Carl J.D. Bauman and Margaret A. Bauman - Page 12

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          would require additional premarketing procedures.  Moreover,                
          because the Wallins Creek seam had already been extensively                 
          mined, the Coal Reserve Report concluded that no recoverable coal           
          reserves existed in the Wallins Creek seam.  The Coal Reserve               
          Report continued and further discussed several shortcomings with            
          other potential seams.                                                      
               The record does not support a finding that the Coal Reserve            
          Report was prepared by a qualified expert.  The author of the               
          Coal Reserve Report subsequently became an employee of ERL and              
          performed other work for the coal partnerships organized and                
          operated by McIntyre.  Nevertheless, the report estimates that              
          the property contained approximately 52.6 million tons of total             
          potential coal reserves.  This figure consists of 23.6 million              
          tons in calculated recoverable reserves and 29 million tons in              
          possible additional reserves.  The Coal Reserve Report explained,           
          however, that the above figure regarding possible additional                
          reserves was uncertain and that additional exploration was needed           
          to verify its accuracy.  The Coal Reserve Report did not conclude           
          whether it would be profitable to mine the underlying property,             
          but it did indicate that a prudent production estimate was                  
          approximately 1 million tons of coal per year.  The Coal Reserve            
          Report did, however, warn potential investors that an in-depth              
          study was necessary before an assessment of the property’s                  
          profitability could be made.  No such study was ever performed.             

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