Exhibit 10.86.1

[*] Indicates that the confidential portion has been omitted from this filed exhibit and filed separately with
      the Securities and Exchange Commission

AMENDMENT THREE TO UNDERGROUND COAL SALES AGREEMENT

THIS AMENDMENT THREE TO UNDERGROUND COAL SALES AGREEMENT ("Amendment Three"), by
and between SAN JUAN COAL COMPANY, a Delaware corporation (referred to herein as
"SJCC") and PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation, and
TUCSON ELECTRIC POWER COMPANY, an Arizona corporation (collectively referred to
herein as the "Utilities") (with SJCC and Utilities herein sometimes
collectively referred to as "Parties"), amends that certain Underground Coal
Sales Agreement dated August 31, 2001 as amended (the "UG-CSA") between SJCC and
the Utilities.

RECITALS

WHEREAS, THE PARTIES WISH TO RESTATE SECTION 8.3 "COAL PROCESSING COMPONENT" OF
THE UG-CSA. 

NOW THEREFORE, in consideration of the terms, covenants and agreements contained
in this Amendment Three and for other good and valuable consideration, the
Utilities jointly and severally agree with SJCC as follows:

AGREEMENT

1.      Section 8.3(A)(1) of the UG-CSA is modified by replacing the value "[*]"
with the value "[*]" in the formula contained in that section.  This change
shall be effective as of January 1, 2003. 

2.      Section 8.3(A)(3) of the UG-CSA is modified by replacing the last
paragraph of that section, that begins: "In no event.", and ends with the end of
the section, with the paragraph:

"In no event shall the inflation-deflation adjustment cause the Processing
CIEEligible-Adj to be less than Processing CIEmin where Processing CIEmin is
calculated as follows:

Processing CIEmin = [*]

or the Processing CIENon-elg-Adj to be less than:

Processing CIEmin  [divided by *]

 

3.      All other provisions of the UG-CSA not specifically amended by this
Amendment Three remain in full force and effect.

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
on their behalf by their respective officers, thereunto duly authorized.

Public Service Company of New Mexico

By:       /s/ Hugh W.
Smith                                                       
Name:       Hugh W. Smith                                                       
Title:           Senior VP, Energy
Resources                                                   Date: April 29, 2005

 

Tucson Electric Power Company

By:       /s/ Michael J.
DeConcini                                               
Name:       Michael J. DeConcini                                                
Title:           SR Vice
President                                                                     
  Date: May 2, 2005

 

San Juan Coal Company

By:       /s/ Gary
Lansdale                                                         
Name:  Gary Lansdale                                    
                         
Title:     VP SJCC                                                         
                                   Date:  April 28, 2005

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CONSENT OF GUARANTOR

BHP Minerals International Inc., a Delaware corporation, (formerly BHP-Utah
International Inc.), the guarantor of the obligations of San Juan Coal Company
under the Underground Coal Sales Agreement pursuant to the Guarantee dated
September 25, 2001 (the Guarantee"), hereby consents to the foregoing Amendment
Three to the Underground Coal Sales Agreement and agrees that all references in
the Guarantee to the Underground Coal Sales Agreement shall be deemed to be
references to the Underground Coal Sales Agreement as amended by this Amendment
Three.

BHP Minerals International, Inc.

By:       /s/ Earl K.
Moore                                                        
Name:       Earl K. Moore                                                       
Title:          CEO & President                                               
                        Date:    May 10, 2005                         
           

 

 

By:       /s/ M. Ruth Rhodes                                                  
Name:     M. Ruth Rhodes                                                     
                       
Secretary                                                                              
Date:                May 11, 2005                         

 

 

 

(Corporate Seal)