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August 17, 2016 <br /> Mr. Peter Hays R��r <br /> State of Colorado <br /> Division of Reclamation Mining and Safety <br /> 1313 Sherman Street, Room 215 AUG 7 8?416 <br /> Denver CO 80203 �'(',cw� U1 ` DIVISION <br /> MIk rG&AFAMgT1O/y <br /> Re. Transfer of DRMS Permit (S&H Mines Permit No. M-2000-158) �' <br /> Dear Peter, <br /> It was a pleasure to meet with you on July 27, 2016 and we appreciate your insight into the permit <br /> transfer process. As we discussed, Gilcrest Reservoir LLC ("Gilcrest") is the current permit holder and the <br /> Division of Reclamation, Mining, and Safety ("DRMS")continues to hold a Gilcrest reclamation bond on <br /> the property. Scout Investments ("Scout") has purchased the property(the "Milliken Property") and the <br /> mine permit (M-2000-158)from Gilcrest and has posted a bond with the DRMS. Based on our internal <br /> agreements,we will not mine the entire property, are responsible for reclamation of lands already <br /> disturbed by mining, and will need to modify this permit to accommodate these plans and changes. <br /> The Gilcrest Permit to Mine (and reclamation plan) as developed by Civil Resources, LLC in 2010 and <br /> approved by your office in February of 2011 includes mining within 200 feet of a number of structures <br /> and the relocation of several pipelines.We have a copy of a structure agreement between Gilcrest and <br /> Noble Energy dated June 29, 2010,where Gilcrest agrees to compensate Noble Energy for any damages <br /> to their structures arising from their Mine Plan. We assume DRMS has a fully executed version on file. <br /> We understand from your office that Scout cannot affect a transfer of this permit from Gilcrest to <br /> ourselves without either structure agreements in place or an Engineers Certification that our mine plan <br /> will not affect these structures per Rule 6.4.19. Unfortunately,the original Civil Resources permit <br /> (approved by your office in 2011) was based off a structure agreement that allowed purchasing, <br /> relocating, etc., of these wells and pipelines and the mine plan-as approved by your office, allows mining <br /> within 200 feet of these non-owned structures and relocates pipelines associated with these structures. <br /> Despite continued efforts by my office and Scout, new structure agreements are not forthcoming from <br /> all parties impacted by the mine plan. Unless we can modify the mine plan,our Engineer can't certify <br /> "no impact". In the same vein,we cannot modify the permit to eliminate this impact to structures until <br /> it has been transferred to us. We are truly in a Catch 22. <br /> Since February of 2016, Scout Investments has approached all owners of structures on our Milliken <br /> property to include but not necessarily limited to Noble Energy, Kerr McGee/Anadarko,XCEL Energy, <br /> and CenturyLink. We have received signed agreements from the majority of parties and they are <br /> attached to this letter. We have made numerous attempts at an agreement with Noble Energy and have <br /> failed to achieve such an agreement. Appendix B documents our written efforts which have included <br /> emails, letters, and phone calls. This effort has included attempts by our attorney, Christopher Hayes, <br /> Esq. and myself. <br /> As we discussed at our meeting,Scout Investments is respectfully requesting that the State of Colorado <br /> Division of Reclamation Mining and Safety approve the transfer of the Gilcrest Mine Permit M-2000-58 <br /> to Scout Investments with the following stipulations: <br />