2011-03-07_REVISION - M1977493 (3)

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Bill Womi cher From: Fritz Holleman Z S t: Monday, March 07, 2011 10:37 AM Bill Wombacher Subject: FW: Climax/EPR Agreement ?.- From: Fritz Holleman Sent: Friday, February 18, 201110:23 AM To: Glenn Porzak; 'Brian Nazarenus (bnazarenus@rcalaw.com)' Subject: Climax/EPR Agreement Brian, Page 1 of 3 Ak ` X93 /// We wanted to respond on a few of the points from our call on Tuesday before you go to the trouble of a lengthy written response to our proposed agreement. First, concerning our proposed paragraph 4, the purpose of that paragraph is to protect the water quality and quantity of those ditches that are a decreed source of supply for Eagle Park Reservoir. Such protection is consistent with the earlier 1998 Agreement between our clients, as well as with the protection we have been discussing in the last few months. If you know that some of the identified ditches are no longer legal sources of • supply for the reservoir, or that the language we have used does something more than protect the quantity and quality of water available to the ditches that supply EPR, we will certainly work with you to modify the language. Second, concerning the remedies in our proposed paragraph 5, we would like to work with you, but do not think what we proposed is unreasonable or beyond what the Mined Land Reclamation Board woul i ose if the issue ends up in front of them. You objected to two issues in particular about this paragraphk(1 e requirement that Climax reimburs our clients for the costs they incur to acquire replacement water in the event EPR is contaminated, and 2) aking the new Agreement part of the mining permit. Your comment was that "our deal was our deal" as of 1998, and you do not plan to renegotiate. We disagree with that analysis. To start, please recognize that the 1998 Agreement was tied to the level of mining as it existed at that time, and Climax is now requesting a much bigger mine. For example, paragraph 15 of the 1998 Agreement addresses the "Covenants of Climax," and subparagraph (b) states: Climax shall not modify any current operations or commence any new operations on any land owned, leased or controlled by Climax that result in the introduction of additional pollutants over the average current pollutant level in water that is to be collected for storage in Eagle Park Reservoir, .. . As you are aware, the affected land area for the mine at the time of the 1998 Agreement was defined by the 1997 amendment to the mine permit, and the boundary under that amendment was significantly smaller than what is requested in AM-06. The new boundary proposed in AM-06 is not within what was contemplated in the 1998 Agreement, poses a greater risk to EPR, and it is not unreasonable for EPR to seek new or different remedies in response. Moreover, the reimbursement we have proposed is fairly consistent with what would be • required under paragraph 10 of the 1998 Agreement, where Climax agreed to indemnify EPR for all loss and damages incurred because of contamination to EPR. The difference is that we have made the indemnification more specific as to the cost of replacement water, and made it a term of the permit, so that our clients will feel more secure in immediately responding to water supply needs with the acquisition of alternative sources in the