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Once again, however, the emotional charge has been

made that the railroad land-grant coal reserves are so vast

and strategically located that, if railroads are ever permitted to participate in competitive federal leasing, they will dominate and monopolize Western coal production.

That charge is simply false and unsupportable.

First, the railroad land-grant coal is at a

disadvantage in competing with coal controlled by the major

coal companies from other areas.

The coal from the Powder

River Basin which has proven to be cheaper to mine and more

desirable to customers than most railroad land-grant coal,

is expected to dominate the market for new utility plants

for the forseeable future. This coal, located far from any

railroad land-grant, is largely controlled by the energy giants who are opposing repeal of Section 2 (c). In fact,

most of the federal coal for which my company intends to bid

is located off the land-grant checkerboards.

Second, the individual railroad holdings are in

fact much smaller than reserves controlled by some of the

companies who currently dominate Western coal production and

hold a large share of federal leases.

Third, enormous portions of the railroad reserves

are already committed by lease to companies like Peabody and

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panies, only a small fraction of railroad reserves can be

developed by their owners.

Because they are interspersed

among federal reserves in land-grant checkerboards, railroad

reserves can be developed only where the Interior Department

is willing to lease.

Even where Interior is willing to

lease, no railroad can develop more than a small number of

coal projects in its land-grant checkerboard before it runs

up against the statutory acreage restrictions of 46,080 acres on the federal lease holdings permitted to any one

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Department can prevent the unlocking of all or any part of

the land-grant checkerboard by simply declining to offer

coal for lease in those areas.

Further, the Attorney

General can effectively veto any federal coal lease to a

railroad whenever he finds the lease may create a situation

inconsistent with antitrust laws.

Each of these reasons standing alone is sufficient

to foreclose any threat of railroad monopoly of Western coal


Taken together, they make the threat of

railroad domination wholly impossible.

Opponents of repeal also argue that railroads might achieve a coal monopoly by abusing their position as major transporters of coal. That possibility has been extensively analyzed by the Antitrust Division, who began their analysis with the conviction that Section 2(c) might be justified by a danger of just that sort of abuse. But in the 1980 Justice Department Report, the Antitrust Division

found they had been wrong in this concern.

With only one

possible exception, they found that the Western railroads

would not be able to engage in an anticompetitive use of

their transportation positions. Further, they found that no

Western railroad would find it profitable to misuse its


position as a railroad, even assuming it had the power to do

The Justice Department's study concluded it was unnecessary and, in fact, anticompetitive to exclude the entire railroad industry from competing for federal coal leases because of the unlikely possibility that a single

railroad might act anticompetitively, especially when the

Justice Department may veto any federal coal lease which

threatens competition.

The Justice Department's conclusions do not

reflect any newly permissive philosophy of antitrust enforce

ment. They were reached originally by the Carter Administration's Antitrust Division, who were as aggressive as anyone in Government in perceiving and pursuing potential threats to competition. They were reached by the same

people who initially held that permitting railroads to hold

federal coal leases might present some threat to competition.

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that assumption federal leasing to railroads would not threaten competition so as to justify the blanket prohibition of Section 2(c). The fast is that, even with some rate

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deregulation, railroads are still subject to continuing regulatory requirements. Any attempt by railroads to use

their transportation services to control Western coal production would subject them to very serious risks of

criminal and treble damage liability under the antitrust


Furthermore, any railroad inclined to flaunt the law

and risk such grave consequences would also face denial of

any further federal leases.

This comes under the Attorney

General's statutory power to recommend against any federal

lease likely to present a threat to competition.

With respect to the leasing process, the opponents

of repeal have asked Members of this Committee to believe

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witness, speaking for MARC, asserted that "if Section 2(c)

is repealed, the railroads will acquire the remaining

federal coal lands." That statement is demonstrably untrue. The statutory acreage limitations would prohibit every rail

road, like any other lessee from acquiring more than 46,000

acres of federal leases in any one state.

In southern

Wyoming, the acreage limitation would limit Rocky Mountain

Energy Company to acquiring leases for two or three

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