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Dave Berry <br />June 8, 2012 <br />Page 5 of 7 <br />16. Also, water passing through the Property in irrigation pipelines is being used to <br />irrigate nearby lands subject to ongoing reclamation. San Miguel Power Association never once <br />disputed Western Fuels - Colorado's right to use the pipelines for this purpose on the Property. <br />17. Pond 007 has existed on the Property since February of 1993 without dispute or <br />complaint from San Miguel Power Association or Lessor at any time up until Mr. Guire's <br />complaint. <br />18. Western Fuels- Colorado has conducted vegetation reclamation activities under the <br />Mining Permit every year since 1998, all without complaint or dispute by San Miguel Power <br />Association or Lessor at any time up until Mr. Guire's complaint. The map attached as Exhibit I <br />shows the commencement date of these activities on the Property and adjacent lands. <br />Discussion <br />In light of the foregoing, Mr. Guire's argument completely fails. He attempts to show <br />that the expiration date of the Mining Lease was fixed at April 30, 1993, relying upon a 1992 <br />lease extension (Exhibit C). However, this ignores the plain language of the rest of the <br />paragraph that was affected by that extension. That language, set forth in the 1977 extension of <br />the Mining Lease (Exhibit B), provides that the Mining Lease shall continue in existence after <br />the reference date "for so long thereafter as coal or other mining operations are being conducted <br />on the leased premises, or on any part thereof, or on any contiguous or nearby lands as a part of a <br />continuous or integrated mining operation or mining plan, unless sooner as herein elsewhere <br />provided." There can be no genuine dispute that the leased premises, or "contiguous or nearby <br />lands" have been mined or under reclamation pursuant to Western Fuels - Colorado's mining plan <br />and the Mining Permit consistently both before and after April 30, 1993. <br />The 1992 extension (Exhibit C) nowhere states any intent to modify that language, nor <br />can any such intent be presumed. Therefore, simply as a matter of contract construction, the <br />language of the 1977 extension still controls and the 1992 extension simply changed the date <br />referenced in Exhibit B from April 30, 1992 to April 30, 1993. This is consistent with standard <br />practice in the mining industry, which frequently provides a term of "advance royalties" under <br />the lease instrument which is typically set to terminate at a date certain, and a "production <br />royalties" phase where actual mining activity is contemplated to occur. This latter phase usually <br />has no fixed termination date due to the difficulty of predicting in advance when mining activity <br />will terminate. Thus, the date that Guire claims is the "expiration date" is not an expiration date, <br />but rather a transition date from the advance period to the production period. <br />The foregoing practice is completely consistent with the actual conduct of the parties <br />under this Mining Lease. Notably, mining did not begin on the Property (though it had been <br />conducted on other lands within the leasehold) until February of 1993 with the construction of <br />Pond 007. However, the Lessee had paid advance royalties consistently up to that date going <br />back all the way to 1956 as reflected in Exhibit H. <br />{00103813.1 <br />C S M B <br />