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...y III. COMMENTS -COMPLIANCE Below are comments on the inspection. The comments include discussion of observations made during the inspection. Comments also describe any enforcement actions taken during the inspection and the facts or evidence supporting the enforcement action. This was a partial inspection of the New Horizon Mine, conducted by Dan Mathews of the DMG Grand Junction Field Office, 101 South 3rtl, Suite 301, Grand Junction, CO 81501. Weather was clear and warm, no recent significant precipitation. In addition to Ross Gubka, of Western Fuels-Colorado (WFC), other participants in the inspection were W FC consultants Greg Lewicki (Lewicki and Associates) and Steve Boyle (BIO-Logic Environmental). Lewicki and Associates is involved in the preparation and coordination of permitting and bond release actions for W FC, and BIO-Logic Environmental has been contracted to perform vegetation inventory and analysis work associated with permitting and bond release. The BIO-Logic Environmental vegetation sampling crew was on site at the time of the inspection, and had initiated sampling within the irrigated pasture reclamation areas the previous day. The primary purpose of the inspection was to view the proposed irrigated pasture reference area, as well as various dryland pasture and irrigated pasture reclaimed areas that are being considered for inclusion in upcoming Phase 2 or Phase 2&3 bond release applications. The status of a pending land use/revegetation technical revision application (TR-55) was discussed, as well as certain aspects of the vegetation sampling approaches and success demonstration methods to be employed for bond release demonstration. Permittino and Bond Release Issues Vegetation sampling for bond release has been initiated. Prior to submittal of Phase 2 or Phase 3 bond release application, it will be necessary for WFC to submit and obtain approval of a technical revision application (presumably TR-55) addressing all of the outstanding vegetationfland use concerns that were identified but not resolved in TR-54. It will further be necessary for WFC to provide necessary documentation for the proposed irrigated pasture reference area including location, vegetation data, soil type, management plan, and success comparison approach, to demonstrate conformance with applicable criteria of Rule 4.15.7(3) and (4). The reference area documentation would presumably also be included within TR-55, and the reference area will need to be approved prior to submittal of a Phase 2 or Phase 3 bond release application applicable to irrigated pasture reclaimed areas. A sampling design question was discussed with Steve Boyle. Bond release vegetation sampling is being conducted this year within irrigated pasture areas and dryland pasture areas of the NH-2 mine block. Some of the reclaimed parcels (both dryland and irrigated parcels) are 9 years old or older and will be sampled this year and next year to support a Phase 3 bond release application. Other reclaimed parcels (again both dryland and irrigated parcels) are less than 9 years old, and will be sampled for cover only, to support a Phase 2 bond release application. Mr. Boyle confirmed that the dryland pasture parcels and irrigated pasture parcels would be sampled separately, to statistical adequacy. He further stated that the "Phase 3 bond release areas" within each category (dryland and irrigated) would be sampled in accordance with a simple random design. The areas cover sampled this year for 15' year Phase 3 sampling would be combined with additional parcels of the same category (dryland or irrigated), for inclusion within a Phase 2 bond release application. Mr. Boyle proposed that additional cover transects would be randomly located within the "Phase 2 only' parcels, and combined with a number of cover transects located in the "Phase 3 areas", and that this combined cover data would be included in the Phase 2 bond release application. For Phase 2 bond release demonstration, a sufficient number of cover transects would be run to meet statistical sample size adequacy (and DRMS minimum sample size) within each category (dryland or irrigated). The number of transects within "Phase 2 only' and "Phase 3" parcels would be proportionally allocated based on relative size of the "Phase 2 only' and "Phase 3" parcels (e.g. if "Phase 2 only" area is twice as large as the "Phase 3" area, twice as many cover transects would be included for the "Phase 2 only' area). A sequential selection procedure would be followed to select the transects from the "Phase 3" area that would be used for Phase 2 bond release demonstration, to conform with random design requirements. In other words, if 10 of 20 transects from the "Phase 3" area are used for Phase 2 success demonstration, Transects 1 through 10 would be used; Transects 11 through 20 would not be used. The approach described is statistically valid and acceptable. 3