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(Page 2) <br />MINE ID # OR PROSPECTING ID # M-1984-108 <br />INSPECTION DATE 2/19/09 INSPECTOR'S INITIALS WHE <br />OBSERVATIONS <br />This inspection occurred by reviewing air photos taken of the site on February 19, 2009. Four photos accompany <br />this report. Review of the air photos indicate no significant alteration to the permit area since the Division's last <br />inspection, occurring on October 26, 2007. The Olathe Pit is approved for 9.9 acres affected land. Affected land <br />will be reclaimed to support wildlife habitat and general agriculture post-mining land use. The Division holds $8,167 <br />financial warranty. <br />As noted by the Division in previous correspondences, the operation has three compliance issues outstanding. A <br />summary of these issues is provided below. These issues have previously been identified by the Division and are <br />not a consequence of this air photo inspection. <br />1. According to the approved reclamation plan, the mining operation would be reclaimed as a pond at the north <br />area and an alfalfa field at the south area. However, as shown in the photos and as previously identified in the <br />Division's inspection report generated from the October 26, 2007 inspection, the Operator has created a second <br />pond at the south area. Therefore, if the Operator desires to keep the south pond as a permanent feature, the <br />reclamation plan must be amended to reflect the change in post mining land use for the south area. <br />2.. Both ponds expose groundwater. Pursuant to Rule 3.1.6(1)(a), the Operator is required to comply with <br />Colorado water laws governing injury to existing water rights. The Operator has not demonstrated a legal right to <br />expose groundwater in either of the two ponds created by this operation. <br />3. Since the Operator could not demonstrate a legal right to expose groundwater, the Division increased the <br />financial warranty sufficient to backfill the ponds and thereby ensure compliance with Rule 3.1.6(1)(a). On January <br />24, 2008, the Division issued its notice to increase the financial warranty from $8,167 to $1,475,493. The Division <br />did not receive the bond increase within the 60-day deadline provided under Rule 4.2.1(2), and on February 3, 2009 <br />provided notice to the Operator of the possible violation and Board hearing for consideration of the possible <br />violation. The Board hearing has been continued to April 8-9, 2009. <br />Correspondence from the Operator, dated February 19, 2009, indicates that the Operator is pursuing compliance <br />with Rule 3.1.6(1)(a) through the Division of Water Resources (DWR). If the Operator can satisfy DWR <br />requirements and demonstrate a legal right to expose groundwater, compliance items 2 and 3 maybe satisfied. <br />According to the Olathe Pit Substitute Water Supply Plan (SWSP), dated July 2, 2008, the Operator intends to <br />expand the mining operation to approximately 22 acres and ultimately expose 13.4 acres of groundwater. Please <br />note that expansion of the permit area will require the conversion of the existing permit to a Regular 112 type permit <br />prior to the commencement of any mining activity beyond the existing permit boundary. Compliance item 1, listed <br />above, may be satisfied through either the Amendment or Conversion process. <br />Response to this inspection report should be directed to the Division's office in Durango at 691 County Road 233, <br />Suite A-2, Durango, CO 81301, to the attention of Wally Erickson, phone (970) 247-5469. <br />I & E Contact Address <br />NAME Judy DeVincentis <br />OPERATOR Western Gravel, Inc. <br />STREET 3001 N. Townsend Avenue <br />CITY/STATE/ZIP Montrose, CO 81401 <br />cc: Steve Shuey, DRMS <br />? CE <br />? BL <br />? FS <br />? HW <br />? HMWMD (CH) <br />? SE <br />? WQCD (CH) <br />? OTHER