You are playing Nightmare mode.
When resolving the "when revealed" effect of stage 3B, no more than X resources may be spent from Bilbo Baggins's resource pool, where X is the number of players in the game.
Begin with the standard quest deck and encounter deck for the Over the Misty Mountains Grim scenario. This scenario has two encounter decks. The first encounter deck consists of Over the Misty Mountains Grim and Western Lands encounter sets, and the second consists of The Great Goblin and Misty Mountain Goblins encounter sets.
Remove the following cards, in the specified quantities, from both of the standard encounter deck:
2x Cave Entrance
2x Lone-lands
2x Dreary Hills
2x Overhanging Rock
1x Great Cavern Room
1x The Great Goblin
3x Goblin Miners
3x Goblin Axeman
Then, shuffle the encounter cards in this Nightmare Deck with the Over the Misty Mountains Grim encounter set icons into the remainder of the first encounter deck. Shuffle the cards with The Great Goblin encounter set icon into the second encounter deck.
Finally, flip this setup card over and place it next to the quest deck. Its effects remain active throughout the game, which is now ready to begin.
While Narrow Ledge is the active location, each player cannot commit more than 3 characters to the quest.
Shadow: Shuffle all copies of Galloping Boulders from the encounter discard pile into the encounter deck.
Action: Exhaust Bilbo
and spend 1 resource to place 5 progress on Dim Valley.
Forced: At the end of the round, each player must discard a random card from his hand.
They were high up in a narrow place, with a dreadful fall into a dim vally at one side of them. –The Hobbit
When Revealed: Each player must choose and discard 3 cards from his hand. Each player assigns X damage among characters he controls, where X is the combined printed cost of the cards he discarded.
The lighning splinters on the peaks, and rocks shiver, and great crashes split the air and go rolling and tumbling into every cave and hallow... –The Hobbit