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1 i <br />Davis Graham &Stubbs LLP <br />January 12, 2009 <br />Via Express Mail <br />Diamond T Sheep, LLC <br />P.O. Box 150 <br />Craig, CO 81626 <br />Re: Exploration Drill Hole <br />Dear Ladies and Gentlemen: <br />I am writing to inform you that Sage Creek Holdings, LLC ("Sage Creek") will be <br />drilling a coal exploration hole oil Diamond T Sheep's surface estate in the SE/4 of Section 33, <br />T6N, R87W, 6' 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 -:he 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 SE/4 of Section 33 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 coal <br />lessee to conduct exploration activities for the reserved federal coal. On July 1, 1963, the Bureau <br />of Land Management issued Federal Coal Lease No. C - 088199 for coal mining operations on <br />the SE/4 of Section 33. I have attached a copy of the most recent Coal Lease Adjustment for <br />your convenience. Seneca Coal Company (the lessee) has assigned the lease to Sage Creek. <br />Sage Creek has filed a Notice of Intent to Explore Involving Removal of 250 Tons or <br />Less of Coal (NOI) with the Colorado Division of Reclamation, Mining and Safety (CDRMS). <br />As part of the NOI process Sage Creek will post a reclamation bond that assures reclamation <br />activities meet the requirements of the Mined Land Reclamation Board for Coal Mining. <br />Charles A. Breer. 303 892 7329. charlie.breer@dgslaw.com <br />:.-nia r nth r. ee: • j,,ite S00 • Denver, Co urado 8020' 303 892 ?400 • fax 30 893 1379 <br />www.dgsaw.com