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Snell & Wilmer LL.P. Mr. Mike Long May 4, 2001 Page 3 Finally, Powderhom has fully cooperated with the Division and has complied with all conditions for the extension of the abatement period of NOV 2000-010. A decision to prematurely enforce these NOVs will irreparably harm Powderhom, and contrary to the State's interests, may threaten Powderhom's ability to implement its reclamation plan. Powderhom wishes to supplement its reply to NOV 2000-010 by the incorporation therein of any arguments contained in this Petition that also apply to the allegations contained in NOV # 2000-O10.I. I. THE FRONTIER BOND REMAINS IN FULL FORCE AND EFFECT The Frontier Bond remains in full force and effect. To the best of our knowledge, Frontier has not defaulted on any sureties it has written and continues to be able to meet its obligations under the Bond. Under the terms and conditions of the surety, Frontier may not cancel the Bond and must comply with all Bond obligations. The fact [hat Frontier's Bond remains in full force and effect is confirmed by the Order of Insurance Commissioner Kirven, which states "Respondent [Frontier] shall also service any existing policies of insurance issued to persons residing in Colorado." Order dated, March 14, 2001. Any uncertainty concerning the financial integrity of the Bo~td is without merit. Frontier entered into a stop loss and reinsurance agreement with National Indemnity Company on September 27, 2000. This agreement, as endorsed, provides over $858 Million in coverage for Frontier liabilities, which includes all liability created by the Bond. Even assuming a worst case scenario, the preponderance of the Powderhor mine reclamation will be completed within two (2) years. It is difficult to imagine a scenario whereby the $858 Million limits would be reached anytime within this period, or for quite a while thereafter. The State was provided copies of the reinsurance agreement and endorsements in March, 2001. Before the state can characterize the adequacy of the Bond, it must fully examine and report its findings conceming the reinsurance agreement, which it does not appear to have completed. Upon completion of the analysis, Powderhom and Frontier must be accorded the opportunity to review and comment, and only then, may the state make a determination as to the adequacy of the Bond. Existence of the National Indemnity reinsurance agreement provides full protection to the state of Colorado in the event of default by Frontier. As a result, the ability of Frontier to write new policies based on the Commissioner's action and its status in Colorado is irrelevant to the condition of the Bond. Under the reinsurance agreement, Frontier would look to National Indemnity to perform and satisfy the claims made under the Bond. National Indemnity is certified by the U.S. Department of Treasury. IO9I3.1