Option Agreement Dated September 28, 2005 Between Buckskin Mining Company And KFX Plant Iii, LLC.

Exhibit 10.68

OPTION AGREEMENT

This Option Agreement ("Agreement"), dated effective as of the 28 th day of September, 2005 ("Effective Date"), is by and between Buckskin Mining Company, a Delaware corporation ("Buckskin") and KFx Plant III, LLC, a Delaware limited liability company ("KFx" and together with Buckskin, the "Parties", and each, a "Party").

Preliminary Statement

A. KFx desires to build a K-Fuel plant using the patented technology of KFx Inc. (the "Plant") on or adjacent to the Buckskin Mine.
B. The Parties have agreed to the terms of a Sublease and Facilities Use Agreement except as provided herein, which agreement is attached hereto as Exhibit A.
C. The Parties have agreed to the terms of a Coal Supply Agreement except as provided herein, which agreement is attached hereto as Exhibit B (together with the Sublease and Facilities Use Agreement, the "Operative Agreements").
D. KFx will make a nonrefundable payment to Buckskin of One Hundred Thousand Dollars ($100,000.00) concurrent with the execution of this Agreement.
E. KFx will have until January 1, 2007, to cause the Operative Agreements to become effective as more fully set forth herein.
F. KFX shall be permitted to use certain property of Buckskin to perform site review for assessing the feasibility of the construction and operation of the Plant.


NOW THEREFORE, IN CONSIDERATION OF the mutual promises, terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Initial Payment. Concurrent with the execution of this Agreement, KFx will pay to Buckskin, One Hundred Thousand Dollars ($100,000.00) as consideration for KFx's receipt of the Option and negotiation of the Operative Agreements. This payment is non-refundable, and if not made within five (5) days after the Effective Date, this Agreement and all rights hereunder shall automatically terminate.

2. Option . (a) KFx shall have the option to cause the Operative Agreements to become effective and be in full force and effect (the "Option ?) at any time after the Option Commencement Date (as defined below) and prior to January 1, 2007 (the " Option Period"). The "Option Commencement Date" shall mean the date upon which the Parties have agreed upon the location of the Plant and facilities related thereto and all exhibits to be attached to the Operative Agreements have been completed to the mutual satisfaction of the Parties.

(b) As of the Effective Date, the Parties have not agreed upon the specific location of the Plant and/or related facilities on Buckskin's property. Thus, the Parties will discuss such in good faith in an effort to determine a mutually agreeable location of the Plant, and facilities related thereto, for purposes of the


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Operative Agreements; provided however, in the event that Buckskin determines that the location of the Plant and related facilities as proposed by KFx are not acceptable to Buckskin (in Buckskin's absolute and sole discretion), then Buckskin may terminate this Agreement without any liability or further obligations to KFx.

3. Exercise of Option. KFx shall only be permitted to exercise the Option by delivering to Buckskin two copies of both Operative Agreements in the form attached hereto, with no changes thereto unless agreed upon by the Parties, signed by KFX, along with the Letter of Credit required in each Operative Agreement. KFx is not permitted to exercise the Option in part and/or at different times; for example, by delivering a signed copy of only one of the Operative Agreements or delivering a signed copy of the Operative Agreements on different days.

4. Failure to Exercise. If KFx fails to exercise the Option within the Option Period as required herein, this Agreement shall terminate and become null and void and the Operative Agreements shall not become effective.

5. Execution of Operative Agreements. If KFx exercises the Option by timely delivery of the Operative Agreements (and relevant Letters of Credit as required therein) to Buckskin, then Buckskin shall, within ten (10) days after the delivery thereof, execute and deliver to KFX a copy of each of the Operative Agreements. The effective date of the Operative Agreements shall be the date when the respective agreements are executed by Buckskin.

6. Grant of License. Upon execution of this Agreement the letter agreement between the Parties dated August 30, 2005, hereby termin ...