That concern has been justified in part in that the Department of Justice, in its 1980 "Report on Competition in the Coal Industry," has interpreted 2(c) as applying to any company related to a common carrier railroad company.

We pointed out in 1975 that 2(c) no longer serves a useful purpose for a variety of reasons, and should be released in accordance with the recommendations of the Public Land Law Review Commission. We also stress that any anticompetitive problems could be better evaluated and dealt with under the antitrust review provisions of Section 15 of the proposed Federal coal leasing amendments then before the Congress.

Santa Fe Mining supports repeal of section 2(c) for all the same policy reasons that we stated in 1975, and which have been articulated again today by a witness who preceded me. We are not asking for special treatment, Mr. Chairman, but rather for the removal of a barrier aimed at only one industry, railroads. All we ask is to be permitted to compete with other companies on a nondiscriminatory basis for Federal coal leases both within our checkerboard area and outside it.

Although much of the discussion at this hearing has centered on the problems presented by the unique land ownership patterns in the checkerboarded area, this is not Santa Fe's only concern with the restrictive efforts of section 2(c). While in the past we have generally leased to other operators, we presently have a management aimed to operate on our own properties as well as on those which we may be able to lease from others in the checkerboard, or elsewhere. Our plans include bringing new coal mining in McKinley County into production in 1983 which will have a capacity of 3 million tons. We intend to participate in the first coal lease sale in New Mexico under the new coal management program scheduled for late 1983. We have also recently taken assignments of two Federal coal leases outside our checkerboard which we expect to be approved by the Interior Department.

Consequently, we hope that legislation repealing 2(c) can be enacted to remove the cloud that hangs over the right of railroad affiliated coal companies to participate in Federal coal developnent by virtue of the interpretations of section 2(c) by the Interior and Justice Departments which have been described here today.

I thank you for your attention, Mr. Chairman. I would be pleased to answer any questions.

[The prepared statement of Mr. Walsh follows:]

STATEMENT

OF

DAVID J. WALSH

SENIOR VICE PRESIDENT

SANTA FE MINING, INC.

ON

S. 1542, 97th CONGRESS

Before the

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

OF THE

SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES

Washington, D. C.

September 11, 1981

Mr. Chairman and members of the Subcommittee, my name is David J. Walsh and I am Senior Vice-President of Santa Fe Mining, Inc. located in Albuquerque, New Mexico. Santa Fe Mining is a subsidiary of Santa Fe Industries, Inc. and is actively engaged in coal, uranium, and other hard minerals development. I am accompanied today by Jeffrey T. Williams, an attorney with the Law Department of Santa Fe Industries, Inc., Chicago, Illinois, and Jerome C. Muys, an attorney with Holland & Hart, Washington, D.C. We welcome this opportunity to testify in support of S. 1542, which would repeal section 2(c) of the Mineral Leasing Act of 1920. We have long advocated the removal of this anticompetitive and anachronistic barrier to the optimum development of federal coal resources.

Santa Fe Industries, Inc. ("Santa Fe") is the parent holding company of a number of subsidiary companies engaged in transportation (including rail, truck, and pipeline), natural resources development (including oil and gas, hard minerals and forest products), construction, and real estate. Perhaps the best known Santa Fe company is The Atchison, Topeka and Santa Fe Railway Company.

Santa Fe Industries has been involved in the development and leasing of coal through its wholly-owned subsidiary, Santa Fe Natural Resources, Inc. Santa Fe Mining, Inc., is a wholly-owned subsidiary of Santa Fe Natural Resources, Inc. Santa Fe Mining's predecessor company--the Cherokee & Pittsburg Coal and Mining Company--was acquired in 1995 for the purpose

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of developing coal for the Atchison, Topeka and Santa Fe's steam locomotives and for other railroad purposes. Later, when oil replaced coal as locomotive fuel in the West, Cherokee's coal operations were restricted to leasing coal for development by others as market demands permitted.

Santa Fe Mining's exploration and development of coal has been carried out principally on the reserved mineral rights of an affiliated company, Santa Fe Pacific Railroad Company, which purchased title to properties comprising railroad grant lands in 1897 from the Atlantic and Pacific Railroad. These lands were originally granted to the Atlantic and Pacific Railroad to aid in the construction of a railroad from Missouri to the Pacific Ocean. Santa Fe Pacific Railroad Company does not operate or have any interest in a railroad, despite that implication in its name, as it sold all of its railroad operating properties to the AT&SF in 1903. Through the years Santa Fe Pacific has disposed of most of the surface of its land grant to ranchers, farmers, and others. However, it reserved the minerals in those transactions and now owns approximately 155,000 acres in fee title and has reserved mineral rights in over 4 million acres of the original grant lands located in Arizona and New Mexico.

In 1972 a drilling program was begun on Santa Fe lands in McKinley County, New Mexico. The results of the drilling program indicated the presence of over 370 million tons of surface-mineable, low sulfur coal in three separate areas.

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Negotiations were commenced in 1974 with potential mine operators and prospective customers in the Southwest, principally major electric utilities with long term energy needs. Leases were subsequently executed with Tucson Electric Power Company and Chaco Energy Company, a subsidiary of Texas Utilities, covering the three areas. These leases and outstanding leases to other parties cover over 500 million tons. Additionally, we have more than 100 million tons of uncommitted proven reserves.

However, these reserves amount to

less than 1 percent of the total uncommitted reserves in the San Juan Basin. Many of Santa Fe Mining's present and potential coal reserves are interspersed with federal, state, Indian, and privately-owned coal lands in the familiar checkerboard ownership patterns which characterize raiload land grant areas in the western United States. Consequently, it may be desirable to develop them in mining units comprised of coal owned by other parties, including the Federal Government. However, due to limitations on our reserves, including both the quantity and quality of the reserves, in order to become a competitor with established coal companies and their reserves of private and federally leased coal, we feel that we must be free to bid on federal coal leases throughout the country.

Santa Fe was actively involved in the efforts in 1975-76 to repeal Section 2(c). The Senate included a section repealing 2 (c) as part of S.391 in the 94th Congress, the Senate version of the bill that was ultimately enacted as the