D. Within the Upper Morgan Run watershed above North Branch, there is over one hundred acres of abandoned surface and underground mines on various coal seams. These past surface and underground mining operations have resulted in numerous surface discharges and baseflow groundwater discharge of acid mine drainage that have significantly degraded the quality of Upper Morgan Run. Rain and snowmelt that percolate through abandoned surface mine pits, high-sulfur spoils, and coal refuse piles eventually discharge into Upper Morgan Run as acidic and mineralized drainage. Also, tens of acres of abandoned underground mines have left freely draining voids where groundwaters are intercepted and transmitted to the surface as acid mine drainage.

E. Upper Morgan Run does not meet the in‑stream water quality requirements in 25 Pa. Code Chapter 93 because the numerous discharges of acid mine drainage from abandoned surface and underground mines are uncontrolled and untreated.

F. Remining is the re-affecting of previously mined areas by surface mining methods to extract remaining coal reserves. Remining, when implemented with the appropriate best management practices (“BMPs”), can be an effective way of abating or reducing acid mine drainage and improving water quality.

G. Section 1396.4f of the Surface Mining Act, 52 P.S. §1396.4f, contains the substance of the Department’s existing program for the remining of previously affected areas. This section of the Act was added in 1984. This section of the Act, along with the implementing regulations, 25 Pa. Code §§87.201-209, are known as Subchapter F.

H. Prior to the formal statutory adoption of Subchapter F and the approval by the Office of Surface Mining of its incorporation into Pennsylvania’s primacy program, the Department entered into a number of Consent Order and Agreements that contained Subchapter F-type provisions.

I. The existing Subchapter F program has been successful in providing incentives for remining and improving water quality throughout Pennsylvania. Since its inception, over 300 Subchapter F permits have been issued. Of these 300‑plus permits, only 6, or less than 2 percent, have incurred long-term treatment liability or ended in bond forfeiture, a rate which is lower than conventional mining permits. As time has passed, the Department has decided that there are additional ways of providing remining incentives and creating possibilities for abating or reducing acid mine drainage and improving water quality.

J. “Reclaim PA” is a program established by Governor Tom Ridge to encourage reclamation of abandoned mined lands in Pennsylvania. The program consists of a series of incentives to encourage remining of abandoned mine lands as one of the most effective means of achieving reclamation. One of these incentives was to add flexibility to Pennsylvania’s Subchapter F permitting program, to further encourage remining in areas which may result in improved water quality.

K. Project XL is a U.S. Environmental Protection Agency ("EPA") initiative to test the extent to which regulatory flexibility, and other innovative environmental approaches, can be implemented to achieve both superior environmental performance and reduced economic and administrative burdens. On September 22, 2000 PADEP and EPA signed a Project XL Final Project Agreement to explore a new approach to encourage the remining and reclamation of abandoned coal mine sites. The approach would be based on compliance with in-stream pollutant concentration limits and implementation of best management practices ("BMPs"), instead of National Pollutant Discharge Elimination System ("NPDES") numeric effluent limitations measured at individual discharge points. This XL Project will provide for a test of this approach in up to eight watersheds with significant acid mine drainage ("AMD") pollution.

L. River Hill applied for a surface coal mining permit for a site within the
Upper Morgan Run watershed in Bigler Township, Clearfield County, Surface Mining Permit #17990103, Kasubick Operation. The Kasubick permit was issued for 228.8 acres to mine the Clarion, Lower Kittanning, Middle Kittanning, Upper Kittanning, Lower Freeport, and Upper Freeport coal seams. The Kasubick permit includes seven (7) preexisting pollutional discharges that drain to Upper Morgan Run or its tributary, emanating from areas within the Kasubick permit boundary or from areas that are hydrologically connected to the proposed mining within the permit. Six (6) of these seven preexisting pollutional discharges are associated primarily with mining on the Kittanning coal seams and drain to Upper Morgan Run from the northeastern portion of the Kasubick permit area. These discharges are identified as MP5, MP7A, MP8A, MP9A, MP13C, and MP14C, and they have been combined arithmetically in the Surface Mining Permit as Hydrologic Unit 1. The seventh preexisting pollutional discharge is identified as MP23, and it drains from an abandoned Lower Freeport underground mine at the headwaters of an unnamed tributary to Upper Morgan Run within the southeastern permit area. There are five other distinct pollutional discharges associated with mining on the Kittanning coal seams and which drain to Upper Morgan Run. They are MP6, MP6A, MP6B, MP6C, and MP14B, and they have been documented and sampled for a one-year baseline period. However, they will not be part of Hydrologic Unit 1, and they will not be routinely monitored as part of the regular SubChapter F requirements nor under the provisions of this Project XL Consent Order and Agreement. They are considered to be minor discharges relative to the six other Kittanning discharges that serve as individual Subchapter F monitoring points. That is, the summation of net acid loading from the five minor discharges is usually less than 5 percent of the total net acid loading from all eleven Kittanning discharges combined. Finally, there are two additional Subchapter F discharges associated with the Lower Freeport underground mine, MP21 and MP22, but these discharges drain to the south toward Alexander Run, and that watershed is not part of this Project XL Consent Order and Agreement. These discharges are considered under Module 26 of the Surface Mining Permit application package and Part A, Section I, Subsection D of Surface Mining Permit #17990103.

M. Prior to the issuance of the Kasubick permit and the entry of this Consent Order and Agreement, neither River Hill nor any officer, principal shareholder, agent, partner, associate, parent corporation, contractor or subcontractor, or any related party has any legal responsibility or liability as an operator for treating the pollutional discharges within the Upper Morgan Run watershed, or has any statutory responsibility or liability for reclaiming the abandoned surface and underground mines there.

N. The water quality of Upper Morgan Run is monitored at a point referred to as MP2, located approximately 1.75 miles upstream of the confluence of Upper Morgan Run and North Branch (see Exhibits 6.1 and 6.2 of River Hill’s Surface Mining Permit #17990103 application package). Water quality samples collected from December 19, 1999 through July 16, 2002 represent baseline water quality conditions. The baseline water quality data (concentrations) and statistical summary for MP2 are provided in the tables attached as Exhibit 1(a) and Exhibit 1(b), respectively.

O. The Department and River Hill have had several discussions regarding the use of Subchapter F to encourage remining and to abate acid mine drainage in Upper Morgan Run. Both parties agree that it is in the public interest to encourage abatement-oriented remining in the Upper Morgan Run watershed and that additional remining can best be accomplished through the application of Subchapter F-like conditions to the entire watershed, rather than to individual permits and discharges.

P. In‑stream water quality monitoring at MP2 is the most effective way to measure the performance of AMD remediation activities within the Upper Morgan Run watershed as the water quality impacts of all remining, reclamation, and abatement activities are manifest at this point. The water quality baseline uses concentration, rather than loading data because: 1) In-stream concentration data are more stable than load data, rendering a higher quality statistical summary; 2) concentration data are much easier and less costly to collect than load data; 3) pollution loads from individual discharges are manifested in the in-stream concentration; and 4) loading data in large streams tend to be dominated by flow, which makes it difficult and impractical to monitor changes in in-stream quality which is the principal goal of AMD-abatement oriented remining.

Q. The Upper Morgan Run Watershed is well-suited for the application of an alternative remining authorization for the following reasons: 1) It is currently not meeting in-stream water quality standards; 2) remining, employing the appropriate best management practices, is likely to result in an overall improvement of the in-stream water quality and reduce the total maximum daily load of mine drainage pollutants; 3) significant reminable coal reserves are present in the watershed; 4) there is significant acreage in the watershed in need of surface reclamation; and 5) there are numerous sources of mine drainage entering the watershed, making monitoring at each discharge point less practical than in-stream performance monitoring.

Order

After full and complete negotiation of all matters set forth in this Consent Order and Agreement and upon mutual exchange of covenants contained herein, the parties desiring to avoid litigation and intending to be legally bound, it is hereby ORDERED by the Department and AGREED to by River Hill as follows:

1. Authority. This Consent Order and Agreement is an Order of the Department authorized and issued pursuant to Section 5 of the Clean Streams Law, 35 P.S. § 691.5; and Section 1917-A of the Administrative Code, supra.

2. Findings.

a. River Hill agrees that the findings in Paragraphs A through Q are true and correct and, in any matter or proceeding involving River Hill and the Department, River Hill shall not challenge the accuracy or validity of these findings.

b. The parties do not authorize any other persons to use the findings in this Consent Order and Agreement in any matter or proceeding.

3. Effect of Agreement. So long as River Hill complies with this ~~This~~Consent Order and Agreement, the Department will enforce the terms and conditions of ~~supersedes~~ Part A, Section I, Subsection D (Preexisting Pollutional Discharges), of Surface Mining Permit #17990103, in accordance with Paragraphs 3 through 20 of this Agreement.~~except as expressly set forth in this Agreement~~ If River Hill breaches this Consent Order and Agreement and/or fails to implement the approved pollution abatement plan (Module 26), ~~then~~ then the Department will enforce the terms and conditions of PPart A, Section I, Subsection D of Surface Mining Permit No. 17990103 as those terms and conditions are currently set forth in that permit. ~~shall automatically be reinstated~~.

4. Monitoring of Preexisting Pollutional Discharges. At the initiation of mining activities, the individual preexisting pollutional discharges at monitoring points MP5, MP7A, MP8A, MP9A, MP13C, and MP14C, comprising Hydrologic Unit 1, and MP23 shall be sampled every calendar quarter. Sample results shall be submitted to the Moshannon District Office within 30 days of the end of the applicable quarter.

5. Monitoring of In‑stream Point. River Hill will conduct water quality monitoring twice per month of Upper Morgan Run at MP2 for pH, specific conductance, iron, manganese, aluminum, sulfate, acidity, alkalinity, and total suspended solids. Monitoring Point MP2 is located on Upper Morgan Run approximately 1.75 miles above the confluence with North Branch. Water quality analyses for MP2 shall be submitted quarterly, no later than 30 days after the end of the applicable quarter.

6. Determination of Significant Quality Degradation in Upper Morgan Run

Significant degradation of median in‑stream water quality will have occurred if either of the two following conditions has been met:

a. If six or more consecutive samples at MP2 exceed the 95% tolerance limit for net acidity, iron and/or manganese concentrations (Item No. 4 of the Baseline Concentration Statistical Summary in the table attached as Exhibit 1(b)); or

b. If statistical analysis of the MP2 data from any water year defined as October 1 through September 30 reveals that the difference between the median concentrations for net acidity, iron and/or manganese as compared to the premining baseline, is statistically significant as determined by a comparison of the approximate 95% confidence levels above the median (Item No. 5 of the Baseline Concentration Statistical Summary in the table attached as Exhibit 1(b)).

7. Degradation of Preexisting Pollutional Discharge Quality

If significant degradation of the median in‑stream water quality at MP2 occurs following the execution of this Agreement, as defined by Paragraph 6 above, then within 30 days of receiving notice by the Department, River Hill shall examine the degraded parameters (only net acidity, iron, and manganese are applicable) of the individual preexisting pollutional discharges as specified below:

a. Determine the current pollutional loading emanating from Hydrologic Unit 1 (comprised of preexisting pollutional discharges MP5, MP7A, MP8A, MP9A, MP13C, and MP14C) and MP23. The current pollutional loading of the degraded parameter(s) defined by Paragraph 6 for each discharge shall be determined using loading rates from the four most recent quarters. This determination will be made using an n-value equal to the baseline n-value, regardless of the number of samples used.

b. Compare the current pollutional load of the degraded parameter(s) defined by Paragraph 6 with the baseline pollutional load established in Modules 26.5(B) and 26.5(C) of Surface Mining Permit #17990103. If statistical analysis of the data from the four most recent quarters reveals that any increase in the median load for the degraded parameter(s), as compared to the premining baseline, is statistically significant, as determined by a comparison of the approximate 95% confidence intervals about the median (Item No. 5 of Module 26.5(C) and listed in Table D2 of Surface Mining Permit #17990103, Part A, Section I, Subsection D.5), then the pollutional load has been significantly increased. Where any preexisting pollutional discharge, prior to remining, met Best Available Treatment (BAT) limits for iron or manganese, the current parameter concentration will be compared to the BAT limits as set forth in 25 PA Code Chapter 87.102. Exceeding the BAT limits will constitute a significant degradation.

c. If the determination in Paragraph 7b above indicates increased pollutional loading of the degraded parameter(s) defined by Paragraph 6 from one or more of the preexisting discharges, River Hill shall implement either of the options described in Subparagraphs 7.c.i and 7.c.ii below, or a combination of these two options.

(i) Commence treatment of the affected discharges necessary to meet the effluent limitations of the applicable parameter(s) established in Table D3 of Part A, Section I, Subsection D.6 of Surface Mining Permit #17990103 within 30 days, unless River Hill is able to affirmatively demonstrate to the satisfaction of the Department within 30 days that the increase in pollutional loading has been caused by factors not attributable to River Hill’s mining operation;

(ii) Cause other measures to be taken within the watershed that improve water quality at MP2 sufficient to restore stream water quality to the baseline level as defined by Exhibit 1(b), statistical summary for MP2. If these measures will take longer than 90 days to implement, River Hill shall provide interim treatment under Subparagraph 7.c.i above until such time as the remedial measures under this Subparagraph 7.c.ii can be implemented.

d. If the determination in Paragraph 7b above does not indicate increased pollutional loading of the degraded parameter(s) defined by Paragraph 6 of one or more of the preexisting discharges, and the Department determines that significant degradation of MP2 has been caused by River Hill’s mining operations, the Department reserves the right, in addition to its other remedies, to require River Hill to comply with paragraph 7.c.

8. Applicability. The provisions of this Consent Order and Agreement apply only to Hydrologic Unit 1 (comprised of preexisting pollutional discharges MP5, MP7A, MP8A, MP9A, MP13C, and MP14C) and MP23. Part A, Section I, Subsection D of Surface Mining Permit #17990103 shall apply to discharges MP21 and MP22. Discharges MP21 and MP22 drain toward Alexander Run, which is not a tributary to Upper Morgan Run.

9. Additional Remedies.

a. In the event River Hill fails to comply with any provision of this Consent Order and Agreement, the Department may, in addition to the remedies prescribed herein, pursue any remedy available for a violation of an order of the Department, including an action to enforce this Consent Order and Agreement.

b. The remedies provided by this Paragraph are cumulative and the exercise of one does not preclude the exercise of any other. The failure of the Department to pursue any remedy shall not be deemed to be a waiver of that remedy. The payment of a stipulated civil penalty, however, shall preclude any further assessment of civil penalties for the violation for which the stipulated civil penalty is paid.

10. Reservation of Rights. The Department reserves the right to require additional measures to achieve compliance with applicable law. River Hill reserves the right to challenge any action which the Department may take to require those measures.

11. Liability of Operator. River Hill shall be liable for any violations of the Consent Order and Agreement, including those caused by, contributed to, or allowed by its officers, agents, employees, or contractors. River Hill also shall be liable for any violation of this Consent Order and Agreement caused by, contributed to, or allowed by its successors and assigns.

12. Transfer of Site.

a. The duties and obligations under this Consent Order and Agreement shall not be modified, diminished, terminated or otherwise altered by the transfer of any legal or equitable interest in the Kasubick mine (SMP #17990103) or any part thereof.

b. If River Hill intends to transfer any legal or equitable interest in the Kasubick mine (SMP #17990103) or any part thereof which is affected by this Consent Order and Agreement, River Hill shall serve a copy of this Consent Order and Agreement upon the prospective transferee of the legal and equitable interest at least thirty (30) days prior to the contemplated transfer and shall simultaneously inform the District Office of the Department of such intent.

c. The Department in its sole discretion may agree to modify or terminate River Hill’s duties and obligations under this Consent Order and Agreement upon transfer of the Kasubick mine (SMP #17990103). River Hill waives any right that it may have to challenge the Department's decision in this regard.

13. Correspondence with Department. All correspondence with the Department concerning this Consent Order and Agreement shall be addressed to:

Department of Environmental Protection

Moshannon District Office

186 Enterprise Drive

Phillipsburg PA 16866

Phone (814) 342-8200 and Fax (814)342-8216

14. Correspondence with River Hill. All correspondence with River Hill concerning this Consent Order and Agreement shall be addressed to:

Harry Hanchar, President

River Hill Coal Company, Inc.

P.O. Box 141

Kylertown, PA 16847

Phone (814) 345-5642 and Fax (814) 345-6765

River Hill shall notify the Department whenever there is a change in the contact person's name, title, or address. Service of any notice or any legal process for any purpose under this Consent Order and Agreement, including its enforcement, may be made by mailing a copy by first class mail to the above address.

15. Severability. The paragraphs of this Consent Order and Agreement shall be severable and should any part hereof be declared invalid or unenforceable, the remainder shall continue in full force and effect between the parties.

16. Entire Agreement. This Consent Order and Agreement shall constitute the entire integrated agreement of the parties. No prior or contemporaneous communications or prior drafts shall be relevant or admissible for purposes of determining the meaning or extent of any provisions herein in any litigation or any other proceeding.

17. Attorney Fees. The parties shall bear their respective attorney fees, expenses and other costs in the prosecution or defense of this matter or any related matters, arising prior to execution of this Consent Order and Agreement.

18. Modifications. No changes, additions, modifications, or amendments of this Consent Order and Agreement shall be effective unless they are set out in writing and signed by the parties hereto.

19. Titles. A title used at the beginning of any paragraph of this Consent Order and Agreement may be used to aid in the construction of that paragraph, but shall not be treated as controlling.

20. Decisions under Consent Order. Any decision which the Department makes under the provisions of this Consent Order and Agreement is intended to be neither a final action under 25 Pa.Code §1021.2, nor an adjudication under 2 Pa. C.S. §101. Any objection which River Hill may have to the decision will be preserved until the Department enforces this Consent Order and Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Consent Order and Agreement to be executed by their duly authorized representatives. The undersigned representatives of River Hill certify under penalty of law, as provided by 18 Pa.C.S. § 4904, that they are authorized to execute this Consent Order and Agreement on behalf of River Hill; that River Hill consents to the entry of this Consent Order and Agreement as a final ORDER of the Department; and that River Hill hereby knowingly waives its rights to appeal this Consent Order and Agreement and to challenge its content or validity, which rights may be available under Section 4 of the Environmental Hearing Board Act, the Act of July 13, 1988, P.L. 530, No. 1988-94, 35 P.S. § 7514; the Administrative Agency Law, 2 Pa.C.S. § 103(a) and Chapters 5A and 7A; or any other provision of law. Signature by River Hill’s attorney certifies only that the agreement has been signed after consulting with counsel.

FOR RIVER HILL COAL COMPANY, INC. FOR THE COMMONWEALTH OF

PENNSYLVANIA, DEPARTMENT OF

ENVIRONMENTAL PROTECTION

_______________________________ _______________________________

Harry Hanchar Michael W. Smith

President District Mining Manager

_______________________________ ________________________________

Attorney for River Hill Coal Co., Inc. Martin H. Sokolow, Jr.

Regional Counsel