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'COLORADO <br />Divisim at Redamation, <br />riniM and saMy <br />ofNkmuralurces <br />1313 Sherman Street, Room 215 <br />Denver, CO 80203 <br />October 18, 2016 <br />Scott Wanstedt <br />Blue Mountain Energy, Inc. <br />3607 County Rd. 65 <br />Rangely, CO 81648 <br />RE: Deserado Mine, Permit No. C-1981-018 <br />2nd Quarter 2016 Sediment Pond Inspection Report and 2"d Quarter 2016 County Road 65 <br />Subsidence Monitoring Report <br />Dear Scott, <br />The Division of Reclamation, Mining and Safety (the Division) has reviewed the Sediment Pond Inspection <br />Report and the County Road 65 Subsidence Monitoring Report for the 2nd Quarter of 2016. The reports <br />were received on August 2, 2016. The Division finds the reports to be in compliance with the following <br />Rules: <br />2nd Quarter 2016 Sediment Pond Inspection Report <br />4.05.9(17) - All Impoundments are inspected quarterly, by a qualified person designated by the operator, <br />for the appearance of structural weakness and other hazardous conditions. The reports are retained with <br />Scott Wanstedt at the Deserado Mine Office, and copies of the reports are submitted to the Division on a <br />quarterly basis. <br />4.05.9(15)(a) - Burrows on the embankments of the RP -2/3 pond, RP -4 pond, RP -5a pond and the Rail <br />Loop Sump (RRS) were listed as filled in. A small vertical hole on the top of the embankment of DP -1 had <br />been repaired and was noted in previous 2016 quarterly reports. Seepage was noted at the SDH -3M and <br />SDH -3U ponds, the cause of the seepage is being evaluated. <br />4.05.9(15)(b) - The existing required monitoring procedures were met. <br />4.05.9(15)(c) - The amount of water impounded in the ponds was documented in the report. <br />4.05.9(15)(d) - The existing storage capacity of the impoundments was documented in the report. <br />4.05.9(15)(e) - The 2nd quarter report did not list any other aspects of the structure affecting stability, or <br />requiring maintenance. <br />1313 Sherman Street, Room 215, Denver, CO 80203 P 303.866.3567 F 303.832.8106 http://mining.state.co.us <br />John W. Hickenlooper, Governor I Robert W. Randall, Executive Director I Virginia Brannon, Director <br />