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d. To transport, store, blend, commingle and sell on the Leased Lands; and, while <br />• Lorencito is actively mining coal on the Leased Lands, coal mined from any lands <br />within three miles of the boundaries of the Leased Lands, which, in the opinion of <br />Lorencito, will improve the marketability of the coal from the Leased Lands; and <br />e. The exclusive right to construct, use and maintain, at Lorencito's sole cost, on the <br />Leased Lands and the surface of the Leased Lands, a coal loading and blending <br />facility, and all buildings, structures, roadways, water delivery and storage <br />facilities, reservoirs, and associated facilities deemed reasonably necessary by <br />Lorencito for carrying out the purposes of this Lease; provided, however, that <br />Lorencito shall not use any portion of the Leased Lands for washing, crushing or <br />processing facilities or to house employees or to store equipment not used on the <br />Leased Lands. No power plants will be placed on the Leased Lands. The coal <br />shall not be dehydrated on the Leased Lands (other than drying which naturally <br />occurs in the mining process). The coal shall not be treated biologically, <br />combusted or its state altered on the Leased Lands in order to convert the coal to <br />methane while the coal is still in the ground. Nothing herein shall be construed as <br />a grant ofwater rights; and <br />f The non-exclusive rights-of--way to use, maintain and improve existing roads on <br />the Leased Lands for the transportation of coal produced or blended on the Leased <br />Lands, and to construct, use and improve and maintain additional roads and <br />railroad spurs reasonably required for the transportation of coal produced or <br />• blended on the Leased Lands. Lorencito will pay to construct new roads which <br />shall be constructed according [o high civil engineering standazds for a road to be <br />used for the intended purposes. Lorencito will maintain, without contribution <br />from Hills or Hills' oil and gas lessees, the existing roads which it uses. <br />Hills hereby reserve, to the extent of their interests in the Leased Lands, all rights in the Leased <br />Lands, including without limitation water and water rights, oil and gas interests and gravel <br />(including gravel disturbed during mining operations), other than those expressly provided to <br />Lorencito in this Lease. At the termination of the Lease, Lorencito will convey to Hill Ranch, <br />without additional consideration, all water rights of Lorencito appurtenant to the Leased Lands. <br />2. Term of Lease <br />a. This Lease shall commence on January 1, 2001 and shall continue until December <br />31, 2006, and for so long thereafter as Lorencito produces coal from the Leased <br />Lands in good and workman-like mining practices, in conformance with <br />applicable laws and without default under this Lease, or until terminated as <br />provided in this Lease. This Lease shall not, in any event, extend beyond <br />December 31, 2010. The twelve-month period commencing on January 1 of one <br />calendar year and ending on December 31 of the same calendaz yeaz is referred to <br />herein as a "Lease year." Lorencito may terminate this Lease at any time by <br />giving at least 90 days prior written notice to Hills specifying the date of <br />termination of this Lease. If Lorencito so terminates this Lease, any obligation to <br />• make payments under Sections 3 will terminate upon the date of termination <br />COAL LEASE FMAL 6-25-01.doc <br />