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GORHAM ENERGY CONSULTANTS LLC <br />December 6, 2012 <br />Via email <br />To: Al Trujillo - Colorado Parks and Wildlife <br />From: Kent Gorham — Gorham Energy Consultants LLC <br />CC: Janet Binns — Division of Reclamation, Mining, and Safety <br />Subject: New Elk Mine Revegetation Plan <br />Dear Al: <br />As you are aware, the New Elk Mine has recently undergone renovation and <br />rehabilitation in an attempt to become a world class coal metallurgical coal producer. <br />The operator, New Elk Coal Company (NECC), operates under permit # C- 1981 -012 <br />issued by the Division of Reclamation, Mining, and Safety (DRMS) as authorized under <br />the Regulations of the Colorado Mined Land Reclamation Board for Coal Mining. <br />Gorham Energy Consultants (GEC) has been contracted to assist NECC in responding to <br />the 2012 Midterm Review recently completed by the DRMS. The midterm review, <br />required by Rule 2.08.3, is conducted in part, to identify any deficiencies in the permit <br />application and is also an opportunity to review the reclamation cost estimate, modify if <br />necessary, and update it with current construction costs. In the broad overview, the <br />reclamation cost estimate is a detailed, task - oriented calculation of the direct costs <br />necessary to demolish structures, restore the area to the approved post- mining <br />topography, retopsoil and revegetate the disturbed area. The estimate also includes <br />calculation for site maintenance over the 10 -year revegetation liability period as well as a <br />26% add -on to direct costs for expenses such as liability insurance, job supervision, and <br />profit, assuming the work would be performed by an independent contractor. <br />Weakness in the coal market has resulted in a temporary shutdown of the New Elk Mine. <br />For emerging companies like NECC, the reclamation bond market is also extremely tight, <br />resulting in NECC submitting cash bonds to the DRMS. NECC understands the <br />requirement and need for an accurate reclamation cost estimate. However, for obvious <br />reasons, it is extremely important for emerging companies, like NECC, to have a viable <br />and sustainable reclamation plan and the adequate amount of bond in place to complete <br />the reclamation plan in the unlikely event of permit revocation and bond forfeiture. <br />One area of the currently approved reclamation plan that appears somewhat inconsistent <br />with current reclamation practices is the re- establishment of shrubs on approximately 11 <br />