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Defendant Western Fuels — Colorado, LLC ( "WFC "), by and through its attorneys, for its <br />Counterclaims, states as follows: <br />PARTIES, JURISDICTION AND VENUE <br />1. WFC is a Colorado limited liability company with a principal place of business in <br />Westminster, Colorado. WFC operates the New Horizon Mine located in Montrose County, <br />Colorado. <br />2. Counterclaim defendants Frank Morgan, Mary Lou Morgan, Michael Morgan, <br />and JoEllen Turner are all residents of Montrose County. <br />3. Jurisdiction and venue are proper in this Court since these Counterclaims involve <br />real property and instruments affecting real property located in Montrose County, Colorado. <br />BACKGROUND FACTS <br />4. In 1992, WFC purchased Coal Mining Permit C- 1981 -008 (the "Permit ") and <br />soon thereafter began mining operations in Montrose County near Nucla, Colorado. <br />5. WFC's activities pursuant to the Permit are administered by the Colorado <br />Division of Mining, Reclamation and Safety (the "Division ") and its supervisory board, the <br />Mined Land Reclamation Board (the "Board "). The federal Office of Surface Mining ( "OSM ") <br />exercises an oversight role. <br />6. Together, the Division and the Board have primary jurisdiction to implement the <br />regulation of coal mining in Colorado pursuant to delegated federal authority under the federal <br />Surface Mining Control and Reclamation Act ( "SMCRA "). The state statutes and regulations <br />administered by the Division and the Board are often referred to as the Colorado Coal Program. <br />7. On September 10, 1998, WFC as Lessee entered a Coal Mining Lease with Frank <br />and Mary Lou Morgan as Lessor. The Coal Mining Lease pertains to property owned by Frank <br />and Mary Lou Morgan and located in Montrose County, Colorado (the "Property" or the <br />"Morgan Property "). <br />8. The Coal Mining Lease was negotiated over a three -year period during which <br />Frank and Mary Lou Morgan were represented by counsel. Frank and Mary Lou Morgan sought, <br />and obtained, several concessions from WFC and alterations to the terms of the Coal Mining <br />Lease through their negotiation efforts. <br />9. A memorandum of the Coal Mining Lease was recorded in the official records of <br />Montrose County on September 11, 1998 as document number 843800. <br />10. The term of the Coal Mining Lease lasts until reclamation of the Property is <br />complete "per the requirements of the mining permit covering the Property." This is anticipated <br />to occur in approximately the year 2022. <br />(00026036.1) 2 <br />