recovery and protection plans for coal operations and/or oil and gas operations on
those lands covered by Federal mineral leases so as to obtain maximum resource
recovery.

(f) RESOURCE RECOVERY AND PROTECTION

Notwithstanding the approval of a resource recovery and protection plan (R2P2) by
the BLM, the lessor reserves the right to seek damages against the operator/lessee in
the event (i) the operator/lessee fails to achieve maximum economic recovery (MER)
(as defined at 43 CFR 3480.0-5(21)) of the recoverable coal reserves or (ii) the
operator/lessee is determined to have caused a wasting of recoverable coal reserves.
Damages shall be measured on the basis of the royalty that would have been payable
on the wasted or unrecovered coal.

The parties recognize that under an approved R2P2, conditions may require a
modification by the operator/lessee of that plan. In the event a coal bed or portion
thereof is not to be mined or is rendered unmineable by the operation, the
operator/lessee shall submit appropriate justification to obtain approval by the
Authorized Officer to leave such reserves unmined. Upon approval by the Authorized
Officer, such coal beds or portions thereof shall not be subject to damages as
described above. Further, nothing in this section shall prevent the operator/lessee
from exercising its right to relinquish all or portion of the lease as authorized by
statute and regulation.

In the event the Authorized Officer determines that the R2P2, as approved, will not
attain MER as the result of changed conditions, the Authorized Officer will give
proper notice to the operator/lessee as required under applicable regulations. The
Authorized Officer will order a modification if necessary, identifying additional
reserves to be mined in order to attain MER. Upon a final administrative or judicial
ruling upholding such an ordered modification, any reserves left unmined (wasted)
under that plan will be subject to damages as described in the first paragraph under
this section.

Subject to the right to appeal hereinafter set forth, payment of the value of the royalty
on such unmined recoverable coal reserves shall become due and payable upon
determination by the Authorized Officer that the coal reserves have been rendered
unmineable or at such time that the operator/lessee has demonstrated an
unwillingness to extract the coal.



Sec. 6. DOCUMENTS, EVIDENCE AND INSPECTION - At such times and in
‘such form as lessor may prescribe, icssec must furnish detailed statements
showing the amounts and quality of all products removed and sold from the
lease, the proceeds therefrom, and the amount used for production purposes or
unavoidably fost.

Lessee must beep open at all reasonable times for the inspection by BLM the
leased premises and all surface and underground improvements, works,
machinery, ore stockpiles, equipment, and all books, accounts, maps, and
records relative to operntions, surveys, Or investigations on or under the leased
lands,

Lessee must allow lessor secess to and copying of documents reasonably
becessary to verify lessee compliance with terms and conditions of the lease.

While this lense remains in effect, informetion obtained under this section will
be closed to inspection by the public in accordance with the Freedom of
Information Act (5 U.S.C. $52).

Ses, 7, DAMAGES TO PROPERTY AND CONDUCT OF OPERATIONS -
Lessee must comply at its own expense with all reasonable orders of the
Seeretary, respecting diligent operations, prevention of waste, and protection of

other resources.

Lessee must not conduct exploration operations, other than casual we, without
am approved exploration plan. Ail exploration plans prior to the commencement
of mining operations within an approved mining permit arca must be submnitted
te the BLM.

or degradation to any land, air, water, cultural, biological, visual, and other
resources, including mineral deposits and formations of mineral deposits not
leased hereunder, and to other land uses or users. Lessee must take measures
deemed necessary by lessor to the intent of this lease term. Such
macesurts may include, but are not limited im, modification to proposed siting or
design of facilities, taming of operations, and specification of interim and final
reclamation procedures. Lessor reserves to itself the right to lease, sell, or
otherwise dispase of the surface or other mineral deposits in the lands and the
right to continue existing uses and to suthorize future uses upon or in the leased
tands, including issuing leases for mineral deposits not covered hereunder and
approving cascments or rights-of-way. Lessor must condition such uses to
prevent unnecessary or unreasonable interference with rights of lessee a6 may be

Sec. 8. PROTECTION OF DIVERSE INTERESTS, AND EQUAL OPPORTU-
NITY - Lessee must: pay when due all taxes legally assessed and levied under
Use taws of the State or the United States; accord all employees complete
freedom of purchase; pay all wages at Icast twice each month in lawful money
of the United States; maintain 2 safe working environment in accordance with
standard industry practices; restrict the workday to not more than 8 hours in any
ene day for underground workers, except in emergencies; and take measures.

to protect the health and safety of the public, No person under the age
OF 16 years should be employed in any mine below the surface. To the extent
that laws of the State in which the lands are situated are more cestrictive than the
Provisions in this paragraph, then the State laws apply.

Lessee will comply with alll provisions of Executive Order No. 11246 of
September 24, 1965, as amended, and the rules, regulations, and relevant orders.
of the Secretary of Labor. Neither lessee nov leasee's subcontractors should
maintain segregated facilities.

See. 15, SPECIAL STIPULATIONS

‘Sec_9. (a) TRANSFERS
) This lease may be transferred in whole or in part to any person,
sassociation or corporation qualified to hold such lease interest.
1D Tis tease may be transferred in whole or in part to another public body
Of to a person who will mine coal on behelf of, and for the use of, the
public body or to a perso who for the limited purpose of creating
Security interest in favor of a lender agrees to be obligated to mine the
‘coal on behalf of the public body.
7 This tease may onty be transferred in whole-or in part to another smai!
‘business qualified under 13 CFR (21.
‘Transfers of record title, working or royalty interest must be approved in
saccordance with the regulations,
(b) RELINQUISHMENT - The lessee may relinquish in writing at any time all
Tights under this lease or any portion thereof as provided in the
Upon lessor’s acceptance of the relinquishment, lessee will be relieved of ail
future under the lease or the relinquished portion thereof,
whichever is applicable,

Sec, 10, DELIVERY OF PREMISES, REMOVAL OF MACHINERY,
EQUIPMENT, ETC. - At such time as all portions of this lease are returned
fessor, lessoe must deliver up to lessor the land leased, underground

and such other supports and structures nocessary for the preservation of the

inery,
tools, and materials that it clects to or as required by the BLM. Any such
structures, machinery, equipment, tools, and materials remaining on the leased
tands beyond [80 days, or approved extension thereof, will become the
Property of the lessor, but lessee may either remove any or all such property or
continuc te be liable for the cost of removal and disposal in the amount
actually incurred by the lessor. Bf the surface is owned by third parties, lessor
will waive the requirement for removal, provided the third parties do not object
to such waiver, Lessee must, prior to the termination of bond liability or at any
other time when required and in accordance with all applicable laws and
regulations, reclaim all lands the surface of which has been disturbed, dispose
of all debris or solid waste, repair the offsite and onsite damage caused by
lessee’s activity or activities incidental thereto, and reclaim access roads or
trails.

See. 1 1. PROCEEDINGS IN CASE OF DEFAULT - If lessee fails to comply
with applicable laws, existing regulations, or the terms, conditions and
stipulations of this Iase, and the noncompliance continues for 30 days afler
written notice thereof, this lease will be subject to cancellation by the Jeasor
only by judicial proceedings. This provision will not be construed to prevent !
the exercise by lessor of any other logal and equitable remedy, including i
waiver of the default Any such remedy or waiver will not prevent later
cancellation for the same default occurring a8 my other tiene.

Sec. 12, HEIRS AND SUCCESSORS-IN-INTEREST - Each obligation of this
lease will extend to and be binding upon, andl every benefit hereof will inure
to, the heirs, executors, administrators, successors, or assigns of the respective
parties hereto.

‘Sec. 13. INDEMNEFICATION -Lessee saust imdemaify and hold hanmkss the
United States from any and all claims arising out of the lessee’s activities and
operations under this lease.

Sec, 14, SPECIAL STATUTES - This lease is subject to the Clean Water Act
{33 US.C. 1252 et seq), the Clean Air Act (42 U.S.C, 4274 et seq), and to all
other applicable laws pertaining to exploration activities, mining operations
and reclamation, including the Surface Mining Control and Reclamation Act of
1977 (30 U.S.C. 1201 et seq.).

(Continued on. page 3)

(Fonin 3400-12, page 2)



(c) THREATENED, ENDANGERED, CANDIDATE, or OTHER SPECIAL STATUS
PLANT and ANIMAL SPECIES

The lease area may now or hereafter contain plants, animals, or their habitats
determined to be threatened or endangered under the Endangered Species Act of
1973, as amended, 16 U.S.C. 1531 et seq., or that have other special status. The
Authorized Officer may recommend modifications to exploration and development
proposals to further conservation and management objectives or to avoid activity that
will contribute to a need to list such species or their habitat or to comply with any
biological opinion issued by the Fish and Wildlife Service for the Proposed Action.
The Authorized Officer will not approve any ground-disturbing activity that may affect
any such species or critical habitat until it completes its obligations under applicable
requirements of the Endangered Species Act. The Authorized Officer may require
modifications to, or disapprove a proposed activity that is likely to result in jeopardy
to the continued existence of a proposed or listed threatened or endangered species,
or result in the destruction or adverse modification of designated or proposed critical
habitat.

The lessee shall comply with instructions from the Authorized Officer of the surface
managing agency (BLM, if the surface is private) for ground disturbing activities
associated with coal exploration on federal coal leases prior to approval of a mining
and reclamation permit or outside an approved mining and reclamation permit area.
The lessee shall comply with instructions from the Authorized Officer of the Office of
Surface Mining Reclamation and Enforcement, or his designated representative, for
all ground disturbing activities taking place within an approved mining and
reclamation permit area or associated with such a permit.

(4) MULTIPLE MINERAL DEVELOPMENT

Operations will not be approved which, in the opinion of the Authorized Officer,
would unreasonably interfere with the orderly development and/or production from a
valid existing mineral lease issued prior to this one for the same lands.

(e) OIL AND GAS/COAL RESOURCES

The BLM realizes that coal mining operations conducted on Federal coal leases
issued within producing oil and gas fields may interfere with the economic recovery of
oil and gas, just as Federal oil and gas leases issued in a Federal coal lease area may
inhibit coal recovery. BLM retains the authority to alter and/or modify the resource



The BLM may enforce this provision either by issuing a written decision requiring
payment of the Mineral Management Service demand for such royalties, or by issuing
a notice of non-compliance. A decision or notice of non-compliance issued by the
lessor that payment is due under this stipulation is appealable as allowed by law.

(g) PUBLIC LAND SURVEY PROTECTION

The lessee will protect all survey monuments, witness corners, reference monuments,
and bearing trees against destruction, obliteration, or damage during operations on
the lease areas. If any monuments, corners or accessories are destroyed, obliterated,
or damaged by this operation, the lessee will hire an appropriate county surveyor or
registered land surveyor to reestablish or restore the monuments, corners, or
accessories at the same location, using surveying procedures in accordance with the
“Manual of Surveying Instructions for the Survey of the Public Lands of the United
States." The survey will be recorded in the appropriate county records, with a copy
sent to the Authorized Officer.

(h) PUBLIC ROAD RIGHTS-OF-WAY AND BUFFER ZONES

No mining activity of any kind may be conducted within the Campbell County Bishop
Road right-of-way and its associated 100-foot buffer zone while the public road
remains in the current (2010) location. The lessee shall recover all legally and
economically recoverable coal from all leased lands not within the foregoing right-of-
way and associated buffer zone. If a permit is obtained to relocate the public road
and it is approved by the appropriate authority, the lessee shall recover all legally and
economically recoverable coal from all leased lands within the foregoing right-of-way
and associated buffer zone. The lessee shall pay all royalties on any legally and
economically recoverable coal which it fails to mine without the written permission of
the Authorized Officer.



Sec. 15, SPECIAL STIPULATIONS (Cont’d.) -

THE UNITED STATES OF AMERICA
(Company of Lesece Name) ad |
Gignac of Laxey enernannnn . an —
(Title) (Tide)
ate) (Date)

Title 18 U.S.C. Section 1001, makes it a crime for any perioa knowingly and willfully to saake to any department or agency of the United Staies any false.
fictitious or fraudulent statements or representations as to any matter within its jurisdiction.

NOTICES

The Privacy Act of 1974 and the regulation in 43 CFR 2.48(d) provide that you be fumizhed with the follawing information in connection |
with information required by this application.

AUTHORITY: 30 U.S.C. 181-287 and 30 U.S.C. 351-359,

PRINCIPAL PURPOSE: BLM will use the information you provide to process your application and determine if you are eligible to hold a
lease on BLM Land.

ROUTINE USES: BLM will only disclose the information acoording to the regulations at 43 CFR 2.56(d).

EFFECT OF NOT PROVIDING INFORMATION: Disclosing the information is necessary to receive a benefit. Not disclosing the
information may result in BLM's rejecting your request for a lease.

‘The Paperwork Reduction Act of 1995 requires us to inform you that:

‘The BLM collects this information to authorize and evaluate proposed exploration and mining operations on public lands,

Response to the provisions of this lease form is mandstory for the types of activities specified.

The BLM would like you to know that you do not have to respond to this or any other Federal agency-sponsored information collection
unless it displays a currently valid OMB control number.

BURDEN HOURS STATEMENT: Public reporting burden for this form ts estimated to average one hour per response including the time
for reading the instructions and provisions, and completing and reviewing the form. Direct comments regarding the burden estimate or any
other aspect of this form to U.S. Department of the Interior, Bureau of Land Management (1004-0073), Bureau Information Collection
Clearance Officer (WO-630), 1849 C Street, Mail Stop 401 LS, Washington, D.C. 20240.

‘(Form 3400-12, page 3)



CABALLO WEST
APPENDIX 2

BUREAU OF LAND MANAGEMENT
SPECIAL COAL LEASE STIPULATIONS
AND COAL LEASE FORM 3400-12



Porm 3400-12 FORM APPROVED

(April 2007) UNITED STATES OMB NO. 1004-0073
DEPARTMENT OF THE INTERIOR . Expires: March 31, 2010
BUREAU OF LAND MANAGEMENT Beriel Number
COAL LEASE

PART 1. LEASE RIGHTS GRANTED

This lease, entered into by and between the UNITED STATES OF AMERICA, hereinafter called lessor, through the Bureau of Land Management (BLM), and
(Name and Address)

hereinafter called lessee, is effective (date) = / / » for a period of 20 years and for so long thereafter as coal is produced in commercial quantities from tk
leased lands, subject to readjustment of lease terms at the end of the 20th lease year and each 10-year period thereafter.

Sec, L This lease is issued pursuant and subject to the terms and provisions of the:
Mineral Lands Leasing Act of 1920, Act of February 25, 1920, as amended, 41 Stat. 437, 30 U.S.C. 181-287, hereinafter referred to as the Act;
Mineral Leasing Act for Acquired Lands, Act of August 7, 1947, 61 Stat. 913, 30 U.S.C. 351-359; ;
‘Te the regulations and formal orders of the Secretary of the Interior which are now or hereafter in force, when not inconsistent with the express and specific

Sec. 2. Lessor, in consideration of any bonuses, rents, and royalties to be paid, and the conditions and covenants to be observed as herein set forth, hereby grants and
Jeases to lessee the exclusive right and privilege to drill for, mine, extract, remove, or otherwise process and dispose of the coal deposits in, upon, or under the
following described lands:

containing ‘Scres, more or less, together with the right lo construct such works, buildings, plants, structures, equipment and appliances and the right
10 use such on-lease rights-of-way which may be necessary and convenicnt in the exercise of the rights and privileges granted, subject to the conditions herein
provided.

PART Ii. TERMS AND CONDITIONS

Sec, 1. (a) RENTAL RATE -Leasee must pay lessor rental annually and in when operations under the lease are interrupted by strikes, the elements, or
advance for each acre or fraction thereof during the continuance of the lease at the casualties not attributable to the leseoc. The lessor, in the public interest, may
rate of $ for each lease year. suspend the condition of continued operation upon payment of advance

royalties in accordance with the regulations in existence at the time of the
{b) RENTAL CREDITS -Rental will not be credited against cither production or suspension. Lessee's failure to produce coal in commercial quantities at the

advance royalties for any year. ‘end of 10 years will terminate the lease. Lessee must submit 2a operation and
reclamation plan pursuant to Section 7 of the Act not later than 3 years after

Sec. 2. (a) PRODUCTION ROYALTIES - The royalty will be percent of| lease issuance.

the value of the coal as set forth in the regulations. Royalties are due to lessor the

final day of the month succeeding the calendar month in which the royalty ‘The lessor reserves the power to assent to or order the suspension of the

obligation accrues. terms and conditions of this lease in accordance with, inter alia, Section 39 of

the Mineral Leasing Act, 30 U.S.C. 209.
{b) ADVANCE ROYALTIES - Upon request by the lessee, the BLM may accept,

for a total of not more thand®* years, the payment : of advance royalties in lieu of 5. LOGICAL MINING UNIT (LMU) - Either upon approval by the lessor of
continued operation, consistent with the regulations. The advance royalty will be the lessee’s application or at the direction of the lessor, this lease will become
based on a percent of the value of a minimum number of tans determined in the an LMU or part of an LMU, subject to the provisions set forth in the
manner established by the advance royalty regulations in effect at the time the regulations.

lessee requests approval to pay advance royalties in lieu of continued operation,

“20 years [Public Law 109-58) ‘The stipulations established in an LMU approval in effect at the time of LMU
Sec. 3. BONDS - Lessee must maintain in the proper office a lease bond in the approval will supersede the relevant inconsistent terms of this lease so long
amount of $ + The BLM may require an increase in this amount| as the lease remains committed to the LMU. If the LMU of which this lease
when additional coverage is determined appropriate. is a past is dissolved, the lease will then be subject to the lease terms which

would have been applied if the tease had not been included in an LMU.
‘Sec. 4, DILIGENCE - This lease is subject to the conditions of ditigent
development and continued operation, except that these conditions are excused
(Continued on page 2)



SPECIAL STIPULATIONS

In addition to observing the general obligations and standards of performance set out
in the current regulations, the lessee shall comply with and be bound by the
following special stipulations.

These stipulations are also imposed upon the lessee’s agents and employees. The
failure or refusal of any of these persons to comply with these stipulations shall be
deemed a failure of the lessee to comply with the terms of the lease. The lessee shall
require his agents, contractors and subcontractors involved in activities concerning
this lease to include these stipulations in the contracts between and among them.
These stipulations may be revised or amended, in writing, by the mutual consent of
the lessor and the lessee at any time to adjust to changed conditions or to correct an
oversight.

(a) CULTURAL RESOURCES

(1) Before undertaking any activities that may disturb the surface of the leased
lands, the lessee shall conduct a cultural resource intensive field inventory in a
manner specified by the Authorized Officer of the BLM or of the surface managing
agency, if different, on portions of the mine plan area and adjacent areas, or
exploration plan area, that may be adversely affected by lease-related activities
and which were not previously inventoried at such a level of intensity. The
inventory shall be conducted by a qualified professional cultural resource
specialist (i.e., archeologist, historian, historical architect, as appropriate),
approved by the Authorized Officer of the surface managing agency (BLM, if the
surface is privately owned), and a report of the inventory and recommendations
for protecting any cultural resources identified shall be submitted to the Regional
Director of the Western Region of the Office of Surface Mining (the Western
Regional Director), the Authorized Officer of the BLM, if activities are associated
with coal exploration outside an approved mining permit area (hereinafter called
Authorized Officer), and the Authorized Officer of the surface managing agency, if
different. The lessee shall undertake measures, in accordance with instructions
from the Western Regional Director, or Authorized Officer, to protect cultural
resources on the leased lands. The lessee shall not commence the surface
disturbing activities until permission to proceed is given by the Western Regional
Director or Authorized Officer.

2) Any existing Class III inventory report covering the lease area that has not
received federal agency review must be reviewed and accepted by the agency, site
NRHP eligibility determinations made, and consultation with the State Historic
Preservation Officer completed before any surface disturbing activities take place.



(3) The lessee shall protect all cultural resource properties that have been
determined eligible or unevaluated to the National Register of Historic Places
within the lease area from lease-related activities until the cultural resource
mitigation measures or site evaluations can be implemented as part of an
approved mining and reclamation or exploration plan unless modified by mutual
agreement in consultation with the State Historic Preservation Officer.

(4) The cost of conducting the inventory, preparing reports, and carrying out
mitigation measures shall be borne by the lessee.

(5) If cultural resources are discovered during operations under this lease, the
lessee shall immediately bring them to the attention of the Western Regional
Director or Authorized Officer, or the Authorized Officer of the surface managing
agency, if the Western Regional Director is not available. The lessee shall not
disturb such resources except as may be subsequently authorized by the Western
Regional Director or Authorized Officer. Within two (2) working days of
notification, the Western Regional Director or Authorized Officer will evaluate or
have evaluated any cultural resources discovered and will determine if any action
may be required to protect or preserve such discoveries. The cost of data recovery
for cultural resources discovered during lease operations shall be borne by the
lessee unless otherwise specified by the Authorized Officer of the BLM or of the
surface managing agency, if different.

(6) All cultural resources shall remain under the jurisdiction of the United States
until ownership is determined under applicable law.

(b) PALEONTOLOGICAL RESOURCES

If paleontological resources, either large and conspicuous, and/or of significant
scientific value are discovered during mining operations, the find will be reported to
the Authorized Officer immediately. Mining operations will be suspended within 250
feet of said find. An evaluation of the paleontological discovery will be made by a
BLM-approved professional paleontologist within five (5) working days, weather
permitting, to determine the appropriate action(s) to prevent the potential loss of any
significant paleontological value. Operations within 250 feet of such discovery will
not be resumed until written authorization to proceed is issued by the Authorized
Officer. The lessee will bear the cost of any required paleontological appraisals,
surface collection of fossils, or salvage of any large conspicuous fossils of significant
scientific interest discovered during the operations.