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M. L. Ehrlich, Esquire October 25, 1991 Page Two (21 This includes accepting responsibility for the cost of preparing the quarterly monitoring report required by the San Joaquin County Public Health Services Department (PHS/EHD). We do not agree with your contention that the cost of preparing such a quarterly report should be our burden. We are perplexed by your assertion that the preparation of such a report is part of the normal operational function and maintenance obligation imposed on this company under the Lease. The premise upon which your contention rests is faulty due to the fact that quarterly reports and monitoring wells are not normal requirements imposed upon all underground storage tank operators prior to the operation of such tanks. We concede that if the installation of monitoring wells and preparation of reports in question had been made a condition of our operating permit, then we would be obligated to prepare and incur the costs associated with such reports and submit them to the PHS/EHD. This simply is not the case. The only reason the PHS/EHD has required monitoring wells and the periodic reporting at issue is because of the result of the above mentioned failed tank test and the subsequent detection of hydrocarbon constituents in the monitoring wells; which, as you have stipulated in your letter, were installed by your clients as required under the Lease. In otherwords, the costs of maintaining the monitoring wells, the preparation of such reports, and any other cost incurred as a result of the integrity of the underground facilities having been compromised. The hydrocarbon release in question is clearly your clients' responsibility under the Lease. Moreover, the fact that your clients have incurred costs in order to comply with the obligations imposed upon them under the Lease, and have expended monies for capital improvements specifically designed to prevent subsequent leaks or reduce the effects of such a leak, is not relevant to the interpretation of Section X of the Lease. Section X in no uncertain terms places the responsibility for costs and damages resulting from the failure of the underground facilities on your clients as part of the allocation of risk amongst the parties under the Lease. The fact that such risk of loss has been realized by your clients does not, as previously stated; warrant or permit your clients to unilaterally ignore their obligations under the Lease. The fact that your clients have acted in good faith to meet certain responsibilities under the Lease is not only to be commended, but it is also to be expected. Your contention that your clients' past implication that such good faith efforts meet their contractual obligations is a justification to ignore continuing future obligations is a creative argument, but to my knowledge has not been recognized under California law.