NACCO Industries (NC) 10-K2021 FY Annual report

* FIGURES ARE LOCATED IN THE SUPPLEMENTAL FIGURES ATTACHMENT

Renee E. Schultz, PE

The Falkirk Mining Company

The effective date of this Technical Report Summary is December 31, 2021.

NACCO Industries (NACCO), through a portfolio of mining and natural resources businesses, operates under three business segments: Coal Mining, North American Mining and Minerals Management. The Coal Mining segment operates surface coal mines under long-term contracts with power generation companies and an activated carbon producer pursuant to a service-based business model. Coal is surface-mined in North Dakota, Texas, Mississippi and Louisiana. Each mine is fully integrated with its customer's operations.

The Falkirk Mining Company (Falkirk), a wholly-owned subsidiary of North American Coal (NACoal), which is a wholly-owned subsidiary of NACCO, operates the Falkirk Mine in North Dakota. Falkirk is the sole supplier of lignite coal to the CCSPP pursuant to a contract under which Falkirk also supplies approximately 0.3 million tons of lignite coal per year to Spiritwood Station power plant.

The CCSPP and Spiritwood Station are owned by Great River Energy (“GRE”). In May 2020, GRE announced its intent to sell or retire the CCSPP in the second half of 2022 and modify Spiritwood Station to be fueled by natural gas.

On June 30, 2021, GRE entered into an agreement to sell the CCSPP and the adjacent high-voltage direct current transmission line to Bismarck, North Dakota-based Rainbow Energy Center, LLC (“Rainbow Energy”) and its affiliates. The transaction between GRE and Rainbow Energy is subject to the satisfaction of certain conditions, including regulatory approvals associated with the sale of the CCSPP and the related transmission assets and the posting of a performance bond related to final mine reclamation. If the conditions are satisfied, the transaction is expected to close in the first half of 2022.Upon completion of the sale of the CCSPP, the existing Coal Sales Agreement, the existing Mortgage and Security Agreement and the existing Option Agreement between GRE and Falkirk will be terminated. If GRE's efforts to sell the power plant are successful, a new Coal Sales Agreement (“CSA”) between Falkirk and Rainbow Energy will become effective and Falkirk will begin supplying all coal requirements of the CCSPP concurrent with Rainbow Energy’s acquisition of the power plant. Falkirk will no longer make any coal deliveries to GRE’s Spiritwood Station. Falkirk will be paid a management fee and Rainbow Energy will be responsible for funding all mine operating costs and directly or indirectly providing all of the capital required to operate the mine. The CSA specifies that Falkirk will perform final mine reclamation, which will be funded in its entirety by Rainbow Energy. The initial production period is expected to run ten years from the effective date of the CSA, but the CSA may be extended or terminated early under certain circumstances.

For purposes of this TRS, the QP has assumed the transaction with Rainbow Energy occurs. The production period under the new CSA is expected to run ten years from the effective date of the CSA. Although the CSA may be extended or terminated early under certain circumstances, the LOM has been developed assuming a 10-year period.

The reserves are located in McLean County, North Dakota, from approximately nine miles northwest of the town of Washburn, North Dakota to four miles north of the town of Underwood, North Dakota. Structurally, the area is located on an intercratonic basin containing a thick sequence of sedimentary rocks. The economically mineable coals in the reserve occur in the Sentinel Butte Formation and the Bullion Creek Formation and are unconformably overlain by the Coleharbor Formation. The Sentinel Butte Formation conformably overlies the Bullion Creek Formation. The general stratigraphic sequence in the upland portions of the reserve area (Sentinel Butte Formation) consists of till, silty sands and clayey silts, main hagel lignite bed, silty clay, lower lignite of the hagel lignite interval and silty clays. Beneath the Tavis Creek, there is a repeating sequence of silty to sand clays with generally thin lignite beds.

Substantial information has been gathered during exploration drilling programs within the region since the 1960s. These data were the fundamental tools used in characterizing substrate composition, geometry, and structure of the Falkirk Mine lignite deposit prior to mining. Exploration programs described in this TRS have considered the stratigraphic nature of the mineralization for the determination of hole spacing, drilling and sampling method, and quality analyses in order to geologically map and evaluate the structural and quality characteristics of the lignite deposit.

The Falkirk Mine lignite deposit is evaluated on a seam-by-seam basis. Drilling exploration data including geologic lithologies, qualities, and hole locations have been compiled in an electronic, geologic database. Drilling exploration programs conducted at the Falkirk Mine have comprised largely of rotary air/mist/mud drilling methods. Drill holes were geophysically logged for natural gamma, density, caliper, and resistivity responses to obtain data related to the subsurface structure. Coal core samples collected for quality analyses were sent to independent commercial laboratories for testing.

The lignite at the Falkirk Mine surface mining operation is uncovered using dragline, dozer, and conventional truck and shovel mining methods due to the proximity of the lignite to the surface and the physical characteristics of the deposit. Lignite is mined using electric cable shovels and large front-end loaders to load a fleet of bottom dump haul trucks and is directly shipped to the CCSPP or placed on the lignite stockpile. The overall average Run of Mine (ROM) quality of the mined lignite seams meets the required power plant quality specifications. Therefore, no mineral processing is performed by Falkirk.

The Falkirk Mine delivered its first coal in 1978, with mine development work taking place in the preceding few years. The Falkirk Mine has, or is currently constructing, all supporting infrastructure for mining operations within the permitted areas.

The Falkirk Mine employs a staff and workforce of approximately 400 employees with fluctuations in employment levels for changes in demand at the CCSPP.

The Mineral Resources in this TRS have been estimated by applying a series of geologic and physical limits as well as high-level mining and economic constraints. The mining and economic constraints were limited to a level sufficient to support reasonable prospect for future economic extraction of the estimated Mineral Resources. The potential of economic extraction is justified by the terms of the existing (and future) CSA with the CCSPP Owners through 2032.

The QP based the Mineral Resource estimates for the Falkirk Mine on a stratigraphic geologic model generated from the verified drilling exploration data.

Mineral Resources classification distances from point of measurement for each class are as followed: Measured – less than 1,320 feet, Indicated - from 1,320 feet to 2,640 feet, and Inferred – from 2,640 – 5,280 ft.

There are no reported Mineral Resources at the Falkirk Mine. The economically mineable portions of the Measured and Indicated Mineral Resources within the constraints of the CSA and under lease control have been converted to Mineral Reserves.

The Mineral Reserves in this TRS were determined to be the economically mineable portion of the Mineral Resources after the consideration of modifying factors related to the mining process which convert Measured Resources to Proven Mineral Resources and Indicated Resources to Probable Mineral Reserves. Inferred Mineral Resources were not considered for Mineral Reserves. A cut-off grade of $2.60/MMBTU has been applied to the Measured and Indicated Resources to upgrade these resources into Proven and Probable Reserves. Mineral Reserves Estimates have been calculated and are shown in Table 1.2.

Parameters for mining dilution, minimum mining thickness, and minimum parting thickness were applied by the QP to the geologic (Mineral Resource) model to create the Mineral Reserve model. Mining pits were projected based on current mining equipment operating parameters and a maximum cumulative stripping ratio of 15:1. Mining pits were then sectioned into blocks; adjusting endwall blocks as necessary. Blocks were reviewed by the QP to ensure

quality thresholds were met. Recovery rates were applied to the lignite tonnages by seam and then the blocks were sequenced based on a projected total tonnage delivered to the CCSPP through the LOM plan to determine the Measured Resources that would be converted to Mineral Reserves.

This disclosure of Mineral Reserves is based upon the QP’s opinion that the LOM plan and cost estimates has been completed to a Pre-feasibility (PFS) level of accuracy, as defined in 17 Code of Federal Regulations (CFR) Part 229.1300, which includes and supports the QP’s determination of Mineral Reserves.

At the time of this TRS, the QP is not aware of any specific factors that would materially affect the Mineral Reserve estimates.

The current delivery requirements included in the LOM plan are based on the most recent projections from the CCSPP owners. All costs were estimated based on the LOM tonnage requirements.

The model used to estimate the operating costs is based on historical costs and performance measures that have been maintained by the Falkirk Mine since its inception. These costs are reviewed and verified on an annual basis to account for changes in site conditions or the operating plan. This information is then used to estimate the projected costs for the LOM plan.

Capital costs include equipment expenditures, land acquisition, and additional mine area development costs. All capital costs incurred by the Falkirk Mine are reimbursed by the CCSPP owners as required under the terms of the CSA. Should the CSA be extended beyond 2032, additional capital costs would be required and funded by the CCSPP owners.

The Falkirk Mine operates under several permits from the state of North Dakota’s Public Service Commission/Reclamation Division under delegated authority of the United States Department of the Interior, Office of Surface Mining Reclamation Enforcement (OSMRE) Surface Mining Control and Reclamation Act (SMCRA). In addition to the mining permit, Falkirk has secured numerous other permit and agreements, including a National Pollutant Discharge Elimination System (NPDES) permit and an Individual Permit issued by the United States Army Corp of Engineers (USCOE). All permits have been secured and continue to be renewed in a timely fashion.

Falkirk currently has all permits in place for the Falkirk Mine to operate and adhere to a mine plan projected through April 2032. Barring any regulatory changes out of Falkirk’s control, the QP does not anticipate hurdles for approval of future renewal applications.

In the QP’s opinion, the geological data, sampling, modeling, and estimate are carried out in a manner that both represents the data well and mitigates the likelihood of material misrepresentations for the statements of Mineral Resources. There are currently no recommendations for Mineral Resources.

This technical report was prepared for The Falkirk Mining Company (Falkirk) which owns and operates the Falkirk Mine.

The purpose for which this technical report summary was prepared is to report Mineral Resources and Mineral Reserves for the Falkirk Mine located in McLean County, North Dakota.

Qualified persons (QPs) are employed by FALKIRK and directly oversee the drilling exploration programs, daily operations, and/or financial reports of the Falkirk Mine. As such, inspections are conducted on a regular basis and no individual date of inspection has been identified. Renee E. Schultz is a licensed Professional Engineer, over 20 years of experience in Surveying, Geology/Modeling, and Engineering/Mine Planning, as well as with the economic aspects of each discipline.

This is the first TRS filed to the United States Securities and Exchange Commission (SEC) in accordance with S-K Subpart 1300 regulations, therefore no preexisting technical report summary exists with the SEC. Mineral Resource and Reserve estimations prior to December 31, 2021 were reported in accordance with guidance of Industry Guide 7.

This terms of reference for this TRS include

Key Acronyms and definitions for this TRS include:

The Falkirk Mine encompasses two Mine Areas – Underwood and Riverdale. The Underwood Mine Area contains mining permits NAFK 8405, 9601, and 8705, while the Riverdale Mine Area contains mining permit NAFK - 9503. The lignite located in each Mine Area that is encompassed in the LOM plan is considered a Mineral Reserve.

The Falkirk Mine, located in McLean County, North Dakota (ND) occurs in the physiographic region of North Dakota known as the “Coteau Slope” and is dominated by landforms that are primarily glacial in origin. Glacial sediments or drift belonging to the Coleharbor Formation were deposited over the land comprising this area during the Wisconsin Age. The maximum relief of the Falkirk Mine is approximately 360 feet (msl), with the elevation ranging from 1720 feet (msl) in the Missouri River Watershed drainage to the south to nearly 2080 feet (msl) in the Lake Audubon Watershed drainage to the north. Topographic features of the Falkirk Mine are shown on Figure 4.1 in the Supplemental Figures Attachment (Pre-mining Topography).

The Soil Survey of McLean County indicates that 95 percent of the acreage is in farms and the land-use is approximately 73 percent cultivated cropland. Vegetative baseline studies of the permitted areas further indicate the prominent vegetation of the Falkirk Mine to be cropland Other vegetative designations include native grassland, tame pastureland, shelterbelts, fish and wildlife habitat and wetlands.

Travel to the Falkirk Mine by air is possible using the Bismarck Airport in Bismarck, ND, approximately 55 miles south of the mine, and then using ground transportation, traveling via Highway 83.

The main railway systems near the Falkirk Mine are Canadian Pacific, BNSF, and Dakota Missouri Valley & Western (DMVW). DMVW crosses through the Falkirk Mine Reserve.

The towns of Washburn and Underwood are within a 10-mile radius of the Falkirk Mine, the towns of the Riverdale and Turtle Lake are within a 25-mile radius and the towns of Bismarck, Mandan and Minot are within a 60-mile radius. These communities provide a vast portion of the employment base at the Falkirk Mine and the CCSPP.

The Falkirk Mine sources power for mine office facilities and operations from the CCSPP. Water for the mine main office facilities also comes from the CCSPP, but Falkirk’s East shift change building receives water from McLean-Sheridan Rural Water. Fuel for equipment is supplied by Dale’s Petroleum Services, Inc., Enerbase Cooperative Services, Farstad Oil, Inc., and Marthon Petoleum Cooperation. These companies are located in Bismarck, Fargo and Minot, ND. The Falkirk Mine has all supporting infrastructure for mining operations. See Section 15.0 for further detail pertaining to the mine specific infrastructure.

The general information provided below is summarized in the Falkirk Mine North Dakota State Mining Permits. Insert permit information

The Falkirk Mining Company is the owner and operator of the Falkirk Mine.

Construction of the Falkirk Mine began in 1975 and deliveries began in October 1978 to the CCSPP owned by Great River Energy.

There were several small underground mines and one small surface mine, all operated and closed in the mid 1900’s, on Falkirk Mine property.

Construction of the Falkirk Mine began in 1975. Coal removal began in 1978 and the CCSPP (2-units , each at 550 MW’s) started Unit #1; Unit #2 started in 1979. The North American Coal Corporation made a lease trade with the Consolidated Coal Company (Consol) in the mid-1980s. North American gave Consol underground coal reserves in Ohio and received coal reserves in North Dakota. These North Dakota coal reserves lie immediately south-southwest of the Underwood Coal Field.

The Falkirk Mine is located in the Sentinel Butte Formation of the Fort Union Group (Figure 6.1) which is one of the most prolific lignite-bearing stratum in the state. Substantial information has been gathered during exploration drilling programs within the region since the late 1960s. These data were the fundamental tools used in characterizing substrate composition, geometry, and structure of the Falkirk Mine lignite deposit prior to mining. Understanding of the local geology has continued with regular, fill-in drilling exploration programs and mining operations.

Near the contact of the Sentinel Butte and Bullion Creek Formations in a complex of sands and thin (less than one (1) foot ) lignite beds locally referred to as the C Sand and C Seam. As in the Sentinel Butte, the Bullion Creek Formation consists of till, silty sands and clayey silts, main Tavis Creek lignite bed, silty clay, and silty clays. The Tavis Creek Bed is split by a clay parting in portions of the reserve. Where the bed has a parting, the splits are referred to as Upper Tavis Creek and Lower Tavis Creek. There are thin lignite beds immediately above and/or below the Tavis Creek in many areas. The first of these thinner seams below the Tavis Creek bed is the Coal Lake Coulee seam. The Coal Lake Coulee seam parted in areas of the reserve and the splits are refered to as the Upper Coal Lake Coulee and the Lower Coal Lake Coulee. Below the Coal Lake Coulee seam, there is a repeating sequence of silty to sand clays with generally thin lignite beds.

Geologic cross-sections A-A', B-B', C-C', M-M', and N-N' (Figure 6.3 in the Supplemental Figures Attachment through the Underwood Reserve, were constructed using data compiled from existing drill holes to illustrate the subsurface relationships of the above mentioned stratigraphic units. The compiled data is based on the drill hole data but is in the form of 3D grid files (a geologic model)

Geologic cross-sections A-A', B-B', C-C', D-D', E-E', F-F' and G-G' (Figure 6.4 in the Supplemental Figures Attachment) through the Riverdale Reserve, were constructed using data compiled from existing drill holes to illustrate the subsurface relationships of the above mentioned stratigraphic units. The compiled data is based on the drill hole data but is in the form of 3D grid files (a geologic model).

No exploration work other than drilling and associated geophysical logging has been conducted at the Falkirk Mine. Geophysical logging is discussed with drilling in Section 7.1 of this TRS.

Data collected during drilling exploration programs at the Falkirk Mine is the sole information available for modeling the lignite deposit for the determination of Mineral Resources. Following coal industry standards, the sampling method used by the Falkirk Mine for modeling quality of the lignite deposit is exclusively core drilling. The Falkirk Mine lignite deposits are evaluated on a seam by seam basis. Drilling exploration data including geologic lithologies, qualities, and hole locations have been compiled in an electronic, geologic database. The information below summarizes the related drilling records.

Drilling exploration programs conducted at the Falkirk Mine have comprised largely of rotary air/mist or mud drilling methods. For the purpose of this discussion, senior geologist and field geologist refer to qualified representatives of Falkirk and/or NACoal. Historically, Falkirk has contracted independent drilling services and geophysical logging services. Drill holes completed at the Falkirk Mine are vertical in orientation and have been broken into four categories which are described below. A drill hole collar location map for the Falkirk Mine is presented in Figure 7.1 in the Supplemental Figures Attachment

Exploratory drill holes, also referred to as pilot holes, typically range in size 5.0 inches (outer hole diameter, od) and terminate at a minimum of 12-feet below the lowest targeted lignite seam as specified by the senior geologist to allow for proper geophysical logging. Cuttings are recovered by the contracted driller on a 5-foot interval and are described by the field or senior geologist. All pilot holes are geophyscially logged for natural gamma, density, caliper, and resistivity responses.

Coal core holes to collect samples for quality assessment are advanced next to pilot holes at specified locations. Core holes are typically 5.6-inches (outer diameter, od) to the point where coring starts, then through coring 4.6-inches (od) with a respective sample diameter of 3.0-inches (od). Samples are collected with a split double core barrel. Coring intervals are determined by the field geologist and reviewed by the senior geologist based on the pilot hole’s geophysical log and cuttings descriptions. Core holes terminate one to two feet below the lowest targeted lignite seam. 90-percent coal core recovery is required such that the field or senior geologist logging the sample can clearly define the roof and floor of the lignite seam (see Section 8.0 for discussion on sample preparation). It is standard practice to only geophysically log the adjacent pilot hole because of its close proximity to the core hole. In unique cases, the core hole may be geophysical logged if there appears to be a discrpency in thickness or elevation between the rotary hole and core hole. with the field logs and quality data for determination of lithologic intervals to be modeled.

Overburden core holes are drilled following the same protocol to the coal cores as described above with the addition of collecting overburden, interburden and underburden samples at five foot intervals. These samples bagged and sent to the lab for textural and geochemacial in addition to lignite, which are shipped to a separate soil lab for geochemical analysis. Data specific to the coal cores collected during these overburden core sampling programs have been reviewed by the QP for inclusion in the geological model.

The fourth, and final, category of drill holes comprise of geotechnical holes and monitoring wells which have been geophysically logged and extend through multiple coal seams. These drill holes follow the parameters outlined for pilot holes and available data has been reviewed by the QP.

Details may vary with each exploration program, however general procedures for drilling at Falkirk Mine include:

To continue with a coal core hole:

Additional drilling tasks include:

As previously discussed in Section 5.2 of this document, numerous drilling exploration programs have been conducted at the Falkirk Mine. Over 5,400 exploration holes have been drilled. Approximately 2,100 of those holes were sampled for quality assessment.

As a whole, Falkirk plans exploration activities to attain an average 1,320-foot drilling density for the ten-year projection ahead of active mining operations. Physical constraints such as stream buffers can affect the final drilling density. This spacing allows operations to optimize seam blending efforts to ship a steady fuel quality to the power plant. It should be noted for the purpose of Mineral Resource estimations and Life of Mine (LOM) projections, the QP has determined a high to moderate level of confidence in a minimum drill hole spacing of 1,320-feet. This confidence comes from the continuity of the lignite seams including both lithologic and quality characteristics, as well as the ability to compare modeled seam projections to active and historical mining operations.

Water levels are reported to the North Dakota Public Service Commission quarterly, within 30 days following the close of each quarter. In the event that access to a monitoring well is denied throughout a quarter due to persistent climatic conditions or circumstances beyond Falkirk's control, then documentation to this effect will be submitted with the quarterly monitoring report.

Water quality samples are analyzed, at a minimum, for the parameters required by NDAC 69-05.2-08-06(1)(e). Sample results will be reported to the North Dakota Public Service Commission (NDPSC) annually within 30 days following the fourth calendar quarter. Wells with adequate water production will be sampled after purging, at a minimum, the volume of stale water calculated to exist in the well, or when the water’s measured parameters for pH and electrical conductivity have reached stabilization. Low producing wells will be purged, allowed to recover, and sampled within twenty-four hours of purging. Wells with insufficient water volume to allow for collection of a representative sample will be documented to that effect in the annual groundwater quality report, in addition to any other condition that may prevent a well from being sampled.

The post-mining monitoring well network consists of wells existing in undisturbed areas and wells installed in reclaimed areas to monitor the quality and elevation of groundwater flowing into and out of the reclaimed spoils. Installation of reclamation monitoring wells in reclaimed areas will be accomplished after SPGM respread, preferably after the establishment of a viable vegetative cover. Generally, reclamation monitoring wells will be placed in the vicinity of pre-mining well sites with screened intervals placed in the same strata where possible. The replacement of wells at pre-mining well sites will facilitate pre- and post-mining hydrogeologic comparisons. The reclamation well installations will concentrate on screening the base of the spoils, with additional wells placed in the next lower aquifer. Information from these initial well installations will determine the need for additional installations.

Locations of destroyed and existing ground water monitoring wells, along with certified domestic wells and springs are shown on Figure 7.2 in the Supplemental Figures Attachment, Groundwater Map excerpted from Falkirks’s Groundwater Monitoring Plan. Many of the destroyed wells were once part of the monitoring program and part of the baseline aquifer testing, but were destroyed due to mining operations or due to being no longer needed.

The major hydrostratigraphic units in the study area consist of glacial till (pebble loam) and glaciofluvial sands and gravels of the Coleharbor Formation; Hagel A Lignite bed (upper split of the Hagel bed), the Hagel B Lignite bed (lower split of the Hagel bed), and the C sand (a sandy-silty zone of stratum below the Hagel B bed) of the Sentinel Butte Formation; and the Tavis Creek Lignite bed, the Coal Lake Coulee Lignite, and the Hensler sand of the Bullion Creek Formation. Above the Hagel bed is a carbonaceous unit that correlates to the Kinneman Creek Lignite bed. Over most of the study area, this unit is primarily carbonaceous clay with thin interbedded lenses of lignite. Locally, the lignite does develop into the dominant lithology and may act as a local aquifer. Because of its usually shallow depth, the Kinneman Creek bed is usually weathered. Within the zone of the C sand there is usually one and sometime several, thin (less than one foot thick) lignite beds locally referred to as the C bed which we currently refer to as the C seam. Below the Tavis Creek bed are additional lignite beds. The first two below the Tavis Creek bed are named the Coal Lake Coulee bed and the Weller Slough bed. There are also sand units below these beds, the most significant being the Hensler sand which lies beneath the Coal lake Coulee bed Strata lying above the Hagel bed are referred to as the Kinneman Creek Interval. Those underlying the Hagel bed but above the Tavis Creek bed are referred to as the Hagel Interval.

Ground water recharge from surface infiltration occurs because of snowmelt and rainfall. Prairie potholes and depressions where surface water accumulates enhance the mechanisms of infiltration into the groundwater system. The quantity of recharge is determined by vertical hydraulic conductivity of the soils, and the depth of the water table. However, the significant aerial extent of the recharge zone is probably the most important factor in determining the volume of water infiltration into the aquifers. Moran and Cherry (1978), in studies performed in the Underwood Coal Field located just north of the Riverdale Coal Field estimated the annual ground water recharge rate for this area of North Dakota to be between 0.86 inches to 1.32 inches. These values of recharge apply to the zones of recharge and cannot be taken as distributed over all of the area. Average aerial depth of ground water recharge measured by Cherry in 1979 rate over a 150-km2 study area was on the order of 1.0 to 4.7 inches per year. The spring of 1979 was the wettest spring of the decade of the 1970's, so the values of recharge rate for 1979 are probably greater than the long-term, average ground water recharge rate (Rehm, et. al. 1980). Geohydrology of the Coleharbor Formation The Coleharbor Formation (Pleistocene) is the shallowest aquifer in the area. It unconformably overlies the Sentinel Butte Formation and includes all of the unconsolidated sediments resulting from deposition during glacial and interglacial periods. Over most of the area, the Coleharbor is a thin formation that locally thickens where it fills valleys in the buried topography. The modified glacial channels that delineate the mining limits north, east, and south of the permit area are in-filled with sediments of the Coleharbor Formation. The channel fill systems contain a complex of interbedded glaciofluvial gravels, sands, silts, and clays. The coarser gravel and sand beds are generally limited to near the bottom of the channel fill.

Groundwater in the Coleharbor Formation accumulates in the discontinuous sand bodies surrounded by clayey sediments. These sand bodies individually can be described as perched aquifers; the sand bodies lack lateral continuity and are generally of limited aerial extent. Consequently, water wells in the Coleharbor Formation typically have very low yields and capacity. They are also very sensitive to changes in precipitation and resultant recharge. Wells in the Coleharbor Formation will react relatively quickly to changes in precipitation: If it rains, the wells produce well, in a drought, the wells have reduced production or even “go dry”. Hydraulic conductivity values from single well response tests average 8.6 feet per day for the Coleharbor channel fill units in the study area (Groenewold, et. al., 1979). The average hydraulic conductivity of the glacial till test is 0.3 feet per day. Some tests indicate that the hydraulic conductivity value of the glacial till could be as low as 10-5 to 10-7 feet per day (Groenewold, et. al., 1979). Pumping tests performed in the central portion of McLean County indicate hydraulic conductivity values of 104 to 6,739 feet per day for the sand and gravel units of the channel fill aquifers (Klausing, 1974). Storage coefficients of the channel fill aquifers obtained from Klausing’s pumping tests range from 0.0001 to 0.00045. One pumping test yielded a specific yield of 0.14. This indicates that the lower sand and gravel strata found in the channel fills are normally confined by the overlying silts and clays.

Stratigraphically, the Hagel A bed is the highest, significant aquifer in the study area. The seam has local undulations that cause variations in the character of this aquifer. In some areas, the Hagel A bed is confined, but in other areas it is under water table conditions. The potentiometric map of the Hagel A bed suggests that water in this aquifer flows radially from surface recharge areas towards the croplines along the Missouri River Valley, the Weller

Slough Trench, and tributaries of the Coal Lake Coulee. Discharge from the Hagel A bed along some outcrops and near surface subcrops is in the form of springs.

Results from single well response tests completed in Hagel A bed are presented in Section 2.2 (NAFK-8405, NAFK-8705, NAFK-9503 and NAFK-9601).The measured hydraulic conductivity of the Hagel A bed ranges from 0.05 feet per day to 4.6 feet per day. However, some monitoring wells exhibited a hydraulic conductivity that was too high to be measured with response tests.

The Hagel B bed lies below the Hagel A bed. The Hagel B bed is in direct hydraulic connection with the Hagel A bed in a few places. A few areas of the Hagel B bed are unsaturated to dry, but is generally confined. Potentiometric levels of the Hagel B bed are normally lower than those of the Hagel A bed except in a few areas where they are in equilibrium. This difference induces leakage from the Hagel A bed to the Hagel B bed.

The hydraulic conductivity measured in response tests Section 2.2 (NAFK-8405, NAFK-8705, NAFK-9503 and NAFK-9601) ranges from less than 0.01 feet per day to 3.45 feet per day Section 2.2 (NAFK-8405, NAFK-8705, NAFK-9503 and NAFK-9601). Recharge of the Hagel B bed is primarily leakage from the Hagel A bed. Groundwater flow in the Hagel B bed is from the high potentiometric areas to discharge areas along the croplines of the coal seam along the Missouri River Valley, the Weller Slough Trench, and tributaries of the Coal Lake Coulee. Some discharge along crops is in the form of springs.

The C sand is the first aquifer below the Hagel B bed. The C sand is an interval of sandy silts to silty sands; it also typically includes one or more thin lignite beds (locally referred to as the C seam). The C sand is a confined aquifer that lies 20 to 30 feet below the Hagel B bed and 60 feet above the Tavis Creek bed.

The general flow direction in the C sand is from the high potentiometric areas towards the Weller Slough Trench, the Missouri River Valley, and the trench of Coal Lake Coulee. Recharge of the C sand is primarily through leakage from the Hagel B bed. The hydraulic conductivity of the C sand, measured in response tests, ranges from less than 0.01 feet per day to 30 feet per day.

The Tavis Creek bed is a lignite bed that lies 60 to 100 feet below the C sand, under a layer of Sentinel Butte Formation clay. The flow in the Tavis Creek bed takes place under confined conditions. Flow in the Tavis Creek bed is from the Weller Slough toward the Missouri River. Recharge of this aquifer appears to be primarily from lateral flow from North of the study area and from Weller Slough and associated filled trench drainages. Some leakage may occur from overlying aquifers. However, the significant thickness of the overlying clays suggests that this leakage ought to be relatively small. The potentiometric surface of the Tavis Creek bed is lower than that of the C sand. The Weller Slough Trench is a source of recharge for the Tavis Creek bed. It appears to have been a main tributary to the pre-glacial valley of the Knife River (Bluemle, 1971). The Weller Slough Trench consists of coarse sediments within the broad depression of the buried channel (Bluemle, 1971). It is hydraulically connected with Lake Sakakawea.

Recharge of the Weller Slough Trench aquifer is from precipitation, discharge from shallow aquifers, and Lake Sakakawea (Klausing, 1974). The bottom of the Weller Slough Trench aquifer reaches 306 feet in depth in well NDSWC 4034 (Klausing, 1974). At this location, the thickness of the coarse sediments is sixteen feet (Klausing, 1971). Pumping tests performed in the central portion of McLean County indicate hydraulic conductivity values of 104 to 6,739 feet per day for the sand and gravel units of the channel fill aquifers (Klausing, 1974). Storage coefficients of the channel fill aquifers obtained from pumping tests range from 0.0001 to 0.00045. One pumping test yielded a specific yield of 0.14. This indicates that the lower sand and gravel strata found in the channel fills are normally confined by the overlying silts and clays. Single well response tests performed in the Tavis Creek bed yielded hydraulic conductivity values of less than 0.01 feet per day to 18 feet per day.

The Coal Lake Coulee lignite bed is under confined conditions located between 15 and 30 feet below the Tavis Creek bed. Flow direction is similar to the Tavis Creek bed and is from the Weller Slough toward the Missouri River.

The main source of recharge for the Coal Lake Coulee bed is from the previously discussed Weller Sough Trench and leakage from the overlying Tavis Creek bed.

The hydraulic conductivity of the Coal Lake Coulee bed, measured in response tests ranges from less than 0.01 feet per day to .32 feet per day.

The Hensler sand is the sand unit monitored as the first aquifer below the Coal Lake Coulee bed. It is part of numerous discontinuous sand units within the Bullion Creek Formation that make up an “aquifer zone” rather than a distinct aquifer (Groenewold, et. al., 1979). The Hensler sand is between just a few feet to more than 30 feet below the Coal Lake Coulee. The flow in the Hensler sand takes place under confined conditions and is from the Weller Slough toward the Missouri River

Recharge of this aquifer appears to be primarily from lateral flow from north of the study area and from leakage from overlying aquifers. The potentiometric surface of the Hensler sand is generally lower than that of the Coal Lake Coulee bed. Single well response tests performed in the Hensler sand yielded hydraulic conductivity values of less than 0.03 feet per day to .25 feet per day.

The Hagel A bed water has calcium-magnesium and sodium as dominant cations. Bicarbonate and sulfate anions are present in the water. The water quality data for the Hagel A bed shows that there is not a predominant type of water. Total dissolved solids range from 777 to 4,838 mg/l and averages 2,082 mg/l. The water is generally very hard.

Water of the Hagel B bed exhibits similar characteristics as the Hagel A bed water. Calcium and magnesium cations are slightly less prevalent, with sodium being the dominant cation in over half of the samples. Dominant bicarbonate anion is more common than dominant sulfate anion type. The water quality data for the Hagel B bed indicates that water type of this aquifer can be quite variable. Total dissolved solids range from 855 to 3,280 mg/l and averages 1,897 mg/l. Water hardness varies from very hard to soft, but is mostly very hard.

The C sand water has a predominant sodium bicarbonate type but sodium sulfate water can also be detected. Calcium and magnesium are less predominant. Total dissolved solids range from 642 mg/l to 3,733 mg/l and averages 1,773 mg/l. Hardness varies from very hard to soft, but is generally soft.

Water of the Tavis Creek bed shows some tendency to the sodium bicarbonate type. However, predominance of the calcium and magnesium cations, and sulfate and bicarbonate anions is observed in some samples. Total dissolved solids are between 450 mg/l and 5,540 mg/l and averages 1,882 mg/l. The water is soft to hard.

The Coal Lake Coulee bed water shows a tendency to be a sodium bicarbonate-sodium sulfate type, but also has major concentrations of calcium and magnesium. Total dissolved solids range from 1550 mg/l to 5,452 mg/l and averages 2,674 mg/l. The water is generally very hard.

The Hensler sand has a predominant sodium bicarbonate type with major concentrations of sulfate. Calcium and magnesium are less predominant. Total dissolved solids range from 743 mg/l to 2,668 mg/l and averages 1,250 mg/l. The water is generally moderately hard, but can range from very soft to very hard.

Background surface water studies and data has been collected since 1981 to present on and adjacent to Falkirk permitted lands. Baseline flow and quality data included ephemeral and intermittent streams and quality and elevation data included permanent wetlands. Water quality testing of the samples was conducted by Minnesota Valley Testing Inc., for total suspended solids, total dissolved solids, pH, total iron, manganese, calcium, sodium, magnesium, electrical conductivity, alkalinity (carbonate and bicarbonate), sulfate, and sodium adsorption ratio Baseline flow quality measurements were performed by Falkirk environmental staff using Stevens recorder gauges and Solinst level-loggers (data logging transducers). Using water level data from the gauges and the transducers, a hydrograph was created to determine the flow rate from a stage-discharge curve. Bentley FlowMaster software is used to perform the hydraulic calculations for the stage-discharge curves.

Quantification of the surface water probable hydrologic consequences was conducted using the SCS method and the Corps of Engineers’ HEC-1 and HEC-HMS hydrology software. HEC-HMS software was developed in 1995 by the U.S. Army Corps of Engineers Hydrologic Engineering Center and is a Windows-based upgrade to the HEC-1 program. Both software computes the volume of runoff and peak discharges for a given storm event by entering watershed parameters such as the watershed area, weighted curve number, and the time of concentration. These programs will also route flows through a stream channel, culvert, and reservoir, and will combine routed hydrographs to compute peak discharges, time of peak discharges, routed hydrographs, and total runoff volumes. The results of the modeling were used to develop the surface baseline conditions for the permitted areas.

Geotechnical soil drilling has been carried out at the property during several investigations. Studies have been implemented prior to entering a new mining area and periodically throughout the life of the mine when questions arise that warrant further investigation or geotechnical confirmation. The most notable studies concerning geotechnical properties are described below.

In 1976 the intitial Ground Stability Study of the Underwood Coal Field was conducted and reported by Robert L. Zook – Soils / Geological Engieer for the initial mine start up. This was followed in 1981 with a study of the same coal field concentrating on an additional minining unit (Mine Area B) by Barry L. Sutphin – Geotechnical Engineer.

Additional studies for spoil stability and opening the additional mining area in the Riverdale field where completed by J. Lyall Workman, P.E. (Calder & Workman, Inc.) in 1994 and 1995 respectively.

Studies were completed in 1996 and 1998 for moving the 8750 dragline to the Island mining area and the slope stability of that mine area (also by Calder & Workman, Inc.)

In 2009 (Calder & Workman, Inc.), 2010 and 2013 (Barr Engineering) Stability Analyses were completed for highwall stability, site specific clay properties and general spoil stability for both mine areas.

Barr Engineering also completed analysis and impacts of highwall failures and a root cause analysis of the failure around our 8750 dragline in 2015.

To conduct the geotechnical analysis required for the above studies soil data was collected during field investigations and laboratory testing programs. Both conventional continuous overburden coring and cone penetration testing were completed as part of the field investigation.

Laboratory testing included:

The slope stability analysis was conducted using the SLOPE/w module of GeoStudio software package.

All of these studies have been used to incorporate best practices and supporting data for our ground control plan that is submitted to MSHA. Guidance for such things as our digging method, depth of prebench highwalls, thickness of and angle of dragline highwalls, spoil height and even the best road building materials have all been gleaned from the information provided in the aforementioned geotechnical studies. Figures 7.3 shows the most recent geotechnical borings completed during a mine-wide study in the Underwood mine area. Figure 7.4 shows the most recent geotechnical boring completed during a mine-wide study in the Riverdale mine area.

The Falkirk Mine lignite deposits are evaluated on a seam by seam basis. As a standard in the coal industry, individual sections of lignite are bagged and sent to the third-party coal testing laboratory. The procedures at the Falkirk Mine for sample collection are summarized below.

Core runs are specified by the senior and/or field geologist by referencing the geophysical log of the pilot hole. Most of the time a single 10-foot core run can typically capture a full lignite seam. In situations where a coal seam, roof and floor are thicker than 10 feet, a 15-foot core barrel is used or multiple runs with the 10-foot barrel is utilized. Once a specified core run is brought to the surface, the field geologist observes the drillers extract the lignite sample from the double barrel core to ensure the integrity of the sample is maintained, and to verify the top and the bottom of the core run. The core sample is transferred from the core barrel directly to a aluminum trough that contains a fix measureing tape. If there is excess drilling mud from on the core sample the field geologist washes with water, verifies the roof and floor of the lignite core is present and checks the expected coal seam thickness referenced from the pilot hole’s geophysical log to determine coal core recovery. If 90-percent recovery cannot be verified, the driller may attempt to retrieve the remainder of the lignite core run from the current hole. If no successful attempt is made to recover the remaining lignite, the driller must recore the lost interval in a new adjacent core hole.

Upon verifying full recovery of the core run, the field geologist succinctly, but thoroughly logs the lignite run. A typical log describes:

After the field geologist describes the core run, the entire lignite section is double bagged and double tagged. Tags include the date, mine identifier, hole ID, seam ID, and “to” and “from” intervals. Double bagging preserves the moisture of the sample, and double tagging safeguards the identification of the sample from the field through transportation to the third-party laboratory.

Lignite cores may be split into multiple samples for the following reasons:

Laboratory results for split cores are reviewed by the senior geologist prior to inclusion in the geologic database for modeling. Quality results for all split samples to identify composition concentrations are identified as a continuous seam in the geologic database. The weighted average is computed in the modeling process. Roofs, floors and partings that meet a minable quality are identified as part of the associated seam, and are modeled in the same manner as the split samples described previously. Roofs, floors and partings that do not meet a minable quality are included in the geologic database as a point of record, but are not modeled with a seam identifier, and thus the quality of those splits is not weighted with the associated seam. Total core runs are shipped for analysis following industry standards, thus split samples in the context of a retained sample are not stored at the Falkirk Mine. Lignites tend to be high moisture coals which oxidize rapidly and do not have a long shelf life once removed from the ground. If core splits were retained, they would not be representative of in-situ coal properties over time.

MVTL participates in round-robin testing programs with other laboratories to ensure result accuracy. MVTL participates in an Interlab Coal Round Robin Program monthly. In 2020, MVTL also participated in a lignite (coal) specific round robin program with NACoal including 8 independent laboratories, one of which was MVTL, that were used by various NACoal mine locations. The round robin consisted of four samples labeled 2001, 2002, 2003, and 2004. Two samples were sourced from Red Hills Mine and two samples were sourced from another NACoal mine, Coyote Creek Mine, located in North Dakota. The two locations provided a range of samples with variability in moisture, ash, sulfur and sodium. The labs participating in the round robin were provided 8-mesh splits and dried, 60-mesh splits of all 4 samples. The general results are summarized in Figure 8.1. MVTL is labeled “Laboratory #5”.

All balances are calibrated and certified annually by a third-party calibration service. Balances are verified daily using certified weights.

The sample receiving and storage room is climate controlled (ventilated, AC, and heat). Samples are received through various couriers, directly from clients, or from the MVTL Field Service division. The samples are cross referenced with a chain of custody form or other client paperwork and then are logged into the Laboratory

Information Management System (LIMS). Each sample is given a unique lab number used for tracking during analysis and throughout the reporting process.

Samples are stored until they are ready to be crushed in the prep room. There is a slight potential for moisture loss during this storage period. Falkirk acknowledges this potential and, as such, double bags samples in the field to preserve as much in-situ moisture as possible.

Retained pulverized and air-dried 60-mesh samples are also stored in this room. These samples can be reanalyzed within 6 months for selective parameters. MVTL contacts and verifies with the client prior to disposal of retains.

The prep room is a temperature-controlled room (AC and Heat) accessible from the sample receiving and storage room. Within the prep room, samples are crushed to 8-mesh using a crusher and are reduced in volume using a riffler. Two different sized crushers and rifflers are available depending on sample size. Compressed air is used to clean the crusher and riffler after each sample to mitigate contamination.

A riffled split of 8-mesh coal is placed on a sample tray and weighed. The weights are sent electronically to LIMS for use in the moisture calculation. The tray is placed in an air dry oven and dried overnight. The temperature of the air dry ovens is monitored and recorded daily. The temperature monitoring devices are verified annually. Another riffled split is sealed in a Ziploc bag and retained. The client is notified prior to disposal of the coal core splits.

Once air-drying is complete, the samples are weighed and again the weights are sent electronically to LIMS. The samples are pulverized to 60-mesh and split using a riffler. Compressed air is used to clean the pulverizer and riffler after each sample. Samples are stored in glass jars for analysis and the splits are retained in whirl-pak bags.

All of the analyses in the laboratory are performed on the 60-mesh sample or ash prepared from it. The samples are mixed by tumbling prior to each analysis. The lab is climate controlled (AC and heat). Coal analysis results are reviewed prior to reporting. The review includes identification of outliers and comparison of results with historical information by site, if available. The analyses are re-analyzed as needed.

The drilling database for the Falkirk Mine was compiled in an electronic, geologic database. The database encompassed the geologic modeling inputs including lithology picks, total depth of hole, base of oxidation (weathering), hole coordinates, and coal core quality data. This data was organized into three tables related to lithology picks, collar survey, and quality.

The drilling database was saved on the Falkirk network drive which contains the geologic model and has limited access. Files saved on this drive are automatically backed-up daily to a local server.

Once the drilling database was compiled, a series of routine data integrity checks were performed by the QP on the database to check for common errors and omissions. The QP visually inspected the database after updates were made, then ran a second data validation check using Carlson software. The validation checks included, but were not limited to, the following:

For any errors or omissions reported, the QP reviewed the geophysical logs, field logs, and quality reports related to the specified holes to reconcile the differences.

After the initial checks were performed, the QP person built the initial model. Once modeled, various cross sections and isopach maps were reviewed for anomalies related to structure and/or quality.

It is the QP’s opinion that the analytical results from the coal cores collected during Falkirk’s exploration programs are consistent with actual as-delivered quality from the active mining operations at the Falkirk Mine. This opinion was based on comparison of historical quality projected from the Carlson model for the annual operating plans to actual as-delivered quality indicated by the customer’s (CCSPP) third-party laboratory, MVTL. It is also the QP’s opinion that the modeled structure of the lignite seams is consistent with active mining operations based on comparisons of modeled seam thickness and trends and actual surveyed seam thicknesses and trends.

The QP found the geologic model was a reasonable and reliable representation of the geologic structure and quality of the lignite seams (horizons) at the Falkirk Mine.

The QP compared the Mineral Resource model supporting the Mineral Reserve for projected quality, volumes and lignite tons, and evaluated monthly and annual reconciliations and found the Mineral Resource model to be an accurate representation of the actual findings during mining operations.

Past and ongoing environmental studies including groundwater and surface water studies discussed in Sections 7.2 and 17.3 have been reviewed and it is the QP’s opinion they are thorough, complete, and provide the necessary information for the start up and ongoing operation of the Falkirk Mine. The geotechnical studies discussed in Sections 7.3 and 13.3 have been reviewed and it is the opinion of the QP that the geotechnical data is adequate to support the pit angles used by the Falkirk Mine.

The QP reviewed the dilution assumptions and found them to be reasonable and consistent with realized results from the active mining operation. Recovery rates are continually being compared to actual recoveries for verification.

The QP has reviewed annual historical values for all costs, pricing assumptions and economic analysis to be reasonable for future projections, which are refined and updated using the historical values, to continuously improve accuracy of the projections. These have been used to support parameters used during mine planning.

The QP considers that reconciliations of staffing and workforce requirements, actual equipment capacities and productivities have been appropriately considered while establishing reliable projections of executing the mine plan.

The Falkirk Mine has established internal policies and controls to manage the environmental, regulatory and social or community aspects for the mining operations. These are periodically reviewed by the QP and other managers at the Falkirk Mine and North American Coal Corporate management for their effectiveness in a culture which follows the principle of continuous improvement.

Although Falkirk has remained consistent with coal core sampling programs following and documenting procedures that align with coal industry standards, there are still some inherent risks in the estimation of Mineral Resources and Reserves. This risk falls in the uncertainty within the earlier drilling.

Throughout the 50+ year history of the Falkirk Mine’s coalfield, The North American Coal Corporation has always used policies, protocols and procedures to ensure the accuracy and integrity of the drilling and coring data. Experienced geologists have always been on the drill rigs or supervising the engineers and/or students on the drill rigs. However, technologies and understandings change. Prior to 1976, the Falkirk Mine did not have a survey grid established. Hence, drill hole locations and elevations were read from USGS topographic quadrangle maps. Also, prior to 1975, geophysical logging on shallow coal exploration holes was not a common practice. This caused errors and deviations in locations, elevations and depths, especially as compared to more modern methods with higher levels of control. Consequently, all drilling data prior to 1976 has been deleted from Falkirk Mine’s databases and is no longer used for modeling and reserve-resource estimates. Verification of lignite quality and trends with newer drilling data has increased the confidence in the early data, but does not eliminate the inherent risk from lack of QA/QC parameters in this small percentage of data in the areas that have not been mined.

Data disclosed in this TRS used for the preparation of geologic models for the purpose of Mineral Resource estimations at the Falkirk Mine have been verified by the QP. The QP has been involved with the verification of these data for the past 17 years and has served as senior mining engineer since 2016. The QP is a registered Professional Engineer in North Dakota; registration number PE-6256. These data include drill hole surveys, geophysical logs, coal core quality, and other relevant test data. Procedures discussed previously in this section follow coal industry standards and were used by the senior geologist and verified by the QP to reconcile any discrepancies upon review of the available data.

It is the QP’s opinion that the data provided for this TRS is more than sufficient for the determination of Mineral Resources and Reserves at the Falkirk Mine.

Processing and metallurgical tests were not conducted on the lignite for the Falkirk Mine. It was known early on that the mine and power plant project would only be economic if a run-of-mine product was used as the fuel source. Therefore, no washability or metallurgical tests were conducted.

The basis of the Mineral Resource estimates for the Falkirk Mine deposit and the methods in which they were prepared are summarized for this item. The S-K 1300 regulations (17 CFR 229.1300) define a Mineral Resource as:

“A concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction. A Mineral Resource is a reasonable estimate of mineralization, taking into account relevant factors, such as cut-off grade, likely mining dimensions, location, or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable. It is not merely an inventory of all mineralization drilled or sampled.”

Following definitions presented in 17 CFR 229.1300 and guidance from the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), Mineral Resources are divided into three categories as listed below and are ranked by increasing level of confidence. Mineral Resources are reported as in-situ tons such that no adjustments have been made to account for mining recovery or losses.

Inferred Mineral Resources are defined as a Mineral Resource for which quantity and quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and quality continuity. Inferred Mineral Resources have the lowest level of confidence determined by the QP.

Indicated Mineral Resources are defined as a Mineral Resource for which quantity and quality are estimated on the basis of adequate geological evidence and sampling such that the QP can apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. These Mineral Resources may be converted to a Probable Mineral Reserve. Indicated Mineral Resources have a moderate level of confidence determined by the QP, and could be upgraded to a Measure Mineral Resource with further exploration.

Measured Mineral Resources are defined as a Mineral Resource for which quantity and quality are estimated on the basis of conclusive geological evidence and sampling such that the geologic certainty of the Mineral Resource is sufficient to allow the QP to apply modifying factors in detail to support detailed mine planning and final evaluation of the economic viability of the deposit. Measured Mineral Reserves have the greatest confidence defined by the QP, and may be converted to a Proven Mineral Reserve.

The QP based the Mineral Resource estimates presented in Table 11.4 for the Falkirk Mine on a stratigraphic geologic model generated from the verified drilling exploration data presented in Section 7.0 of this TRS. The choice of stratigraphic modeling is due to the continuous spatial continuity of the lignite seams.

The QP managed the developement the stratigraphic geologic model for Mineral Resource estimation using Carlson Mining software. All verified drilling data to date was included in the model. The Falkirk Mine lignite deposit was modeled using U.S. customary units projected to NAD 1983 North Dakota State Plane South coordinate system. Key assumptions, parameters and methods to estimate Mineral Resources are discussed herein.

The structure of the Falkirk Mine deposit is determined by “to” and “from” depth picks from geophysical logs and field logs correlated the drill hole collar survey. Depth picks represent the roof or floor of a lignite seam which define a horizon or domain.

Table 11.1 presents the stratigraphic Horizons modeled for Mineral Resource estimation. Modeled horizons were required to have quality data in the drilling database to be considered.

In addition to the lignite seam horizons, the pre-mine surface topography, overburden, interburden, parting thickness and the base horizon till (BHTI) depth determined from drill cuttings and geophysical logs.

After the QP verified the drilling data following procedures outlined in Section 9.0 of this TRS, the geologic database including three tables encompassing geologic lithology picks, quality data, and collar surveys was imported into the modeling software.

Once the drilling data was imported, a preliminary topographic surface was created by triangulation of an electronic contour map of the Falkirk Mine and surrounding area. A 200 by 200-foot grid surface was then applied to the triangulated surface. Surveyed drill holes were modeled using inverse distance with a grid cell of 200-feet to create a second topographic grid. Differences in the two modeled topographic surfaces resulted in the designed topographic surface of the mine area.

The lithology and location tables were then referenced by the modeling program and the structural model was developed. The lignite horizons were correlated and modeled using 200-foot grid cells. Missing lithologic data were extrapolated from ten surrounding drill holes using an inverse distance squared calculation. Geologic cross sections were created and correlations checked by the QP. Any errors identified in the lithologic descriptions were reconciled.

Lignite quality was then modeled for the entire deposit. As with the structural model, the quality model uses 200-foot grid cells to model quality of the deposit. Drill holes missing quality data employed an inverse distance squared calculation to assign averaged values from surrounding drill holes.

The lignite existence limits were created by clipping the lignite seams to a model limit. 200-foot grid cells were used to develop this existence model. Next, a limiting quality mask was applied to the modeled horizons. The defined quality limits were applied to the quality grids to remove areas where the lignite quality was not acceptable as a Mineral Resource.

In-situ tonnages for the lignite seams were calculated within Carlson by applying a formula to each horizon by the area, thickness, density, and real/extrapolated quality values (i.e. modeled parameters).

Historically, geologic models at the Falkirk Mine have been generated using inverse distance methods. These models were established and used in the development of detailed mine plans, financial projections, landowner tonnage estimates, daily operation plans, and month end reconciliations. The models have proved to be consistent with field conditions (structure and quality), which is attested to the simplified geology of the region as described in Section 6.0 of this TRS. Geologic units are laterally continuous with generally graded quality. Use of inverse distance methods is a coal mining industry standard of geologic modeling. However, to further justify the use of inverse distance modeling methods, the QP along with Carlson software personel, also modeled the drilling data in Carlson software using kriging methods and compared the two model outputs.

Both inverse distance methods and kriging methods resulted in a similar model. The QP did not see a need for Falkirk to alter geologic modeling methods.

The QP serves as the senior mine engineer at the Falkirk, reviewed and validated the geological model using various checks between drill hole data and modeled horizons.

Drill hole locations were randomly selected to verify modeled values of each horizon were representative of the imported drill hole data. Additional visual inspection of the model included review of various consecutive cross sections as well as isopach maps of the modeled structure (roofs, floors, and seam thickness) and quality. Newly modeled grids were also compared to previous models. Changes in modeled values were minor and isolated to areas where new drilling data had been included from recent exploration programs. Anomalies, such as spikes in the data

were reviewed against the original drill hole data, any errors in the drilling database were reconciled and the model was reconstructed.

The QP feels it is also important to note that the Falkirk Mine is a mining operation actively producing coal. A regular practice in the engineering department is to compare the mined-out pits from the monthly survey data to the geologic model. These comparisons provide a reference for the geologists to verify general trends in the modeled lignite structure.

The QP found the geologic model was a reasonable and reliable representation of the geologic structure and quality of the lignite seams (horizons) at the Falkirk Mine.

The Mineral Resources presented in Table 11.4 were estimated by applying a series of geologic and physical limits in addition to high-level mining and economic constraints which meet the level of detail required for an initial assessment (IA). Key constraints used by the QP to determine Mineral Resource estimates are summarized below. Details pertaining to physical constraints are discussed further within sections 3.0 and 17.0 of this TRS. Mining and economic constraints specific to Mineral Resource estimates are discussed herein.

Geologic Constraints:

Physical Constraints:

Mining and Economic Constraints:

Pits were projected to meet the requirements of the existing contract to provide lignite fuel to the CCSPP as described in the CSA and assumes the continuation of the CCSPP under a new Coal Sales Agreement between Falkirk and Rainbow Energy concurrent with Rainbow Energy’s acquisition of the power plant which is expected to occur in the first half of 2022.

Basic unit costs presented in Table 11.3 were used to determine the maximum reasonable effective stripping ratio of 15:1 for the Falkirk Mine. The sales price has historically remained fairly steady due to the stripping ratio and delivered tons being fairly consistent. Unit costs were derived from general historic unit costs at the Falkirk Mine.

The geologic model was used to create a map of the deposit. Recovery of in-situ tonnage was assumed to be 100-percent. No dilution factors were applied. Preliminary pits were determined by the QP based on logical mining units, then modified for any physical constraints. General tonnage for areas were calculated in Carlson with a simple closed polyline assuming vertical walls. Lignite quality grids were then individually loaded into Carlson for the QP’s consideration with tonnage estimates to determine a general mine sequence and direction.

Resource pit shells projected through 2032 were used to determine the boundaries for resource estimation.

The Mineral Resource categorization applied by the QP includes the consideration of geologic continuity, spatial distribution of drill holes, abundance of data, and quality limits. Mineral Resources presented in this TRS were estimated and categorized under Measured, Indicated, or Inferred categories. The potential of economic extraction is justified by the terms of the existing CSA. Due to the contractual relationship with the customer, it is the QP’s opinion that the prospect of economic extraction is clearly defined.

Due to the uniformity of the structure and quality of the Falkirk Mine coal field, drill hole distances that will define the spatial distribution between Mineral Resource Categories are based on the drill hole distances currently utilized by Falkirk As stated in Section 7.2, the minimum drill hole spacing within the controlled tracts within the permit boundary area at the Falkirk Mine is 1,320 feet, and fill in drilling tightens the spacing. This drilling density has reliably predicted coal tonnage and quality for over 40 years.

The defined distance limits of the Mineral Resource categories are presented in Table 11.4.  

Inferred Mineral Resources are defined as tonnages which meet the general resource requirements and fall within an area where the average distance between quality drill holes from 2,640 to 5,280 feet. Modeled values at these distances require a large amount of interpolation between drill holes, however due to the level uniformity of the structure and quality data of the Falkirk Mine coal field along with the high level of control and oversight during collection of nearby drilling data, the resulting resource estimates have a moderate level of confidence by the QP and a moderate level of uncertainty.

The categorized Mineral Resources reported herein are exclusive (or inclusive) of Mineral Reserves. The effective date of Mineral Resource estimates is December 31, 2021.

Due to the contract provisions of the CSA, factors including contract term or likelihood of economic extraction, lignite sales price, and quality parameters/limits have far less risk of being affected than a mineral sold on the open market. Nonetheless some risks still need to be addressed. Additional exploration may positively or negatively affect Mineral Resource estimates. Furthermore, Mineral Resource estimates may be materially affected by a significant change in the assumptions including general mining costs and land control. New regulations may impose additional economic factors, delays to future permit renewals, or restrictions to physical estimation boundaries. Falkirk assumes the CCSPP will to continue to operate after Rainbow Energy’s acquisition of the power plant, which is expected to occur in the first half of 2022. Numerous regulatory authorities, along with well-funded political and environmental activist groups, are devoting substantial resources to anti-coal activities to minimize or eliminate the use of coal as a source of electricity generation. As a result of such activities, a prematurely retirement of the CCSPP could have a material adverse effect on the mineral resource estimates. The QP is not aware of any specific factors that would currently materially affect the prospect of economic extraction.

This Item discloses the Mineral Reserve estimates for the Falkirk Mine based on the QP’s detailed evaluation of the modifying factors as applied to indicated or measured mineral resources, which demonstrate economic viability of the Falkirk Mine property. The estimated Mineral Reserves are in accordance with the definitions of “Mineral Reserve” as describe by the S-K 1300 regulations (17 CRF 229.1300) as:

“A coal reserve is the economically mineable part of a Measured or Indicated coal resource demonstrated by at least a Preliminary Feasibility Study, which includes information on mining, processing, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.”

Following definitions presented in 17 CFR 229.1300, and guidance from the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), Mineral Reserves are divided into two categories as listed below and are ranked by increasing level of confidence.

Probable Mineral Reserve is the economically mineable part of an indicated and, in some cases, a measured mineral resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

Proven Mineral Reserve is the economically mineable part of a measured mineral resource and can only result from conversion of a measured mineral resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors.

Modifying factors were applied to convert Mineral Resources into Mineral Reserves. These include, but are not restricted to, mining, processing, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

The sample system collects a twice daily (12-hour, midnight to midnight) representative sample of the delivered lignite on the same conveyor belt where the certified conveyor belt scale weighs the tons of lignite delivered over the same period. The conveyor belt is located after the truck dump hopper and storage silos.

This disclosure of Mineral Reserves is based upon the qualified person’s preliminary feasibility study (pre-feasibility or PFS), as defined in 17 CFR Part 229.1300, which includes and supports the qualified person’s determination of Mineral Reserves. A pre-feasibility study was chosen by the qualified person, as opposed to a feasibility study, because the Falkirk Mine has successfully operated for over 40 years and has established a detailed and thorough understanding of the modifying factors that support the conversion of Measured and Indicated Resources to Mineral Reserves for the remaining LOM Plan. The QP does not believe that a feasibility level study is required because of the confidence in the available data.

The mining plans included annual stripping and lignite production qualities and quantities. Annual production costs were estimated based on the mine plan quantities, surface mining methods, equipment fleets in use, and unit prices that have been proven by historical production at the Falkirk Mine. The current mining methods, used at the Falkirk Mine since inception, are planned to continue until enough lignite reserve is depleted to fulfill the contractual obligations of the CSA for fuel supply to the Coal Creek Power Plant.

The following key assumptions, parameters, and methods describe how the QP converted the mineral resources to mineral reserves. All recoverable lignite required to fulfill the contractual obligations of the CSA are contained within the LOM Plan pit extents. The criteria used to estimate the recoverable reserves contained within the LOM pits as estimated by Falkirk include:

The price and other economic assumptions used to estimate the recoverable reserves are supported by the existing all-requirements CSA, the assumption of a new CSA with Rainbow Energy after Rainbow Energy acquires the CCSPP, and the mine plan associated with these contracts. Compensation from GRE and Rainbow Energy under the CSA’s includes reimbursement of all mine operating costs plus a contractually-agreed fee based on the amount of coal delivered. The CCSPP is located directly next to the Falkirk Mine (i.e. a mine-mouth operation) and 100% of the required coal to operate the CCSPP is sourced from the Falkirk Mine.

Criteria for determination of Mineral Reserve estimate are justified in further details in the discussion of run-of-mine tonnages under Section 13.0 of this TRS.

Methods to develop the LOM Plan are as follows:

A workplan forecast is developed to determine the schedule and estimated MMBtu requirements of the CCSPP by month for the first eighteen months of the LOM Plan and then by year until the end of the LOM Plan.

To determine initial tonnages for consideration of Mineral Reserves, modifying factors including the minimum mining thickness and dilution parameters are applied to the geologic model used to define Mineral Resources. Quality limits are reassessed on a seam by seam basis. Falkirk engineers then project mining pits in Carlson Software following pit design parameters discussed under Section 13.0 of this TRS. Projections are directed to the topography from the lowest mineable lignite seam. Highwalls are projected at 55-degrees and endwalls are projected at 55-degrees. Volumetric and tonnage data is utilized by the program to determine production and timing schedules.

This process produces a high-level summary by mining unit including rehandle volumes and projected qualities by period.

The high-level summary includes:

The total hours, allotted volumes, tonnages and quality by period are the primary inputs for the Falkirk Mine financial model.

After the metered hours for each applicable equipment are calculated to deliver the required tonnages by period, historical equipment costs/hr are applied to determine the total equipment costs for that period. The staff levels are calculated from the required equipment hours and current wages are applied to determine the total labor costs for that period.

Historical unit costs including actual machine operated costs and hours, materials and supplies, and fuel are the basis of the financial model. The historic unit costs are escalated using indices tables and forward-looking futures. The

escalated units are then applied to the input hours, volumes, and tonnages previously sequenced to forecast operating costs. In addition to general operating costs, costs pertaining to stockpile inventory adjustments, reclamation, royalties, mine closure, and capital projects are projected and escalated accordingly.

The resulting lignite schedule from the financial model based on the specified delivery schedule determine the Mineral Resources that carry through to become Mineral Reserves.

The effective date of Mineral Resource estimates is December 31, 2021.

The Falkirk Mining Company’s Falkirk Mine is a surface lignite mining operation located near Underwood, North Dakota. This operation is a multiple seam mining operation, which is projected to ultimately produce approximately 7.0 million tons per year through 2031. The lignite coal is shipped by conveyor to the CCSPP, located six miles south of Underwood, North Dakota.

The primary coal bed is the “Hagel” which is divided into the Upper Hagel (A-1) and Lower Hagel (A-2). These two seams are coincident throughout most of the permit, but are sometimes separated by a clay parting. The Hagel coal bed is overlain in a portion of the permit area by the Kinneman Creek (KNC) seam. This coal seam averages 2.7’ in thickness and ranges from 2.0’-4.3’ within the estimated economically minable area. The KNC seam lies an average of 65’ above the Hagel seam, but varies greatly, from less than 25’ to over 88’ above the Upper Hagel seam. Below the Lower Hagel is a layer of interburden and the final minable “B” seam. The Upper Hagel seam averages 8.5’, and ranges from 3’ - 9’ in thickness. The parting varies from 0’ - 3’ in thickness, and averages less than 1’. Thickness on the Lower Hagel seam ranges from 0’ - 5’ and averages less than 1’ .Throughout most of the present permit area, the parting is absent and the Hagel or A seam averages 8.5’ in thickness. Interburden thickness ranges from 5’ - 25’ and averages 13.5’. The B seam ranges from 1.5’ - 4.5’ and averages 3.5’. Portions have B seam separated into two seams by a parting layer which renders this seam uneconomical to mine due to quality impacts.

These economically minable coal seams are underlain by numerous other seams. The C bed of the Hagel lignite interval is the stratigraphically lowest seam in the Sentinel Butte Formation. The Tavis Creek, Coal Lake Coulee, and Weller Slough beds all occur in the upper portion of the Bullion Creek Formation. These lower coal seams are not economically recoverable by surface mining methods because of prohibitive overburden thickness. However, in portions of the Riverdale 4th Addition, the Tavis Creek and Coal Lake Coulee beds are economically recoverable and are proposed to be mined.

Topsoil and subsoil removal will precede the stripping of the overburden from the areas to be mined. The topsoil lift will be removed until the color change with subsoil is representatively exposed across the stripping area or in accordance with soil survey recommendations. A sufficient volume of subsoil will be removed to respread 24, 36, 42, or 48” of SPGM as required by spoil sampling analyses. An exception is areas of prime soils affected by mine pits, where a total of 48” will be salvaged. In some areas, gravel and sand lenses have been identified in the soil material. These materials will not be salvaged as SPGM, and may be spoiled or used as haulroad fill. Additional material will generally be available in the same area for salvage as indicated on the soil survey map, to guarantee that sufficient SPGM will be available for respread. Characteristically, this topsoil/subsoil removal and respread or stockpiling operation usually occurs during the summer and fall of the year preceding mining. During the fall topsoil/subsoil removal operation, sufficient SPGM will be removed to allow mining operations to continue until April of the following year. The removal and direct respread or stockpiling of the topsoil/subsoil will be accomplished using 32-yard class tractor-scrapers or a truck\shovel fleet.

Stockpiling will be in accordance with the methods approved by the Public Service Commission of North Dakota. Volumes will be measured by load count, ground or aerial survey. The stockpiles will be seeded with an approved mixture to help control wind and water erosion and weed infestation. All stockpiling will be identified by a numbering system labeling each stockpile.

First, the truck and shovel fleet remove overburden to an elevation which approximates the first minable lignite seam; usually this will be the H lignite seam. If, however, the I seam is encountered and determined to have economic value based on quality and thickness it may be recovered as well. This overburden material is hauled to fill in the topography to final grade in the reclamation. Truck and shovel operations may be required to remove other interburdens and rehandle material depending on sequencing/production and reclamation planning.

Overburden removal operations will be accomplished by the 8750 and 195M draglines as necessary. The draglines will be scheduled to operate a maximum of 21 shifts per week, 52 weeks per year. The 8750 Dragline and 195M Dragline will be used to remove overburden in a single-pass operation (Figure 13.1), with the pit widths varying from 90’ to 300’, depending on the overburden depth and stability of the material in the areas designated to be mined. The draglines will be assisted by a truck-shovel operation for overburden removal. The angle of repose for the spoil piles will vary from 20º to 40º, depending on the geology of the overburden overlying the coal and the depth of burial of the coal. For mine planning purposes, the angle of repose was assumed to be 37º. The highwall slope will also vary due to pit conditions, and will range from 45º to 70º, with the design slope for planning purposes being 60º.

Usually, the dragline is capable of handling 115’ of overburden before it becomes necessary to rehandle. If spoil stability requires overburden to be rehandled, a variety of spoil handling techniques, including chop-cutting, benching, pre-benching with auxiliary equipment, and others, may be used to solve the problems. The remaining overburden material in the pits will be side cast into the adjacent open pit once the coal has been removed. (Figure 13.2) The initial boxcuts will be excavated with 32-yard class tractor-scrapers a truck\shovel fleet, or with a dragline, depending on the location and depth of the overburden, and the availability of the equipment.

Recoverable Run of Mine (R-O-M) tonnages at the Falkirk Mine meet the following conditions:

The average lignite quality through the LOM is projected to be:

Recovery rates of individual coal seams are presented in Table 13.2 and were determined from various comparisons between surveyed severed tons, haul truck payloads, delivered tons, and modeled tons accounting for dilution and minimum mining thickness.

Mining dilution is determined by an analysis of the geologic model, the coal core data, and the as-delivered coal analyses from the power plant. Roof and floor samples from the coal cores have been periodically collected and analyzed. Statistical analysis has shown that the quality parameters in the roof and floor samples are much more variable than those in the coal seams. Due to this variability, the roof and floor analyses have been used to develop average qualities, with typical distribution ranges.

The geologic model based on the coal core data are interrogated to establish average yearly coal qualities, based on the actual historical yearly mining areas. These yearly coal qualities (from the model) are then compared to the yearly as-delivered analyses from the power plant.

It should be noted that this procedure of estimating mining dilution is also including the sampling bias in the power plant’s coal sampling systems and other plant specific variables. This means that the dilution estimates are designed to incorporate the biases and variables within the specific power plant.

Mining dilution presented in Table 13.3 was initially determined from like coal at a neighboring location. Later, the drilling data was compared to actual as-delivered quality data and confirmed that the original dilution parameters remained applicable with only slight adjustments. Dilution parameters are applied to all lignite seams and are outlined herein:

To determine highwall stability, a circular arc failure approach has been utilized. A minimum FoS of 1.2 was calculated using the Modified Bishop Method for each highwall configuration that will be encountered by the mine. Due to the depth and multiple seam nature of the lignite deposit, benching will be required to allow for continuous burden removal and lignite mining. For individual slopes less than 80 feet, highwall angle are stable up to 70 degrees. Between 80 and 180 feet, the effective slope angle decreases with a linear relationship from 60 to 40 degrees as follows:

The bulk of geotechnical studies at the Falkirk Mine since 1976 pertain to spoil stability which influence operation plans for production and reclamation. Many studies have been conducted to verify mining method and direct best practices when entering into a new or unknown mine area. Others have been conducted as a result of either highwall or spoil failures that have been observed at the mine. One such failure occurred at the toe of the dragline bench causing the bench to move vertically downward and horizontally outward toward the spoil piles which lead to a Barr Engineering study in 2015. There have been several failure types observed at the mine, including heaving of the pit floor followed by a slump failure of the highwall or spoil, block failure of the clayey glacial till and wedge failures along fault zones. As a result, there have been several spoil studies performed by qualified engineering firms over the years, including the most recent by Barr Engineering in 2013 titled “Spoil and Highwall Slope Stability Study for Riverdale and Underwood Mine Areas – Falkirk Mine”. The laboratory results were summarized and analyzed using several tests including “One-dimensional swell or settlement potential of soils”, “Moisture-Density Relationship”, “Unconfined Compression test” and “Consolidated Undrained Triaxial Test” all of which are ASTM standard tests. Figure

An example of a slope stability analysis done by Barr is presented in Figure 13.3.

To help remediate the rotational bench failures, the truck-shovel operation does not dump material within the first two spoil peaks, and spoil piles are not to exceed 90-feet in height above the dragline bench. Furthermore, extra attention is given to ensure water is not stored in spoil valleys for a prolonged period. In addition, the work area is inspected by shift supervisors for cracking, heaving, flowing groundwater, or any other abnormal conditions prior to starting work in an area, and following any precipitation or freeze/thaw event. The inspection requirements are specified as part of Falkirk’s safeguards under the Ground Control Plan. A certified person must document inspections of the work areas during each shift and after every rain, freeze, or thaw. Dragline operators and groundman are continuously monitoring bench and spoil conditions as they dig and utility workers use constant observation of the highwalls and spoils when working in the pits.

A dewatering system, known as the headerline, is installed ahead of mining to facilitate the removal of groundwater and surface water from the mining areas into predetermined pit water ponds. These ponds area monitored by the dewatering supervisors as well as the environmental specialist at the mine.

Haul roads and pit ramps are typically designed to a width of 100 feet to allow for two-way traffic. Ditches are constructed in cut sections consisting of 4H:1V inslopes, 15-foot flat ditch bottom, and 3H:1V or flatter backslopes. Haul roads are surfaced with a minimum of 6 inches of aggregate.

Dragline walkways are typically designed to a width of 200 feet. Ditches are constructed in cut sections consisting of 3H:1V inslopes, 14-foot flat ditch bottom, and 3H:1V backslopes.

Some haul roads may utilize selective fill to improve roadway strength and stability. Two application methods have been employed: application one utilizes 10%-20% selective fill blended uniformly within the road subgrade soil, application two involves subcutting the subgrade and uniformly blending 10%-20% selective fill with the subcut material. Final reclamation of both applications consists of covering any selective fill/soil mixtures with four feet of suitable plant growth material, as well as ensuring any selective fill/soil mixtures are well above the elevation of the expected zone of saturation.

The Falkirk Mining Company employees approximately 416 full time workforce employees; including maintenance staff and equipment operators; and 70 full time staff employees. In addition to the full time employees, Falkirk employees several seasonal coop and intern employees.

No mineral processing is performed.

The public utility lines and facilities locations are presented in Figure 15.1 (LOM Infrastructure Map, located in the Supplemental Figures Attachment).

The Falkirk Mine receives power from the CCSPP on circuit breaker feeds 61NB1 and 61NB2. Two parallel 69kv transmission lines run two miles from the CCSPP switch yard to the mine office substation.  The line then branches out of the mine office substation to feed the East Mine Area and Riverdale Pits.  The line that feeds the East Mine Area pit substation has branch feeders along the way that also supply the New Shop substation, Facility substation and the East Heat Enclosure substation.  The line that feeds the Riverdale pit substation has a branch feeder that supplies the Riverdale Heat Enclosure substation. The 69kv distribution line network is comprised of thirty-two miles of powerline across the mine site. The East Mine Area and Riverdale Pit substations are scheduled to be advanced ¾ mile in 2022, to accommodate for future mining in those respective areas.

Potable water is supplied to Falkirk from the CCSPP, after treating the water onsite.

Sanitary waste produced at the main Falkirk Mine office and maintenance facility is pumped to a waste pond administered by the CCSPP. Outlying buildings utilize drain fields.

A registered groundwater well sourced from the Hensler Sand aquifer feeds the equipment wash bay and fire hydrants.

Sedimentation ponds W6-02, W6-04, R26-01, and E34-06 serve as the water source for dust suppression water horses located in Sections 6, 26, and 34.

The primary market for the Falkirk Mine lignite is the adjacent the CCSPP for which the mine was developed. The Falkirk Mine’s coal quality is such that it is cost prohibitive to transport over long distances. NACoal and Falkirk have made efforts to identify specialty niche markets for the lignite with limited success.

The Falkirk Mine is a fully developed and functioning mining operation. All aspects of the mining, haulage and delivery of lignite to the CCSPP are handled by Falkirk. Falkirk is a mine-mouth project where the lignite is delivered directly to the power plant using off highway haul trucks. All production from the mine is delivered to the CCSPP under the existing CSA with GRE and the expected new CSA with Rainbow Energy. Under the CSA, Falkirk receives a contractually-agreed fee based on the amount of lignite delivered. While Falkirk is responsible for

all mine operations, the customer (GRE currently and Rainbow Energy when the acquisition of the CCSPP by Rainbow is completed) is responsible for funding all mine operating costs and provides all of the capital required to build and operate the mine. This contract structure eliminates exposure to spot coal market price fluctuations. No other material outside contracts are required to provide this service. No material contracts with affiliated parties are in place. Falkirk is an active operation and all material contracts are in place for the continued operation of the mine.

The Falkirk Mine is operating under the State of North Dakota Public Service Commission (NDPSC) Surface Coal Mining and Reclamation Operations Permits NAFK-8405, Revision 41 and Renewal #7, NAFK-8705, Revision 39 and Renewal #6, NAFK-9503, Revision 33 and Renewal #5 and NAFK-9601, Revision 17. The permits were issued by the State of North Dakota under delegated authority of the United States Department of the Interior, Office of Surface Mining Reclamation Enforcement (OSMRE) Surface Mining Control and Reclamation Act (SMCRA).

A list of active permits at the Falkirk Mine is provided as Table 17.1 below.