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Paul Flack February 21, 2012 Depletions Replacements Conditions of Approval Page 2 High volumes of discharge water from the Apache Seam were not anticipated until mining operations expanded in 2012. Therefore, there is no measurement device on the outlet of the pond and no accounting forms necessary for the administration of water within the pond. The applicant claims that the out -of- priority diversion of discharge water does not require immediate augmentation due to the prolonged lagging factors, as estimated in Attachment A. The lagged depletion factors used to create Attachment A were obtained from the Pioneer et al SWSP modeling which has CBM wells within the same Lower Raton coal formation. We have determined that the use of such lagging factors is appropriate for the purposes of this emergency SWSP as the Apache Seam is located within the Lower Raton coal formation. During the 90 day emergency SWSP plan period, the applicant plans to develop the necessary accounting for proper pond /storage administration of both fully consumable and mine discharge waters (including evaporative loss and lagged depletion calculations), and install a measuring device on the outlet of the pond. A draft of the spreadsheet currently under development is shown in Attachment B. According to the applicant, current plans are to install a pump and a measuring device located at the pond outlet location. Then discharge water may be returned to the Purgatoire River and /or re- routed for uses on the mine site if approved accordingly. According to the request, the applicant has entered into two water lease agreements as shown in Attachment C. The lease from the City of Trinidad provides up to 250 acre -feet of water on an annual basis for NECC's mining operations at NEM. Deliveries of said replacement water will be made according to the Division Engineer's September 1, 2011 Amended Approval of an Administrative Exchange — New Elk Mine, as shown in Attachment D. 1. This SWSP shall be valid from January 11, 2012 through April 10, 2012. Additional SWSP's are required until a court decreed plan for augmentation is obtained for the proposed uses. The applicant shall advise the State Engineer and the Division Engineer of the applicant's plan for obtaining approval of future operations in this SWSP according to the provision of C.R.S. §37 -92- 308(4) or §37 -92- 308(7) as soon as possible after the issuance of this SWSP. The statutory fee of $300 will be required for additional SWSPs pursuant to C.R.S. §37 -92- 308(8). Any request for an additional SWSP must be submitted to this office no later than 45 days prior to the expiration of this plan, and shall include all necessary accounting for proper pond /storage administration of both fully consumable and mine discharge waters. Approval of this plan does not imply approval by this office of any such court application. 2. The applicant shall obtain a valid water well permit from this office. Application for said permit must be submitted to the Division of Water Resources no later than March 9, 2012. This well permit (GWS -45) application shall include a well construction variance from normal well constructions to fit the mining operation. Once obtained, all follow up documentation and forms must be provided so as to keep the permit valid. The provisions of C.R.S. §37 -90- 137(2) prohibit the issuance of a permit for a well to be located within 600 feet of any existing well, unless the State Engineer finds that circumstances so warrant after a hearing held in accordance with the procedural rules in 2CCR402 -5. This hearing may be waived if you are able to obtain statements from the owners of all wells within 600 feet, verifying that they have no objection to your use of the proposed well. Should a new well permit be denied for reasons of 600 foot spacing, or any other legitimate reason, approval of this substitute supply plan will be canceled.