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INN <br />Davis Graham &Stubbs LLP <br />January 8, 2009 <br />Via E-Mail and U.S. Mail <br />Mr. Byrum C. Lee, Jr. <br />Lee & Associates, L.L.C. <br />1444 Blake Street <br />Denver, CO 80202 <br />Re: Exploration Drill :Hole <br />Dear Byrum: <br />I am writing to inform you that Sage Creek Holdings, LLC ("Sage Creek") will be <br />drilling a coal exploration hole on Cross Mountain's surface estate in the N/2 of Section 22, <br />TSN, R87W, 6th P.M., Routt County, Colorado. Sage Creek intends to drill the exploration hole <br />prior to March 1, 2009. Drilling the exploration hole during the winter months will minimize <br />any surface disturbance. Only the immediate area surrounding the drill hole where the drill rig <br />will set up and the proposed mud pits will be disturbed. The maximum area that might be <br />disturbed by this activity is 0.25 acres, however, Sage Creek expects the extent of disturbed land <br />to be significantly less (about 0.10 acres). Topsoil will be stored for salvage during reclamation <br />activities. The reclaimed areas will be reseeded with either a dryland pasture mixture or <br />rangeland mixture depending on the exact drill hole location. In an additional effort to minimize <br />any surface disturbance Sage Creek does not plan to construct any new roads. Sage Creek <br />expects to complete the exploration activities in approximately 7 to 10 working days. <br />The coal in the N/2 of Section 22 was reserved by the United States pursuant to the Coal <br />Lands Act of 1910 and the Stock Raising Homestead Act. Both of those statutes permit a <br />licensee to conduct exploration activities for the reserved federal coal. On September 1, 2008, <br />the Bureau of Land Management (`BLM') issued Coal Exploration License No. COC-73106 for <br />coal exploration operations on the N/2 of Section 22. I have attached a copy of the exploration <br />license for your convenience. BIN issued the exploration license to Colorado Coal Resources, <br />LLC ("Colorado Coal") although Sage Creek has obtained the right to drill the exploration hole <br />pursuant to an exploration and drilling agreement with Colorado Coal. Colorado Coal will <br />formally assign its rights under the exploration license to Sage Creek in the near future. <br />Charles A. Bmer. 303 892 7329. eharlie.brut5142slawsom <br />•! '•e?:rnr?, nr''i ?treel • ?. ure 600 • Deriver, Culurado 80:'0,' - 303 872 ,WX) • tax .'.03 693 1379 <br />www.dgslaw.com