2006-06-12_REVISION - M1978314 (2)

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MOSES, WITTEMYER, HARRISON AND WOODRUFF, P.C. Maureen Iacoby Paul Ocsao March 8, 2005 Page 2 unappropriated water is available and no priority cal{ is being administered on a stream system is sometimes referred to as "free river" conditions. Since the existing grovel extraction operation on the King Mountain property has continued from year to year with diversions from Smith Creek sanctioned by the Water Commissioner, it appears that free river conditionsexist inthe Egeria/Smith Creek basins for a good part of a normal water supply year. While Angus Investment intends to develop a secure, year-round supply forthe expanded gravel operation, iris reasonabkto assumethatthe current mining operation can continue with the relativelysmell amountofwaterneeds beingmet through freeriverdiversions. To the extent that water is available to any of Angus Investment's small storage reservoirs under free river conditions, water could also be stored for later pumping and use for dust suppression. Angus Investment LLC bas asked my firm to analyze rho water rights and to develop an application for change of water rights or a plan for augmentation to meet the water supply demands of the expanded gravel operation. We have retained the services of Martin and Wood, consulting water rights engineers, to assist with this project. Martin and Wood is evaluating rho water rights acquired with the King Mountain Oravel property, as well as other water righb on Angus Investment's King Mountain Ranch for potential use as ari augmentation souroe We exn~ to file a Water Court atplication as soon as Martin and Wood's evaluation is complete. Ifnecessary, once the Water Court application is filed, we will also apply to the office of the State Engincer for approval ofa temporary substitute watersupplyplan to provide asotrrce ofwatersupplyto the gravel operation until a decree is obtained in the Water Court case. L In summary, Angus Investment LLC aclmowledges that it will ultimately need Water Court approval of a change of water rights or plan for augmentation to provide a full, legal water supply for its expanded gravel operation. However, while the Water Court application is pending, (- limited gravel mining operation may continue at the site with water supplies provided by diversions L from Smith Crcek under free river conditions and/or under a substitute water supply plan to be approved by the State Engineer's office. If I can answer any quesdona or provide additional ~' information, please let me know.