Common use of Allowable Deductions Clause in Contracts

Allowable Deductions. It is expressly understood and agreed that none of Lessee’s mining or production costs, including but not limited to costs for materials, labor, overhead, distribution, transportation within the mine permit area prior to the point of sale, loading, crushing, sizing, screening, or general and administrative activities, may be deducted in computing Lessor’s royalty. All such costs shall be entirely borne by Lessee and are anticipated by the rate of royalty set forth in this Lease. In the event that the point of sale for coal produced from this Lease is located outside the mine permit area boundary, Lessee may deduct the reasonable, actual costs of transportation of such coal from the mine permit area boundary to the point of sale from gross proceeds in computing Lessor’s royalty; provided, however, that transportation deductions for coal transported by Lessee, Lessee’s affiliates, or by non-arm’s-length contract are subject to review and modification by Lessor. Lessee shall be allowed to deduct its actual, reasonable washing and treatment costs from gross proceeds in computing Lessor’s royalty; provided, however, that, upon Lessor’s request Lessee shall provide to Lessor appropriate justification to demonstrate that Lessee’s costs are reasonable.