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14. In early 2012, mining activity was open and obvious on the Subject Lands and <br />nearby lands. The open pit is not far from the Subject Lands. A haul road traverses the Subject <br />Lands and is in daily use to haul coal and materials from the open pit, together with access to the <br />administration building. A large retention pond (Pond 007) associated with the mining activity is <br />obvious on the Subject Lands. The Subject Lands are also traversed by irrigation pipelines that <br />are also visible and that carry water to other lands in reclamation. <br />15. Western Fuels- Colorado is in full compliance with the Mining Lease, having paid <br />in full all royalties due under the Mining Lease and having satisfied or discharged all other <br />obligations arising under the Mining Lease. Exhibit H reflects the payment of royalties from <br />1993 forward. Payment of production royalties commenced in 1994 and ended in 1998. <br />16. Western Fuels - Colorado took the assignment of the Mining Lease as stated above <br />in April 1992, and began mining activity on the Subject Lands beginning with the construction of <br />Pond 007 in February 1993. During 1992 -93, Mr. Guire was an employee of Western-Fuels <br />Colorado. <br />17. Western Fuels- Colorado and its predecessors paid a total of $105,000 in "advance <br />royalties" pursuant to the Mining Lease by the year 1993. Mining of coal on the Subject Lands, <br />and payment of "production royalties" as defined in the Mining Lease began in 1994. Western <br />Fuels- Colorado made a total of $746,798.89 in royalty payments to Lessor over the course of the <br />Mining Lease. See, Exhibit H. <br />18. Those royalty payments are well in excess of the purchase price value of the <br />Subject Lands, and all production royalty payments were made after April 30, 1993. <br />19. San Miguel Power Association, Inc., the predecessor of 4/7, LLC and the Lessor <br />until February 2012, accepted the above royalty payments and never disputed Western Fuels - <br />Colorado's right of access or conduct under the Mining Lease in any way. Indeed, until <br />Mr. Guire's complaint, there hasn't been a single dispute between Lessor and Lessee having to <br />do with Lessee's right to access, mine, or reclaim the Subject Lands. <br />20. The Subject Lands contains a haul road that is vital to Western Fuels- Colorado's <br />operations on lands that are being actively mined. Western Fuels - Colorado uses the haul road to <br />move equipment and haul spoil materials removed from the active pit to other areas where active <br />reclamation is underway. San Miguel Power Association never once disputed Western Fuels - <br />Colorado's right to use the haul road, which has been continuous since the early 1990s. <br />21. In addition, water passing through the Subject Lands in irrigation pipelines is <br />being used to irrigate nearby lands subject to ongoing reclamation obligations. San Miguel <br />Power Association never once disputed Western Fuels- Colorado's right to use the pipelines for <br />this purpose on the Subject Lands. <br />22. Pond 007 has existed on the Subject Lands since February 1993 without dispute <br />or complaint from San Miguel Power Association or Lessor at any time until defendant took title <br />to the Subject Lands. <br />{001050641 } 4 <br />