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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
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
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
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.
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
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
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.
Wyoming, the acreage limitation would limit Rocky Mountain
Energy Company to acquiring leases for two or three