COAL

Coal

Bituminous coal seams are found on NZ's Cibola, McKinley, San Juan, and Navajo Tracts. The coal is believed to be low sulphur, boiler fuel grade. Most of this coal is found on the McKinley Tract where it was early noted in outcrops. (Cleary, Gibson and Dilco coal seams identified.) Reserve estimates of 160 million tons in-place were made from studies of these outcrops. Subsequent subsurface drilling by several experienced coal companies (Peabody and AMAX most notably) refined these early estimates over part of the acreage. NZ enjoyed leasehold income in excess of $300,000 from this coal exploration activity in the 1970s, but no practical coal deposits were ever located. However, a very small strip coal mine -- the Crown Coal Mine -- was actually permitted by Gifford-Hill (now a Hansen company) on the northeastern corner of the McKinley Tract. No dirt was ever moved and this 2 million ton reserve (NZ's reserves, 50 foot overburden) mine was abandoned in 1991 for lack of economics.

Nowhere have seams of coal over seven feet thick been located, and typically, the seams are less than three feet. Except for the Crown Coal Mine

vicinity, the coals are capped by competent overburden which precludes low cost stripping. Moreover, the surface is in Indian ownership and the area has no close railroad access at present. (Star Lake spur someday). Also, there are over 6 billion tons of thicker, more accessible coals in the regional vicinity.

NZ's shallow coal seams, typically dissected by canyons, are not considered prospective for coal seam gas. Some coal seams (Menefee and Dakota) do occur but have nowhere found to be thick enough to sources appreciable amounts of natural gas.

The coal occurrences were better defined by drilling in the frantic exploration days of former President Jimmy Carter's "Energy Crisis". One isolated coal deposit of only 2 million tons of strippable coal was actually permitted but never mined.

The conclusion of A.I. Levorsen in his report to NZ of June 3, 1953, still holds true today: "At present, this (NZ coal) has little value and probably will not compete normally with other New Mexico and Arizona deposits for some time to come."

References: NZ Railroad Title, 1992; Chronicle of New Mexico and Arizona Land Company, 11-15-91; Historic Land Grant Assets, 6-1-99; Liquidation Values "Historic Assets", 1998.

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