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,~ State of~Colorado Sept. 15, 1989 I am submitting a revised draft of the reclamation cost in the amount of $895,680.00. The only changes are wage rates, adjusted to the $10.00 rate we day employees, elimination of contractors' profits, and elimination of job foreman hours. We feel these changes are realistic interpretations of actual reclamation conditions. No changes were made for equipment ownership costs vs equipment rental costs, however, we suggest that these rates should be adjusted to ownership conditions. Regarding our financial situation, Pueblo can expect no assistance from our bank, Texas American Bank of Fort Worth, for funding of additional bond coverage. Oakridge Energy, Inc. is two-thirds owner of Pueblo Coal, Inc. You are aware Oakridge has filed a $25,000,000.00 actual damages and $170,000,000.00 punitive damages lawsuit against our operator, gas purchaser, et al. This suit regards contractual claims: take-or-pay from 1984 forward and underpayment of contract price from 1985 forward, as -we71 as other grievances. The contractual claims are almost certain to be decided in Oakridge's favor. The actual damages for these two issues alone will be sufficient to service Oakridge and Pueblo's cross-collateralized debt, guaranteed debt, taxes, attorneys' fees, etc... The suit was filed November, 1986 and is set for trial in January, 1990. Considering the continuances granted to date and the Judges attitude, we expect the trial to be heard no later than the Spring of 1990. our bank, as the lawsuit has progressed, has been very supportive of Oakridge. They have provided funding to Oakridge via a cash collateral agreement to provide litigation costs and operating costs to get us to trial. They can assist Oakridge only from its cash flow. The cash collateral agreement allows the bank to determine the usage of the funds. Pueblo would not be able to benefit from Oakridge funds until the lawsuit is determined. At that time, we expect both companies to be debt-free entities, aggressively pursuing it's interests in the oil, gas and coal industries. Enclosed is our check in the amount of $700.00 in payment of the, civil penalty for violation C89-005. We sincerely appreciate your working with us through the prolonged period of financial reversal. Present market conditions provide an enhanced opportunity for coal sales. The upward trend of natural gas prices has made coal more competitive in the energy market. We would like to resolve the permit renewal issue so that we would have the opportunity to bid for coal contracts as soon as possible.