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Form 3400 -I2 FORM APPROVED
<br />(September 2010) UNITED STATES OMB NO 1004 -0073
<br />DEPARTMENT OF THE INTERIOR Expires June 30, 2013
<br />BUREAU OF LAND MANAGEMENT Serial Number COC -74813
<br />COAL LEASE
<br />PART 1. LEASE RIGHTS GRANTED
<br />This lease on June 1. 2013 entered into by and between the UNITED STATES OF AMERICA, hereinafter called lessor, through the Bureau of Land Management
<br />(BLM), and
<br />Blue Mountain Energy, Inc.
<br />3607 County Road #65
<br />Rangely, CO 81648
<br />hereinafter called lessee, is effective (to be determined) for a period of 20 years and for so long thereafter as coal is produced in commercial quantities from the
<br />leased lands, subject to readjustment of lease terms at the end of the 20th lease year and each 10 -year period thereafter.
<br />Sec. L This lease is issued pursuant and subject to the terms and provisions of the:
<br />The Mineral Leasing Act of 1920, as amended, 30 U.S.C. 181 - 287: or
<br />The Mineral Leasing Act for Acquired Lands, 30 U.S.C. 351 — 359;
<br />and to the regulations and formal orders of the Secretary of the Interior which are now or hereafter in force, when not inconsistent with the express and specific
<br />provisions herein.
<br />Sec. 2. Lessor, in consideration of any bonuses, rents, and royalties to be paid, and the conditions and covenants to be observed as herein set forth, hereby grants and
<br />leases to lessee the exclusive right and privilege to drill for, mine, extract, remove, or otherwise process and dispose of the coal deposits in, upon, or under the
<br />following described lands:
<br />See Legal Description Addendum
<br />containing 3,154.76 acres, more or less, together with the right to construct such works, buildings, plants, structures, equipment and
<br />ap ^liances and the right to use such on -lease rights -of -way which may be necessary and convenient in the exercise of the rights and
<br />I :ges granted, subject to the conditions herein provided.
<br />PART II. TERMS AND CONDITIONS
<br />Sec. 1. (a) RENTAL RATE - Lessee must pay lessor rental annually and in
<br />advance for each acre or fraction thereof during the continuance of the lease at the
<br />rate of $3.00 for each lease year.
<br />(b) RENTAL. CREDITS - Rental will not be credited against either production or
<br />advance royalties for any year.
<br />Sec. 2. (a) PRODUCTION ROYALTIES - The royalty will be 8.0 percent of the
<br />value of the underground coal as set forth in the regulations. Royalties are due to
<br />lessor the final day of the month succeeding the calendar month in which the
<br />royalty obligation accrues.
<br />(b) ADVANCE ROYALTIES - Upon request by the lessee, the BLM may accept,
<br />for a total of not more than 20 years, the payment of advance royalties in lieu of
<br />continued operation. consistent with the regulations. The advance royalty will be
<br />based on a percent of the value of a minimum number of tons determined in the
<br />manner established by the advance royalty regulations in effect at the time the
<br />lessee requests approval to pay advance royalties in lieu of continued operation.
<br />Sec. 3. BONDS - Lessee must maintain in the proper office a lease bond in the
<br />amount of $1,288,000. The BLM may require an increase in this amount when
<br />additional coverage is determined appropriate.
<br />Sec. 4. DILIGENCE - This lease is subject to the conditions of diligent
<br />,ivvPlnnment and continued oneration, except that these conditions are excused
<br />(Continued on page 2)
<br />when operations under the lease are interrupted by strikes, the elements, or
<br />casualties not attributable to the lessee. The lessor, in the public interest, may
<br />suspend the condition of continued operation upon payment of advance
<br />royalties in accordance with the regulations in existence at the time of the
<br />suspension. Lessee's failure to produce coal in commercial quantities at the
<br />end of 10 years will terminate the lease. lessee must submit an operation and
<br />reclamation plan for the BLM's approval pursuant to 30 U.S.C. 207(c) prior
<br />to conducting any development or mining operations or taking any other
<br />action on a leasehold which might cause a significant disturbance of the
<br />environment.
<br />The lessor reserves the power to assent to or order the suspension of the
<br />terms and conditions of this lease in accordance with, inter alia, Section 39 of
<br />the Mineral Leasing Act, 30 U.S.C. 209.
<br />5. LOGICAL MINING UNIT (LMU) - Either upon approval by the lessor of
<br />the lessee's application or at the direction of the lessor, this lease will become
<br />an LMU or part of an LMU, subject to the provisions set forth in the
<br />regulations.
<br />The stipulations established in an LMU approval in effect at the time of LMU
<br />approval will supersede the relevant inconsistent terms of this lease so long
<br />as the lease remains committed to the LMU. If the LMU of which this lease
<br />is a part is dissolved, the lease will then be subject to the lease terms which
<br />would have been applied if the lease had not been included in an LMU.
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