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conditional water rights herein were appropriated to provide water for the operation of the Mine <br />facility. A mining and exploration program for the Mine property was begun by Applicant's <br />predecessors during the late 1960's, and continued through the 1970's. Preliminary permits were <br />issued in 1981. Construction began in 1981 on surface facilities, coal handling facilities, and <br />portals for the Mine. Coal production from the "F" Seam began in 1982. Beginning in 1991, <br />Applicant began development of the "B" Seam, and purchased and installed longwall mining <br />facilities. Longwall mining production from the "B" Seam began in 1992 and was concluded in <br />2008 when longwall mining in the "E" Seam was begun. Production from the Mine has increased <br />as a result. As coal production has increased, and increases in the future, water demand for the <br />Mine increases as well. In response to such increased water demand at the Mine, Applicant has <br />engaged in substantial improvement of its water supply facilities and capabilities. Applicant <br />operates an integrated system of water rights and facilities for operation of the Mine of which the <br />subject conditional water right is a part. <br />2. Diligence Activities since the last Finding of Reasonable Diligence: <br />a. In 2004, Applicant filed its application with the Colorado Division of <br />Reclamation, Mining and Safety for a permit to mine the "E" Seam reserves in Applicant's <br />Federal Lease No. C-1362. That Permit Revision, No. PR-10, was approved on July 7, 2006. <br />Development of mining plans and the application to the Colorado Division of Reclamation, <br />Mining and Safety, and work on the permit since filing of the application, involved thousands of <br />hours of work by Mountain Coal employees, consultants, and attorneys. Since the Mine facility is <br />a necessary prerequisite to the operation of the Mine and the development of the conditional water <br />rights for Mine operation, this work constitutes diligence in the development of the subject <br />conditional water rights. <br />b. In February, 2006, the Applicant filed Case No. 06CW34 seeking a <br />finding of reasonable diligence in the'development of the conditional decrees for the Mountain <br />Coal Company Nontributary B East Mains Fault Well, the Mountain Coal Company Nontributary <br />Southeast Panels Fault Well, the Northeast Panels Sealed Sump, and the Northwest Panels Sealed <br />Sump, and seeking to make portions of those water rights absolute, based on the diversion, <br />storage, and beneficial use of water pursuant to those water rights. In December 2006, a ruling <br />and decree was entered making the following conditional water rights absolute: 0.27 c.f.s.; 27.9 <br />acre-feet of Mountain Coal Company Nontributary B East Mains Fault Well; 0.27 c.fs.; 27.9 <br />acre-feet of Mountain Coal Company Nontributary Southeast Panels Fault Well; and 95.8 acre- <br />feet of Northeast Panels Sealed Sump. The court also made a finding of reasonable diligence as <br />to the remainder of Applicant's conditional water rights in that case. Since the subject conditional <br />water right is part of a unified and integrated water supply system, of which the Mountain Coal <br />Company Nontributary B East Mains Fault Well, the Mountain Coal Company Nontributary <br />Southeast Panels Fault Well, the Northeast Panels Sealed Sump, and the Northwest Panels Sealed <br />Sump water rights form a part, the Applicant's efforts to develop those water rights constitute <br />-3-