-4 Federal Coal Leasing Act Amendments of 1976. A similar amendment to the House bill, H.R. 6721, was defeated by a tie vote in the House Committee, primarily because it was felt that the 2(c) issue had not been fully aired in hearings before the Committee. Following passage of the House bill, and before the Senate had acted on it, the House Subcommittee on Mines and Mining held oversight hearings on the 2(c) issue at which time I testified in support of Santa Fe's efforts to repeal section 2(c). Our concern then, as now, is that 2(c) could be interpreted to disqualify mining companies only indirectly related to a company "operating a common-carrier railroad" from competing for federal coal leases. 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 section 2(c) as applying to any company related to a common carrier railroad company. We pointed out in 1975 that 2(c) no longer served a useful purpose for a variety of reasons and should be repealed in accordance with the recommendation of the Public Land Law Review Commission. We also stressed 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 Act Amendments then before the Congress. Although we were hopeful that the expected conference committee would approve the repealer amendment, the Senate ultimately decided to accept the House version of the bill in -5 order to avoid further delays in implementing a new coal management program, so the bill never went to conference. Consequently, there was no opportunity for further consideration of the matter. Developments over the last five years apparently have convinced the Justice Department that its antitrust review authority under Section 15 is the most effective way to deal with all anticompetitive aspects of federal coal leasing, including any that might be associated with railroads or their affiliates, so that the Department was able to recommend repeal of 2(c) in its 1980 report on "Competition in the Coal Industry." Santa Fe Mining supports repeal of Section 2 (c) for all of the same policy reasons that we stated in 1975 and which have been articulated again today by the preceding witnesses for the Justice and Interior Departments, Rocky Mountain Energy Company, and Burlington Northern. We see no need to reiterate them, but wish only to emphasize that permitting railroads and railroad affiliates to participate on an equal footing with coal companies, diversified energy companies, electric utilities and others in the federal coal leasing program will significantly enhance competition. We are not asking for special treatment, Mr. Chairman, but rather for the removal of a barrier aimed at one industry that today operates to impede competition in the coal industry by railroads and, perhaps, their affiliates. All we ask is to be permitted to compete with other companies on a -6 nondiscriminatory basis for federal coal leases, both within our checkerboard area and outside of it. Although much of the discussion at this hearing has centered on the problems presented by the unique land ownership patterns in the checkerboard areas, this is not Santa Fe's only concern with the restrictive effects of section 2(c). While in the past we have generally followed a practice of leasing our minerals to other operators, we presently have a management commitment 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 present plans include bringing a new coal mine in McKinley County, New Mexico into production in late 1983 which will have an annual capacity of 3 million tons. Santa Fe Mining intends 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 Section 2(c) can be enacted to remove the cloud that hangs over the right of railroad affiliated coal companies to participate in federal coal development by virtue of the differing interpretations of Section 2(c) by the Interior and Justice Departments which have been described here today. I will be pleased to attempt to answer any questions you may have. Senator WARNER. Thank you. Your testimony is quite clear, and your statement amplifies the points that you wish to stress. I would like to have a panel for the next three witnesses. It is my understanding that their presentations are somewhat consistent. We have Mr. Given, director of project development, Consolidation Coal Co. on behalf of Mining and Reclamation Council of America, Mr. Ronald Teissere, vice president of the Washington Energy Co., of Seattle, Wash., and David Alberswerth, Western Organization of Resource Councils, Washington, D.C. Mr. Given, would you proceed? May I compliment you on your statement. I think your statement presents very succinctly the other side of this issue. STATEMENT OF THOMAS A. GIVEN, DIRECTOR OF PROJECT I am speaking today on behalf of the Mining and Reclamation Council of America (MARC). MARC is a national organization representing large, medium and small coal producers throughout the country. The council's producing member companies mined approximately 70 percent of the Nation's total output last year. Mr. Chairman, we appreciate the opportunity to be here today to restate, in the strongest terms possible, the coal industry's opposition to the repeal of section 2(c) of the Federal Coal Leasing Act. Senator WARNER. Let me interrupt. You said, "the coal industry's opposition." Will you qualify that statement a little bit? I know that there are other persons heavily involved in the coal industry who petitioned to move to have a second hearing for the precise purpose that they want to reevaluate their position under this issue. Mr. GIVEN. To the extent MARC is represented, the 70 percent portion thereof. Senator WARNER. All right. Mr. GIVEN. As you know, since 1920, section 2(c) has prohibited common carrier railroads from leasing Federal coal deposits. We believe the policies and concerns that led to enactment of those prohibitions over 60 years ago are still valid today. Our opposition to 2(c) repeal has been characterized by some as anticompetitive-that we simply want to avoid competition from the railroads. Let me assure you, Mr. Chairman, nothing could be further from the truth. The issue is not simply whether or not a few railroads should be allowed to bid for Federal coal. There are currently over 160 companies holding Federal leases, and frankly we could care less about the addition of a few more. The real issue is the unique relationship that exists between the railroads and the coal industry, and the coal reserves in the West, and how that relationship might be altered under 2(c) repeal. Given the railroads' vast coal ownership and transportation monopoly, we believe our concern is more than justified and poses complex problems that deserve the scrutiny of the Congress. Historically, we have encouraged competition in our industry, particularly as it relates to Federal coal leasing. The record will clearly show our continuing commitment to a fair and competitive leasing system. We oppose 2(c) repeal, not because we fear competition, but because we fear repeal will destroy the competitive nature of our leasing system, and lead the way to a potential monopoly over western coal development. Coal remains an extremely competitive business. We wish only to insure that it stays that way. The issue, as well as the need for retaining section 1(c), was perhaps best articulated by a former Justice Department official during the 1976 congressional hearings. Senator WARNER. I have read your statement very carefully. I believe you are giving me a verbatim rendition, are you not? Mr. GIVEN. In the interest of time let me present the following scenario, if you will. Factually, the railroads are currently unwilling to construct new rail for western coal development today. None of their capital dollars are going forward for new rail. Vast quantities of western coal are currently leased by the railroads to coal companies. That has been said several times today. Many of these leases are coming up for renewal or renegotiation within the next few years. By frustrating the development of these leases, these leases will not be renewed and will probably revert back to the railroads. If section 2(c) is repealed, the railroads will acquire the remaining Federal coal lands. Through legal land manipulation the commodity clause is circumvented day after day. Thereby monopoly is created. There is a much broader scope here than just looking at Federal coal lands. You have to look at the marketplace, and the marketplace looks at coal production and the transportation of that coal to the marketplace. I want to talk about the export business. We also look at the new terminals. The new terminals that have been created or that are announced today are closer to the railroads also on the west coast, so, therefore, we have all three components being tied to one entity. I think a monopoly would exist. Thank you, Sir. [The prepared statement of Mr. Given follows:] |