICAL RESOURCES - If paleontological resources, either large
and conspicuous, and/or of significant scientific value are discovered during
construction, the find will be reported to the Authorized Officer
immediately.  Construction will be suspended within 250 feet of said find.
An evaluation of the paleontological discovery will be made by a BLM approved
professional paleontologist within five (5) working days, weather permitting,
to determine the appropriate action(s) to prevent the potential loss of any
significant paleontological value.  Operations within 250 feet of such
discovery will not be resumed until written authorization to proceed is
issued by the Authorized Officer.  The lessee will bear the cost of any
required paleontological appraisals, surface collection of fossils, or
salvage of any large conspicuous fossils of significant scientific interest
discovered during the operations.

(c)  MULTIPLE MINERAL DEVELOPMENT - Operations will not be approved which, in
the opinion of the Authorized Officer, would unreasonably interfere with the
orderly development and/or production from a valid existing mineral lease
issued prior to this one for the same lands.

(d)  OIL AND GAS/COAL RESOURCES - The BLM realizes that coal mining
operations conducted on Federal coal leases issued within producing oil and
gas fields may interfere with the economic recovery of oil and gas; just as
Federal oil and gas leases issued in a Federal coal lease area may inhibit
coal recovery.  BLM retains the authority to alter and/or modify the resource
recovery and protection plans for coal operations and/or oil and gas
operations on those lands covered by Federal mineral leases so as to obtain
maximum resource recovery.

(e)  RESOURCE RECOVERY AND PROTECTION - Notwithstanding the approval of a
resource recovery and protection plan (R2P2) by the BLM, lessor reserves the
right to seek damages against the operator/lessee in the event (i) the
operator/lessee fails to achieve maximum economic recovery (MER) (as defined
at 43 CFR 3480.0-5(21)) of the recoverable coal reserves or (ii) the
operator/lessee is determined to have caused a wasting of recoverable coal
reserves.  Damages shall be measured on the basis of the royalty that would
have been payable on the wasted or unrecovered coal.

The parties recognize that under an approved R2P2, conditions may require a
modification by the operator/lessee of that plan.  In the event a coalbed or
portion thereof is not to be mined or is rendered unminable by the operation,
the operator/lessee shall submit appropriate justification to obtain approval
by the authorized officer (AO) to leave such reserves unmined.  Upon approval
by the AO, such coalbeds or portions thereof shall not be subject to damages
as described above.  Further, nothing in this section shall prevent the
operator/lessee from exercising its right to relinquish all or portion of the
lease as authorized by statute and regulation.

In the event the AO determines that the R2P2, as approved, will not attain
MER as the result of changed conditions, the AO will give proper notice to
the operator/lessee as required under applicable regulations.  The AO will
order a modification if necessary, identifying additional reserves to be
mined in order to attain MER.  Upon a final administrative or judicial ruling
upholding such an ordered modification, any reserves left unmined (wasted)
under that plan will be subject to damages as described in the first
paragraph under this section.

Subject to the right to appeal hereinafter set forth, payment of the value of
the royalty on such unmined recoverable coal reserves shall become due and
payable upon determination by the AO that the coal reserves have been
rendered unminable or at such time that the operator/lessee has demonstrated
an unwillingness to extract the coal.

The BLM may enforce this provision either by issuing a written decision
requiring payment of the MMS demand for such royalties, or by issuing a
notice of non-compliance.  A decision or notice of non-compliance issued by
the lessor that payment is due under this stipulation is appealable as
allowed by law.

(f)  PUBLIC LAND SURVEY PROTECTION - The lessee will protect all survey
monuments, witness corners, reference monuments, and bearing trees against
destruction, obliteration, or damage during operations on the lease areas.
If any monuments, corners or accessories are destroyed, obliterated, or
damaged by this operation, the lessee will hire an appropriate county
surveyor or registered land surveyor to reestablish or restore the monuments,
corners, or accessories at the same location, using surveying procedures in
accordance with the "Manual of Surveying Instructions for the Survey of the
Public Lands of the United States."  The survey will be recorded in the
appropriate county records, with a copy sent to the Authorized Officer.

R2-FS-2820-13 (92)                                        Serial No. WYW136142

                             UNDER JURISDICTION OF
                           DEPARTMENT OF AGRICULTURE

The permittee/lessee must comply with all the rules and regulations of the
Secretary of Agriculture set forth at Title 36, Chapter II, of the Code of
Federal Regulations governing the use and management of the National Forest
System (NFS) when not inconsistent with the rights granted by the Secretary
of Interior in the permit.  The Secretary of Agriculture's rules and
regulations must be complied with for (1) all use and occupancy of the NFS
prior to approval of an exploration plan by the Secretary of the Interior,
(2) uses of all existing improvements, such as forest development roads,
within and outside the area permitted by the Secretary of the Interior, and
(3) use and occupancy of the NFS not authorized by an exploration plan
approved by the Secretary of the Interior.

All matters related to this stipulation are to be addressed

to:  District Ranger

at:  2250 East Richards Street, Douglas, WY  82633

Telephone:  307/358-4690

who is the authorized representative of the Secretary of Agriculture.


that the leased lands are examined to determine of cultural resources are
present and to specify mitigation measures.  Prior to undertaking any
surface-disturbing activities on the lands covered by this lease, the lessee
or operator, unless notified to the contrary by the FS, shall:

1.   Contact the FS to determine if a site specific cultural resource
     inventory is required.  If a survey is required, then:

2.   Engage the services of a cultural resource specialist acceptable to the FS
     to conduct a cultural resource inventory of the area of proposed surface
     disturbance. The operator may elect to inventory an area larger than the
     area of proposed disturbance to cover possible site relocation which may
     result from environmental or other considerations. An acceptable inventory
     report is to be submitted to the FS for review and approval at the time a
     surface disturbing plan of operation is submitted.

3.   Implement mitigation measures required by the FS and BLM to preserve or
     avoid destruction of cultural resource values. Mitigation may include
     relocation of proposed facilities, testing, salvage, and recordation or
     other protective measures. All costs of the inventory and mitigation will
     be borne by the lessee or operator, and all data and materials

   salvaged will remain under the jurisdiction of the U.S. Government as

The lessee or operator shall immediately bring to the attention of the FS and
BLM any cultural or paleontological resources or any other objects of
scientific interest discovered as a result of surface operations under this
lease, and shall leave such discoveries intact until directed to proceed by
FS and BLM.

FOREST SERVICE REGION 2 SENSITIVE SPECIES - The Forest Service is responsible
for assuring that the leased land is examined prior to undertaking any
surface-disturbing activities to determine effects upon any plant or animal
species listed as sensitive by the Regional Forester.  The findings of this
examination may result in some restrictions to the operator's plan or even
disallow use and occupancy that would lead to the listing of a sensitive
species under the Endangered Species Act of 1973.

ENDANGERED OR THREATENED SPECIES - The FS is responsible for assuring that
the leased land is examined prior to undertaking any surface-disturbing
activities to determine effects upon any plant or animal species listed or
proposed for listing as endangered or threatened, or their habitats.  The
findings of this examination may result in some restrictions to the
operator's plans or even disallow use and occupancy that would be in
violation of the Endangered Species Act of 1973 by detrimentally affecting
endangered or threatened species or their habitats.

The lessee/operator may, unless notified by the FS that the above
examinations are not necessary, conduct the examinations on the leased lands
at his discretion and cost.  These examinations must be done by or under the
supervision of a qualified resource specialist approved by the FS.
Acceptable reports must be provided to the FS identifying the anticipated
effects of a proposed action on endangered or threatened species or their
habitats, and the anticipated effects and impacts to Forest Service Region 2
Sensitive species that my occur or have habitat in the area.


By:  /s/ Larry H. Fox


               (Section 2(a)(2)(A) of MLA)

      POWDER RIVER COAL COMPANY, (the "Company")
         (Company Name)

hereby certifies as follows:

      That neither the Company nor any entity controlled by or under

common control with the Company holds or has held for 10 years any Federal

coal lease from which coal is not being produced in commercial quantities or

which is not otherwise in compliance with Section 2(a)(2)(A) of the Mineral

Leasing Act.

      Dated this 4th day of August, 1998.

     (Name of Company)

By /s/ Larry H. Fox