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Mike Boulay -2- January 6, 2014 DRMS: South Fan (0.9 acres) Page 5 "During the inspection we noted the size of the South Fan reclaimed area (Photograph No. 9). We had a discussion in the field that is seemed larger than 0.9 acres. SCC will need to confirm the size of the South Fan reclaimed area of 0.9 acres. SCC: Based on a scaled version of Google Earth, we feel the reported disturbed area of 0.9 acres at the South Fan is accurate. DRMS: Other (Exploration Drill Holes) Page 6 "Access to these sites is very difficult and due to recent storms through the area the roads were heavily rutted and Cottonwood Creek was deemed impassable at the time of the bond release inspection. Only three of the ten drill hole exploration sites were accessible. These included PCC -04, PCC -05 and PCC -01. Photographs of the PCC -04 and PCC -01 reclaimed drill pads are shown on Photograph No's 11 and 12. The access road to PCC -05 is shown in Photo No. 13. The reclamation looked very good at each of these three locations that were accessible and no problems were noted. The DRMS will exclude the exploration sites PCC -02, PCC -03 and PCC -06 through PCC -10 from this bond release and will make an attempt when weather permits to access these locations." SCC: Snowcap disagrees with the DRMS in their assertion that exploration sites PCC - 02, PCC -03 and PCC -06 through PCC -10 be excluded from the current bond release application for the sole reason of not being inspected. When the decision was made not to inspect these areas, Snowcap was lead to believe that they would be flown by the Division in November, and that would be sufficient inspection for the bond release requirement. Three of the ten sites were accessed during the inspection, and as mentioned in the report, "the reclamation looked very good at each of these three locations....." All ten of the exploration sites were reclaimed and seeded prior to 1987, giving them over 25 years of growth. The exploration sites were included in the "2011 & 2012 Phase III Bond Release Evaluation — Years 1 & 2" performed by Cedar Creek Associates, Inc. This vegetation evaluation report, which is the permit requirement for Snowcap Coal Company, concluded that these, and all other sampled areas, substantially exceed and pass all standards and criteria required for bond release. It should also be noted that all exploration sites and associated access roads are located on BLM surface properties. By its letter to the Operator dated January 7, 1998, the BLM released the Operator from liability to the BLM for reclamation on the access roads and drill pads. DRMS: Reclamation Success — Rule 4.15, Rule 3 — Page 7 "SCC has complied with all permit conditions and has met the requirements for those acreages listed on Table 2 being requested for Phase II & III bond release with exception of a few areas where there are bare areas or a general lack of vegetation. These areas may be excluded from Phase II & III bond release pending further consideration which will be detailed in our forthcoming Proposed Decision and Findings of Compliance for bond release application SL -8." And Revegetation — Rule 4.15 — Page 7 & 8 "The DRMS concurs with the findings made by Cedar Creek; however as previously discussed several small bare areas or poorly vegetated areas were noted during the inspection. These include 2.6 acres at reclaimed Pond 7, 2 West Portals (north), the berm along Diversion D -D10, berms along the permanent drainage channel at the North Decline, and approximately 0.5 acres along the southeast edge of the North Portal area adjacent to the Highline Canal." SCC: Isolated bare areas are expected in reclaimed areas. The sparse vegetation in bare areas is accounted for in vegetation evaluations. As long as there are just a few bare areas, the average vegetation measurements for a sampling unit are not adversely affected. The