Patterns and Trends in Federal Coal Lease

Ownership, 1950-80

April 1981

NTIS order #PB81-188484
Library of Congress Catalog Card Number 81-600029

For sale by the Superintendent of Documents,

U.S. Government Printing Office Washington, D.C. 20402
Preface

The Office of Technology Assessment is carrying out an assessment on current

Federal coal leases. The assessment is in response to Public Law 94-377 which required

OTA to perform a complete analysis of all activities on current Federal coal leases.

The final assessment report, which will focus on the development and production

potential of these leases, is in preparation.

This technical memorandum on the patterns and trends in Federal coal lease ownership between 1950 and 1980 was prepared prior to the full Federal coal lease assessment at the request of Sen. James McClure, Chairman of the Committee on Energy

and Natural Resources.

This memorandum traces the history of the 538 Federal coal leases in existence at

the end of 1979. It focuses on the coal lessees themselves: who they are, what they do,

how and when they acquired Federal coal leases, and what they have done with those

leases. It identifies the participants in the Federal coal leasing program between 1950

and 1980, traces the ownership on a lease-by-lease basis, and discusses the business activities and organizational structures of the lessees.

This memorandum does not discuss anticipated production from Federal coal

leases, nor does it discuss factors, including Federal policies, that could affect development of and production from Federal coal leases. These topics will be covered in the

final report.

#●

JOHN H. GIBBONS

Director

.

111
Federal Coal

James Boyd

Leasing Assessment Advisory Pane l

Lynton K. Caldwell, Chairman

Department of Political Science, Indiana University

Jack Simon, Co-chairman

Director, Illinois State Geological Survey

Carla Kish

Private Consultant

C. Wayne Cook

Chairman

Department of Range Science

Colorado State University

Lloyd Ernst

Manager, Operations

Western Fuels Association, Inc

Thomas M. France

Northern Rockies Action Group

Gerrie Greene

Legislative Representative

National Association of Counties

James R. Jones

Vice President

Environrnental Affairs Department

Peabody Coal Co.

Regional Representative

Western Organization of Resource Councils

Robert Lang*

Plant Science Division

University of Wyoming

Jonathan Lash

Natural Resources Defense Council, Inc.

Alfred Petrick

Petrick Associates

Daniel J. Snyder

President

Colorado- Westmoreland, Inc.

Joseph Yancik

Vice President

Research and Technical Services

National Coal. Association

● Resigned January 1930.

iv
OTA Federal Coal Leasing Assessment Staff

Lionel S. Johns, Assistant Director, OTA

Energy, Materials, and International Security Division

Audrey Buyrn, Materials Program Manager

Michael J. Gargas McGrath, * Principal Investigator

Karen L. Larsen, Associate Project Director

Deborah L. Pederson, * Research Assistant

Carol A. Drohan, Administrative Assistant

Patricia A. Canavan, Secretary

Ownership Project Contract Staff

James S. Cannon, Principal Investigator

Cheryl A. Stevenson, Research Associate

Robert Faragasso, Research Assistant

Contributors

Mel Horwitch Frank Wobber

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling* Kathie S. Boss Debra M. Datcher

Patricia A. Dyson* Mary Harvey* Joe Henson

● OTA contract personnel.
Contents

Chapter Page

1. Introduction and Findings. . . . . . . . . . . . . . . . . . . . 3

Federal Coal: Overview . . . . . . . . . . . . . . . . . . . . . 3

Lease Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . 4

Lease Title Transactions . . . . . . . . . . . . . . . . . . . . . 4

The Business Organization of Coal Lessees . . . . . . . 6

Coal Lease Ownership Distribution by

Business Activity Category . . . . . . . . . . . . . . . . 9

Implications of Coal Lease Ownership Patterns. . . . 14

2. Lease Ownership by Business Category. . . . , . . . . . 17

A. Electric Utilities . . . . . . . . . . . . . . . . . . . . . . . . . 21

B. Energy Companies . . . . . . . . . . . . . . . . . . . . . . 28

C. Peabody Coal CO. . . . . . . . . . . . . . . . . . . . . . . . 33

D. The Steel Industry . . . . . . . . . . . . . . . . . . . . . . . 35

E. Independent Coal Companies . . . . . . . . . . . . . . . 38

F. Oil and Natural Gas Companies (Minor). . . . . . . 43

G. Unincorporated Individuals . . . . . . . . . . . . . . . . 46

H. Natural Gas Pipeline Companies . . . . . . . . . . . . 48

I. Nonresource-Related Diversified Companies . . . . 51

J. Kemmerer Coal Co. . . . . . . . . . . . . . . . . . . . . . . . 53

K. Metals and Mining Companies . . . . . . . . . . . . . . 54

L. Landholding Companies . . . . . . . . . . . . . . . . . 58

M. Other Leaseholders . . . . . . . . . . . . . . . . . . . . . . 63

Appendix: Methodology . . . . . . . . . . . . . . . . . . . . . . . 67

List of Tables

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

Number of Acres Under Lease and Percent of

Total Leased Land by Type of Business

Organization, 1950-80 . . . . . . . . . . . . . . . . . . . . . . 6

Number of Acres and Percent of Total Leased

Land Held by Business Activity Category. . . . . . . . 9

Average Number of Leases and Average

Number of Acres Held per Lessee, 1950 -80. . . . . . . 14

Business Activity Categories Holding at Least 5

Percent of All Leased Land in 1950, 1965,

and 1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Number of Acres and Percent of Total Leased

Land Held by Business Activity Category. . . . . . . . 19

1980 List of Lessees. . . . . . , . . . . . . . . . . . . . . . . . 20

Utility Company Leaseholdings . . . . . . . . . . . . . . . 22

Percent of Utility Owned Leases Held by

Industry Subcategory. . . . . . . . . . . . . . . . . . . . . . . 23

Utility Company Leaseholders . . . . . . . . . . . . . . . . 24

Energy Company Leaseholdings. . . . . . . . . . . . . . . 28

Energy Company Leaseholders ... , . . . . . . . . . . . 29

Peabody Coal Co. Leaseholdings . . . . . . . . . . . . . . 34

Steel Company Leaseholdings . . . . . . . . . . . . . . . . 36

Steel Company Leaseholders . . . . . . . . . . . . . . . . . 37

Independent Coal Company Leaseholdings . . . . . . 39

Oil and Gas (Minor) Companv Leaseholdings . . . . 43

17. Oil and Gas (Minor) Company Leaseholder; . . . . . 44

18. Unincorporated [ndividual Leaseholdings . . . . . . . 46

19. Natural Gas Pipeline Company Leaseholdings . . . . 49

20.

21.

22.

23.

24.

25.

26.

27.

Natural Gas Pipeline Leaseholders . . . . . . . .

Leaseholdings of Nonresource-Related

Diversified Companies. . . . . . . . . . . . . . . .

Kemmerer Coal Co. Leaseholdings . . . . . . .

Metals and Mining Company Leaseholdings

Metals and Mining Company Leaseholders .

Independent Land Company Leaseholdings .

Independent Land Company Leaseholders . .

Leaseholdings of Companies in the “Other”

Category . . . . . . . . . . . . . . . . . . . . . . . .

List of Figures

Figure No.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

. . . . . 49

. . . . . 51

. . . . . 53

. . . . . 55

. . . . . 56

. . . . . 58

. . . . . 59

. . . . . 63

Total Acres of Federal Coal Under Lease, 1950-80 . 5

Number of Federal Coal Acres Under Lease

by Type of Business Organization, 1950 -80...... 7

Number of Federal Coal Acres Under Lease

by Business Activity Category, 1950 -80 . . . . . . . . . 11

Acres Leased by Utility Companies . . . . . . . . . . . . 22

Percent of Total Leased Acres Held by Utilities . . . 22

Acres Leased by Energy Companies . . . . . . . . . . . . 29

Percent of Total Leased Acres Held by

Energy Companies . . . . . . . . . . . . . . . . . . . . . . . . . 29

Acres Leased by Peabody Coal Co. . . . . . . . . . . . . 34

Percent of Total Leased Acres Held by

Peabody Coal Co. . . . . . . . . . . . . . . . . . . . . . . . . . 34

Acres Leased by Steel Companies. . . . . . . . . . . . . 36

Percent of Total Leased Acres Held by

Steel Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Acres Leased by Independent Coal Companies. . . . 39

Percent of Total Leased Acres Held by

Independent Coal Companies . . . . . . . . . . . . . . . . 39

Acres Leased by Oil and Gas (Minor) Companies. . 44

Percent of Total Leased Acres Held by Oil

and Gas (Minor) Companies . . . . . . . . . . . . . . . . . 44

Acres Leased by Unincorporated Individuals . . . . . 46

Percent of Total Leased Acres Held by

Unincorporated Individuals . . . . . . . . . . . . . . . . . . 46

Acres Leased by Natural Gas Pipeline Companies . 49

Percent of Total Leased Acres Held by

Natural Gas Pipeline Companies . . . . . . . . . . . . . . 49

Acres Leased by Nonresource-Related

Diversified Companies. , . . . . . . . . . . . . . . . . . . . . 52

Percent of Total Leased Acres Held by

Nonresource-Related Diversified Companies . . . . . 52

Acres Leased by Kemmerer Coal Co. . . . . . . . . . . . 54

Percent of Total Acres Held by Kemmerer Coal Co. 54

Acres Leased by Metals and Mining Companies . . . 55

Percent of Total Leased Acres Held by

Metals and Mining Companies. . . . . . . . . . . . . . . 55

Acres Leased by Independent and

Subsidiary Land Companies. . . . . . . . . . . . . . . . . . 59

Percent of Total Leased Acres Held by

Independent and Subsidiary Land Companies . . . . 59

vi
CHAPTER 1

Introduction and Findings
CHAPTER 1

Introduction and Findings

This technical memorandum is part of the Office of Technology Assessment’s congressionally

mandated study of outstanding Federal coal

leases. This report traces the history of the 538

Federal coal leases in effect at the end of 1979.1

It focuses on the coal lessees themselves: who

they are, what they do, how and when they acquired Federal coal leases, and what they have

done with these leases. More specifically, it

identifies the participants in the Federal coal

‘This report does not analyze leases previously issued which

have been relinquished or the few leases issued in 1980.

FEDERAL COAL: OVERVIEW

According to a 1977 mineral industry survey

by the U.S. Bureau of Mines, approximately 54

percent of the demonstrated coal reserve base in

the United States lies west of the Mississippi.

The U.S. Department of Interior’s final environmental statement for the Federal Coal Management Program (April 1979) states:

Federal coal is expected to have a growing importance in national coal production. Of overall

Western coal reserves, approximately 60 percent

is owned by the Federal Government and an additional 20 percent is dependent on the availability of complementary Federal coal for its

production.

Since 1920, the Department of Interior has conducted a leasing program through which the private sector gains permission to mine coal in Federal lands. During the past 60 years, about 17

billion tons of coal on 790,000 acres have been

leased. Land currently under lease represents

about 12 percent of the total coal reserves managed by the Federal Government. In fiscal year

1978, total production from leased land

amounted to about 60 million tons.

No mining of Federal coal is possible without

a lease. Issuance of a lease grants to the lessee

the exclusive right to mine coal subject to conditions set forth in the lease by the Department of

leasing program between 1950 and 1980, traces

the history of ownership on a lease-by-lease

basis, and discusses the business activities and

organizational structures of the lessees.

The study is the first to analyze the component of the restructuring of the national coal industry as reflected in changing ownership patterns on Federal coal lands leased to the private

sector. This study examines trends and developments in ownership patterns of leased Federal

coal land and provides new information concerning the types of companies holding coal

leases and the organizational structures used to

manage their activities related to coal leases.

Interior and by Federal and State laws. Historically, leases have been issued by two methods;

competitive bidding at lease sales and noncompetitively through an application process called

preference right leasing. About half of all existing leases have been issued by each method,

but the Federal Coal Leasing Amendments Act

of 1976, which abolished the preference right

system, requires competitive leasing of Federal

coal. 2

Coal mines on land currently under lease contribute an increasing share of the industry’s total

production. Output from mines on leased land

provided 9 percent of the industry’s total production in 1979 as contrasted with 1 percent in

1970. Coal is currently mined on 18 percent of

the outstanding leases. The remaining 82 percent are in various stages of mine plan development or have experienced no development activity. The Department of Interior estimates that

production of coal from land currently under

lease will more than triple by 1985 from the 59

million tons produced in 1978 (1979 Federal

Coal Management Program Report). Total national production, according to numerous fore2Unlike the oil and gas leasing program, no coal leases are issued

through the lottery system.

3
4

casts, is predicted to increase from 689 million

tons in 1977 to approximately 1 billion tons by

1985.3 The Department commenced issuing new

3

The Direct Use of Coal, OTA-E-86 (Washington, D. C.: Office

of Technology Assessment, U.S. Congress, April 1979).

LEASE ACQUISITION

There are four ways for private parties, corporations, or individuals to obtain Federal coal

leases. They are:

● de novo leasing from the Federal Government;

● assignment of an existing lease;

● segregation of an existing lease into two or

more leases; and

● acquisition of a leaseholding company.

De novo leasing is used in this report to describe the original issuance by the Federal

Government of a lease through competitive bid

or a preference right lease application. Although

every lease has a de novo origin, only 117, or 22

percent of all outstanding leases, are now

owned by the de novo leasing party.

Under the Mineral Leasing Act, lessees are

permitted to sell or transfer coal leases to other

parties; this is called lease assignment. Seventyfive percent of all outstanding coal leases have

been obtained by their current owner after assignment from earlier lessees. In many cases,

lease ownership histories show several lease assignments: 146 leases (27 percent) have been asLEASE TITLE TRANSACTIONS

Number Percent

Means of lease acquisition of leases of leases

De novo. . . . . . . . . . . . . . . . . . . . . . 117 22

Segregation . . . . . . . . . . . . . . . . . . . 18 3

Assignment . . . . . . . . . . . . . . . . . . . 403

One . . . . . . . . . . . . . . . . . . . . , . . (146) (27)

Two . . . . . . . . . . . . . . . . . . . . . . . (124) (23)

Three or more . . . . . . . . . . . . . . . (133) (25)

Total . . . . . . . . . . . . . . . . . . . . 538 100

De novo leasing, assignments, and segregation are three methods through which a party

leases under the new coal management program

in January 1981, after a 10-year moratorium on

most leasing. Given the 5- to 12-year leadtime

required to develop a coal mine, production

from presently unleased land will be relatively

small during most of the 1980’s.

signed once in their history; 124 (23 percent)

have been assigned twice; 133 leases have been

assigned three or more times. One lease has

been assigned six times.

Lease assignments are essentially private

transactions. Under the Mineral Leasing Act, all

assignments must be approved by the Department of Interior, but any cash, property, service

agreement, or overriding royalty involved as

part of the lease assignment is, with few limitations, a matter of negotiation between the

assignor and assignee.

Lease segregation, also called partial assignment, involves the splitting by a lessee of an existing lease into two or more units with a new

lease (or leases) being issued for a portion of the

acreage. This study found that the current owners of 18 leases (3 percent of the total) obtained

them from previous lessees by the segregation

process.

The following table summarizes the lease acquisition routes used by the present owners of

the 538 outstanding coal leases.

can gain direct ownership of a Federal coal

lease. Corporate acquisition is a method by

which a company can gain control of a coal

lease without necessarily obtaining ownership

title to the lease itself. Scores of mergers and acquisitions affecting the control of hundreds of

leases have occurred throughout the history of

the leasing program. At least 10 of the 36 wholly

owned coal mining companies now owning

leases once held them as independent mining
5

companies, including three companies acquired

by major energy companies in 1980. ’

Each of the four methods to acquire ownership or control of leases has been used by the

largest leaseholders. This study has noted the

tendencies of different companies or industries

‘Since corporate acquisitions do not necessarily result in a transfer of title of a coal lease, it IS impossible in this survey to quantify

precisely the number of corporate acquisitions involving leases.

to use different acquisition methods to different

degrees. Most individuals and steel companies,

for example, obtained their leases de novo. On

the other hand, only 16 of the 110 leases acquired by energy majors were obtained de novo.

Half were obtained by assignment, at least 31

percent by the purchase of the leaseholding

company, and 2 percent by segregation.

Figure 1 shows the total number of acres under Federal coal lease from 1950-80.

Figure 1. —Total Acres of Federal Coal Under Lease

1950-80

Acres

800,000

700,000 —

600,000 —

500,000 —

400,000 —

300,000 —

200,000 —

100,000 —

I

1 I I I 1 I

1950 1955 1960 1965 1970 1975 1980

Year

SOURCE Office of Technology Assessment.
6

THE BUSINESS ORGANIZATION OF COAL LESSEES

Changes in the organization and management

of coal mining enterprises is one measure of

restructuring within the industry. This study examines trends in business reorganization reflected by changes in Federal coal lease ownership between 1950 and 1980. Four types of organizational structures were analyzed. They are:

● unincorporated individuals—persons, including sole proprietorships, partnerships,

and estates;

● independent corporations—companies no t

wholly owned by one or more other companies;

● subsidiary corporations-companies wholly owned by a single other company; and

● multicorporate entities—companies wholly

owned by two or more companies (such as

joint ventures) and two or more companies

sharing ownership interests in leases.

Distinct and important trends in business reorganization of the coal mining industry can be

seen in the changes in coal lease ownership patterns between 1950 and 1980. The early dominance of small, single business, independent

lessees has shifted to large, diversified, complex

business entities. Historically, the coal leasing

program has not served as a policy instrument

through which the Government has influenced

business organization trends in the coal industry. Leasing patterns have been the outcome of

nongovernmental decisions and factors, specifically the business priorities of the lessees themselves and marketplace economics.

Table 1 and figure 2 trace the history of lease

ownership by the four types of business organizations examined in this survey. The table and

figure show that unincorporated individuals

have held a steadily decreasing percentage of the

Federal land under coal lease between 1950 and

1980. They reveal the dominant role of independent corporations as lessees through 1970

and their decline in relative importance since

then. They show that lessees which are subsidiaries of parent corporations have increased

their holdings to a position of dominance today.

And they show that multicorporate entities are

the newest type of business organization to attain significance in Federal coal leasing,

Unincorporated Individuals

In the early decades of the leasing program,

most leases were held by individuals in their

own name. In 1950, individuals held 27 percent

of all acres under lease, collectively constituting

the second largest category of lessee identified in

the survey. The role of individuals has steadily

declined in relative importance so that today

they hold only 5 percent of all land under lease.

There has been little new leasing by individuals

in the past decade and there is little likelihood of

substantial production on most leases held by

individuals.

The decline in leasing by unincorporated individuals reflects the decreasing use of the “sole

proprietorship” business organization by small

Table 1 .—Number of Acres Under Lease and Percent of Total Leased Land

by Type of Business Organization, 1950-80

Unincorporated Independent Subsidiary Multi corporate Uncategorized

i Individuals corporations corporations entities companies

Total land Total land Total land Total land Total land

Year Acres (#) leased (o/o) Acres (#) leased (%) Acres (#) leased (o/o) Acres (#) leased (%) Acres (#) leased (%)

1950 . . . . . . . . . 11,129 2 7 % 18,504 45% 10,824 26%o — 00/0 1,035 20/0

1955 . . . . . . . . . 17,618 23 40,495 53 15,921 21 — o 1,915 3

1960 . . . . . . . . . 25,678 18 79,715 55 36,058 25 – o 2,453 2

1965 . . . . . . . . . 41,475 13 169,402 55 91,690 30 640 <1 5,147 2

1970 . . . . . . . . . 78,935 11 319,847 44 271,329 37 60,504 8 2,643 <1

1975 . . . . . . . . . 66,515 9 257,637 34 321,576 42 112,418 15 6,848 1

1980 . . . . . . . . . 43,215 5 204,612 26 343,865 43 197,491 25 1,845 <1

SOURCE Office of Technolony Assessment
7

Figure 2.— Number of Federal Coal Acres Under

Lease by Type of Business Organization, 1950-80

Acres

700,000 —

600,000 —

500,000 —

400,000 —

300,000 —

200,000 —

100,000 “

.

/ / /

,, / corporate/ /

1950 1955 1960 1965 1970 1975 1980

Year

SOURCE Off Ice of Technology Assessment

mining interests in favor of some form of incorporated business structure. Incorporation provides increased protection over sole proprietorships for mine operators against personal liability for corporate actions as well as other business

advantages.

Other reasons for the decline in leaseholdings

by unincorporated individuals include the abolition of the preference right leasing program, a

popular lease acquisition route for individuals,

including land speculators and land acquisition

agents operating under contract to corporations; the leasing moratorium which increased

the value of existing leases and induced some individuals to sell their holdings; and the diligent

development requirements defined in the 1976

coal leasing regulations which may have acted

as an incentive for some individuals to sell leases

that they could not mine.

Corporations and Subsidiaries

Various types of corporate structures control

94 percent of all outstanding leases. The largest

share, 69 percent of all leases, are owned either

by independent corporations or companies that

are wholly owned subsidiaries of one parent

company.

In 1950, 45 percent of all leased land was held

in the name of independent corporations and 26

percent of all land under lease was held by subsidiaries. By 1980, the figures had almost exactly reversed, as 26 percent of all land was held by

independent companies and 43 percent by subsidiaries.

The shift in leaseholdings from independent

to subsidiary companies is particularly notable

among those corporate lessees whose principal

business activity is coal mining. In 1950, 18

independent coal mining companies comprised

the largest single leaseholding category identified in the survey. At that time, only three coal

mining subsidiaries of noncoal parents held

leases. By 1980, however, 36 lessees were categorized as wholly owned coal mining subsidiaries. Together these companies hold 36 percent

of all land under lease. In contrast, the share of

leased land held by independent coal companies

decreased over the last 30 years from 35 to 7

percent.

In many cases, there is a direct link between

the decline of independent coal companies and

the growth of subsidiaries. At least 10 of the

wholly owned coal mining subsidiaries holding

leases today previously operated as independent

companies. A larger number of independent

coal companies went out of business after sale of

their assets—including coal leases—to noncoal

companies which have since organized coal

mining subsidiaries to which the leases were

then assigned.

Landholding companies provide another example of the trend towards leasing by subsidiary rather than independent companies. In

1960, 8 percent of all land under lease was controlled by independent landholding companies

which hoped to profit from the eventual assignment of their leases to coal development compa-
8

nies. Today the independent landholding companies hold less than 1 percent of all land under

lease. On the other hand, starting in the early

1960’s, leaseholdings by companies which are

subsidiaries of companies with principal business activities other than coal mining has increased steadily and today nine landholding

subsidiaries control more acreage than the independents ever did.

The two leasing trends among landholding

companies noted above appear to be unrelated.

Most independent landholding companies acquired leases as speculators and they have

gradually liquidated their holdings over the past

decade. Many of the companies now holding

leases—most notably the energy companies and

utilities—have formed landholding subsidiaries

to which leases have been assigned. These subsidiary landholding companies are legal entities

through which large corporations hold land,

normally not for speculation, but for future

development.

Multicorporate Entities

OTA has defined multicorporate entities as

companies wholly owned by two or more companies (such as joint ventures) or two or more

companies sharing ownership of leases.

In the past 15 years, 17 multicorporate entities have acquired Western coal leases. These

include two companies completely owned by

two or more corporations. One of these, Peabody Coal Co., has been owned since 1977 by

the Peabody Holding Co., which in turn i s

owned by six corporations. The second company is Ark Land Co., which is a subsidiary of

Arch Minerals Corp. Arch Minerals in turn is

owned by three companies: 50 percent by Ashland Oil Corp., 25 percent by Hunt Industries

(partnership of five Hunt family trusts) and 25

percent by Hunt Petroleum Corp. (a partnership

of six Hunt trusts, including the five owners of

Hunt Industries).

In addition to these two companies, the multicorporate entities category of business organizations includes eight joint ventures, each of

which is owned by two companies. The joint

ventures and their parent companies are listed in

the following table.

]oint Venture Participating corporations

Colowyo Coal Co. . . . . . W. R. Grace & Co. and

Hanna Mining Co.

North Antelope Coal Co.. Peabody Coal Co. and

Black Butte Coal Co. . . .

Medicine Bow Coal Co. .

Bridger Coal Co. . . . . . .

Stansbury Coal Co. . . . .

Cumberland Coal Co. . .

Western Coal Co.. . . . . .

Finally, ownership

Panhandle Eastern Pipeline

co.

Peter Kiewit Sons and Union

Pacific Corp.

Arch Minerals Corp. and

Union Pacific Corp.

Pacific Power & Light Co. and

Idaho Power Co.

Ideal Basic Industries and

Union Pacific Corp.

Peter Kiewit Sons and Union

Pacific Corp.

Public Service Co, of New

Mexico and Tucson Electric

co.

of seven blocks of leased

land is ‘shared by two or more corporations

which hold an undivided interest in the leases.

The largest group of leases in this category includes a block of southern Utah leases held by

resource development subsidiaries of three

utilities. Secondly, Consolidation Coal Co. and

Kemmerer Coal Co. share the ownership of 10

leases in Utah.5 Consolidation Coal also shares

ownership of a Wyoming lease with Mobil Oil

Corp. 6 In addition, a subsidiary of The Coastal

Corp. and Equipment Rental Services share two

Utah leases. Next, subsidiaries of Texas Eastern

Transmission Corp. and Eastern Gas & Fuel

Associates hold a lease in New Mexico as do

Peabody Coal Co. and Thermal Energy Co. Finally, four Montana leases are owned by subsidiaries of Pacific Power & Light Co. and Peter

Kiewit Sons.

5

In 1980, Consolidation was assigned a SO-percent share of three

leases in Colorado held by Kemmerer Coal Co.

‘In 1980, Consolidation applied for approval of assignment to

Mobil of its share in the Wyoming lease.
9

COAL LEASE OWNERSHIP DISTRIBUTION BY

BUSINESS ACTIVITY CATEGORY

The appearance of different types of companies in the coal industry besides the traditional

independent, single interest, mining company is

the most obvious aspect of the restructuring taking place within the industry and the development which has received the most attention of

public policy makers and industry analysts. This

study examined leasing patterns and trends

among lessees grouped into 13 business categories. 7 The 13 categories are:

Electric utilities;

Energy companies;

Peabody Coal Co.;

Steel companies;

Independent coal companies;

—.

‘The categories include 10 industries, two individual companies

that were classified as distinct business categories for various reasons and an other category for the remaining lessees. Each of the

13 business categories controlled or controls at least 5 percent of all

land under lease at some time between 1950 and 1980. (See ch, 2,

sec. M, Methodolgy )

Oil and gas (minor) companies;

Unincorporated individuals;

Natural gas pipeline companies;

Nonresource-related diversified companies;

Kemrnerer Coal Co.;

Metals and mining companies;

Landholding companies; and

“Other” lessees.

Table 2 summarizes the findings of this study

with regard to the relative growth and decline in

leaseholdings by the members of each of the 13

categories. The table shows the steady increase

in lease ownership by the electric utilities and by

the major energy companies and the recent involvement of nonresource-diversified companies and natural gas companies. It shows the impact on coal lease ownership patterns of the

1977 sale of Peabody Coal Co. to a six-firm

holding company. It shows the early dominance

of leasing by independent coal companies and

unincorporated individuals and their steady

Table 2.—Number of Acres and Percent of Total Leased Land Held by Business Activity Category

—

1950 1955 1960 1965 1970 1975 1980

Acres Land Acres ‘Land Acres Land Acres Land Acres Land Acres Land Acres Land

held leased held leased held leased held leased held leased held leased heId leased

(#) (

0

/0) (#) (

0

/0)

EIectric utilities. ... . . . 0 0 2000 3% 45,363 15%132,038 18%142,077 19%163,259 21% “

Energy companies . . . . . . 0 0 0 0 0 0 9,491 3 132,274 18 138,409 18 155,024 20

Peabody Coal Co. . . . . . . 0 0 0 0 0 0 (6,251) (2) (59,121) (8) (68,923) (9) 62,009 8

Steel companies . . . . . . . . 4,993 12 14,817 19 19,888 14 34,158 11 46,114 6 49,448 6 60,015 8

Independent coal

companies . . . . . . . 14,584 35 25,022 33 41,557 29 77,273 25 78,297 11 58,837 8 55,410 7

Oil and gas (minor)

companies . . . . 0 0 0 0 0 0 2,080 1 26,911 4 42,193 6 45,926 6

Unincorporated

individuals . . . . . . 11,129 27 17,618 23 25,678 18 41,475 13 78,995 11 66,515 9 43,215 5

Natural gas pipeline

companies . . . 0 0 0 0 0 0 0 0 0 0 32,522 4 36,317 5

Nonresource-related

diversified companies 0 0 0 0 0 0 4,610 1 10,015 1 12,580 2 35,675 5

Kemmerer Coal Co. . . . . . . 475 1 1,752 2 6,849 5 18,504 6 33,793 5 33,988 4 32,191 4

Metals and mining

companies . . . . . . 5,009 12 5,009 7 9,266 6 17,708 6 107,504 15 118,300 15 17,620 2

Landholding companies. 1,360 3 4,576 6 11,504 8 13,411 4 43,581 6 26,225 32 4,661 <1

“Other” lessees. . . . . . . . . 2,907 7 3,240 4 18,288 13 39,134 13 41,153 6 37,051 5 77,861 10

NOTE Uncategorlzed lessees hold less than 2 percent of land under lease at any analysis date

— —

Numbers might not add to 100 percent because of the holdings of uncategorized lessees

Numbers in ( ) tabulated in metals and mining category (1970 and 1975) or in independent coal company category (1965)

Uncategorized 1,035 1,915 2,453 5,147 2,643 6,848 1,845

Lessees 2%0 3./0 2% 2%0 <1 % 1% < 1 %

SOURCE Off Ice of Technology Assessment
10

decline in relative importance over the past 30

years. It shows the early participation of the

steel and metals and mining industries and Kemmerer Coal Co. and the gradual reduction in the

relative position of the steel industry, the swings

in metals and mining company leasing, and the

continuing involvement of Kemmerer. It shows

the rise of the independent landholding company in the active leasing periods of the late 1950’s

and early 1960’s when many leases were let, followed by the liquidation of their holdings in the

lease-tight moratorium era of the 1970’s.

Table 2 and figure 3 also summarize the absolute changes in leaseholdings that have occurred over the past 30 years. They show the

steady rise in acreage held by the steel companies, independent coal companies and unincorporated individuals through 1970, followed

by the slow decline in the holdings of the latter

two categories since then. Table 2 and figure 3

also illustrate how the significant but relatively

modest increases in the holdings of these three

groups during the 1960’s compare to the more

substantial acquisitions of some new entrants to

leasing in that period.

Electric Utilities

Electric utilities currently own more Federal

coal land than any other industry group. Increasing their holdings from 8,263 acres in 1960

to 163,259 acres in 1980, utilities now control 21

percent of all land under lease. Seventeen utilities now hold leases.

More than any other industry group examined in this survey, utilities have undergone

complicated internal restructuring related to

coal lease management. Several utilities now

hold leases in the name of one or more wholly

owned coal mining companies, multifuel resource development companies, landholding

companies, or corporate entities without employees or business activities. Also, utilities

have been very active in joint venture leasing

and multicorporate development projects. The

internal restructuring of utilities and their involvement in multicorporate leasing ventures

appear to indicate a policy decision by some

utility managements that coal leasing and mining activities should be separate from electrical

generation activities because of the difference in

management skills required. Furthermore, this

division enables utilities, as a regulated industry, to distinguish clearly among totally

regulated, partially regulated and unregulated

business activities.

Utilities are now a major producer of coal.

The industry’s output totaled 11 percent of the

Nation’s entire coal production in 1979 compared to just 2.2 percent in 1961. Most of this

coal is “captive” production, destined for

powerplants owned by the utility operating the

mine, although the industry is increasingly selling coal on the open market. Utilities play a

unique role in the coal industry because of their

growing status as a major producer of coal as

well as their more long term position as the

country’s major coal consumers. Utilities

burned 77 percent of all domestically used coal

in 1979.

Energy Companies

This study examined the leaseholdings of the

18 largest private energy companies based on

total worldwide petroleum production. Eleven

of the 18 companies now own Federal coal

leases. Together they control 155,024 acres, 20

percent of all land under lease.

The late 1960’s marked the period of largest

growth in lease holdings by energy majors, well

before the Arab oil embargo and the energy conscious 1970’s. Most leases acquired by energy

majors have remained under their control,

though many have been assigned to newly

formed subsidiaries within the companies’

respective management structures.

Most Western coal leases have been obtained

by the energy companies through lease assignment or through the purchase of a leaseholding

company, rather than by de novo leasing from

the Government. This kind of merger and acquisition activity is a component of the strategy begun by the oil majors in the 1960’s to gain their

initial coal reserves in the East.

Peabody Coal Co.

Peabody Coal Co. is the largest single company holding leases in the West. It owns 62,009

acres of Federal coal leases, 8 percent of the total

land under lease. Once an independent compa-
11

Figure 3.— Number of Federal Coal Acres Under Lease by Business Activity Category, 1950-80

Acres

800,000

700,000

600,000

500,00(

400,00(

300,000

200,000

100,000

Other lessees

Year

SOURCE Office of Technology Assessment

74-866 0 - 81 - 3
ny, it was acquired by Kennecott Copper Corp.

in 1968. In 1977, Kennecott divested the company to the Peabody Holding Co., comprised of

six corporations with business interests as

diverse as aerospace, mineral extraction, and

life insurance. Peabody now holds leases in five

Western States,

Steel Companies

Steel companies were among the earliest participants in Federal coal leasing, owning 12 percent of the land under lease in 1950, Their holdings have steadily grown, but the percentage of

total leased acreage controlled by the industry

has dropped to 8 percent today. Most steel industry coal production, like that of utilities, is

for “captive” use.

Unlike most other coal lessees, steel companies have leased primarily metallurgical grade

coals in Utah, Colorado, and Oklahoma.

Independent Coal Companies

In 1950, 18 independent coal companies constituted the largest single group of lessees, controlling 35 percent of all land under lease, or

nearly 15,000 acres, From 1950 to 1970, leaseholdings by independent coal companies grew

steadily to over 78,000 acres, but their share of

total leased acreage dropped to 11 percent.

Today, independent coal companies control

nearly 56,000 acres, which is, however, only 7

percent of total leased acreage. Over 60 independent coal companies have held leases,

though none of the 18 leaseholding independents in 1950 is among the list of 21 independents

in 1980.

Independents are still the fifth largest leaseholding group and several present lessees—

notably Garland Coal Mining Co., North

American Coal Co., and Energy Fuels Co.—

have used the leasing program to build large

coal reserve bases. Nonetheless, small independent coal companies in the West are in a precarious position today. Rising mining costs, the

reference of the utilities for large long-term supply contracts, and slow growth in local domestic or industrial coal use in the West have restricted the business opportunities of independent coal companies.

Oil and Gas Companies (Minor)

Several oil and gas companies not appearing

in the energy or natural gas pipeline categories

have acquired coal leases in the past 15 years,

Eight such companies now control 45,926 acres,

6 percent of the total. The lessees in this

category include small companies, such as the

Hiko Bell Mining and Oil Co., and very large

companies, such as Kerr-McGee Corp. and

Quaker State Oil Refining Corp. Holdings by

these companies have grown steadily since

1965.

Unincorporated Individuals

The role of unincorporated individuals in the

leasing program, at one time second only to the

independent coal companies, has greatly declined in relative importance. From 1950 to

1970, acreages held by unincorporated individuals grew from over 11,000 to nearly 79,000

acres, but their share of the total leased acreage

dropped from 27 to 11 percent. Today, individuals hold over 43,000 acres, or 5 percent of

the total. (See Business Organization of Coal

Lessees, pp. 6-8. )

This study identified three categories of individual coal lessees: bona fide coal miners

operating “sole proprietorship” mines; persons

working directly and primarily in the coal industry, such as officials at coal companies and

coal brokers or salesmen; and land agents, who

do not specialize in coal properties, acting either

on their own behalf or under contract to corporations interested in acquiring coal reserves.

Natural Gas Pipeline Companies

Natural gas pipeline companies are among the

most recent entrants to coal leasing. All 27

leases now held by the industry were acquired in

the 1970’s. Six natural gas companies control

36,317 acres, about 5 percent of the land under

lease. All but two of the leases were obtained by

assignment during the leasing moratorium of

the past decade—i.e., there was a substantial

change in the pattern of lease ownership even

during this period when opportunities to acquire leases de novo were limited.
13

Nonresource-Related Diversified

Companies

The nonresource-related diversified business

category includes companies with principal lines

of business which are not energy or mineral resource related, but which complement or could

be integrated with resource development. It

includes —e. g., General Electric Co., which sells

electric generation equipment—and chemical

companies, which might use coal as a chemical

feedstock.

The companies in this category are latecomers

to Western coal leasing. They controlled just 1

percent of all land under lease in 1970. Their

holdings grew to 35,675 acres by 1980—5 percent of the total land under lease.

Kemmerer Coal Co.

Kemmerer Coal Co. is one of the oldest Western coal producers and among very few surviving companies in the coal industry founded and

headquartered in the West. Since 1926, it has

been owned by the Lincoln Corp., a holding

company of Kemmerer family interests.

Kemmerer Coal now owns 32,191 acres of

leased land, 4 percent of the total, down from its

peak of 33,988 acres in 1975. The company

reached a peak of relative importance in 1965,

with 6 percent of the total land under lease, or

18,504 acres. The company has mined coal in

the southwestern Wyoming coalfields for many

decades.

In September 1980, the Kemmerer family announced its intention to sell Kemmerer Coal Co.

If completed, this transaction will cause the

largest single shift in coal lease ownership since

Peabody was purchased by its holding company

in 1977.

Metals and Mining Companies

Metals and mining companies, like steel companies, entered Western coal leasing early.

Total relative holdings declined from 12 percent

of all leased land in 1950 to 6 percent in 1965,

they then grew steadily to 15 percent in 1970,

only to drop over the past 5 years to 2 percent

today. During the period from 1950 to 1975,

their holdings increased steadily in absolute

terms from just 5,000 acres to over 118,000

acres, then decreased sharply to about 18,000

acres in 1980.

The major reasons for the rise in leaseholdings by metals and mining companies in the late

1960’s were the acquisition of Peabody Coal Co.

by Kennecott Copper Corp. and the land acquisition programs of Amax, Inc., and Utah International, Inc. The principal reasons for the decline of leaseholdings over the past 5 years have

been the acquisition of Utah International by

General Electric Co. and Kennecott’s divestiture

of Peabody.

Landholding Companies

Independent landholding companies, like individual land agents, figured prominently in the

early history of the leasing program but have

largely liquidated their holdings. Their relative

importance peaked in 1960 when they controlled 8 percent (11, 504 acres) of all land under

lease. Their holdings continued to rise until

1970, when they owned over 43,000 acres or 6

percent of leased land. The seven companies in

this category now control only 4,661 acres, less

than 1 percent of the total land under lease.

Independent landholding companies acquired

most of their leases de novo or by assignment

from individuals in the 1950’s and 1960’s when

leases could be easily and inexpensively obtained. The leasing moratorium of the 1970’s and

the abolition of the preference right leasing program restricted new leasing opportunities

thereby increasing the assignment value of land

already under lease. As a result, most independent land companies sold their leases in the

1970’s.

“Other” Lessees

This last category includes lessees which do

not fit into one of the other 12 groups established during this survey. The percentage of

acres held by lessees in this category has varied

from 4 percent in 1955 to 13 percent in 1960 and

1965. They presently hold about 10 percent of

all land under lease. The following table lists

some of the lessees currently falling in the

“other” category.
IMPLICATIONS OF COAL LEASE OWNERSHIP PATTERNS

More lessees are participating in the coal leasing program in 1980 than in 1950, but the list of

lessees is increasingly dominated by large multiinterest companies and, on the average, the

lessee of today controls considerably more

acreage than its predecessors. The number of

lessees has nearly doubled during the past 30

years from 84 to 159, but the total acreage of

land under lease has jumped eighteenfold during

the same period. While the average lessee controlled 494 acres of leased land in 1950, the

average lessee controls 4,975 acres in 1980. On

the other hand, the number of distinct industries

holding major shares in Federal leasing is increasing. In 1950, only four business activity

categories identified in this survey held at least 5

percent of all land under lease. By 1980, nine

such categories were identified. These leasing

patterns are summarized in tables 3 and 4.

Three trends resulting from increased leasing

by widely different types of companies, each of

which controls large acreages of leased land, can

be noted. The first trend is toward involvement

in leasing by horizontally integrated companies.

The energy companies, natural gas pipeline

companies, and smaller oil and gas companies

Table 3.—Average Number of Leases and Average

Number of Acres Held per Lessee, 1950-80

Average number of Average number of

leases held per acres held per

Year lessee lessee

1950 . . . . . . 1.04 494

1960 . . . . . . 2.69 1,198

1970 . . . . . . 2.69 4,073

1980 . . . . . . 3.38 4,975

SOURCE Office of Technology Assessment.

together own 31 percent of all outstanding coal

leases. For these companies, involvement in coal

leasing is part of a strategy to branch into

several energy resource fields.

Growing involvement of companies for

which coal reserve acquisition represents a vertical integration of business activities is a second

trend in lease ownership patterns. Steel companies and electric utilities—which together

own 29 percent of all land under lease today—

are the two principal examples of leasing by vertically integrated companies. Steel companies

have for decades mined significant quantities of

coal and have participated in the leasing program since its inception. The growth of utility

involvement in Western leasing since 1965 to its

position as the largest leaseholding business activity category in 1980 represents a new and

significant type of vertical integration among

lessees. The coal leasing program has provided

an important avenue for utility entry into the

coal industry. Utilities provided 11 percent of

the Nation’s coal output in 1979. They own 21

percent of all Federal coal land under lease and

produced 30 percent of all coal mined on Federal

land. Approximately one-fourth of all utility

“captive” coal production was mined from

leased Federal reserves.

A third trend reflects the growing involvement of large, already diversified companies in

coal leasing. These include metals and mining

companies —e.g., which are diversifying their

mineral extraction skills to include coal. In addition, it includes chemical and high-technology

companies for which entry into the coal industry represents a diversification not integrated with existing business activities.
Table 4.— Business Activity Categories Holding at Least 5 Percent of All Leased Land, 1950-80

1950 1965 1980

Independent coal companies Independent coal companies ‘

- “ Electric utilities

Unincorporated Individuals Unincorporated individuals Energy companies

Metals and mining companies Kemmerer Coal Co. Peabody Coal Co.

Steel companies Metals and mining companies Steel companies

Steel companies -

Independent coal companies

Electric utilities Oil and gas (minor) companies

Unincorporated individuals

Natural gas pipeline companies

Non resource diversified companies

SOURCE Office of Technology Assessment

—

The shift in leaseholdings to large, diversified

and integrated companies suggests several

observations. First, lease development decisions

are increasingly shaped by priorities which

reflect business opportunities and capital

availability unrelated to coal development.

Secondly, these lease ownership changes can

cause a relocation of final decisionmaking

authority affecting coal development from local

managers to those sometimes working hundreds

or thousands of miles from lease sites. Thirdly,

the internal business arrangements established

by large companies to manage coal leases result

in complex coal development decisionmaking

processes. While all three of these trends might

contribute to increased efficiency in the coal industry, they make understanding coal industry

priorities an increasingly difficult task.

Another result of lease ownership changes is

the appearance of more lessees with the financial resources available for coal development

that far exceed the resources available to the

earlier, smaller coal leasing companies, Increasing participation by larger and more complex

corporate entities is not surprising considering

the larger capital requirements posed by today’s

coal development.

Next, the increasing tendencies of the large,

diversified companies holding leases to establish

multicorporate development projects could

raise competition concerns not posed when leasing was dominated by many small independent

companies. Multicorporate lease development

ventures provide a means for corporations to

distribute the risks involved in undertaking

large-scale coal development projects. They also

increase the capital generating capacity of the

project as a whole. At the same time, they increase the level of intercorporate information

exchange and communication. Finally, joint

venturing through subsidiaries far removed

structurally from the parent organization has

recently provided indirect entry into leaseholding by railroads. ’ (Railroads are prohibited

by the Mineral Leasing Act of 1920 from direct

lease ownership. )9

Several recent studies have pointed to the

potential importance of Federal coal leasing

policies as a determining factor in the organization and development of the coal industry over

the next several decades. The Harvard Business

Study, Energy Future-e. g., observes that

“competition can be protected by methods short

of horizontal divestiture, such as existing antitrust laws, setting limits on the share of

reserves any single firm can control, and innovative leasing policies. The last can be

especially effective. ” The present study shows

that over the past 30 years, ownership patterns

on leased public coal land have generally been

similar to the pattern of industry restructuring

typical for private land. Indeed, some developments on Federal coal leases—such as the

growing role of utilities as “captive” coal

producers—seem to be lead indicators rather

than causes of the changing character of the

American coal industry.

‘See ch. 2, sec. Nl, Otl~cr Lt,t/scltc)ldt~r 5, tor further Information.

“A recent JustIce Department report recommends strlk]ng from

Federal law. prt)hiblt i<)ns against the ]ssuance of Federal coal leases

to ra]iroads or their afti]lates, ( ~“()~)fpctltf{ltr /11 t~~c CcJu/ ]tldustr<y,

rep[)rt 01 the U.S. Ilepartment ot Justice, pursuant to sec. 8 of the

Federal Coal Leasing Amendments Act (lt 197b f[]r Iiscal year 1979;

U.S. Department (>t lu~tlce, Antitrust L)lvisl{)n; November 1980, )
CHAPTER 2

Lease Ownership by

Business Category
CHAPTER 2

Lease Ownership by Business Category

In this report, lessees are grouped into 10 industries. Leasing patterns and trends are then

examined separately for each industry. In addition, the leasing histories of two companies are

analyzed. Each of the 12 lessee categories have

controlled at least 5 percent of all land under

lease at one or more of the seven dates selected

for analysis between 1950 and 1980. In addition,

a 13th group, called other was formed, from 1essees that did not fall into 1 of the 10 group categories.

The 13 business categories are:

Electric utilities;

Energy companies;

Peabody Coal Co.;

Steel companies;

Independent coal companies;

Oil and gas (minor) companies;

Unincorporated individuals;

Natural gas pipeline companies;

Nonresource-related diversified companies;

Kemmerer Coal Co.;

Metals and mining companies;

Landholding companies; and

Other lessees.

Table 5 summarizes the relative growth and

decline in leaseholdings by each of the 13 categories. The table shows the steady increase in

lease ownership by the electric utilities, the major energy companies, and the oil and gas (minor) companies since the mid-1960’s. It shows

the recent involvement of nonresource-related

diversified companies and natural gas pipeline

companies. It shows the effect of the sale in 1977

of Peabody Coal Co. to a six-firm holding company (The Peabody Holding Co. ) on coal lease

ownership patterns. It shows the early dominance of leasing by independent coal companies

and nonincorporated individuals and their

steady decline in relative terms over the past 30

Table 5.—Number of Acres and Percent of Total Leased Land Held by Business Activity Category

Electric utilities

Energy companies

Peabody Coal Co. .

Steel companies .

Independent coal

companies . . . .

Oil and gas (minor)

companies .

Unincorporated

individuals .

1950 1955 1960 1965 1970 1975 1980

Acres Land Acres Land Acres Land Acres Land Acres Land Acres Land Acres Land

held leased held leased held leased held leased held leased held leased held leased

(#) (

0

/0) (#) (

0

/0) (#) (

0

/0) (#) (%) (#) (%) (#) (%) (#) (%)

. . . . . . 0 0 2,000 3% 8,263 6 %

- 45,363 15% 132,038 18°/0142,077 19%163,259 2170

. . . . . . 0 0 0 0 0 0 9,491 3 132,274 18 138,409 18 155,024 20

. 0 0 0 0 0 0 (6,251) (2) (59,121) (8) (68,923) (9) 62,009 8

. . . . . . 4,993 12 14,817 19 19,888 14 34,158 11 46,114 6 49,448 6 60,015 8

. . . . . 14,584 35 25,022 33 41,557 29 77,273 25 78,297 11 58,837 8 55,410 7

. . . . . 0 0 0 0 0 0 2,080 1 26,911 4 42,193 6 45,926 6

. 11,129 27 17,618 23 25,678 18 41,475 13 78,995 11 66,515 9 43,215 5

Natural gas pipeline

companies . . . . 0 0 0 0 0 0 0 0 0 0

Nonresource-related

diversified companies . 0 0 0 0 0 0 4,610 1 10,015 1

Kemmerer Coal Co. . . . . 475 1 1,752 2 6,849 5 18,504 6 33,793 5

Metals and mining

companies . . . . . 5,009 12 5,009 7 9,266 6 17,708 6 107,504 15

Landholding companies. . 1,360 3 4,576 6 11,504 8 13,411 4 43,581 6

“Other” lessees. . . . . . . . . 2,907 7 3,240 4 18,288 13 39,134 13 41,153 6

NOTE Uncategorlzed~essees hold less than 2 percent of land under lease at any analysis date

Numbers might not add to 100 percent because of the holdings of uncategorized lessees

Numbers in ( ) tabulated in metals and mining category (1970 and 1975) or in independent coal company category (1965)

Uncategorized 1,035 1,915 2,453 5,147 2,643

Lessees 2°0 3.,0 2% 2°0 < 1 %

SOURCE Off Ice of Technology Assessment

32.522 4

12,580 2

33,988 4

118,300 15

26,225 32

37,051 5

36.317 5

35,675 5

32,191 4

17,620 2

4,661 <1

77,861 10 .

6848

100

1,845

< 1%

19

74-866 0 - 81 - 4
20

years. It shows the early participation of the

steel and metals and mining industries and Kemmerer Coal Co. and the gradual reduction in

steel industry influence, the swings in metals

and mining company leasing, and the continuing involvement of Kemmerer. It shows the rise

of the independent landholding company in the

late 1950’s and early 1960’s followed by the liquidation of their holdings in the lease-tight

moratorium era of the 1970’s.

Each of the following sections discusses the

history of leasing by 1 of these 13 groups. Each

section is divided into two parts. The first summarizes the relative and absolute changes in

leaseholdings by category and presents general

observations and conclusions about the leasing

patterns and trends in that category. The second

section contains a detailed history of lease acquisitions by individual companies in the group.

Table 6 presents a list of companies holding

leases in 1980.

Table 6.—1980 List of Lessees

A. Electric utilities

American Electric Power Co. (Franklin Real Estate Co.)

Arizona Public Service Co. (Resources Co.)

Black Hills Power & Light Co. (Wyodak Resources

Development Co.)

Idaho Power Co. (Bridger Coal Co.

33.3 percent)

Iowa Public Service Co. (Energy Development Co.)

Montana-Dakota Utilities (Knife River Coal Co.)

Montana Power Co. (Western Energy Co.)

(Northwestern Resources

co.)

Moon Lake Electric

Association

Nevada Power Co. (Nevada Electric Investment

co.)

Pacific Gas & Electric Co. (Eureka Energy Co.)

Pacific Power & Light Co. (Bridger Coal Co.

66.6 percent)

(Western Minerals Co.)

(Eden Ridge Coal Co.)

(Spring Creek Coal Co.)

(Resources Development

Co., Inc.)

Public Service of New Mexico (Western Coal Co.

co. 50 percent

San Diego Gas & Electric Co, (New Albion Resources Co.)

Southern California Edison Co. (Mono Power Co.)

Tucson Electric Power Co. (Western Coal Co.

Utah Power & Light Co.

Washington Water Power Co.

B. Energy companies

Atlantic-Richfield Co.

Conoco, Inc.

Exxon Corp.

Getty Oil Co.

Gulf Oil Corp.

Mobil Corp.

Occidental Petroleum Corp.

Shell Oil Corp.

Standard Oil of Indiana Co.

The Sun Co.

50 percent)

(Washington Irrigation &

Development Co.)

(Swisher Coal Co.)

(Thunder Basin Coal Co.)

(Consolidation Coal Co.)

(Carter Oil Co.)

(Carter Mining Co.)

(Plateau Mining Co.)

(Mobil Oil Corp.)

(Sheridan Enterprises, Inc.)

(Empire Energy Co.)

(Sunoco Energy

Development Co.)

—

C. Peabody Coal Co.

Peabody Holding Co. (Peabody Coal Co.)

(North Antelope Coal Co.

50 percent)

D. Steel companies

Armco Steel Corp. (Evans Coal Co.)

Kaiser Steel Corp.

Republic Steel Corp.

Sharon Steel Corp. (U.S. Fuel Co.)

U.S. Steel Corp.

E. Independent coal companies

Amca Resources (Amca Coal Leasing, Inc.)

Baukol-Noonan, Inc.

Belden Enterprises

Cameron Coal Co.

Cimarron Coal Co.

Cravat Coal Co. (Conotton Land Co.)

Divide Coal Mining Co.

Energy Fuels Co.

Garland Coal & Mining Co.

General Exploration, Inc. (Cambridge Coal Co.)

(GEX Colorado)

James Bros. Coal Co.

Mid Continent Coal & Coke Co.

National King Coal, Inc.

North American Coal Corp. (Coteau Properties, Inc.)

(The Helen Mining Co.)

The Pacola Co.

Reliable Coal & Mining Co.

Ryan’s Creek Coal Co.

Sewanee Mining Co.

Usibelli Coal Mine, Inc.

Wasatch Coal Co.

Westmoreland Coal Co. (Colorado Westmoreland,

Inc.)

F. Oil and gas (minor) companies

Anschutz Corp.

Ashland Oil and Hunt Interests (Ark Land Co.)

(Medicine Bow Coal Co.

50 percent)

Belco Petroleum Corp.

Consolidated Gas & Oil Corp. (Sunland Mining Corp.)

Hiko Bell Mining & Oil Co.

Kerr-McGee Corp. (Kerr-McGee Coal Corp.)

Texaco, Inc.
21

Table 6.— 1980 List of Lessees (continued)

Petroleum International, Inc.

Quaker State Oil Refining Co. (Kanawha & Hocking Coal &

Coke Co.)

G. Unincorporated individuals

59 individuals. See pp. 46-48.

H. Natural gas pipeline

companies

The Coastal Corp. (Coastal States Energy Co.)

(Southern Utah Fuel Co.)

The El Paso Co. (El Paso Natural Gas Co.)

Internorth Corp. (Northern Minerals Co.)

Northwest Energy Corp. (Western Slope Carbon,

Inc.)

Panhandle Eastern Pipeline (North Antelope Coal Co.

Corp. 50 percent)

Texas Eastern Transmission

Corp. (Fannin Square)

1. Nonresource-related diversified companies

FMC Corp.

General Dynamics Corp. (Material Service Corp.)

(Freeman United Coal

Mining Co.)

General Electric Co. (Utah International, Inc.)

Monsanto Co. (Sweet water Resources,

Inc.)

W. R. Grace & Co. (Colowyo Coal Co.

50 percent)

J. Kemmerer Coal Co.

Lincoln Corp. (Kemmerer Coal Co.)

K. Metals and mining companies

Amax, Inc, (Amax Coal Co.)

Asarco, Inc.

Hanna Mining Corp. (Colowyo Coal Co.

Intermountain Exploration Co.

Phelps Dodge Corp.

Pitkin Iron Corp.

St. Joe Minerals Corp.

L. Landholding companies

Ametex Corp.

Cari International Mining Corp.

Carroll County Coal Co.

Kinq Cannel Coal Co.

50 percent)

Western Nuclear, Inc.)

Anchor Coal Co.)

. ... — . . —

M. “Other” lessees

The Alaska State Bank

American Colloid Co.

California Portland Cement Co.

Carbon Emery Bank

Cooperative Security Corp.

Crane Co. (CF&l Steel Co.)

Eastern Gas & Fuel Associates (Eastern Associated

Properties Corp.

Energy Reserves Group, Inc.

Equipment Rental Service

Geo Resources Exploration,

Inc.

Ideal Basic Industries, Inc.

Kaneb Services Inc.

Midcontinent Limestone Co.

Monolith Portland Cement Co.

Mountain States Resource

Corp.

Northwest Industries, Inc.

Peter Kiewit Sons, Inc.

Standard Equipment, Inc.

Texas Industries, Inc.

Union Pacific Corp.

N. Uncategorized lessees

Granite Creek Coal & Uranium

co.

Mandrones Mining Co.

Ruby Construction Co., Inc.

Vitro Minerals, Inc.

(Stansbury Coal Co.

50 percent)

(Leeco, Inc.)

(Lonestar Steel Co.)

(Rosebud Coal Sales)

(Big Horn Coal Co.)

(Wytana, Inc.)

(Cumberland Coal Co.

50 percent)

(Black Butte Coal Co.

50 percent)

(Mining Systems Corp.)

(Black Butte Coal Co.

50 percent)

(Cumberland Coal Co.

50 percent)

(Stansbury Coal Co.

50 percent)

(Medicine Bow Coal Co.

50 percent)

Smith-HolIiday and Associates,

Ltd.

Thermal Energy Co.

Thompson Creek Coal & Coke

co.

NOTE Subsidary leaseholders noted in parentheses

SOURCE Off Ice of Technology Assessment

A. ELECTRIC UTILITIES

The electric utilities industry has been an im- ducer. Utilities are the largest users of coal. In

portant participant in the Federal coal leasing 1979, 77 percent of the coal consumed domestiprogram for the last 20 years. Its importance cally was burned in utility company boilers.

derives from its role as both consumer and pro- Utilities are also a major producer of coal, either
22

for “captive” use at powerplants owned by the

coal mining utilities or for sale to other consumers. Utilities mined about 11 percent of the

coal produced nationwide in 1979.

Coal burning plants produced 48 percent of

the Nation’s electricity in 1979, compared to 19

percent in 1950. The importance of utilities both

as consumers and producers of coal is likely to

increase in the next several decades, and increases in captive production by utilities may

well proceed faster than the increases in national

coal production. The Federal Energy Regulatory

Commission estimates that utility coal production will provide 19 percent of the total coal

production in 1985, compared to 7 percent in

1975 and 2 percent in 1961.

Utility interest in coal mining is reflected in

their increasing holdings of Federal coal. Since

the late 1950’s, utilities have steadily increased

their coal leaseholdings. By 1975, utilities held

the most acreage under lease of the 12 categories

examined in this survey, a position they hold today. In January 1980, 17 utilities controlled

163,259 acres of leased land, 21 percent of the

total. (See table 7 and figures 4 and 5.) Utilities

with service areas as far apart as Ohio and

southern California or Washington State and

Texas are now neighbors in Western coalfields.

More than any other business group examined in this study, utilities have undergone internal corporate restructuring in response to their

entry into the coal industry. Most early utilit y

lease acquisitions were made by the parent company which was principally involved in power

generation. As these companies have developed

specific coal development plans they increasingly have organized specialized subsidiaries to

handle various tasks. Four distinct types of utiliTable 7.—Utility Company Leaseholdings

Percent of total

Number of Number of acreage under

Year leases held acres held lease

1950 . . . . . . 0 0 0

1955 . . . . . . 1 2,000 30/0

1960 . . . . . . 8 8,263 6

1965 . . . . . . 29 45,363 15

1970 . . . . . . 67 132,038 18

1975 . . . . . . 80 142,077 19

1980 . . . . . . 106 163,259 21

SOURCE Office of Technology Assessment

Figure 4.—Acres Leased by Utility Companies

Acres

160,000 -

120,000

- [

I \;::’:J,-:.:;~

,./ . . . - I \ .

40.000~

1950 55 60 65 70 75 80

Year

SOURCE Off Ice of Technology Assessment

Figure 5.— Percent of Total Leased

Utility Companies

Acres Held by

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

ty subsidiaries holding leases today are identified in this survey. They include wholly owned

coal mining companies, general resource development companies (involved in multifuel supply acquisition), landholding companies, and

passive companies without employees created

as legal entities to hold percentage interests in

coal properties being mined by other joint ventures. Table 8 shows the percentage of total

utility acreage held by the various subsidiar y

categories and parent companies throughout the
23

Table 8.—Percent of Utility Owned Leases Held by Industry Subcategory

Resource

Utility parent Coal mining Landholding development Passive

Year company subsidiary

1950 . . . . . — —

1955 . . . . . — 1000/0

1960 . . . . 64% 36

1965 . . . . . . 42 36

1970 ... . . 32 25

1975 . . . . . 30 20

1980 . . . . . . 13 26

SOURCE Office of Technology Assessment

history of utility leasing. The table shows the increased use of resource development and passive subsidiaries in this past decade and the intermittent employment of land subsidiaries

since the mid-1960’s. Leaseholding by parent

companies has steadily declined, while that of

wholly owned coal mining companies have remained relatively constant. It is not uncommon

for a single utility to own subsidiaries falling

into several different categories and to maintain

leaseholdings in all their names.

This internal restructuring appears to be a

recognition by utilities that more complex

management organizations are necessary if they

are to diversify successfully into resource

development businesses such as coal mining.

The management skills, planning needs, and

decisionmaking structure needed to run a coal

company are different from those historically

required by the utility industry. Furthermore,

this division enables utilities, as a regulated industry, to clearly differentiate among totally

regulated activities (such as power generation),

partially regulated actions (such as captive coal

purchases), and unregulated business practices

(such as sales of utility produced coal on the

open market).

Utilities are important in the coal industry in

general and for coal lease ownership patterns in

particular, not only because of their substantial

leaseholdings and operation of “captive” mines,

but also because of their coal purchasing decisions. Over the past 20 years, for technical reasons, utilities have increasingly depended on

suppliers capable of providing large quantities

of coal from single deposits under long-term

contracts (up to 35 years). Over 90 percent of

the coal produced in several Western States,

subsidiary

-

—

—

220/0

17

11

20

subsidiary subsidiary

— —

— —

— —

— —

2 5 % —

30 4 %

33 7

most significantly Wyoming (93 percent), is

now sold under contract rather than on the spot

market. These purchasing preferences, coupled

with the large decreases in residential and commercial markets have made it more difficult for

small coal producers to find markets. As their

markets have dwindled, many small companies

have sold their holdings, including their coal

leases, to larger companies, including the utilities.

History of Leasing

From modest beginnings in the 1950’s, utilities

made their largest lease acquisition gains in the

1960’s. Utility company leaseholdings rose from

6 percent of all land under lease in 1960 to 18

percent in 1970. Despite the leasing moratorium

of the 1970’s, utilities increased their holdings

from 132,038 acres to the present total of

163,259 acres. The lease acquisition programs of

the individual utilities listed in table 9 are

described below.

Montana-Dakota Utilities Co.

Two North Dakota leases were acquired by a

Montana-Dakota Utilities Co. subsidiary, Knife

River Coal Co., in the 1950’s, one in 1951 and

the other in 1957. In 1961, the company added a

third lease and in 1967 it completed its lease acquisition to date with the addition of two more

leases. All five of the company’s leases were acquired de novo. A coal mining company, Knife

River has mined lignite from these Federal leases

for more than 20 years.
24

Table 9.—Utility Company Leaseholders

1950.

1955.

1960.

1965.

1970

1975

None

Montana-Dakota Utilities (Knife River Coal Co.)

Montana-Dakota Utilities (Knife River Coal Co.)

Montana Power Co.

Pacific Power & Light Co.

Black Hills Power & Light Co. (Wyodak Resources

Development Co.)

Montana-Dakota Utilities (Knife River Coal Co.)

Montana Power Co.

Pacific Power & Light Co.

Black Hills Power & Light Co. (Wyodak Resources

Development Co.)

Public Service of New Mexico Co. (Public Service

Coal Co.)

Washington Water Power Co. (Washington

Irrigation & Development Co.)

Moon Lake Electric Association

Nevada Power Co. (Nevada Electric Investment Co.)

Montana-Dakota Utilities (Knife River Coal Co.)

Montana Power Co. (Western Energy Co.)

Pacific Power & Light Co.

Black Hills Power & Light Co. (Wyodak Resources

Development Co.)

Public Service of New Mexico Co. (Public Service

Coal Co.)

Washington Water Power Co. (Washington

Irrigation & Development Co.)

Moon Lake Electric Association

Southern California Edison Co. (Associated

Southern Investment Co.)

Arizona Public Service Co. (Resources Co.)

San Diego Gas & Electric Co. (New Albion

Resources Co.)

Nevada Power Co. (Nevada Electric Investment Co.)

Iowa Public Service Co. (Energy Development Co.)

Montana-Dakota Utilities (Knife River Coal Co.)

Montana Power Co. (Western Energy Co.)

(Northwestern Resources Co.)

Pacific Power & Light Co. (Bridger Coal Co.

66.6 percent)

(Western Minerals Co.)

Black Hills Power & Light Co. (Wyodak Resources

Development Co.)

Public Service of New Mexico Co. (Western Coal Co.

50 percent)

NOTE Subsidiary leaseholders are noted in parentheses

SOURCE Off Ice of Technology Assessment

Pacific Power & Light Co.

Pacific Power & Light (PP&L) was the second

utility to begin leasing Federal coal land in the

West. It has acquired the largest coal leaseholdings of any utility and is the second largest “captive” producer in the country. The company has

made use of coal-related subsidiaries more than

any other utility in this survey.

The company’s first move into leasing occurred in May 1956, when the company ac1980

—

Washington Water Power Co. (Washington

Irrigation & Development Co.)

Moon Lake Electric Association

Southern California Edison (Mono Power Co.)

Arizona Public Service Co. (Resources Co.)

San Diego Gas & Electric Co. (New Albion

Resources Co.)

Nevada Power Co. (Nevada Electric Investment Co.)

Iowa Public Service Co. (Energy Development Co.)

Tucson Gas & Electric Co. (Western Energy Co.

50 percent)

Idaho Power Co. (Bridger Coal Co. 33.3 percent)

American Electric Power Co. (Franklin Real Estate

co.)

Wisconsin Electric Power Co. (Badger Service Co.)

Utah Power & Light Co.

Montana-Dakota Utilities (Knife River Coal Co.)

Montana Power Co. (Western Energy Co.)

(Northwestern Resources Co.)

Pacific Power & Light Co. (Bridger Coal Co. 66.6

percent)

(Western Minerals Co.)

(Eden Ridge Coal Co.)

(Spring Creek Coal Co.)

(Resource Development

Co., Inc.)

Black Hills Power & Light Co. (Wyodak Resources

Development Co.)

Public Service of New Mexico Co. (Western Coal Co.)

Washington Water Power Co. (Washington

Irrigation & Development Co.)

Moon Lake Electric Association

Southern California Edison Co. (Mono Power Co.)

Arizona Public Service Co. (Resources Co.)

San Diego Gas & Electric Co. (New Albion

Resources Co.)

Nevada Power Co. (Nevada Electric Investment Co.)

Iowa Public Service Co. (Energy Development Co.)

Tucson Electric Power Co. (Western Coal Co.

50 percent)

Idaho Power Co. (Bridger Coal Co. 33.3 percent)

American Electric Power Co. (Franklin Real Estate

co.)

Utah Power & Light Co.

Pacific Gas & Electric Co. (Eureka Energy Co.)

—

quired prospecting permits by assignment from

two individuals. These were later converted into

Wyoming coal leases. Two months later the

company added a third Wyoming lease de novo.

All three are still held in the name of the parent

company.

Next, in 1956, PP&L acquired a prospecting

permit in Oregon from an individual. It added a

second lease in Oregon de novo in 1962. Title to

both leases remained in the name of the parent

company until assignment to a subsidiary, Eden
25

Ridge Coal Co., 1

in 1977. Eden Ridge was formed to investigate the mining potential of these

two Oregon leases, but a NERCO official told

OTA in an interview for this survey that PP&L

views development prospects as slim.

PP&L next acquired a Montana lease. In

1964, the parent company acquired de novo a

large tract. In 1971, the Decker joint venture

agreement between PP&L and Peter Kiewit Sons

Inc., was initiated. Shortly thereafter, PP&L

assigned 50 percent of the lease to a Peter Kiewit

subsidiary called Wytana, Inc., and transferred

its remaining 50-percent interest to a newly

formed PP&L subsidiary, Western Minerals,

Inc. Western Minerals, like Eden Ridge, has no

employees. All coal mining is done by Peter

Kiewit Sons, Inc.

Three other Montana leases eventually were

added to the Decker mining unit. The first was

obtained by PP&L in 1966. In 1971, a portion of

the lease was segregated to form a new lease

owned jointly by the Decker partners. The second lease was initially issued de novo to Peter

Kiewit Sons, Inc., in 1966 and assigned to the

joint venture subsidiaries in 1971. The third

lease was initially issued in 1963 to Rosebud

Coal Sales Co., a Peter Kiewit Sons subsidiary

assigned to PP&L in 1966, and reassigned to the

joint venture subsidiaries in 1975.

PP&L controls three other Montana leases

not currently connected to the Decker ventures.

Two were issued to this utility de novo, one in

1963 and one in 1965; both are held in the name

of the parent company. In 1966, PP&L acquired

the third, a 2,347-acre tract, from its original

lessee, Peter Kiewit Sons. In 1977, the parent

company assigned the lease to a landholding

subsidiary, Resource Development Co., Inc.

(The subsidiary was originally incorporated in

1969 as Western Resources Inc.; it changed its

name to Resource Development in October

1970. ) One year later Resource Development reassigned the lease to another PP&L subsidiary,

Spring Creek Coal Co. Spring Creek is a bona

fide wholly owned coal mining subsidiary

‘Eden Ridge iS one 0f several subsidiaries established by Pacific

Power & L]ght ]n the 1970’s, None are subs] d]aries directly t)t the

parent ct)mpany. All are owned d]rectly by NERCO, Inc., a resOU rce devc](lprnen t ~ubsldla ry established by PP& 1. to ct)ordl na te

and d] rect t uel acq u IS I t ]f~n and developrnen t act ivl t ]es NERCO

I tselt h[)ld~ ntl lease>,

responsible for the development of a mining

operation in Montana. The mine is currently

under construction.

PP&L also acquired a second Wyoming lease

package. Five leases were issued de novo to

PP&L, two in 1960, two in 1965, and one in

1966. A sixth was obtained in 1968 after assignment from an individual. PP&L assigned all six

of the leases to Resource Development Co. in

1977. The seventh lease was obtained directly

by Resource Development Co. in May 1979 by

assignment from Gulf Oil. The lease was originally issued in 1932 and, prior to acquisition by

Gulf in 1977, had been owned by five different

individuals.

In a third Wyoming project, PP&L owns twothirds interest in Bridger Coal Co., a joint venture formed in 1974 to mine coal for the Jim

Bridger powerplant in Wyoming. PP&L’s interest is held by another NERCO subsidiary, Pacific Minerals Co., formed, like Spring Creek, to

run a specific mining project. The other onethird interest is owned by Idaho Power Co. (see

p. 27).

The Bridger Coal Co. owns three Wyoming

coal leases. All three leases were originally

issued de novo to PP&L, one in 1965 and two in

1967. The three were reassigned to Bridger in

1974. Under the terms of the assignment, Idaho

Power must pay PP&L an overriding royalty of

2.66 cents/ton of coal mined. PP&L’s own subsidiary, Pacific Minerals, is also required under

the same agreement to pay an overriding royalty to its parent of 5.33 cents/ton.

PP&L acquired two leases in 1971 in Washington. This is the fourth State in which the

company holds Federal coal leases. Today, it

owns two leases jointly with Washington Irrigation and Development Co., a subsidiary of

Washington Water Power Co. Both of the companies obtained one of the leases de novo in

1971. Also in 1971, PP&L was assigned W-percent interest in the second lease which was originally issued to Washington Irrigation in 1961.

Black Hills Power & Light Co.

In 1956, Black Hills Power & Light Co. obtained a lease originally issued to an individual

in 1944. The lease was acquired in the name of

Wyodak Resources Development Corp., a utili-
26

ty subsidiary founded in 1956 to develop a coal

fuel supply for the parent’s generating plants.

The subsidiary added three leases de novo to

this Wyoming land package, one each in 1959,

1961, and 1965.

Montana Power Co.

Two subsidiaries of Montana Power currently hold leases. Two Montana leases, part of the

Colstrip mining project, are held by Western

Energy Co. One lease which includes abandoned Burlington Northern Railroad coal mine

and is one of the oldest leases in the Federal program, was originally issued to an individual in

1921. In 1923, the lease was assigned to a railroad subsidiary which operated the mine for

several decades. Montana Power Co. acquired

the lease in 1959 and assigned it to Western Energy Co. in 1966. The second Montana lease

was acquired de novo by the parent company in

1966 and reassigned 1 month later to Western

Energy.

Northwestern Resources Co., another Montana Power subsidiary, acquired a single Wyoming lease in 1975. Originally issued in 1944,

this lease had previously been owned by six individuals. Both Western Energy and Northwestern Resources are involved in coal and uranium

fuel supply projects, the former within the

borders of Montana and the latter out of the

State.

Public Service Co. of New Mexico

and Tucson Electric Co.

Seven New Mexico coal leases are now owned

by Western Coal Co., a joint venture of Public

Service Co. of New Mexico and Tucson Electric

C o

2

. Prior to 1973, the leases were owned in entirety by the New Mexico utility. The parent

utility acquired two leases de novo in 1958.

Both were assigned to a wholly owned coal mining subsidiary, Public Service Coal Co., in

1962. Three other leases were obtained de novo

by the coal subsidiary in 1961.

~ln December 1980, the two utilities announced their intention

to liquidate Western Coal Co. They have sold their coal processing

equipment to Utah International and are negotiating with several

potential assignees for their leaseholdings.

In 1971, Public Service Coal Co. changed its

name to Western Coal Co. In 1973, Tucson Gas

and Electric Co. (name changed to Tucson Electric Co. in 1979) joined the company as coventurer. Western Coal obtained the final two

leases in 1977 by assignment by individuals.

Moon Lake Electric Association

Moon Lake Electric Association was founded

in 1956 and supplies electricity to the Uinta

basin in central Utah. It currently purchases all

power for its customers from Utah Power &

Light Co. In 1958, Moon Lake Electric acquired

a large Colorado coal lease de novo in hopes of

building its own generating equipment to be

supplied with captive coal.

Washington Water Power Co.

Washington Water Power Co. today owns

two Washington leases jointly with PP&L.

Washington Water Power is a utility supplying

the Spokane area and is the active mining partner in the Centralia mine. Its leaseholdings are

in the name of Washington Irrigation & Development Co., a bona fide coal mining firm (see

Pacific Power & Light pp. 24-25, for details).

Nevada Power Co.

Two large lease blocks in southern Utah are

owned by utilities. One 10-lease group is owned

by Nevada Power Co. through its Nevada Electric Investment Co. landholding subsidiary. Six

were obtained de novo by the subsidiary, three

in 1961, one in 1962, and two in 1963. A seventh

was acquired in 1963 by assignment from an individual who had held, the lease since 1944.

Another lease was added in 1971. It was originally issued in 1936 to an individual, assigned to

Southern Utah Fuel Co. (then an independent

coal company), and then assigned to Utah Construction and Mining Co. prior to acquisition by

the Nevada utility. The final two leases were obtained in 1977, one by assignment from Peabody Coal and the other by segregation of a new

lease from one owned by the Huntington Corp.
2 7

Southern California Edison, San Diego Gas &

Electric, and Arizona Public Service Co.

These three utilities also own a large block of

coal leases in southern Utah. The 21 leases in

this package were acquired jointly by the three

utilities.

The original three participants in this utility

venture were Resources Co. and New Albion

Resources Co.—resource development subsidiaries of San Diego Gas & Electric and Arizona

Public Service respectively, and Associated

Southern Investment Co., a landholding subsidiary of Southern California Edison Co,

Twenty of the 21 leases were acquired by these

three ventures in 1964 or 1965 by assignment of

prospecting permits initially issued to a total of

six individual land agents. In 1972, Southern

California Edison Co. assigned its one-third interest in these leases from Associated Southern

Investment to a resource development subsidiary, Mono Power Co. The 21st lease was originally issued as a prospecting permit in 1963 to a

seventh individual land agent, assigned to an

eighth, converted to a lease, assigned to a landholding subsidiary of Peabody Coal Co., assigned to Peabody Coal Co. itself, and finally

assigned to the utilities’ three subsidiaries in

1974.

Iowa Public Service Co.

An 8,000-acre Wyoming coal lease was obtained de novo in 1969 by Energy Reserves, Inc.,

a wholly owned coal mining subsidiary of Iowa

Public Service Coal Co. In 1970, the subsidiary

changed its name to Energy Development Co.

Idaho Power Co.

Through its subsidiary, Idaho Energy Resources Co., Idaho Power Co. owns one-third

interest in Bridger Coal Co. Bridger is the developer of the coal mine which supplies the Jim

Bridger powerplant in Wyoming. Bridger’s three

leases are discussed under the Pacific Power &

Light section of this chapter (see pp. 24-25).

Wisconsin Electric Power Co.

Wisconsin Electric Power Co. is the only utility which has ever entered and left Federal coal

leasing. In 1970, it acquired de novo a large

Wyoming lease in the name of a subsidiary,

Badger Service Co. In 1975, the utility assigned

the lease to Stansbury Coal Co., a joint venture

of the Union Pacific Corp. and Ideal Basic Industries.

American Electric Power Co.

American Electric Power, which has service

areas in the Ohio Valley, came the greatest distance of any utility to acquire Federal coal

leases. It acquired total or partial interest in 11

leases between 1974 and 1976, one in Colorado

and 10 in Utah. All are held in the name of a

landholding subsidiary, Franklin Real Estate

c o .

The single Colorado lease was originally issued in 1956 and owned previously by three individuals. Franklin acquired it by assignment in

1975. The 10 Utah leases include some of the

oldest in the Federal coal leasing program. Nine

were obtained from McCulloch Oil Corp. or its

subsidiary, Bratzah Corp. Prior to control by

the oil company, seven of these leases were

owned by several independent coal companies.

The tenth utility lease, originally issued in 1921,

was owned previously by three independent

coal companies prior to acquisition by Franklin

Real Estate.

Utah Power & Light Co.

Although Utah has the largest number of outstanding Federal coal leases and the longest

history of leasing activity, the State’s largest

utility is a relatively late entrant to leasing. Utah

Power & Light Co., however, now owns 12

Utah leases, all in the name of the parent. In

1972, the company acquired its first lease by

assignment from Cooperative Security Corp.,

owned by the Church of the Latter Day Saints,

which had held it since 1957. In 1976, it added a

second lease, which had previously been owned

by five individuals in the course of its 43-year

history. In 1977, several more leases were

added, one from an individual and four from

Peabody Coal. Peabody’s leases had previously

been owned by several independent coal mining

companies or individuals active in the coal mining industry. In December 197’9, Utah Power

74-866 ‘2 - 81 - 5
28

added its final five leases, all by assignment

from Peabody. These leases had previously

been owned, a few for several decades, by a succession of individuals and independent land

agents.

Pacific Gas & Electric Co.

The San Francisco-based Pacific Gas & Electric Co. (PG&E) is the most recent utility entrant to Federal coal leasing. In the mid-1970’s

PG&E began looking for a coal supply for what

will be, if it is built, the first coal burning

generating facility in California. In 1977, PG&E

B. ENERGY COMPANIES

Since 1965, the major energy companies have

been increasing their Federal coal leaseholdings.

3 (See table 10. ) All of the major energy

companies initially confined their activities to

oil. Petroleum and natural gas continues to provide most of their revenues and profits. The acquisition of coal reserves, however, has become

a major component of their diversification programs. According to the 1980 Report of the

President’s Commission on Coal, oil and gas

companies now own approximately 41 percent

of the Nation’s recoverable coal reserves (excluding nonleased Federal reserves). 4 The Department of Energy’s Information Administration reports that 36 oil companies now own

coal. These companies have been steadily increasing coal production. In 1967, according to

DOE, oil companies accounted for 11 percent of

all coal produced, in 1974 the figure rose to 19

percent; in 1979 it was approximately 23 percent. All recent surveys of coal expansion plans

conclude that oil companies will continue to

capture an increasing share of the coal market,

at least through the next decade.

‘The 18 largest companies in terms of worldwide petroleum production are included in the energy compan y category in this

survey. The 18 are Exxon, Mobil, Texaco, Standard Oil Co. of

California, Gulf, Standard Oil Co. of Indiana, Shell, Arco, ConO C O, Sun, Phillips, Union, Standard of Ohio, Cities Service,

Marathon, Getty, Amerada Hess, and Occidental.

‘The oil and gas companies referred to in this reference include

not only the companies in the energy company category of this

section, but those in the oil and natural gas company (minor) category (see Oil and Natural Gas Companies (Minor), pp. 43-45).

acquired three leases from Heiner Coal Corp.,

an independent coal company which acquired

the leases in the mid-1960’s. In 1977, the utility

obtained 50-percent interest in a fourth lease by

buying Heiner Coal Co. ’s share of a lease owned

jointly with Equipment Rental Service. In 1979,

it added two leases previously owned by Kennecott Coal Co. and before that by Knight Ideal

Coal Co. Title of two of the six leases remains in

the name of the parent utility. Ownership of the

other four was assigned in 1979 to a newly

formed resource development subsidiary, Eureka Energy Co.

Table 10.—Energy Company Leaseholdings

Percent of total

Number of Number of acreage under

Year leases held acres held lease

1950. , . . . . 0 0 0

1955 . . . . . . 0 0 0

1960. , . . . . 0 0 0

1965. , . . . . 8 9,491 30/0

1970 . . . . . . 67 132,274 18

1975. , ., . . 67 138,409 18

1980 . . . . . . 86 155,024 20

SOURCE Office of Technology Assessment

The leasing of Federal coal land has provided

the major route for energy companies to increase their coal reserve holdings in the West.

This survey has found that 11 of the 18 largest

energy companies now own coal leases (see

table 11). Collectively they now control 155,024

acres of Federal coal land, 20 percent of the total

land under lease (see table 10).

Energy companies made their initial entry

into Western coal leasing in the mid-1960’s and

achieved their largest leasing gains between

1965 and 1970 (see figures 6 and 7). In 1970,

energy companies held more land than any of

the 12 business categories examined in this survey. They were passed by utilities in 1975. During the leasing moratorium of the 1970’s, energy

companies continued to add to their leaseholdings, although more slowly. Energy companies

still rank as the second largest leaseholders

among the 12 categories,
29

Table 11 .—Energy Company Leaseholders

1950. . . .

1955. . . .

1960. . . .

1965. . . .

1970. . . .

1975. . . .

1980. . . .

None

None

None

Gulf Oil Corp.

Gulf OiI Corp.

Atlantic-Richfield Corp.

Sun Oil Corp.

Continental Oil Corp. (Consolidation Coal Co.)

Humble Oil & Refining Co. (Carter Oil Co.)

Occidental Petroleum Corp. (Heiner Coal Co.)

Gulf Oil Corp.

Atlantic-Richfield Co.

Sun Oil Corp.

Continental Oil Corp. (Consolidation Coal Co.)

Exxon Corp. (Carter Oil Co.)

Occidental Petroleum Corp. (Heiner Coal Co.)

Mobil Oil Corp.

Texaco, Inc.

Gulf Oil Corp.

Atlantic Richfield Co. (Swisher Coal Co.)

(Thunder Basin Coal Co.)

The Sun Co. (Sunoco Energy Development Co.)

Conoco, Inc. (Consolidation Coal Co.)

Exxon Corp. (Carter Oil Co.)

(Carter Mining Co.)

Mobil Corp. (Mobil Oil Corp.)

Texaco Inc.

Shell Oil Corp.

Standard Oil of Indiana Co. (Empire Energy Co.)

Occidental Petroleum Corp. (Sheridan

Enterprises, Inc.)

Getty Oil Co. (Plateau Mining Co.)

NOTE Subsldiary leaseholders are noted in parentheses

SOURCE Off Ice of Technology Assessment

Figure 6. —Acres Leased by Energy Companies

Acres

160,000 1

80.000

40,000

/ /// ////// ,

/////’//’//’ // ,

4

80

I I I

1950 55 60 65 70 75

Year

SOURCE Office of Technology Assessment

Figure 7.— Percent of Total Leased Acres Held by

Energy Companies

10° 0

5° 0

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

The energy companies generally have not

leased de novo. Only 16 of the 110 leases acquired by the energy majors were obtained by

de novo leasing from the Department of Interior. Fifty-four leases were obtained by assignment of existing leases, including those held by

many small miners and independent coal companies. Another five were acquired when existing leases not owned by an energy company

were split, or segregated, into two leases with

the newly created lease being issued to an

energy company. Finally, 35 leases were obtained by energy companies when they purchased companies which held coal leases among

their assets. The lease acquisition routes of the

energy companies are summarized in the following table:

Number of Percent of

leases so leases so

Lease acquisition path obtained obtained

De novo . . . . . . . . . . . . . . . . . 16 15%

Assignment . . . . . . . . . . . . . . 54 50

Lessee acquisition. . . . . . . . . . 35 31

Segregation . . . . . . . . . . . . . . 5 4

During 1980, energy companies acquired

ownership of at least three leaseholding companies. Swisher Coal Co., an independent coal

producer until it was purchased in 1976 by

another independent, General Exploration Co.,

was sold to a subsidiary of Atlantic Richfield.

Getty Oil Co. purchased Plateau Mining Co.

from UNC Resources. A Plateau lease was for-
30

merly owned by an independent coal company.

Finally, a Standard Oil Co. (Indiana) subsidiary

purchased Empire Energy Co. from Houston

Natural Gas Corp. Empire was an independent

company until its acquisition by Houston in

1976. 5

History of Leasing

The remaining sections of this subchapter discuss the lease acquisition procedures used by the

11 leaseholding energy companies.

Gulf Oil Corp.

One of the earliest corporate mergers by a

major oil company involving coal reserves was

driven not so much by coal as by chemicals. In

late 1963, Gulf Oil acquired Spencer Chemical

Co. of St. Louis, the parent company of Pittsburg & Midway Coal Co. (P&M). Though

P&M was already among the Nation’s larger

coal companies (16th largest producer in 1960,

11th largest in 1965), Spencer had significant

noncoal assets that were attractive to Gulf.

The merger brought eight Western coal leases

to Gulf. Four leases had been acquired by P&M

as prospecting permits in New Mexico in 1959.

They were assigned to Spencer in 1960 and assigned to Gulf in 1964 after the merger. Another

four-lease package inherited by Gulf in Colorado had been obtained by Spencer in 1962 after

assignment from independent coal companies—

Hayden Brothers Coal Corp., Edna Coal Co.,

and Moffat Coal Co. They were assigned to

Gulf in 1964.

Gulf added a Colorado lease on its own in

1974. The lease was originally issued to a cooperative, Paonia Farmers Coal Co., and was later

owned by individuals.

Gulf completed its Western leaseholdings to

date with the acquisition of five Wyoming leases

in 1975. All five were originally issued to J. C.

Karcher in the early 1960’s and were assigned in

5

1n addition to these acquisitions, energy companies in 1980 also

increased leaseholding by obtaining leases on the assignment market and through segregation. Shell Oil–e.g., obtained a 1,920-

acre lease by segregation. Cities Services, making its first move

into leasing, filed an application to acquire three leases by assignment. These lease ownership changes occurred too recently to be

included in the findings of this survey.

1968 in part to Concho Petroleum Co. of which

Karcher was president.

Atlantic Richfield

In January 1966, the Richfield Oil Corp. and

the Atlantic Refining Co. merged to form the

Atlantic Richfield Co. Several years before the

merger, Richfield had begun a major land acquisition program in southern Utah. Individual

land agents acquired prospecting permits between 1962 and 1964 for 12 of the leases in what

became a 14-lease block. Five of the 12 were

assigned to Richfield in 1964 and 1965 and the

remaining 7 permits were assigned to Atlantic

Richfield directly from the land agents in 1966

and 1967. Richfield added two competitive

leases on its own de novo in 1964.

This lease block is one of the few multilease

packages to change hands as a unit after acquisition by a major company. The company assigned the entire package to El Paso Natural Gas

Co. in 1971. El Paso is currently proposing to

open two mines on this land. (See Natural Gas

Pipeline, pp. 48-51. )

Atlantic Richfield has continued to be one of

the most active of the energy majors in acquiring coal leases, despite the El Paso assignment.

The company now holds three Colorado leases.

One lease was acquired de novo in 1967, a nd

one was added by assignment from Reliable

Coal & Mining Co. (an independent) in 1969.

The third lease was acquired by assignment

from the wife of the lease’s original owner who

mined the property from 1934 until his death,

Another three Atlantic Richfield leases in

Wyoming cover part of the site of the Black

Thunder coal mine. Atlantic Richfield acquired

one of these leases de novo. A second lease was

acquired by assignment from an individual in

1968. The third was obtained in 1972 by segregation of part of an existing lease owned by an

individual. Two of the three leases were assigned in 1977 to the energy company’s wholly

owned coal mining subsidiary, Thunder Basin

Coal Co.

Atlantic Richfield’s most recent move in the

West has been in Utah. In January 1980, the

company purchased Swisher Coal Co. from the

General Exploration Co. Swisher was an independent, Utah-based coal company until it was
bought by General Exploration in 1976. (This

company still holds Federal leases through

another subsidiary, GEX Colorado. ) Swisher is

now a subsidiary of Arco Coal Co., which in

turn is a subsidiary of Atlantic Richfield. With

the purchase of Swisher, Arco Coal gained control of four leases. One was acquired by Swisher

in 1976 by assignment from Ura Swisher, the

company’s founder. A second lease was acquired by assignment in 1976 as was a third in

1978. The fourth lease was acquired de novo by

Swisher in 1978.

Conoco, Inc.

In 1966, Continental Oil Co. (name changed

to Conoco, Inc., in 1979) acquired Consolidation Coal Co., then and now the Nation’s second largest coal producer.

Over the past 15 years, Conoco has acquired

five coal lease packages in four States, though

one package has been assigned by Conoco to

another company. This latter group consists of

five New Mexico leases acquired by Consolidation Coal Co. prior to acquisition by Conoco.

In 1977, all five were assigned to Ideal Basic Industries, a large cement company.

In the early 1960’s, the independent Consolidation Coal Co. acquired two large lease blocks

in Utah. The first includes 10 leases acquired

with the assistance of individual land agents and

independent landholding companies. In 1963,

individual land agents—six in total—acquired

prospecting permits that were later converted to

the 10 leases. In 1966, the permits were assigned

to Midwestern Minerals, Inc. In 1968, the leases

were assigned to Consolidation Coal, which by

then was a subsidiary of Continental.

The second Utah package also contains 10

leases. Ownership of these leases is shared with

Kemmerer Coal Co. Four of the leases were

originally issued in 1962 to Kemmerer with a

partial assignment to Consolidation in 1966.

Another five leases, in contrast, were issued

originally to Consolidation in 1962 and then

partially assigned to Kemmerer in 1966. The

tenth lease was acquired jointly in 1968.

In 1972, Consolidation moved into Colorado

leasing with the acquisition of seven leases from

Ember Mining Co., an independent landholding

company. Ember had acquired the leases in

1967, five by assignment from individuals and

two de novo. Consolidation retains ownership

of six of the seven leases; one was assigned to

Northern Minerals Co., a subsidiary of Internorth Corp., in 1979.

In its only leasing venture in Wyoming, Consolidation and Mobil Oil Corp. share ownership

of a single lease. The lease was segregated to the

two companies in 1977 from a lease owned by

Mobil Oil since 1971.

Consolidation Coal Company also holds

North Dakota’s 16 leases. Truax-Traer Coal

Co., a Consolidation division, acquired the oldest lease in 1965 and assigned it to Consolidation in 1966. Consolidation acquired two

other leases de novo in 1971. The final lease was

segregated in 1977 to Consolidation from an existing lease owned by North American Coal

Corp.

Exxon Corp.

Exxon owns four Wyoming leases. Three

were issued to Humble Oil & Refining Co.

(name changed to Exxon Corp. in 1972) in 1967

and assigned 2 years later to Carter Oil Co. (a

subsidiary of the energy company since 1959).

The fourth lease was obtained by Carter Oil in

1975 by segregation of part of a lease owned by

Amax, Inc. Three of the leases remain in the

name of Carter Oil, while the fourth was assigned to a coal mining subsidiary, Carter Mining Co., in 1978.

Exxon is often cited as an example of an oil

company that made a de novo entry into Western coal leasing. Some amplification of this

statement, however, may be in order. While

three of the four leases mentioned above were

obtained de novo at competitive lease sales, all

three sales were held in response to an application by either the Farmers Union Central Exchange or an individual, Paul Faust. In each

case, Exxon outbid the original lease applicant

at the lease sale.

Sun Co., Inc.

Sun Oil Co. (name of the parent until a reorganization in 1971 left the oil unit as the major

subsidiary of Sun Co., Inc. ) acquired a Wyoming lease de novo in 1968. Covering 14,680
—

32

acres, this lease is Sun Oil’s largest lease among

its seven Wyoming leases. A second lease, acquired de novo in 1971 by Cordero Mining Co.,

was assigned to Sun in 1973. Another three

leases were acquired in 1975 by assignment from

Humac Co. and L. A. Haneline. These leases

were previously owned by American Humates,

Inc., and J. C. Karcher. As mentioned above,

Karcher participated in the Gulf Oil acquisitions

as president of Concho Petroleum.

In 1974, the Sun Co., Inc., organized the

Sunoco Energy Development Co., a resource

development arm coordinating coal, uranium,

and alternative energy activities. The five leases

owned by Sun Oil were assigned to the subsidiary in 1976. The final two leases in the Sun

package were acquired by Sunoco Energy Development later that year. Both had been originally issued to an individual, assigned to Summit Exploration and Development Co., and then

assigned to two individuals prior to acquisition

by the energy company subsidiary.

Occidental Petroleum Corp.

Occidental Petroleum was the last of the major energy companies to enter coal leasing in the

1960’s. Occidental’s entry into coal was via the

purchase of a leaseholding company. Island

Creek Coal Co. (then an independent coal company) purchased Heiner Coal Co., a Utah-based

independent, family-run coal company in 1965.

Heiner operated coal mines in Utah and Colorado, which Island Creek closed. Occidental obtained control of Heiner’s leases when it acquired Island Creek in 1968. All of Heiner’s coal

leaseholdings were assigned a decade later to

Pacific Gas & Electric Co.

Heiner Coal owned part or all of six Utah coal

leases at the time of Occidental’s acquisitions.

One of the six was acquired de novo in 1962 and

another in 1966. One-third ownership of two

other leases was acquired de novo in 1962. A

fifth lease was originally issued to Minerals Development Corp. (also run by the Heiner family) in 1962 and assigned to Heiner Coal 1 year

later. The final lease was acquired originally by

two companies and assigned to Minerals Development which assigned 50 percent to Heiner

Coal and 50 percent to Equipment Rental Service in 1964.

Although Occidental has sold the Heiner

leases, it is still involved in leasing. In 1977,

Sheridan Enterprises, Inc., an Occidental subsidiary, acquired seven leases by assignment.

Six leases were originally issued to Irvin Neilson

in 1965, assigned to Industrial Resources, Inc.,

in 1967 and sold to Sheridan. The seventh was

previously owned by three individuals. Sheridan is developing a mining plan for the property

as part of a joint venture with Colorado-Ute

Electric Association.

Mobil Corp.

Mobil Oil Corp. was the first energy company to enter Federal coal leasing in the 1970’s.

In 1971, it acquired a 4,000-acre Wyoming

lease. In 1977, it segregated 840 acres and

created a second lease, the ownership of which it

shares with Conoco’s Consolidation Coal Co.

subsidiary. In 1976, Mobil Oil was reorganized

and the oil unit became the major subsidiary of

a new holding company called Mobil Corp.

Texaco, Inc.

In 1974, Texaco entered coal leasing when it

obtained by assignment five Wyoming leases

from Reynolds Mining Corp., a subsidiary of

Reynolds Metals Corp. Reynolds had obtained

three of the leases de novo in the mid-1950’s and

two more in 1968 by assignment from an individual. (See Metals and Mining, pp. 54-48. )

Shell Oil Co.

In 1975, Shell acquired by assignment two

leases, one in Montana and one in Wyoming.

The Wyoming lease was originally issued to

Farmers Union Central Exchange, Inc., in 1967.’

The Montana lease was originally issued to J.

C. Karcher in 1965 and assigned three times in

1967—to Concho Petroleum, to Humic Acid

Products of America, and back to Concho. Shell

is the third energy major to receive leases

previously owned by J. C. Karcher.

‘In July 1980, Shell increased its Wyoming holdings when it obtained a 1,920-acre lease which was segregated from a Peabody

lease. This transaction occurred too recently to be included in this

survey.
33

Standard Oil Co. (Indiana)

In February 1980, Standard Oil Co. of Indiana purchased Empire Energy Corp. from Houston National Gas Corp. Empire was an independent coal company from its formation in

1969-76. Empire operated a Colorado coal mine

in the early 1970’s . Acquired by Houston

Natural Gas in 1976, it is now owned by Amoco

Minerals Co., a Standard of Indiana subsidiary.

Through Empire, Standard now controls three

Colorado leases. Two of the three were obtained

by Empire when it acquired, upon its founding,

the assets of Silengo Coal Co. The third was obC. PEABODY COAL CO.

Peabody Coal Co. became the largest coal

producing company in the mid-1960’s. It also

holds more Federal coal leases than any other

company, a position it has held since 1970. The

company ranks third among the 12 lessee categories studied in this survey.

Until 1968, Peabody Coal was an independent corporation. In 1968, it was purchased by

Kennecott Copper Corp. The merger was opposed by the Federal Trade Commission (FTC).

FTC argued that Kennecott was a potential de

novo entrant to the coal industry—in other

words, it was reasonable to think that Kennecott would eventually decide to acquire coal

reserves and mining experience on its own.

Therefore, FTC maintained the merger could

reduce the future number of competitors in the

coal industry. In 1971, FTC ruled that the

merger violated section 7 of the Clayton Act

and ordered Kennecott to divest Peabody. The

decision was upheld by the U.S. Court of Appeals and certiori was denied by the Supreme

Court.

In June 1977, Kennecott sold Peabody to a

consortium called the Peabody Holding Co. The

six participants in the holding company are:

Percent

ownership

Company Business actitlity of Peabody

Newmont Mining Corp. Metals and mining 27.5 %

The Williams Co. . . . . Chemicals 27.5

Bechtel Corp. . . . . . . . Engineering and 15.0

construct ion

tained in 1976 by assignment from Utah International, Inc.

Getty Oil Co.

Getty Oil Co. is the most recent entrant

among the energy majors to coal leasing found

in this survey. In June 1980, Getty outbid

Eastern Gas and Fuel Associates and purchased

Plateau Mining Co. from its previous owner,

UNC Corp. Plateau owns three leases in Utah.

Two were obtained in 1971 by assignment and

the third was acquired de novo in 1974.

Percent

ownership

Company Business activity of Peabody

The Boeing Co.. . . . . . . Aerospace 15.0

Fluor Corp.. . . . . . . . . . Engineering and 10.0

construction

The Equitable Life

Assurance Society. . . . Insurance 5.0

None of the companies participating in the

Peabody group own leases on their own.

Table 12 and figures 8 and 9 show the pattern

of coal lease holdings by Peabody Coal Co. The

numbers in parentheses and the dotted lines indicate lease holdings when Peabody was owned

by Kennecott Copper Corp. ’ Between 1965 and

1970 Peabody acquired 59,121 acres of leased

land, 8 percent of the total land under lease.

Nearly all of these leases were obtained by

Peabody, either through direct lease ownership

or through individual land agents under contract to the company, when the company was

independent.

Between 1970 and 1975, Peabody added 14

more leases totaling approximately 9,000 acres

to its holdings and attained a leasing peak of 9

percent of total leased land. In the past 5 years,

the company assigned 11 leases and added only

“Leases held when Peabody was a Kennecott subsidiary are tabulated in this survey with the metals and mining company leaseholdlngs. Because of the diverse business activities of the holdilng

company members, the unique ownership structure of the holding

company, and the tact that Peabody owns more than 5 percent of

the leases, Peabody’s leases are treated as a separate category in

this survey beginning in 1980.
34

Table 12.—Peabody Coal Co. Leaseholdings

Percent of total

Number of Number of acreage under

Year leases held acres held lease

1950 . . . . . . 0 0 0

1955 . . . . . . 0 0 0

1960 . . . . . .

1965a. . . . . . (4) (6,251) (2%)

1970 b 

. . . . . (30) (59,121) (8)

1975 b . . . . . (43) (68,923) (9)

1980 . . . . . . 33 62,009 8

a

Leases held when Peabody was an independent coal company These leases

have been included in the independent coal company category for this date,

b

Leases held when Peabody was owned by Kennecott Copper Corp. These

leases have been included in the metals and mining company category for

these dates

SOURCE Off Ice of Technology Assessment

Figure 8.—Acres Leased by Peabody Coal Co.a

Acres

60,000

40,000

I

/ ///// /// /

/

20.000 —

/ ///////////// /

I I

///////////////

//////[////~////

\ ///

1950 55 60 65

Year

SOURCE Office of Technology Assessment

one, thereby reducing its lease

acres.

The question of Kennecott’s

70 75 80

total to 62,009

influence over

the slowing and eventual reversal of Peabody’s

lease acquisitions after the merger was central to

the divestiture debate. Evidence from this

survey supports the argument that Kennecott

had little or no influence over the leasing

slowdown. Peabody had already become the

largest Western leaseholder by the tirne of the

merger, but it has yet to bring most of this land

into production. Furthermore, other companies

acquiring land packages at the same time also

reduced their leasing activities in the late 1960’s.

Finally, concern over excessive leasing by the

Figure 9.–Percent of Total Leased Acres Held by

Peabody Coal Co.a

10.0”/01 I

7.5 %

5 %

/// /////// /

/

/

[

1950 55 60 65 70 75 80

Year

a

The dashed lines indicate that the Peabody holdings were Included in either

the Independent coal company or the metals and mining categories

SOURCE Off Ice of Technology Assessment

Department of Interior limited leasing opportunities. 8

History of Leasing

During the 1960’s Peabody Coal acquired

leases in five States—New Mexico, Colorado,

Montana, Wyoming, and Utah. During the

1970’s, it added and assigned leases in four of

them.

New Mexico

In 1963, Sentry Royalty Co., a Peabody subsidiary until it was dissolved into the parent just

before the Kennecott merger, acquired de novo

a 2,045-acre lease in northwestern New Mexico.

Peabody assigned it to Cimarron Coal Co., a

Denver based independent, in 1978. Peabody is

still active in New Mexico. In 1971, it entered a

joint venture with Thermal Energy Co., owned

by a group of small oil companies, and 3 years

‘An interesting aside t o the Peabody -Kennecot t history is provided by Kennecott’s management of two other leases it obtained

when it purchased Knight Ideal Coal Co.—an independent mining

company in 1965. After acquisition the mine was shut down. The

removal of a potential competitor to Peabody by Kennecott was

seen as a significant action by those arguing for divestiture of

Peabody by Kennecott.
35

later the venture obtained a lease by assignment

from an individual.

Colorado

Peabody holds eight Colorado leases. Three

leases were obtained by a land agent and assigned to Sentry in 1966. Sentry obtained the remaining five Colorado leases de novo, two in

1963, and one each in 1964, 1965, and 1966.

Montana

Peabody’s single Montana lease was acquired

de novo in 1971.

Wyoming

Peabody owns nine leases in Wyoming. Four

were obtained as prospecting permits by Sentry

Royalty, three in 1963, and one in 1966. These

were later converted to leases. Two leases were

acquired by assignment from an individual in

1968. One lease, originally issued in 1965, was

assigned to Peabody by Kerr-McGee Corp. in

1973. The final two leases were created by

segregation of part of the acreage contained in

the 1966 lease mentioned above. One segregation of 40 acres occurred in 1972. Ownership of

the second lease, segregated in 1977, is shared

by a Peabody subsidiary and a subsidiary of

Panhandle Eastern Pipeline Co. Title to the lease

is held by Antelope Coal Co., the name of the

joint venture.

Utah

Peabody has been especially active in Utah.

The company has held title to 25 leases in Utah

D. THE STEEL INDUSTRY

The steel industry is the second largest consumer of coal in the country, behind electric

utilities. It is also second to the utilities in producing captive coal —i. e., coal produced for internal use rather than sale in the open market.

About 60 percent of the steel industry’s needs

are supplied by captive mining operations

owned by steel companies. Most major steel

firms own substantial coal reserves. The inbetween 1965 and 1980, although 11 of these

leases have been assigned to other companies.

One block of 13 leases in southern Utah was

acquired by Peabody in the mid-1960’s. All of

the prospecting permits from which the leases

were derived were acquired first by land agents,

seven in all, and assigned simultaneously to

Sentry Royalty in 1967. The company assigned

one of these leases to three utilities in 1974 and

still owns the others.

The remaining 23 Utah leases, once or now

owned by Peabody, have complicated histories.

Only one was acquired de novo by Peabody, a

1967 lease assigned to Utah Power and Light in

1977. Five other leases were acquired first by

Huntington Corp. and assigned to Peabody in

1971. Peabody still owns two of them. Two

were assigned to Nevada Electric Investment

Co. and one to Utah Power & Light. The other

six leases were initially owned by individuals.

All six changed hands among individuals and

independent companies before they were assigned to Peabody between 1967 and 1974. In

1977, Peabody

Light Co. ’

“In 1980, Peabodv

assigned them to Utah Power &

assigned several more of its leases in Utah,

Wyoming, and Colorado. These transactions occurred too recently to be included in this study. Despite this assignment, Peabody

remains a major leaseholder, but its rank among the top leaseholding categories might drop a notch or two as a result.

dustry produced 55.6 million tons of coal in

1979, about 7 percent of the country’s total output and 37 percent of all coal mined from captive operation.

The steel industry’s interest in coal mining is

generally limited to metallurgical-grade coals.

Most of this coal is converted into coke for use

as a raw material in ironmaking; unlike steam

coal (which provides over 80 percent of the total
36

coal market), metallurgical coal is not used as a

primary energy source. Hence, steel industry

captive coal mining expands and contracts in response to the fluctuating demand for steel rather

than in response to energy markets. The slow

growth in domestic steel output in recent decades has thus been reflected by steel industry

coal production. The percentage of total coal

produced by the major steel companies has fallen from 11 to 7 percent between 1955 and 1979.

This performance contrasts to the pattern of

utilities, the other major industry currently producing captive coal, which has doubled its coal

output between 1975 and 1979.

In its Western coal lease acquisition programs, the steel industry has focused its attention on metallurgical-grade coalfields in Oklahoma, Colorado, and Utah, largely ignoring the

subbituminous coal regions such as the Powder

River basin.

The steel industry was one of the earliest

large-scale participants in the Federal coal leasing program. In 1955, its ownership share of

Federal coal leases peaked as it controlled 19

percent of all acreage under lease. But even

though total leasing by the industry has increased in the past 20 years, even faster growth

by other industries has diminished its role (see

table 13 and figures 10 and 11).

Five independent steel companies now hold

Western leases covering 60,015 acres or 8 percent of all land under lease. Two other steel

companies acquired coal land as independent

corporations, but they have since been acquired

as subsidiaries of diversified companies (see

table 14).

Unlike most other industrial participants in

coal leasing, most steel companies obtained

Table 13.—Steel Company Leaseholdings

Percent of total

Number of Number of acreage under

Year leases held acres held lease

1950 . . . . . . 3 4,993 12%

1955 . . . . . . 10 14,817 19

1960 . . . . . . 16 19,888 14

1965 . . . . . . 28 34,158 11

1970 . . . . . . 36 49,114 6

1975 . . . . . . 39 49,448 6

1980 . . . . . . 44 60,015 8

SOURCE Office of Technology Assessment.

Figure 10.—Acres Leased by Steel Companies

Acres

80,000~

60.000 —

/ ///////// /

40,000 — ///////// /// /

/ / /////////// /’ /

/ / ///////’//// // /

/////////// ////’// /

/////////// /////// /

20.000 — //////// ‘/// //////// ,

//// /// / / / / / /’//////// /

// ////// ////////// /////// ,

/ //i ////Y//////// /// //////// /

/ / / / / ///////////// / / / ///////// /

/ / / / / ~ / / / / ~ / / / //~// /’/~//// /J///// /

1950 55 60 65 70 75 80

Year

SOURCE: Off Ice of Technology Assessment.

Figure 11 .—Percent of Total Leased

Steel Companies

20%

15%

1 00/0

5 5%

Acres Held by

#////// //////// /

////////// //// ,

( /// / ////l/////

I

1950 55 60 65 70 75 80

Year

SOURCE Off Ice of Technology Assessment.

their leases de novo and retain title in the parent

company rather than in coal mining subsidiaries. The exception is Armco Steel which acquired its land through the purchase of two

Oklahoma coal mining companies. The steel industry has assigned few leases, and it engages in

no joint ventures with nonsteel companies.

The steel industry has been a major producer

of coal from leased land, but there has been little

growth of steel industry involvement in new

coal lease acquisition in recent years. The in-
37

Table 14.—Steel Company Leaseholders

1950. . . . U.S. Steel Corp. (Geneva Steel Co.)

Kaiser Steel Corp.

1955. . . . U.S. Steel Corp. (Geneva Steel Co.)

Kaiser Steel Corp.

Armco Steel Co. (Evans Coal Co.)

Lone Star Steel Co.

Colorado Fuel & Iron Co.

1960. . . . U.S. Steel Corp.

Kaiser Steel Corp.

Armco Steel Corp. (Evans Coal Co.)

Colorado Fuel & Iron Co.

1965. . . . U.S. Steel Corp. (Geneva Steel Co.)

Kaiser Steel Corp.

Armco Steel Corp. (Evans Coal Co.)

(Evelyn Coal Co.)

Colorado Fuel & Iron Co.

Pacific States Steel Corp.

1970. . . . U.S. Steel Corp.

Kaiser Steel Corp.

Armco Steel Corp. (Evans Coal Co.)

1975. . . . U.S. Steel Corp.

Kaiser Steel Corp.

Armco Steel Corp. (Evans Coal Co.)

Republic Steel Corp.

1980. . . . U.S. Steel Corp.

Kaiser Steel Corp.

Armco Steel Corp. (Evans Coal Co.)

Republic Steel Corp.

Sharon Steel Corp. (U.S. Fuel Co.)

NOTE Subsldiary leaseholders are noted in parentheses

SOURCE Office of Technology Assessment

dustry now controls far more leased reserves

than can be mined for captive use in the next 10

years. The lack of growth in national steel production, the particularly severe impact of foreign steel on Western markets, and insufficient

and aging domestic coking capacity combine to

threaten further to reduce demand for this coal.

The Department of Interior’s production regulations will probably require some action on

the part of steel lessees holding nonproducing

leases if they do not want to lose control of these

coal reserves. The lessees could vigorously seek

assignees for leases which will not be needed to

supply captive needs by 1991. Alternatively,

steel lessees could attempt to diversify their

business activities and begin marketing coal.

Finally, should they successfully challenge Interior’s production requirements, steel lessees

could continue their historic pattern of mining

only to meet their own needs and retaining reserves for use in the long term.

History of Leasing

In 1950, the steel industry controlled 12 percent of all land under lease. Three Utah leases

were held by Geneva Steel Co. (a division of

U.S. Steel) and Kaiser Steel Corp.

By 1955, three other steel companies joined

these two companies on the list of coal lessees.

The Texas-based Lone Star Steel Co. acquired

several Oklahoma leases de novo as part of a

land package that grew into seven leases by the

end of the decade. The company was acquired

in 1959 by Northwest Industries, a diversified

midwest corporation, and has remained a

Northwest subsidiary since then. Its leaseholdings were dropped from the steel industry category beginning in 1960 and are now included in

the other category.

Armco Steel Corp. moved into Western coal

leasing in the early 1950’s with the acquisition of

Evans Coal Co. Evans had previously been an

independent coal company, controlling several

Oklahoma coal leases at the time of acquisition.

Through Evans, Armco eventually acquired 11

leases. Several of the leases were obtained by

Evans through assignments from other companies, several others were obtained de novo, and

the remaining few were added when Armco purchased in 1964 another independent coal company called Evelyn Coal Co. Evelyn was dissolved in 1968 and Armco assigned the leases to

Evans.

The final new steel entrant in the 1950’s was

Colorado Fuel & Iron Co. (name changed to

CF&I Steel Corp. in 1966). It acquired a single

Colorado lease by assignment from an individual in 1952. Like Lone Star Steel, CF&I itself

was acquired by a larger diversified corporation—in this case Crane Industries—in 1969.

This lease was removed from steel industry

holdings in this survey beginning in 1970 and is

now included in the other category.

Despite the removal of Lone Star Steel and

CF&I from the steel industry category, total

steel industry holdings grew from 1955 to 1970.

Most of the growth can be attributed to land acquisition programs on the part of U.S. Steel and

Kaiser Steel. Both companies sought during this

time to acquire coal reserves for use well into
—

38

the next century. Kaiser Steel organized two

central Utah lease packages during this period.

One package involves six leases, all obtained de

novo; one in 1947, three in the early 1950’s and

two in 1963. A second, four-lease package includes a lease obtained when Kaiser purchased

Utah Fuel Co. in 1951 (receiving a lease issued to

Utah Fuel in 1941) and two leases acquired by

assignment from pacific States Steel in 1965. A

final lease was added de novo in 1979.

The U.S. Steel Corp. acquired three-lease

blocks during this period to add to its previously obtained leases mentioned above. It obtained

two Colorado leases de novo in 1960. A second,

much larger Colorado lease package includes

two leases obtained by assignment in 1956, four

added de novo in the early 1960’s, and six obtained between 1965 and 1971 by segregation of

existing leases owned by Midcontinent Coal &

Coke Co. The steel company added two leases

in Montana de novo in 1967.

Pacific States Steel Co. of California briefly

engaged in Western coal leasing in 1960 when it

obtained two small Utah leases by assignment

from Heiner Coal Co. Pacific States assigned

them to Kaiser Steel in 1965 and has never returned to the Western coalfields.

Two new steel industry participants in coal

leasing appeared in the 1970’s, although the

holdings of each are small. First, Republic Steel

Corp. won a competitive lease in Alabama under the short-term leasing program in 1974. Second, in November 1979, Sharon Steel Co. entered Western coal leasing through its acquisition of UV Industries, a company involved in

metals and mining (including coal) and brass

manufacturing. 10 By this transaction Sharon

gained several Utah coal leases held for decades

by United States Fuel Co., a subsidiary of UV

Industries. (See Metals and Mining Company,

pp. 54-58. )

E. INDEPENDENT COAL COMPANIES

1OE1ghtY_~lX percent Of the stock of Sharon Steel is owned by

NVF Co. which is chaired by the Miami investor, Victor Posner.

EIecause 83 percent of the total revenues of NVF Co. in 1979 were

derived from Sharon Steel, the company is categorized in this

survey as a steel company.

Independent coal companiesll operating in

the West were seriously hurt in the post-World

War II era by the shrinking demand for coal on

railroad, industrial, and home-use markets.

They have been adversely affected since then by

increasing health and safety regulation costs.

They have had difficulty in obtaining a share of

the utility market which, although growing, has

become increasingly directed toward large volume suppliers. Since they own valuable coal reserves, many independents have been acquired

by companies seeking to enter the Western coal

market.

I I Independent coal cc~mpan ies in this survey include lessees

which did (or have) actually mined coal within a few years of the

time they controlled (or control) leases (though not necessarily

from leased land), which had (or have) inhouse expertise and

financial capability to mine coal but were (or are) constrained

from doing so by market conditions, or which are currently developing mining plans. It excludes companies whose principal line of

business activity is (or was) noncoal at the time of lease ownership

even if they otherwise met the above criteria.

The performance of small independent coal

companies in Western coal leasing mirrors the

changing conditions affecting independents nationwide. 12 In 1950, 18 independents controlled

21 leases, or 35 percent of all coal land under

lease, (See table 15 and figures 12 and 13. ) Independent coal companies then held more land

than any other category in this survey. By 1955,

24 independent coal companies were lessees; by

1960, 26 companies held leases; and by 1965, 32

companies were involved, historically the industry’s widest participation. The trend then reversed and there are now only 21 independents

holding leases (only 3 more than in 1950), although total land under lease has grown eighteenfold during the 30-year period. More than 60

i ZIn 1949, companies producing less than 100,000 tons Per Year

contributed 17.8 percent of the country’s coal; by 1964, their share

had been reduced to 5.5 percent. Between 1963 and 1967, the number of mines producing less than 25,000 tons per year had declined

44 percent.
39

Table 15.—lndependent Coal Company

Leaseholdings

Year

1950 . . .

195 5

1960 . . . . . .

1965 . . . . . .

1970 . . . . . .

1975 . . . . . .

1980 . . . . . .

Number of

leases held

21

30

38

64

66

57

57

Number of

acres held

Percent of total

acreage under

lease

14,584

25,022

41,557

72,273

78,297

58,837

55.410

3 5 %

33

29

25

11

8

7

SOURCE Office of Technology Assessment

Figure 12.— Acres Leased by lndependent Coal

Companies

Acres

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

Figure 13. —Percent of Total Leased Acres Held by

Independent Coal Companies

1950 55 60 65 70 75 80

Year

SOURCE Off Ice of Technology Assessment

independent coal mining companies have owned

Federal coal leases at some time between 1950

and 1980, but none of the original 18 leaseholders are among the 21 present leaseholding independents. The number of acres under independent coal company lease, like the number of companies involved, grew during the 20-year period

from 1950 to 1970. Total acreage held by independent coal companies reached 78,297 b y

1970. This was followed by a decline.

In relative terms, the percentage of leased

land held by independent coal companies has

exhibited a steady decline over the entire 30-

year period—from 35 percent in 1950 to 7 percent today. The biggest drop occurred between

1965 and 1970—from 25 to 11 percent—at a

time when utilities and the energy companies

were achieving their biggest gains.

The shrinking role of independents is attributable both to the large number of leases assigned

from independents to other corporations (with

the assignor often going out of business entirely)

and to the acquisition of many independent coal

companies. At least 11 of the 32 wholly owned

coal mining subsidiaries now owning leases

were once independent leaseholders. Many

other independents were dissolved or renamed

upon acquisition. The attractiveness of independents as acquisition targets and the marketability of coal leases held even by bankrupt

independents on the assignment market underscores the importance of independents historically in defining desirable coal reserves.

The independent coal mining industry in the

West has been greatly reduced but still exists.

The collective holdings of the 21 lessees in this

category rank fifth among the 12 groups identified in this survey. Several medium-sized independent coal companies, such as Garland Coal

& Mining Co., or MidContinent Coal & Coke

Co., have effectively used the leasing program

for decades and maintain a strong position

within the industry, in part because of their

leaseholdings. Also, in the past decade several

new companies, such as Energy Fuels Co., have

obtained coal leases and established themselves

as important Western coal producers.
40

History of Leasing

Providing a company-by-company history of

lease acquisition and disposition by independents is a complicated task because many small

companies have been involved in Federal coal

leasing, often holding just a single lease for a

short time. The remainder of this section attempts to sketch the activities of independent

coal companies and to derive leasing trends.

1950

Eighteen independent coal companies held

leases on January 2, 1950. The Davis Coal Co.

mined for years on a small New Mexico tract

and the Paul Rees Coal Co. operated on an

Oklahoma lease tract. The Rees lease was

assigned in 1976 to Mining Systems Corp., 2

years after the Rees family retired. The Davis

lease is still owned by the Davis family, but

mining ceased decades ago.

Colowyo Coal Co. obtained a large Colorado

lease by assignment from an individual in 1946

and operated it as an independent coal producer

for decades until 1973 when the company was

acquired by W. R. Grace & Co.

Edna Coal Co., a partnership of four Colorado mines, owned four Colorado leases when it

operated as an independent. In the early 1960’s,

the company was acquired by Pittsburg & Midway Coal Co. which was in turn purchased by

Gulf Oil. Two of the four leases ended up in

Gulf’s hands, and the other two have been assigned several times among individuals and

small noncoal companies. Another lease owned

in 1950 by an independent, Hayden Brothers

Coal Corp., also became part of the Gulf holdings in the early 1960’s. A lease acquired in 1923

by the Paonia Farmers Coal Co. also eventually

became part of the Gulf holdings.

The Clark Coal Co., which changed names in

the late 1950’s to North Fork Coal Co., operated

a small mine on a lease in Colorado. The lease is

now controlled by Anchor Coal Co., a subsidiary of St. Joe Minerals.

Utah Fuel Co. owned four leases in 1950, and

Calumet Fuel Co. owned one. Both companies

were purchased by Kaiser Steel Corp. in 1951.

Champion Coal Mining Co. held a lease as an

independent from 1932 to 1970 when it became

part of the holdings of Western Slope Carbon,

Inc., now a subsidiary of the natural gas company, Northwest Energy.

Dakota Collieries Co. owned a large North

Dakota lease from 1922 to 1956. It mined coal

for use in local sugar beet factories. In 1957, the

mine was bankrupt and sold to North American

Coal Co., itself an independent. Nugget Coal

Co., a Wyoming-based independent, owned a

Wyoming lease for 25 years that is now in the

hands of a Peter Kiewit Sons subsidiary.

King Cannel Coal Co. operated a small mine

on a southern Utah lease tract in the early

1950’s. The company still exists but ceased mining in the mid-1950’s and its lease was reassigned to the landholding company category

starting in 1960. Vulcan Fuel Co., Royal Coal

Co., and Lion Coal Corp. are other independent

Utah coal companies which operated on leased

land in 1950. All are out of business and their

leases are now owned by American Electric

Power Co, and Getty Oil Co. subsidiaries.

The final two 1950 independent coal company lessees are now both subsidiaries of much

larger companies. Independent Coal & Coke

Co. held one Utah lease in 1950, added three

more over the next half decade, and two others

in the early 1960’s. In 1968, the company was

bought by North American Coal Corp. and dissolved in 1973. North American then assigned

the leases to a Valley Camp Coal Co. subsidiary. Valley Camp, then an independent, was acquired by Quaker State Oil Refining in 1976.

After acquisition by Quaker, the lease package

was assigned again, this time to American Electric Power, the present owner. Finally, Southern

Utah Fuel Co. owned one lease in 1950 and

added three more in the early 1960’s. Southern

Utah was acquired by Coastal States Gas Corp.

(now the Coastal Corp. ) in 1973.

Early 1950’s

Between 1950 and 1955, nine new independent coal companies entered coal leasing and

three departed. Two of the entrants, Cameron

Coal Co. and The Pacola Co., still hold their

leases today, but neither is currently mining.

Both companies were founded by members of

the Porter family. The three Cameron leases ad-
41

join the Pacola lease, and all four were acquired

de novo. The companies plan joint development

of the leases, probably with Garland Coal &

Mining Co., if a market for the coal develops.

Peerless Coal & Coke Co. and Evelyn Coal

Co. were other Oklahoma entrants to leasing i n

the early 1950’s. Both companies mined metallurgical-grade coals for steel mill use. Peerless,

which shipped its coal to Kaiser’s Fontana mill

in southern California, went out of business,

and after several assignments the lease now

belongs to an Armco Steel subsidiary. Evelyn

Coal Co. was brought outright by Armco in

1964. The company was dissolved and its three

leases were assigned to Armco’s Evans Coal Co.

subsidiary.

In 1954, Thompson Creek Coal & Coke Co.

acquired a small Colorado lease previously

owned by three individuals and another independent. The company ceased mining in the

1960’s but retains the lease as a landholding

company. McNeil Coal Corp. was another

small Colorado independent operating in the

1950’s. Its single lease was assigned to two other

independent operating coal companies, first to

Kerr Coal Co. from 1956 to 1964 and then to

Juanita Coal & Coke Co. from 1964 to 1975.

Juanita then assigned the lease to GEX Colorado, a subsidiary of General Exploration Co.,

an independent coal company still holding the

lease.

The final early 1950’s independent newcomers

operated in Utah. Western Coal Mining Co. attempted to develop a small mine on three leases

in central Utah but went bankrupt in the process. Its leases are now controlled by a bank.

Knight Ideal Coal Co. operated a Utah mine on

two leases prior to its acquisition by Kennecott

Copper in the mid-1960’s. Kennecott closed the

mines and, in 1979, sold the two inactive leases

to Pacific Gas & Electric Co. Finally, Paramount Coal Co. acquired a single Utah lease.

Subsequent to the death of the company’s

founder, the lease was assigned several times

and is now owned by Utah Power & Light Co.

The Late 1950’s

Newcomers continued to outnumber departees among independent coal company lessees in

the second half of the 1.950’s and total leaseholdings nearly doubled between 1955 and 1960.

A key development in coal leasing at this time

was the consolidation of many Oklahoma leases

into assets of one of the largest independent coal

companies operating in the area today —Garland Coal & Mining Co. Originally formed in

1955 by members of the Porter family, it merged

in 1959 with three independent lessees; Garland

remained as the surviving company. By this

merger Garland inherited one lease from Fall

River Mining Co., one from Canadian Mining

Co., and three from Bokoshe Coal Co. In 1964,

Garland acquired Choctaw Coal Co. and the

latter’s two leases. In 1966, five other companies

merged into Garland, including Ouachita Coal

Co., holder of four Federal leases. In the mid1960’s, Garland acquired 11 leases on its own, 5

of them de novo, 1 by assignment from another

family company—Southern Development Co.

—and 5 by assignment from Mine Service Co.,

a coal accounting firm which eventually dissolved into Garland, Some of Garland’s acquisitions were later assigned. In 1974, the Mine

Service leases were assigned to American Smelting & Refining Co., two leases were assigned in

1977 to the Anschutz Corp. and in 1978 one

lease was assigned to an Armco Steel subsidiary. The sequence of mergers and acquisitions

in the 1950’s and 1960’s has left Garland with 14

leases today.

The Early 1960’s

Four small Utah coal companies made brief

appearances in Federal coal leasing in the early

1960’s and all have since liquidated their holdings. Heiner Coal Co., a small family company

with mines in Utah and Colorado, obtained part

or total interest in six Utah coal leases. The company was bought in 1966 by Occidental Petroleum Corp.’s subsidiary, Island Creek. In 1976,

the leases were assigned, most of them to Pacific

Gas & Electric Co. Other leases held by Liberty

Fuel Co., Spring Canyon Coal Co., and Castle

Valley Mining Co. are now owned by utility

companies.

The early 1960’s saw five newcomer companies appear who remain among the list of present lessees. The largest was North American
42

Coal Corp., which acquired several leases in

North Dakota. As discussed above, its leaseholdings later swelled with the acquisition of Independent Coal & Coke Co. In 1974, the large

independent moved into Eastern coal leasing

with the acquisition of two Pennsylvania leases

by a subsidiary, Helen Mining Co. North American now holds leases in the name of the parent,

Coteau Properties (a landholding subsidiary

formed in 1972), and Helen Mining Co.

Mid-Continent Coal & Coke Co. is a small

Colorado mining firm which began acquiring

Federal leases in the early 1960’s. The company

has now expanded its holding to include nine

leases—all in Colorado, five of which were obtained de novo, two by segregation of part of

U.S. Steel Corp. leases, and two by assignment

from U.S. Steel, The latter four lease transfers

provide one of the few examples encountered in

this survey of leases traveling from large, noncoal companies to smaller coal independents.

Wasatch Coal Co. obtained a single Utah

lease in the 1960’s. It assigned it temporarily but

regained ownership, which it still holds today.

Next, Usibelli Coal Mine, Inc., acquired a large

Alaska lease by assignment late in 1960. Finally,

Divide Coal Mining Co. obtained de novo in

1962 a small Montana lease tract which it continues to mine.

Several other independents entering in the

early 1960’s were acquired by corporate mergers

before the end of the decade. Consolidation

Coal Co. obtained several leases de novo and in

the name of land agents before its acquisition by

Continental Oil Co. in 1966. (See Energy Companies, pp. 28-33. ) United Electric Coal Co. obtained an Oklahoma lease de novo in 1964. The

company was acquired by General Dynamics

Corp. in 1966. In 1974, it was merged with

another General Dynamics subsidiary, Freeman

Coal Co., to form Freeman-United Coal Co. Finally, the land acquisition programs of Peabody

Coal Co., through a subsidiary, Sentry Royalty

Co., were also initiated in the early 1960’s when

the company was an independent. In 1968, Kennecott Copper Corp. acquired Peabody and its

leases, but the company was sold to six-firm

holding company in 1977. (See Peabody Coal

co., pp. 33-35. )

Several small independent companies made

appearances in the Colorado leasing market in

the early 1960’s. Morgan Coal Co., based in Indianapolis, acquired three leases which were

assigned in 1977 to Energy Fuels Corp. which

now mines them. Reliable Coal & Mining Co.,

separate from Morgan but founded and managed by the same people, acquired a Colorado

lease, but later assigned it to Cambridge Mining

Corp. (see The Late 2960’s). The Ohio-based

James Brothers Coal Co., headed by two nephews of the company’s founder, obtained a small

Colorado lease in 1960. The company’s current

president stated in an interview for this survey

that despite an investment of over $100,000 he

has not succeeded in his attempts to enter the

Western coal market. He argued against government red tape and the actions of large companies which he felt tended to squeeze small

operators out of contention for coal contracts.

The Late 1960’s

The fortunes of independent coal miners declined significantly in the second half of the

1960’s. Although their total acreage under lease

grew slightly, the percentage of total leased land

controlled by independents was more than

halved. Also, for the first time the number of departing companies outnumbered the newcomers, 15 to 8.

Colorado was the focus of independent coal

company leasing activity. All eight newcomers

appeared in this State. Cambridge Mining obtained a lease by assignment, operated a mine

for several years, and sold out to General Exploration Co. Silengo Coal Co. mined in western Colorado on a lease it obtained by assignment, but the company was bought out by Empire Energy Co., an independent itself until it

was acquired first by Houston National Gas in

1976 and then by Standard Oil of Indiana in

1980, Routt Mining, a small company run by

the Steele family, mined on a small lease, but in

1976 the lease was assigned to Sunland Mining

Corp., then an independent. Sunland was

bought by Consolidation Gas & Oil Corp. of

Denver in 1978. Belden Enterprises, Inc., acquired a lease in the 1960’s which it still holds.
—

43

The lease is being mined, however, by a joint

venture of Nicer and Eastern Gas & Fuel Associates. Finally, in the late 1960’s two small leases

were owned by three small companies—Partch

Bros., Nu-Mine Coal Co., and Ohio Creek Coal

Mine. They have been assigned to individuals.

The 1970’s

From 1970 to 1980, the leaseholdings of independent coal companies dropped significantly.

Acreage under lease fell from 78,297 to 55,410

acres. Percentage of acreage under lease fell

from 11 to 7 percent. The number of independents fell from 25 to 21.

Several independents survived the 1950’s and

1960’s as leaseholders. These include North

American Coal Co., Garland Coal & Mining

Co., and General Exploration Co. Also, Energy

Fuels added four Colorado leases to its earlier

holdings.

In addition, there were two major newcomers

in the 1970’s. Colorado Westmoreland, Inc., a

subsidiary of Westmoreland Coal Co., obtained

a Colorado lease de novo in 1978. Secondly,

Amca Coal Leasing, Inc., a subsidiary of Kentucky-based Amca Resources, Inc., acquired

two Colorado leases and three Utah leases by

assignment.

Finally, several small companies have acquired Federal coal leases for the first time during the past decade. These include: Ryan’s Creek

Coal Co., which obtained a Kentucky lease de

novo in 197’9; Cimarron Coal Co., which acquired a New Mexico lease by assignment in

1978; Sewanee Mining CO., which acquired two

Colorado leases by assignment in 1977’; Cravat

Coal Co., which acquired a Wyoming lease in

197’7 in the name of a subsidiary, Conotton

Land Co.; National King Coal, Inc., which obtained a Colorado lease by assignment in 1978;

and Baukol-Noonan, Inc., which acquired a

North Dakota lease by assignment in 1970.

F. OIL AND NATURAL GAS COMPANIES (MINOR)

The oil and natural gas category in this

survey includes coal lessees whose principal line

of business activity is oil and/or natural gas exploration or production, excluding the 18 energy majors and the large natural gas production

and distribution companies. (See Energy Companies and Natural Gas Pipeline Companies,

pp. 28-33 and 48-51. ) Companies ranging from

one man oil wildcatters to very large corporations just beneath the size of the energy majors

fall into the oil and gas category in this survey.

As shown in tables 16 and figures 14 and 15,

oil and natural gas company leaseholdings have

grown steadily since 1965. Eight companies now

hold 30 leases covering 45,926 acres or about 6

percent of the total. Three of these companies

hold leases in the name of the independent

parent, two control land through coal mining

subsidiaries and two employ landholding subsidiaries. One company is a joint venture (see

table 17. )

Table 16.—Oil and Gas (minor) Company

Leaseholdings

Percent of total

Number of Number of acreage u rider

Year leases held acres held leas e

1950 . . . . . . 0 0 0

1955 . . . . . . 0 0 0

1960 . . . . . . 0 0 0

1965 . . . . . . 2 2,080 10/0

1970 . . . . . . 11 26,911 4

1975 . . . . . . 27 42,193 6

1980 ... . . 30 45,926 6

SOURCE Office of Technology Assessment

History of Leasing

The 1960’s

Richfield Oil Co. was the first oil and natural

gas firm to enter the Western coal leasing program. It acquired de novo two Utah competitive

leases in 1964. In 1966, Richfield Oil merged

with Atlantic Refining Co. to form the Atlantic-
44

Figure 14.—Acres Leased by Oil And Gas (Minor)

Companies

Table 17.—Oil and Gas (minor) Company

Leaseholders

Acres

‘

ooo o

~

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

Figure 15.—Percent of Total Leased Acres HeId by

Oil and Gas (Minor) Companies

6° o

4° 0

2° 0

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

Richfield Corp. Richfield’s leases were recategorized in this survey to the energy company

group at that time. These leases eventually

became part of a 14-lease block.

Four oil and gas companies acquired leases

between 1965 and 1970 and total acreage under

lease by this business category grew tenfold as a

result. The four companies are North American

Resources Corp., Hiko Bell Mining & Oil Co.,

Seneca Oil Corp., and Kerr-McGee Corp.

1950. . . . None

1955. . . . None

1960. . . . None

1965. . . . Richfield Oil Co.

1970. .., North American Resources Corp.

Kerr-McGee Corp.

Seneca Oil Corp.

Hiko Bell Mining & Oil Co.

1975. . . . Kerr-McGee Corp. (Kerr-McGee Coal Corp.)

1980.

Belco Petroleum Corp.

Hiko Bell Mining & Oil Co.

Petroleum International, Inc.

McCulloch Oil Corp. (Braztah Corp.)

Ashland Oil & Hunt Interests (Ark Land Co.;

Medicine Bow Coal Co.)

Anschutz Corp.

Kerr-McGee Corp. (Kerr-McGee Coal Corp.)

Belco Petroleum Corp.

Hiko Bell Mining & Oil Co.

Ashland Oil & Hunt Interests (Ark Land Co.;

Medicine Bow Coal Co.)

Petroleum International, Inc.

Anschutz Corp.

Consolidated Gas & Oil Corp. (Sunland Mining

Corp.)

Quaker State Oil Refining Co. (Kanawha &

Hocking Coal & Coke Co.)

NOTE Subsidliry leaseholders are noted in parentheses

SOURCE Office of Technology Assessment

North American Resources Corp. (called Texota Oil Co. until 1969) acquired two leases in

Oklahoma by assignment in the late 1960’s.

Ownership of one lease is shared with an individual. Both leases were reassigned in 1973 to

another small oil and gas company, Petroleum

International, Inc., their present owner.

Seneca Oil Corp. acquired a 6,337-acre lease

in New Mexico in 1968 by assignment from the

same individuals involved with the North

American Resources leases mentioned above.

The Oklahoma-based company assigned the

lease in 1974 to another individual, It is now

owned by Peabody Coal and Thermal Energy

c o .

Hiko Bell Mining & Oil Co. acquired three

Utah leases by assignment in 1968. Hiko Bell has

retained ownership up to the present except for

a brief period in 1978 when the leases were temporarily assigned to Au Mine, Inc., a Canadian

mining company.

The Kerr-McGee Corp. (called Kerr-McGee

Oil Industries, Inc., until 1965) is the largest

company falling into the oil and gas category in
45

this survey. Kerr-McGee has acquired six Wyoming leases. One lease was obtained in 1968 by

assignment from an individual, but the company assigned it to North American Coal Co. in

1975. Three other leases were obtained de novo

in 1968, and two more were added in 1970.

These five leases were assigned by the parent

company to a newly formed coal mining subsidiary in 1974 called Kerr-McGee Coal Corp.,

the present lessee.

The 1970’s

By 1975, North American Resources Corp.

and Seneca Oil Corp. had retired from coal leasing (explained above), but four new entrants

had acquired leases.

Petroleum International, a small company

founded in 1962, acquired North American Resources’ two leases in 1969 (see above). Secondly, Belco Petroleum Corp. acquired two Wyoming leases. One lease was acquired de novo in

1971, but the company sold it in 1976 to Ark

Land Co. It still owns the other, which was obtained by assignment from an individual in

1970.

McCulloch Oil Corp. or its subsidiary, Braztah Corp., acquired and assigned nine Utah

leases during this period. All were obtained by

the oil company from independent coal companies and all are now controlled by American

Electric Power Co. (AEP). In 1974, McCulloch

obtained four leases by assignment which were

then assigned to AEP later that year. Two, obtained by McCulloch in the same fashion, were

assigned in 1974 to Braztah and then assigned to

AEP in 1976. One was obtained by assignment

directly by Braztah in 1972 and assigned to AEP

in 1976. The remaining two were segregated in

1974 to McCulloch from leases owned by an independent coal company, assigned to Braztah in

1974 and assigned to AEP in 1976.

The largest land package controlled by oil

and gas companies is a 10-lease unit acquired in

the early 1970’s by Ark Land Co., the fourth

new entrant to the coal leasing program in the

1970-75 period. Ark is a landholding subsidiary

of Arch Minerals Corp. Arch Minerals, the

business activity of which is limited to coal mining, is a joint venture formed in 1969 by Ashland Oil Co. and six Hunt family trusts operating through Hunt Petroleum Corp. and Hunt

Industries. Ark acquired one of the leases de

novo in 1971, Three others were acquired from

a cement company, Monolith Portland Midwest

Co., two by assignment (one in 1971 and one in

1974) and one by segregation in 1971. Five other

leases were obtained by assignment in 1971

from Simplot Industries. A final lease in this

package was added by assignment from Belco

Petroleum in 1976.

Arch Minerals owns 50 percent of another

lease by virtue of its participation in the

Medicine Bow Coal Co. joint venture. Arch

Mineral’s share is held in the name of Dana Coal

Co. The partner is a subsidiary of Union Pacific

Corp. (See Other Leaseholders, p. 63. ) Medicine

Bow acquired a single Wyoming lease in 1974

by segregation of one of the Ark Land leases

mentioned above.

The past 5 years have seen moderate growth

in leaseholdings by oil and natural gas companies up to the present level of 6 percent of

total acres under lease. The Anschutz Corp. acquired two leases by assignment in 1977. Sunland Mining Corp., which obtained one lease de

novo in 1966 and one by assignment in 1977,

was recategorized in this survey from an independent coal company to an oil and gas subsidiary in 1978 when it was acquired by Consolidated Gas & Oil Corp. of Denver.

Finally, Kanawha & Hocking Coal & Coke

Co. was also recategorized into the oil and gas

category from the coal company group. Kanawha obtained four leases in 1973, all by assignment. Three were obtained from North American Coal Co. and one from a North American

subsidiary called Independent Coal & Coke Co.

Kanawha was an eastern independent coal company until 1951 when it was acquired by Valley

Camp Corp., a large independent coal mining

firm in Cleveland. In 1976, Valley Camp was

acquired by Quaker State Oil Refining Co. of

Pennsylvania, its current owner and controlling

interest in the four Utah coal leases.
46

G. UINCORPORATED INDIVIDUALS

If there is one aspect of the Federal coal leasing program reminiscent of the Wild West of

old, it is the role of unincorporated individuals

as lessees. Individuals have been attracted to the

leasing program from its earliest days. The

qualifications to hold a lease are easily met; the

winning bids on competitive leasing have often

been low; the filing fees required for preferenceright leasing are low; and a lease can be held for

some time without actual mining taking place.

Small miners, land speculators, land agents

working for large corporations, inventors, and

vacationers mingle among the list of individuals

holding leases over the past 60 years. In 1950,65

individuals held 56 leases covering about 27 percent of all acreage under lease. Individuals comprised the second largest of the 12 categories

defined for this survey, behind independent coal

companies.

The total acreage under lease, the number of

leases, and the number of participants falling into the individual category grew to a peak in

1970 (see table 18). Despite the growth in absolute terms, however, individuals, like independent coal companies, have since 1950 controlled a decreasing percentage of the total land

under lease. Even as total holdings were growing in the 1950’s and 1960’s, their gains were

dwarfed by de novo leasing on the part of other

categories, and the percentage of all leased land

held by individuals declined from 27 to 11 percent from 1950 to 1970 (see figures 16 and 17).

In the 1970’s, the role of individuals declined

both in absolute and in relative terms. The

number of acres held by individuals was nearly

halved between 1970 and 1980. Fifty-nine inTable 18.—Unincorporated Individual Leaseholdings

Percent of total

Number of Number of acreage under

Year leases held acres held lease

1950 . . . . . . 56 11,129 27%

1955 . . . . . . 64 17,618 23

1960 . . . . . . 68 25,678 18

1965 . . . . . . 80 41,475 13

1970 . . . . . . 84 78,995 11

1975 . . . . . . 71 65,515 9

1980 . . . . . . 43 43,215 5

SOURCE Office of Technology Assessment

Figure 16.—Acres Leased by Unincorporated

Individuals

Acres

80,0001 f

60,000 — /// // /// /

/ //// ////// /

// /’// //////// /

/ /// ////////// /

40,000 — / /// ////// //// /

/ /// ////// ////// ;

/ /// ///////////// /

/ /// ///////////// / /

/ / / / ////////// /// // /

20,000 — //// / //////// ///// //7/

/// /// //// / ///// /////// /

/// // ///////// //// ////// // /

/// / / / / / /’// //////// //////// /// /

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

Figure 17.— Percent of Total Leased Acres Held by

Unincorporated Individuals

28 “lo

21 “/0

14 0/0

7 “/0

1950 55 60 65 70 75 8

Year

SOURCE Office of Technology Assessment

)

dividuals now control 5 percent of total land

under lease. The 1980 figures, although small

compared to those of a decade ago, even so

overstate the role of individuals today. Some

leases are held by the wives, sons, or daughters

of now deceased miners or by elderly miners no

longer able to work on the mines. A few of the

current individual titleholders have recently
47

died, and the future of the leases are tied to the

dispositions of their estates. Several other leases

are the remnants from much larger lease packages that were assigned to corporations. Little

development interest has been evinced in these

remnants.

The majority of individuals involved in coal

leasing entered de novo or by assignment from

other individuals. The trend in ownership of

leases acquired by individuals is towards their

consolidation into properties held by corporations. The remainder of this chapter discusses,

with examples, some of the roles played by individuals throughout the leasing program.

Coal Miners

Most of the early leases obtained by individuals were acquired to provide reserves for small

mines operated by the lessees. The Bureau of

Land Management (BLM) case files chronicle

developments on scores of such small mining

operations. They were often family run, and the

death of a family member commonly marked

the turning point in a lease’s history. Coal was

generally sold on local home-heating and industrial markets or to nearby powerplants. Many

of these leases were located in central Utah, the

mountains of west central Colorado, and the

Raton basin in northeast New Mexico.

A New Mexico lease issued to Leo Warren in

1944 is typical. Mr. Warren mined on the small

tract for 3 years and then sold the operation for

$2,500 to Clayton Davidson who mined the

seams until his death a decade later. The lease

was then assigned by a Davidson heir back to

Leo Warren, who sold it again 2 years later to

George Simpson and Hollis Tate. Mr. Tate died

in 1972, and his wife assigned the Tate interest

in the lease back to Leo Warren. In 1977, both

Simpson and Warren assigned the 1ease to its

present owner, Floyd Ingraham.

Cyrus Wilberg, an oldtime Utah miner, provides another example. He obtained a Federal

lease in 1945 which he mined until 1958. He then

formed a partnership with his four sons, each of

whom held 20 percent. One son, Ted, died in

1960, and Ted’s wife sold his share to Cyrus and

the remaining sons. Another son, Lamar, died

in 1964, and his share, too, was divided

amongst the survivors. Four years later, the

family assigned the lease to Peabody Coal Co.

which assigned it in 1977 to Utah Power & Light

Co., the current owner. A second lease remains

in the Wilberg family.

Some of the early coal mining families eventually acquired substantial holdings which ultimately became part of the coal reserve bases for

mining companies which they founded —e. g.,

the Porter family of Kansas City at one time

owned Oklahoma leases in the name of several

individual family members and small companies

established by them. In the 1960’s, most of the

family’s holdings were merged with the assets of

six or more nonfamily owned, independent coal

companies to form Garland Coal & Mining Co.

Garland is still controlled by the Porter family.

Ura Swisher, founder of the Swisher Coal Co.

now owned by Arco, has held leases in his own

name. Clara Howard Miller and Robert Davis

both owned leases in their own names before

founding smal1 companies to which they assigned them. John Kemmerer, Jr., head of Kemmerer Coal Co., held a lease in his own name

before turning it over to the company. Many

more examples of such leasings by bona fide

coal miners could be cited.

Land Agents

Individuals whose principal business activity

has been the acquisition and sale of coal land,

coal companies, and coal leases, as opposed to

the actual mining of coal, have dominated the

roster of unincorporated lessees over the past 30

years, and have far outnumbered individual

coal miners. These land agents, who were especially active during the 1960’s, include some

miners who branched out into land and lease

brokering, some nonaffiliated land speculators

and lease packagers, and agents acting under

contracts to gather coal reserves on behalf of ,

corporations.

The list of individual lessees falling into this

category at some time in their careers includes

many of the most experienced businessmen in

the Western coal industry. Hardy Hall, Charles

Silengo, and B. R. Noe are examples of men

whose lease brokering work was an outgrowth

of bona fide coal mining experiences. Hall, who

still owns a lease in his name, is now a vice

president at Garland Coal & Mining Co. and an
48

official at Cameron Coal Co., the Pacola Co.,

and Ember Mining Co. Silengo owned leases

with his brother and ran the Silengo Coal Co.

and Cambridge Mining Co., two companies

that held leases and mined coal. Silengo has had

many other coal industry endeavors, some of

which continue to this day. B, R. Noe owned

and operated first the Clark Coal Co. and then

the North Fork Coal Co. Both companies produced coal, but when the mine they operated

was closed, the company was reorganized as B.

R. Noe Coal Co., which exists today as an inactive lessee.

The list of individual lessees also includes

people whose principal line of business activity

was never related to coal but whose involvement in coal was an outgrowth of other business

activities. One such notable individual lessee

was Malcolm McKinnon, who acquired and

sold numerous leases until his death in 1975,

Although most of his leases had been sold on the

assignment market prior to his death, several in

his own name and the name of his wife remain.

The large increase in the number of individuals holding prospecting permits and leases

in the 1960’s reflects the increasing number of

individual agents working under contract to

assist corporations in their lease acquisition programs. Most of the preference-right lease

packages put together in southern Utah in the

mid-1960’s occurred with the assistance of these

agents. For example, the Rasmussen family obtained prospecting permits which eventuall y

became part of a 10-lease block later owned by

Consolidation Coal and a 21-lease block compiled by Peabody Coal. (See Energy Companies

and Peabody Coal Co., pp. 28-33 and 33-35. )

Donna and Bryan Archer also assisted in assembling the Peabody lease package. John Organ,

who was former president of Midwestern Minerals, Inc., a mineral land sales company, also

obtained prospecting permits which became

part of the Peabody lease package. Many other

examples could be cited.

The lines of demarcation between bona fide

coal miners, general coal industry businessmen,

land brokers, and agents under contract are difficult to draw. But it is clear that individuals

have operated in all of these capacities throughout the history of the coal leasing program.

Other Individual Lessees

There are a few other individual lessees of

note. Richard J. Bass acquired in 1967, and still

owns with other members of his family in trusts,

the largest Federal coal lease ever issued. No

development has occurred on this 20,701-acre

tract in Wyoming.

J. C. Karcher has owned Wyoming coal leases

in his own name and in the names of companies

he has headed, including Concho Petroleum and

American Humates. All of the leases once

owned by Karcher or his business interests have

been assigned to three energy companies: Gulf,

Sun, and Shell,

Finally, there is a small Montana lease now

owned by the Bugni family of Butte. Originally

issued in 1938, it has been owned by eight other

individuals. The last year coal was mined from

the lease was in 1946. Although the lease appears to be the site of some activity, it is generally agreed among knowledgeable observers that

coal production prospects are slim.

H. NATURAL GAS PIPELINE COMPANIES

Major natural gas companies collectively are

the most recent business group to acquire Western coal leases .13 All of the 27 leases they own

were acquired during the 1970’s, 24 of them in

the period between 1971 and 1974. (See table 19

and figures 18 and 19. ) Six pipeline companies

now control 36,317 acres of leased land, about 5

percent of the total under lease (see table 20. )

A logical reason for natural gas companies to

acquire coal leases is their concern over gas supplies and the hope that coal will be a feedstock

for substitute gas (synfuel). However, the involvement is also consistent with the general
49

Table 19.—Natural Gas Pipeline Company

Leaseholdings

- . —

Percent of total

Number of Number of acreage under

Year— leases held acres held lease

-

1950 . . . . . . 0 0 0

1955 . . . . 0 0 0

1960 ., . . . . 0 0 0

1965 . . . . . 0 0 0

1970 ....., 0 0 0

1975 . . . . . . 24 32,522 40/0

1980 . . . . 27 36,317 5

——.—— —

SO~URCE Off!ce of Technology Assessment

Figure 18. —Acres Leased by Natural Gas Pipeline

Companies

Acres

30,000 —

20000 —

10,000 — //’/’’//’’// /

I I 1

1950 55 60 65 70 75 80

Year

SOURCE Off Ice of Technology Assessment

Figure 19.— Percent of Total Leased Acres Held by

Natural Gas Pipeline Companies

4.5% —

3 .0% — //’’//// /

/// /// /

////// /

/// /// /

//’/’/// /

1.5% // ///// /

/ / ///// /

/////// /

/////// /

1 I I

1950 55 60 65 70 75 80

Year

SOURCE Off Ice of Technology Assessment

Table 20.—Natural Gas Pipeline Leaseholders

1950. None

1955. None

1960, None

1965. None

1970. None

1975. The El Paso Co. (El Paso Natural Gas Co.)

Texas Eastern Transmission Corp. (Fannin Square)

Coastal States Gas Corp. (Coastal States Energy Co.)

(Southern Utah Fuel Co.)

Northwest Energy Corp. (Western Slope Carbon, Inc.)

1980. The El Paso Co. (El Paso Natural Gas Co.)

Texas Eastern Transmission Corp. (Fannin Square)

The Coastal Corp. (Coastal States Energy Corp.)

(Southern Utah Fuel Co.)

Panhandle Eastern Pipeline Corp. (North Antelope

Coal Co. 50 percent)

Northwest Energy Corp. (Western Slope Carbon, Inc.)

Internorth Corp. (Northern Minerals Co.)

NOTE Subsldlary leaseholders are noted In parentheses

SOURCE Off Ice of Technology Assessment

pattern of diversification within the industry.

Following the pattern of the major oil companies a decade earlier, many natural gas companies in the 1970’s have substantially diversified

and now resemble multiresource development

companies, although natural gas is still their

chief business. Along with this diversification

has been an internal restructuring of gas companies often accompanied by the creation of an

overall holding company to manage several new

operating units plus the traditional gas business.

For example, El Paso Natural Gas Co. was reorganized in 1974 as the El Paso Co., and

Northern Natural Gas Co. was renamed in May

1980 as Internorth Corp. Also, new subsidiaries

such as Coastal States Energy Co. have been

formed.

A few of the land packages acquired by pipeline companies were originally engineered for

inclusion into major synfuel projects. These

projects have generally suffered from economic,

regulatory, and technical problems, but the industry has investigated other uses for their coal.

Several are seeking long-term contracts to supply steam coal for new utility projects.

Only 2 of the 27 leases now owned by natural

gas pipeline companies were acquired de novo

from the Government; the rest were acquired by

assignment from other lessees or were segregated from preexisting leases, For leases acquired by assignment, the former lessee frequently left the coal lease owning roster after
50

the transaction and occasionally went out of

business entirely.

It is impossible to ascertain whether the

assignment lease acquisition route was a deliberate gas industry strategy or the only option

available during the moratorium on de novo

leasing. Whatever the rationale, the increase in

ownership of leased Federal coal reserves by

natural gas companies occurred during a time

when little de novo leasing was permitted.

History of Leasing

El Paso Natural Gas Co. was the first pipeline

company to enter Western coal leasing, and its

holdings are by far the largest. The company

obtained one of the largest blocks of leased land

in the West by purchasing an already assembled

package in toto and rounding it out with small

pieces from two other development packages. In

1971, El Paso purchased 13 southern Utah leases

from Atlantic Richfield Co., which had a c -

quired the leases between 1964 and 1966. (See

Energy Companies, pp. 28-33. ) In 1973, El Paso

added a 14th lease when Peabody agreed to split

one of its nearby leases. The segregation portion

of the Peabody lease was reissued to El Paso.

One year later El Paso added a final lease also

by segregation. In this case, the existing lease

was owned by three California utilities, Like the

Atlantic Richfield leases, the Peabody and utilities leases were originally issued in the mid1960’s. El Paso was reorganized in 1974 as a

holding company, The El Paso Co., and El Paso

Natural Gas Co. became its largest subsidiary (a

situation which prevails today).

The second pipeline company to enter coal

leasing was Texas Eastern Transmission Corp.

which owns one New Mexico lease jointly with

a subsidiary of Eastern Gas and Fuel Associates,

Eastern Associated Properties Corp. The lease

was acquired by assignment in 1972 from the

Bisti Coalfield Joint Venture #2. It was issued to

an individual originally in 1967.

Texas Eastern Transmission holds 50-percent

interest in the lease in the name of Fannin

Square Corp. Fannin Square is a passive corporation with no employees. The two companies

also hold 10 pending preference-right lease applications covering more than 30,000 acres.

Coastal States Gas Corp. has, like El Paso,

recently undergone reorganization as an energy

resource holding company, The Coastal Corp.

The company now holds Utah leases in the

names of two subsidiaries, Southern Utah Fuel

Corp. and Coastal States Energy Corp.

In 1973, Coastal States Gas purchased the

assets of Southern Utah Fuel Co., formerly an

independent Utah-based coal company. Southern Utah owned four leases at the time. One

lease was originally issued in 1941 to an individual but was assigned to Southern Utah in 1945.

This lease remains in the name of Southern Utah

today. A second Southern Utah coal lease was

obtained de novo in 1966 but assigned to

Coastal States Energy Co. when the coal company was acquired. The other two Southern

Utah Fuel Co. leases, issued in 1962, were jointly owned with Equipment Rental Service and

Heiner Coal Co. In 1974, the Southern Utah

share was assigned to Coastal States Energy Co.

In 1977, Heiner Coal sold its one-third share to

Coastal States Energy which now owns a twothirds interest in each of the two leases with

Equipment Rental holding the remaining third.

To these four leases, Coastal States Energy

added a fifth lease de novo in 1979. Although

only a single lease, it covers 2,632 acres, more

than the combined acreage of the other four.

Northwest Energy Co. of Salt Lake City entered Western coal leasing after Coastal States

and by the same route: purchasing a leaseholding independent coal company. In December

1974, Northwest bought Western Slope Carbon,

Inc., and with this acquisition inherited three

Colorado coal leases which it still controls. One

lease, originally issued to an individual in 1949,

was sold to Western Slope in 1970. A second

lease dating back to 1931 was owned first by an

individual, then by an independent coal company before assignment to Western Slope in

1970. Western Slope attempted to modify one of

its leases to include additional acreage but was

denied by the BLM. In 1973, however, the land

was offered for competitive leasing and Western

Slope acquired it de novo.

The fifth natural gas pipeline company involved in Western coal leasing entered via a

unique route for the industry. Panhandle Eastern Pipeline Co. formed a joint venture with a
Peabody Coal Co. subsidiary in the mid-1970’s,

North Antelope Coal Co. (name changed from

Antelope Coal Co. in 1979). Panhandle’s 50-

percent interest is held in the name of Pan

Eastern Coal Co., a subsidiary of the parent

pipeline company. In 1977, North Antelope acquired a 320-acre lease in Wyoming by segregation from an existing Peabody lease.

Internorth Corp. (name changed from Northern Natural Gas Co. in May 1980) is the sixth

natural gas pipeline company now holding Federal coal leases. In 1979, it acquired a Colorado

lease by assignment from Consolidation Coal

Co. Consol obtained title to the lease from

Ember Mining Co., which had owned it for 5

years. The lease is held by Northern Minerals

Co., a subsidiary of Internorth.

Houston Natural Gas Co. participated in leasing for 3 years, but it recently sold its coal subsidiary, 14 In 1976, Houston bought Empire En1’Hf~uston’s leases were not included in any tabulatl(~n in this

chapter because they were not [}wned by the company a t any of

the dates \elected t(~r ownership analysls.

ergy Corp., an independent coal mining company which owned three Colorado leases. In

March 1980, the natural gas company sold Empire to Amoco Minerals Co., a subsidiary of

Standard Oil Co. (Indiana). The acquisition

represents Standard of Indiana’s initial move

into coal. Empire’s leases are now categorized

with energy company holdings in this survey.

Several lease transactions in 1980, too late to

be included in this survey, suggest that natural

gas companies will continue to increase their

lease holdings. Northwest Coal Co., another

subsidiary of Northwest Energy Co., agreed in

March to purchase from Peabody Coal 5,000

acres of Utah coal land, including several

Federal leases. Wyoming Fuels Co., a subsidiary

of Kansas Nebraska Natural Gas Co., is developing a mining plan for its Colorado lease.

Nicer, Inc., the parent company for Northern

Illinois Gas Co., recently bought, through

another subsidiary, a 49-percent interest in

Snowmass Coal Co. and 50 percent of Grand

Mesa Coal Co., which are separately developing mining plans for Colorado leases.

L NONRESOURCE-RELATED DIVERSIFIED COMPANIES

The nonresource-related diversified business

category includes those companies with principal lines of business activities which are not

energy or mineral resource related, but which

complement or could be integrated with resource development. It includes chemical companies, for which coal mining could provide a

new source of feedstock for chemical production

or the raw material for synfuel manufacturing

processes which they may develop. It includes

high technology companies such as General

Electric and General Dynamic which have

already entered the energy field and for which

coal mining represents a related diversification.

Nonresource-related diversified companies

are latecomers to Western coal leasing. As

shown in table 21 and figures 20 and 21, the

companies falling into this category held no

leases before 1963 and controlled a scant 1 percent of all land under lease in 1970. Holdings

grew in the I W O’S, however, from 10,015 to

Table 21.— Leaseholdings of Nonresource-Related

Diversified Companies

Year

1950 . . . . . .

1955 . . . . . .

1960 . . . . . .

1965 . . . . . .

1970 . . . . . .

1975 . . . . . .

1980 . . . . . .

Number of Number of

leases held acres held

Percent of total

acreage under

lease

o 0

0 0

0 0

3 4,610

6 10,015

7 12,580

33 35,675

0

0

0

10/0

1

2

5

SOURCE: Off Ice of Technology Assessment

35,675 acres. The major event causing this increase was the purchase of Utah International,

Inc., by General Electric Co, and the transfer of

Utah International’s 26 leases from the metals

and mining group to this category. Nonresource-related diversified companies now hold 5

percent of all land under lease.
52

Figure 20.—Acres Leased by Nonresource-Related

Diversified Companies

Acres

‘“’ooo~

1950 55 60 65 70 75 80

Year

SOURCE. Office of Technology Assessment

Figure 21. - Percent of Total Leased Acres Held by

Nonresource-Related Diversified Companies

45 0/0

F I

1950 55 60 65 70 75 80

Year

SOURCE. Office of Technology Assessment

History of Leasing

FMC Corp.

In 1959, the Food

Corp. (name changed

Machinery & Chemical

to FMC Corp. in 1960)

obtained three prospecting permits in Wyoming

by assignment from individuals. In 1963, these

permits were converted to leases. The chemical

company still owns two of the leases but assigned the third to Cumberland Coal Co. in

1977.

General Dynamics Corp.

United Electric Coal Co. acquired de novo

three prospecting permits, two in Colorado and

one in Oklahoma, between 1962 and 1964 as an

independent coal company. The prospecting

permits were converted to leases in 1965, In

1966, United Electric was acquired by General

Dynamics. In 1974, the parent company merged

United with another coal subsidiary, Freeman

Coal Mining Co., to form Freeman United Coal

Mining Co., which in turn was made a subsidiary of Material Service Corp., a division of

General Dynamics. Two of the leases were assigned to Material Service Corp. in 1975 and the

third was assigned to Freeman United in 1977.

W. R. Grace& Co.

W. R. Grace& Co. entered Western coal leasing when it bought Colowyo Coal Co., formerly an independent, in 1973. Colowyo held a

Colorado lease it had obtained by assignment

from an individual in 1946. The lease was

assigned to W. R. Grace upon the acquisition of

Colowyo. In 1976, Hanna Mining Co. joined

the chemical company as a joint venture partner

in the mining project run by Colowyo. W. R.

Grace now has 50-percent interest in the coal

lease by virtue of its participation in the joint

venture.

Monsanto Co.

In 1977, Monsanto Co. acquired one Wyoming lease by assignment which had originally

been issued in 1927, and then acquired by two

coal mining companies. Monsanto holds this

lease in the name of a subsidiary, Sweetwater

Resources, Inc.

General Electric Co.

Twenty-six of the 33 leases now falling in the

nonresource-related diversified category are

held by Utah International, Inc., a subsidiary of

General Electric Co. since 1976, All of the leases

were acquired when Utah International was an

independent metals and mining company. The

histories of the leases now controlled by General

Electric Co. are summarized under Metals and

Mining Companies, pp. 54-58.
53

J. KEMMERER COAL CO.

Kemmerer Coal Co. is one of the oldest Western coal producers and among very few surviving companies in the coal industry founded and

headquartered in the West. The company was

started by members of the Kemmerer family in

1887, and has been mining coal steadily from

southwestern Wyoming coalfields for nearly a

century.

In 1926, the Kemmerer family reorganized its

business interests and formed the Lincoln Corp.,

a holding company of which Kemmerer Coal

became a subsidiary. The Lincoln Corp. holds

an interest in several noncoal businesses in addition to its ownership of Kemmerer. This ownership structure is unique among lessees encountered in this survey. Kemmerer operates similar

to an independent coal company and the family

maintains local control, but technically it is a

subsidiary of a corporation not otherwise involved in coal mining and not falling into one of

the other business categories identified in this

survey. For these reasons and because Kemmerer has held more than 5 percent of the outstanding acreage under Federal lease at least at one of

the analysis dates (see appendix) it is analyzed

separately in this report. The singling out of

Kemmerer Coal Co. is appropriate not only because it meets the criteria established in this

survey for such treatment, but also because the

ownership structure of the company may

change soon, In September 1980, the Kemmerer

family retained Morgan Stanley & Co. to organize and conduct the sale of its coal holdings. If

the coal company does sell, it will cause the

greatest single event shift in Western coal lease

ownership since Peabody Coal Co. was purchased from Kennecott Corp. in 1977. After

such an acquisition, the principal business activity of a new parent might necessitate a recategorization of Kemmerer’s holdings, a process

simplified by its current separate status.

Kemmerer is currently the third largest holder

of Federal coal leases. Beginning with a single

lease obtained in 1927, Kemmerer has acquired

27 leases in 3 states—Wyoming, Colorado, and

Utah. Only 1 of these leases has been assigned

by Kemmerer; its remaining 26 leases include

32,191 acres or 4 percent of the land now under

lease.

Kemmerer was one of the first of the major

leaseholding companies to obtain large Western

holdings. As of 1960, Kemmerer already owned

5 percent of the land under lease. Its holdings

nearly quintupled in the 1960’s to 33,793 acres

and reached a peak of 33,988 acres in 1975. (See

table 22 and figures 22 and 23. )

Unlike many of the major leaseholders, Kemmerer acquired most of its leases de novo, relying on its extensive knowledge and experience in

Western coalfields to identify leasable reserves.

It has sold little of its leased land by assignment

although most of its leases are not currently in

production.

History of Leasing

The first of the 27 leases obtained by Kemmerer Coal Co. is also the only lease the company has ever assigned in toto. In 1927, GunnQuealy Co. r a Kemmerer subsidiary since early

this century, leased a 157-acre tract of Federal

coal land in Wyoming. The company mined on

the land and twice received acreage modifications, to 475 acres in 1929 and to 1,752 acres in

1950, thus expanding its reserves base. In 1975,

the lease was assigned to Columbine Mining

Co., which operated it for 2 years before closing. In September 1977, the lease was assigned

to Sweetwater Resources, Inc., a Monsanto

Corp. subsidiary.

Kemmerer’s other leasing activity in Wyoming includes six leases acquired in the late

Table 22.—Kemmerer Coal Co. Leaseholdings

Percent of total

Number of Number of acreage under

Year leases held acres held lease

1950 . . . . . . 1 475 1%

1955 . . . . . . 1 1,752 2

1960 . . . . . . 4 6,849 5

1965 . . . . . . 10 18,504 6

1970 . . . . . . 26 33,793 5

1975 . . . . . . 27 31,988 4

1980 . . . . . . 26 32,191 4

SOURCE Off Ice of Technology Assessment
54

Figure 22.—Acres Leased by Kemmerer Coal Co.

Acres

30,000 — / ////// //// /

/ / //// /// // /

/ ///// ////// /

///’////’// ///// / /’////// ///// /

20,000 — ////////////// /

/////////////// /

//////////////// /

/

///////////////// /

— ////////////////// /

/////////////////// /

//////////////////// /

///////////////////// /

//////////////////////// /

1950 55 60 65 70 75 80

Year

SOURCE Offlce of Technology Assessment

Figure 23. —Percent of Total Leased Acres Held by

Kemmerer Coal Co.

///////////////’/’/’/’/’/’/’/ ’

— //’/////////////////////// /

/////////////////////////// /

///////////////////////////// /

////////////////////////////// “

/

/ > ~ >

1950 55 60 65 70 75 80

Year

SOURCE Office Of Technology Assessment

.

1950’s and early 1960’s. Five of the leases were

acquired de novo by Kemmerer. The sixth lease

stemmed from a prospecting permit issued in

1958 to John Kemmerer, Jr., the company’s

chairman, who assigned the resulting lease to

Kemmerer Coal in 1966.

Moving from Wyoming south into Colorado,

Kemmerer Coal obtained lo leases in 2 units in

the mid-1960’s. Three leases were obtained de

novo from prospecting permits issued to Kemmerer in 1964.15 Six of the seven other leases

stemmed from prospecting permits issued to individuals, John Wanner and A. Saterdal and

assigned to Kemmerer. The final Colorado lease

was issued to an individual in 1929. The lease

was subsequently owned by four other individuals, a small company, and a sixth individual

before being assigned to Kemmerer in 1966.

Ownership of this lease has changed hands more

times than any other lease examined in this

survey.

Kemmerer’s final package of leases is in central Utah. Ownership of the 10 leases involved is

shared with Consolidation Coal Co. Four of the

leases were originally obtained de novo by

Kemmerer in 1962 with a 50-percent share assigned to Consolidation in 1966. Another five of

the leases stem from prospecting permits originally issued to Consolidation in 1962, with a 50-

percent share in the resulting leases assigned to

Kemmerer in 1966. The final lease was acquired

de novo and jointly by the two companies in

1970.

151n 1980, Kemmerer tiled an application to assign 50-percent interest in these three leases to Consolidation Coal Co.

K. METALS AND MINING COMPANIES

The metals and mining industry’s involve- Like the

ment in Western coal leasing has been long, companies

steel industry, metals and mining

entered coal leasing early and had

complicated, and frequently controversial. The acquired considerable reserves by the midindustry involves some of the largest leasehold- 1960’s. As shown in table 2317 and figures 24

ers in the West. lb -

more hard rock minerals, excluding uranium. It does not include

companies primarily involved with coal, limestone, or trona exl~The metals and mining category includes companies whose traction, nor does it include cement or construction companies.

principal line of business activity includes the mining of one or lpThe tota] ]easeholdings listed for 1980 in table 23 understate
55

and 25, the industry gradually increased its

leaseholdings through the 1950’s and 1960’s.

The increase in holdings accelerated during the

first half of the 1970’s. By 1975, the industry

controlled 118,300 acres, or 15 percent of all

land under lease. From this peak, however,

leaseholdings have dropped 90 percent in the

past 5years.

The sharp reduction in leasing by metals and

mining companies has occurred primarily beTable 23.—Metals and Mining Company

Leaseholdings

Year

Number of

leases held

1950 . . . . .

1955 . . . . . .

1960 . . . . . .

1965 . . . . . .

1970 . . . . . .

1975 . . . . .

1980 . . . . . .

2

2

5

11

69

87

13

Number of

acres held

5,009

5,009

9,266

17,708

107,504

118,300

17,620

Percent of total

acreage u rider

lease

12“%0

7

6

6

15

15

2

SOURCE Off Ice of Technology Assessment

Figure 24.—Acres Leased by Metals and Mining

Companies

Acres

1 Zo,ooor

90,000 —

60,000 —

30.000 —

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

(c(lntlnuecl trc)m p. 54}

Figure 25.— Percent of Total Leased Acres Held by

Metals and Mining Companies

15° 0

10“ 0

5° 0

1950 55 60 65 70 75 80

Year

SOURCE Office of Technology Assessment

cause several of the top leaseholding companies

in this category have recently been acquired by

firms from other industries. The list of present

and past metals and mining companies owning

Federal coal leases appears in table 24.

The ownership of two Utah leases by United

States Fuel Co., a subsidiary of U.S. Smelting &

Refining Co. since World War I (name changed

to UV Industries in 1972) provided the sole stake

of the metals and mining industry in Western

leasing in 1950. U.S. Fuel obtained these leases

de novo, and they have never been assigned. In

November 1979, UV Industries was purchased

by Sharon Steel Co. Consequently, the leases

were reclassified in this survey in 1980 with steel

industry rather than metals and mining company holdings.

The only new metals and mining industry entrant to leasing in the 1950’s was Reynolds Mining Corp., a subsidiary of Reynolds Metal

Corp. It acquired de novo three leases in Wyoming in the late 1950’s and added a fourth by

assignment in 1968 from a cattle company.

Reynolds planned to build a large coal-fueled

aluminum plant near the leases, but the project

was abandoned. In 1974, it assigned the entire

lease block to Texaco, Inc.; Reynolds has not

reentered Federal coal leasing.

The 1960’s

In the 1960’s, several of the largest currently

outstanding lease packages were organized by
56

Table 24.—Metals and Mining Company

Leaseholders

1950. . . .

1955. . . .

1960. . . .

1965. . . .

1970. . . .

1975. . . .

1980. . . .

U.S. Smelting & Refining Co. (U.S. Fuel Co.)

U.S. Smelting & Refining Co. (U.S. Fuel Co.)

U.S. Smelting & Refining Co. (U.S. Fuel Co.)

Reynolds Metals Corp. (Reynolds Mining Corp.)

U.S. Smelting & Refining Co. (U.S. Fuel Co.)

Reynolds Metals Corp. (Reynolds Mining Corp.)

Utah Construction & Mining Co.

U.S. Smelting & Refining Co. (U.S. Fuel Co.)

Reynolds Metals Corp. (Reynolds Mining Corp.)

Utah Construction & Mining Co.

Kennecott Copper Corp. (Peabody Coal Co.)

(Kennecott Coal Co.)

American Metals Climax, Inc. (Meadowlark Farms)

Elena Mining Co.

Ametex Corp.

UV industries (U.S. Fuel Co.)

Utah International, Inc.

Kennecott Copper Corp. (Peabody Coal Co.)

(Kennecott Coal Co.)

Amax, Inc. (Meadowlark Farms)

Elena Mining Co.

Ametex Corp.

American Smelting & Refining Co.

Pit kin Iron Corp.

American Fuels Corp.

Intermountain Exploration Co.

Amax, Inc. (Amax Coal Co.)

Asarco, Inc.

Pitkin Iron Corp.

Intermountain Exploration Co.

Hanna Mining Corp. (Colowyo 50 percent)

Phelps Dodge Corp. (Western Nuclear, Inc.)

St. Joe Minerals Corp. (Anchor Coal Co.)

NOTE Subsldiary leaseholders are noted in parentheses

SOURCE Office of Technology Assessment

metals and mining lessees. By the end of the

decade total acreage under this industry’s control had increased from 9,266 to 107,504 acres.

Utah International, Inc., was the first metals

and mining company to undertake a lease acquisition program in the 1960’s. The company,

originally named Utah Construction & Mining

Co. (its present name was adopted in 1971), initially undertook heavy construction projects,

but by the mid-1960’s, had established significant worldwide mineral exploration and production interests. In 1976, Utah International

was purchased by General Electric Co. The

company’s 26 leases were recategorized in this

survey from the metals and mining group to the

nonresource-related diversified group as a result

of the General Electric purchase.

The first and smaller of the two lease packages held by Utah International involves six

leases in Colorado. Four leases were obtained de

novo and two more were added by assignment.

The second lease block, one of the largest in the

West, was assembled by Utah International and

several individual land agents employed by the

company. Seventeen of the 20 leases eventually

included in this group were first acquired by

four land agents as prospecting permits, In

1966, the permits were assigned to Utah International, and the company converted them to

leases in 1968. Three de novo leases were obtained by the company, one each in 1965, 1966,

and 1971 to fill out the package.

Peabody Coal Co., now the largest holder of

Federal coal leases, also made its major lease acquisitions in the 1960’s. The company acquired

leases in Colorado, New Mexico, Wyoming,

Montana, and Utah. Peabody Coal now controls 62,009 acres of leased land.

Peabody initiated most of its leasing programs as an independent coal mining company.

In 1968, however, the company was purchased

by Kennecott Copper Corp. The Peabody leaseholdings were categorized with metal and mining company holdings in this survey for that

time. Kennecott owned Peabody until, responding to a court order, it sold the company in 1977

to a six-firm holding company. Upon the divestiture, Peabody’s leases were removed from the

metals and mining company category.

The lease acquisition histories for Peabody’s

holdings are discussed under Peabody Coal Co.,

p. 34.

Kennecott Copper briefly held two Utah

leases which were unrelated to Peabody Coal

Co. In the mid-1960’s, the company purchased

the assets of Knight Ideal Coal Co., which included two leases obtained in the 1950’s. The

company was renamed Kennecott Coal Co. and

reorganized as a subsidiary. Kennecott, unlike

the independent coal operator Knight Ideal,

never mined on the leases. In 1979, they were

assigned to Pacific Gas & Electric Co.

Meadowlark Farms, Inc., was the third major

new entrant in coal leasing in the 1960’s.

Meadowlark was originally organized as a land

reclamation and postmining agricultural subsidiary to Ayshire Collieries Corp., an independent coal company. Meadowlark acquired

two Wyoming leases in 1965. In 1969, Ayshire

was acquired by American Metals Climax, Inc.
57

(name change to Amax, Inc., in 1974). 1” As a

result, Meadowlark became a subsidiary of its

new parent and Ayshire was renamed Amax

Coal Co. The leases were assigned from Meadowlark to Amax Coal Co. in 1977.

The final two metals and mining companies

to enter Western leasing in the 1960’s were Elena

Mining Corp. and Ametex Corp. Elena obtained

a New Mexico lease with intentions of using the

coal in a nearby copper-leaching plant it

operated. The company went out of business in

1968. Ametex was formed in the late 1960’s to

mine silver deposits. In 1968, it branched into

coal and bought a sma1l lease near the Elena

property which had been owned by two individuals since it was issued in 1925. When Elena

went out of business Ametex acquired its lease

also. In the mid-1970’s Ametex ceased its mineral development projects, but continued to

hold title to the coal leases. The original

owners of the company sold to a Colorado businesswoman who resold it in March 1980 to an

Oklahoma businessman.

The Ametex lease, along with two tracts

owned by Florentine Padillo, have been the subjects of legal controversy since 1971. Between

1971 and 1976, a series of conflicting lease assignments were filed by various parties claiming

to be bona fide lessees of record. A BLM investigation subsequently identified four possible

true assignors and seven possible legal assignees. In April 1977, the BLM denied all the assignments during the 5-year period. Several

lawsuits contesting the actions of the BLM and

various lease claimants are still pending.

The 1970’s

Between 1970 and 1975, four new metals and

mining companies appeared on the list of coal

lessees. The American Smelting & Refining Co.

(name changed to Asarco, Inc., in 1975) purchased through assignment a five-lease package

in Oklahoma from Garland Coal & Mining Co.

All five had previously been owned by individuals and a coal brokerage company. (See Independent Coal Companies, pp. 38-43. )

Pitkin Iron Co., a small iron ore mining firm,

acquired partial interest in several Colorado

leases in 1970. These leases, issued in 1958 to individuals, are still jointly held, although the

ownership of the shares owned by individuals

has changed several times.

American Fuels Corp., a small Albuquerquebased mining company with gold, silver, and

fluorspar holdings, briefly entered coal leasing

from 1973 to 1977. It bought a producing lease

in western Colorado from Commonwealth Coal

Co. and sold it to Sewanee Mining Corp.

Intermountain Exploration Co., a small gold

and silver mining company, purchased on the

assignment market one small Utah lease in 1973.

Between the time of initial lease issuance in 1933

and assignment to Intermountain, the lease was

owned by five individuals from two families.

Metals and mining industry leaseholdings

dropped sharply between 1975 and 1980, largely

because of the purchase of metals and mining

companies by outside interests. Peabody Coal

Co., Utah International, and UV Industries

were all acquired by nonmetals and mining

companies. Also contributing to the decline was

the recategorization of Ametex Corp. as a landholding company, and the assignment of the

leases owned by American Fuels Corp. and Kennecott Coal Co. to companies from other industries.

This decline in the leaseholdings of the metals

and mining industry was partially offset by the

entrance of three new metals and mining lessees.

Western Nuclear, Inc., a subsidiary of the

metals and mining company, Phelps Dodge,

Inc., acquired a small Wyoming lease in 1975

from an individual who had owned it for 21

years. Secondly, in 1978, Anchor Coal Co. purchased through assignment a small Colorado

lease. The tract had been owned previously by

four independent coal mining companies and

one individual. A subsidiary of A. T. Massey

Coal Co., Anchor, was organized solely to develop this lease. A. T. Massey Coal Co., for-
58

merly an independent coal company, was acquired by St. Joe Minerals Corp. in 1974.20 St.

Joe is involved i n mineral extraction

worldwide. 21

L. LANDHOLDING COMPANIES

Dozens of companies with no capability to

mine coal have played an important role in the

leasing of Federal coal land. The landholding

company category in this survey includes an

assortment of such lessees .22

Landholding companies played an important

role in the early days of Federal coal leasing. In

1960, they controlled about 8 percent of all land

under lease. Total acreage leased by land agents

peaked a decade later in 1970 with 43,581 acres

under 33 leases. In the 1970’s, however, landholding companies have almost completely disappeared from the leasing picture. Their total

holdings are now less than 1 percent of land

under lease (see tables 25 and 26, figure 26).

The near elimination of independent land

agents suggests an evolution toward lease ownership by companies with the capability to mine

coal. Many land speculating and lease brokerage firms have taken their profits through

assignment or relinquished their leases. The

leasing moratorium of the 1970’s is partly re- —

Finally, Hanna Mining Co. joined W. R.

Grace & Co. as a joint owner of the Colowyo

Coal Co. in 1976. The lease, one of the oldest in

the West, was held by an individual from 1924

to 1946 when it was purchased by Colowyo.

Colowyo was an independent coal mining company until it was purchased by Grace in 1973.

The wholly owned subsidiary became a joint

venture with the entry of Hanna.

Table 25.—lndependent Land Company

Leaseholdings

Percent of total

Number of Number of acreage under

Year leases held acres held lease

1950 . . . . . . 1 1,360 3%.

1955 . . . . . . 5 4,576 6

1960 . . . 10 11,504 8

1965 . . . . . . 11 13,411 4

1970 . . . . . . 33 43,581 6

1975 . . . . . . 19 26,225 3

1980 . . . . . . 8 4,661 < 1

SOURCE. Off Ice of Technology Assessment

sponsible for this development. By limiting access to new leases, the moratorium enhanced the

value of existing leases on the assignment market. As the assignment price rose, many landholding companies sold. The diligent development regulations of 1976 may have provided

another incentive for landholding companies to

sell. Leases not acquired by bona fide coal mine

developers by the early 1980’s are likely to fail

to meet the 1986 coal production requirements

because of the leadtime needed to open a new

mine. Their value on the assignment market, in

theory, should diminish as the deadline draws

near.

The decline in importance of independent

landholding companies, however, has coincided

with the rise in importance of landholding companies which are subsidiaries of other comPani cs.’s The relative growth rates can clearly
59

Table 26.—lndependent Land Company

Leaseholders

1950. . . . Nancv -Lee Coal Co.

1955.

1960.

1965.

1970.

1975.

1980.

. Minerals Development Corp.

Utah Coking Coal, Inc.

Utah Coking Coal, Inc.

King Cannel Coal Co.

Huntington Corp.

Choctaw Coal Co.

. King Cannel Coal Co.

Huntington Corp.

Utah Coking Coal, Inc.

American Humates, Inc.

Lignite Electric Power Cooperative

Southern Development Co.

King Cannel Coal Co.

Huntington Corp.

Humac Co.

Lignite Electric Power Cooperative

Rilda Corp.

Ember Mining Co.

Concho Petroleum Co.

B. R. Noe Coal Co.

Industrial Resources, Inc.

Thompson Creek Coal & Coke Co.

King Cannel Coal Co.

Humac Co.

Concho Petroleum Co.

Industrial Resources, Inc.

Thompson Creek Coal & Coke Co.

Carroll County Coal Co.

Thermal Energy Co.

King Cannel Coal Co.

Thompson Creek Coal & Coke Co.

Thermal Energy Co.

Carroll County Coal Co.

Cari International Mining Corp.

Ametex Corp.

Smith-Holladay and Associates, Ltd.

SOURCE Off Ice of Technology Assessment

be seen in figures 26 and 27. Subsidiary landholding companies now hold more acreage than

the independents ever held. Three of the 10 land

agent subsidiaries are owned by electric utility

companies; two by oil and gas companies; one

by a natural gas pipeline company; one by an

independent coal company; and one from the

other category. (See Corporation and Subsidiaries in ch. 1, p. 7.)

The two phenomena appear to have occurred

independently, No independent land companies

were purchased by other companies to emerge

as subsidiaries. Independents simply sold their

leases to other companies. Concurrently, new

leasing entrants occasionally used landholding

subsidiaries to gather leases and existing lessees

created new landholding subsidiaries to which

leases were assigned. Hence, the growth in lease

Figure 26.—Acres Leased by Independent and Subsidiary Land Companies

Areas

60,000

. .

. .

I

1950 55 60 65 70 75 80

Year

SOURCE Off Ice of Technology Assessment ●

Figure 27.— Percent of Total Leased Acres Held by

Independent and Subsidiary Land Companies

6%

4%

2%

1950 55 60 65 70 75 80

Year

Note The decllne in Ieaseholdings by Independent land companies

and the rise I n leaseholdings by subsidiary Iandholding companies appear to be Independent phenomena See discussion

in the text

SOURCE Office of Technology Assessment

ownership by landholding subsidiaries is caused

by the internal reorganization of coal leaseholding companies into more complex, decentralized

business structures and does not reflect a swallowing of small, independent landholding companies by larger corporate interests.

Leases held by subsidiary land companies do

not face a key barrier to development confront-
60

ing leases owned by independents; they do not

necessarily have to undergo assignment before

mining can occur. Some parent companies routinely assign leases from landholding to coal

mining subsidiaries prior to the initiation of

mine development (e. g., Pacific Power & Light

Co.), but such action is not obligatory. Several

leases now in production are owned by landagent subsidiaries but mined by outside designated operators or a nonlease titleholding mining subsidiary of the same parent company.

Land-agent subsidiary roles in leasing must be

analyzed on a company-specific basis with particular attention paid to corporate strategy

behind the use of the land companies.

History of Leasing

The 1950’s ‘

The Nancy Lee Coal Co. was the only 1950

lessee grouped in the landholding category,

Named after Nancy and Lee Squire of Fort

Smith, Ark., the company acquired a coal lease

in 1949. It retained ownership for slightly more

than a year, assigning the lease to Evans Coal

Co. while retaining a 10 cents/ton overriding

royalty on future strip mined coal.

By 1955, two other companies appeared in

the landholding category. (See table 26 for a

complete list of landholding companies. )

Minerals Development Corp., headed by Andre

Heiner, from a family prominent in Utah and

Colorado coal and mineral development, obtained two Colorado leases by assignment from

Kaiser Steel Corp. in 1953. Several years later

the company assigned the leases to U.S. Steel

Corp. The company obtained a third lease de

novo in 1952 and assigned it in 1955 to Heiner

Coal Co., a bona fide mining firm run by the

Heiner family. The lease was later assigned to

Pacific State Steel Corp. and is now again

owned by Kaiser Steel.

Utah Coking Coal, Inc., appears in the complicated history of two Utah coal leases now

owned by Utah Power & Light, One lease was

originally issued in 1934 and was owned by five

different individuals until assignemnt to Utah

Coking Coal in 1953. The second lease was

issued to an individual in 1953 and acquired by

Utah Coking Coal 1 year later. Utah Coking

Coal assigned both leases 12 years later to Rilda

Corp., a California-based land company. Rilda

assigned both leases to Peabody Coal in 1972,

and in December 1979, Peabody sold them to

Utah Power & Light.

Three new independent land companies entered coal leasing between 1955 and 1960. The

Huntington Corp., founded by a mining engineer from the University of Utah, acquired five

leases de novo in Utah in 1958. In 1971 Huntington assigned its five leases to Peabody Coal Co.

Peabody assigned one lease to Nevada Electric

Investment Co. (a subsidiary of Nevada Power

Co.), assigned two others to Utah Power &

Light, and retains ownership of a fifth.

King Cannel Coal Co. operated a mine on a

Utah lease tract acquired by assignment from an

individual in 1941. The mine operated until the

mid-1950’s when it was closed. It has not operated since then, although the company retains

ownership of the lease. Because it has not mined

since then, the categorization of this company in

this survey was changed from coal to land company in 1960.

Choctaw Coal Co., one of many small Arkansas companies established by the Gaither

family, owned two Colorado coal leases from

1958 until 1964. Both were assigned to Choctaw

from Larsen Mining Co. and then assigned by

Choctaw to Garland Coal & Mining Co.

in 1964. They are now owned by the Anschutz

Corp., an oil and gas company .24

The Early 1960’s

Three new independent land agents entered

coal leasing in the early 1960’s. The first new independent agent at this time was Southern Development Co. which obtained de novo a 51.6-

percent interest in an Oklahoma lease in 1962.

The other owners included three members of the

Porter family and Florence Loomis. Southern

Development and its colessees assigned the lease

to Garland Coal & Mining Co. (founded by the

Porter family) in 1968. Although this lease was

actually issued de novo by the BLM in 1962, the
61

land was previously covered by an Indian lease

issued in 1940 to Paris Purity Coal Co. and later

assigned to Coaldale Mining Co. The land was

transferred into the Federal from the Indian domain in the late 1940’s. As part of a land exchange, it and several other Indian leases were

later reissued as Federal leases.

Another independent land agent, Lignite Electric Power Cooperative, acquired a large North

Dakota lease de novo in 1962. This company,

formed by several North Dakota businessmen,

hoped to acquire fuel reserves to sell to several

local rural electric companies. Eight years later

the company assigned the lease to BaukolNoonan, Inc., its present owner.

In 1961, a Texas company, American Humates, acquired three Wyoming leases. The

company also operated under the names of Humic Acid Products of America, Inc., and Humac

Co. It claimed to have developed a new chemical technique to extract humic acid, used in fertilizer manufacture, from oxidized outcropping

of lignite coal. The company assigned the three

leases to Sun Oil Co. in 1975. They are now

owned by a Sun subsidiary, Sunoco Energy Development Co.

Subsidiary land companies entered the leasing

field for the first time in the early 1960’s. The

subsidiaries include Sentry Royalty Co., which

was wholly owned by Peabody Coal Co., and

Nevada Electric Investment Co., which was and

is wholly owned by Nevada Power Co. Sentry

was active throughout the West (see Peabody

Holding CO., pp. 33-35), while the power cornpany subsidiary has confined its leasing activities to Utah.

The Late 1960’s

The independent land companies posted their

largest leasing gains in the second half of the

1960’s, obtaining 43,581 acres by 1970, more

than three times their total. in 1965 and more

than they have owned since. Although two

companies dropped from the ranks, five new entrants appeared, including Rilda Corp., whose

two Utah leases acquired in 1965 from Utah

Coking Coal have already been discussed.

In 1968, B. R. Noe Coal Co. acquired a Colorado lease originally issued in 1945 and previously owned by an individual and an independent coal company which operated under

two names. The B. R. Noe Coal Co. was a coal

wholesaler and a landholding company. In

1971, the lease was assigned to Empire Energy

Corp., then an independent coal company. In

1978, Empire assigned the lease to Anchor Coal

Co., a subsidiary of St. Joe Minerals Co.

Industrial Resources, Inc., acquired in 1967

by assignment five Colorado leases which were

originally issued to an individual. Until 1976,

Industrial Resources was a subsidiary of Wolfe

Ridge Minerals, Inc. Wolfe Ridge was then sold,

and Industrial Resources became a parent company. The leases were then assigned to a newly

formed subsidiary of Industrial Resources,

called Industrial Assets, Inc. All three entities

were landholding companies. In 1978, the entire

five-lease package was assigned to Sheridan

Enterprises, a wholly owned coal mining subsidiary of Occidental Petroleum Corp.

In 1967, Ember Mining Co. acquired a Colorado lease package containing six leases. Five

were obtained by assignment from individuals

and a sixth was obtained de novo. Ember never

mined coal; it was formed as a landholding entity by the Porter family. In 1972, Ember assigned

the lease package to Consolidation Coal Co.

A small Texas-based company, Concho Petroleum, acquired an 80-percent interest in six

Wyoming leases in the late 1960’s. All were

originally issued earlier in the decade to J. C.

Karcher, Concho’s president. Five of the leases

were reassigned to Gulf Oil Corp. in 1975. The

sixth was acquired the same year by Shell Oil.

The final company to be added to the list of

landholding lessees in the late 1960’s was

Thompson Creek Coal & Coke Co. Formerly an

independent coal company, its mines shut down

around this time. The company has been gradually liquidating its holdings since the late 1960’s.

A 120-acre Colorado lease was assigned to the

landholding category from the independent coal

category beginning in 1970. (See lndependent

Coal Companies, pp. 38-43. ) ThOmpson Creek

still owns the lease.

Subsidiary land companies made only modest

increases in leaseholdings for the second half of

the 1960’s. Sentry Royalty’s leases were all

assigned to Peabody Coal when Sentry was dissolved into the parent company in 1968. Ka-
62

nawha & Hocking Coal & Coke Co. (a landholding subsidiary of Valley Camp Co.), a newcomer, acquired one Utah lease at this time. The

major new entrant was Associated Southern Investment Co., a landholding company owned

by Southern California Edison Co., which obtained one-quarter interest in a large (19-lease)

block in southern Utah now owned jointly by

three utilities. In 1972, the utility assigned its

share internally from Associated Southern to

Mono Power Co., its resource development

arm.

The Early 1970’s

Lease acquisition efforts by independent land

companies were cut short by the moratorium of

1971. Total leased acreage controlled by land

agents dropped 40 percent during the first half

of the 1970’s. Five companies sold all leaseholdings, and only two entrants appeared (see table

26).

The first newcomer was Thermal Energy Co.,

a joint venture now owned by six companies. In

1964, it acquired partial interest in a New Mexico coal lease previously owned by an individual and one of the original venture organizers.

This lease includes part of a block of coal reserves, which Chaco Energy C0.,

25 a subsidiary

of Texas Utilities, plans to develop. Partial lease

assignments between Chaco, Thermal, and Peabody Coal are pending.

The other newcomer was Carroll County

Coal Co., a corporation which in 1970 obtained

a 412-acre lease in Utah. Carroll was a subsidiary of Pickands Mather & Co. of Cleveland,

Ohio at the time. The company outbid Malcolm

McKinnon, an independent Utah landman, for a

lease at a competitive sale. Shortly thereafter,

McKinnon bought Carroll County from Pickands Mather and obtained the lease.

Late 1970’s

Independent land company leaseholdings

dropped another 80 percent between 1975 and

1980, down to less than 1 percent of total leased

acreage today. Three companies liquidated as-

“Thermal is included as a land company because it will not actually be inv[>lved in cc)al mine development, It acquired the land

and searched for bona fide developers.

sets, while three new smaller companies acquired leases.

The first new entrant, Ametex Corp., holds

two New Mexico leases. Previously a small

metals and mining company, it was moved to

the land company category for the period when

it ceased its metal operations (see Metals and

Mining Companies, p. 54-58 for lease history).

Cari International Mining Corp. obtained a

small Oklahoma lease in 1976 which had been

owned by the Gaither family since 1962. Cari

was originally organized as a subsidiary of

Miranda International Mining Corp. which is in

turn owned by Celso de Rocha Miranda, a Brazilian citizen living in Rio de Janeiro. Although

it was involved in some coal mining in Georgia,

today it is a land company. Miranda International was dissolved in 1977, making Cari the

parent company today.

Finally, Smith-Holladay & Associates, Ltd.,

obtained a small Utah lease in 1978. Run by the

previous titleholder of the lease, John Davidson

Smith, the company is now seeking assignees or

codevelopers for the lease tract.

While independent land company leaseholdings have dropped nearly 90 percent in the last

decade, holdings by land subsidiary companies

have more than doubled. They now own more

than independents owned at their peak, about 7

percent of all acreage under lease. The new entrants of the 1970’s include: Franklin Real

Estate, subsidiary of the utility American Electric Power Co.; Ark Land Co., subsidiary of

Arch Minerals, which is in turn owned by oil

companies; Coteau Properties, subsidiary of

North American Coal Co., a coal independent;

Northern Minerals, Inc., a subsidiary of Internorth Corp., a natural gas pipeline company;

Resource Development Co., subsidiary of the

Iowa Public Service Co.; Amca Coal Leasing,

Inc., a subsidiary of Amca Resources, Inc., an

independent coal company; and Eastern Associated Properties Corp., a subsidiary of Eastern

Gas & Fuel Associates which is involved in shipping and oil and gas in addition to coal. The

histories of leases acquired by these companies

as well as those acquired by the subsidiary land

companies mentioned earlier are discussed in

the subchapters covering the business activity of

their parents.
—

63

M. OTHER LEASEHOLDERS

The other leaseholder category includes all

present and past lessees whose principal line of

business activity does not fall among the 12

groups previously discussed. As shown in table

27, the percentage & acres held by companies

falling in this category has varied over the past

30 years from a low of 4 percent in 1955 to a

high of 13 percent in 1960 and 1965. About 10

percent of the land currently under lease falls

into the other category.

The lessees in this category have a wide range

of business activities and their lease acquisitions

do not appear to follow any particular pattern.

Nor are there any apparent distinguishing

trends in the evolution of their leaseholding

over time. In order to provide as comprehensive

a picture of coal leasing as possible, the 1980

leaseholdings of other companies are described

in detail below. Other companies holding leases

earlier are then simply listed as the histories of

those leases have been discussed in the subchapters of their present owners.

Peter Kiewit Sons, Inc.

Peter Kiewit Sons, Inc., a Nebraska-based

construction and mining company, is currently

the largest leaseholder in the other category.

Kiewit’s 17,875 acres of leased land are included

in nine leases.

Three of Kiewit’s leases are owned entirely by

wholly owned subsidiaries, Rosebud Coal Sales

Co. and Big Horn Coal Co. Big Horn obtained a

Wyoming lease by assignment in 1959. Rosebud

acquired one Montana lease de novo in 1964

Table 27. —Leaseholdings of Companies in

the “Other” Category

Year

1950 . . . .

195 5

196 0

196 5

197 0

1975 . ,

198 0

Number of

leases held

2

4

15

36

38

38

50

Number of

acres held

2,907

3,240

18,288

39,134

41,153

37,051

77,861

SOURCE Off Ice of Technology Assessment

Percent of total

acreage under

lease

70/0

4

13

13

6

5

10

and added a Wyoming lease by assignment 1

year later.

Ownership of Kiewit’s other six leases is

shared with other companies as part of joint

ventures. Ownership of Kiewit’s 50-percent

share in each is held in the name of Wytana,

Inc., a subsidiary. Four leases are part of the

Decker Coal project in Montana. Pacific Power

& Light Co. is the partner. (See Electric Utilities,

pp. 21-28 for lease histories. ) Kiewit also owns a

50-percent share in two joint ventures which

hold Wyoming leases. Ownership of each is

shared with a Union Pacific Corp. subsidiary.

The first, Black Butte Coal Co., obtained a

14,903-acre tract by assignment from Kiewit’s

Rosebud Coal Sales Co. subsidiar y in 1976.

Rosebud had obtained the lease de novo only 4

months prior to the assignment. This is the second largest coal lease ever issued by the Department of Interior. In the second project,

Kiewit holds a 50-percent interest in Cumberland Coal Co. which obtained a lease by assignment from FMC Corp. in 1977.

Union Pacific Corp.

Railroad leaseholdings are restricted by the

Mineral Leasing Act as follows:

NO company or corporation operating a common-carrier railroad shall be given or hold a permit or lease under the provisions of this chapter

for any coal deposits except for its own use for

railroad purposes. ” (30 U.S.C. 202)26

Since railroads have virtually eliminated their

use of coal as a boiler fuel for their locomotives,

opportunities to mine for their own use are

practically nonexistent.

Joint venturing through subsidiaries far removed structurally from the parent organization has recently provided indirect entry into

‘“[-lesp[~nslb]l]ty t~~r the entt~rcement [>} th]s pr~>~,lsl~~n ~~a~ t ran~-

terred from the Department (}t the> lnterl~~r t[~ thd Department (,t

Energy when IXIE was t~rganlzed ]n 1Q77, (See Q 1 Stat. 5fJ5 and 42

LJ. S.C. ( 7152(b) ) A recent ]u~tlce Department rep{~rt rec~~mmends

~triklng tr~lm 1+’d~’ral law pr(~h ihltlt~ns Jgalnst the Issuance [It

Federal C<M1 leases tt~ rallr{~ads t~r their att]] iatcs. ( C(>I)I/~ct~tI(~)~ [)1

tli[’ Clu~l 1~~111(~ tr y rep(}rt t~t the U S. [>epart ment (~t lust Ice, purtua n t to wc, 8 t~l the Federal C-(M I I.e.]~1 ng Amend m~~n ts Act of

1Q76 for tiscal year 1Q79: U.S. Department {~t lustice, Antitrus t

Dlvlsion: N~lvember 1Q80. )
64

leaseholding by railroads. The Union Pacific

Corp., parent company for the Union Pacific

Railroad, has acquired a 50-percent interest in

four joint ventures which hold large Wyoming

leases and mine coal for nonrailroad use. As explained above, the Union Pacific Corp. is a partner, with Peter Kiewit, in the Black Butte Coal

Co. and Cumberland Coal Co. lease development projects. The Union Pacific Corp. ’s share

in both is held in the name of Bitter Creek Coal

Co. In a third project, Medicine Bow Coal Co.,

a joint venture with Arch Mineral Corp., acquired a lease in 1974 which was segregated

from a lease owned by Arch Mineral’s subsidiary, Ark Land Co. The Union Pacific Corp. ’s

share is held in the name of Hanna Basin Coal

Co. Finally, Stansbury Coal Co., ownership of

which is shared with an Ideal Basic Industries,

Inc., subsidiary, obtained a lease by assignment

in 1975. The Union Pacific Corp. ’s share in this

joint venture is held in the name of Winton Coal

c o .

The Union Pacific Corp. has undertaken its

lease development projects through complex

ownership structures and participation in joint

ventures. Ownership of the Union Pacific

Corp.'s share is through subsidiaries, Winton,

Hanna basin, and Bitter Creek, which are legal

entities for leaseholding separate from the railroad unit. (They have no employees. ) Moreover, these subsidiaries are not direct subsidiaries of the Union Pacific Corp., but are owned

by Rocky Mountain Energy Co., a resource development subsidiary, which in turn is owned

by the Union Pacific Corp.

Cement Manufacturers

Four companies primarily involved in the cement business currently own Federal coal leases.

Ideal Basic Industries, Inc. f holds six of the nine

leases controlled by these companies. Five of

Ideal’s leases are located in New Mexico; they

were obtained by assignment from Consolidation Coal Co. in 1977. The sixth lease is owned

by Stansbury Coal Co., a joint venture with the

Union Pacific Corp. (see above). Ideal’s 50-

percent share in this venture is held in the name

of a subsidiary, Ideal Coal Co. Texas Industries,

Inc., obtained a New Mexico lease by assignment from an individual in 1976. Monolith

Portland Cement Co. has owned a Colorado

lease since 1951, currently in its name and

earlier through a now dissolved subsidiary,

Monolith Portland Midwest Co, California

Portland Cement Co, obtained a Utah lease by

assignment from an independent coal company

in 1962.

Steel Subsidiaries

Two steel companies which are subsidiaries of

diversified corporations own leases. Since their

leases were acquired when they were independent corporations, the lease histories of the holdings of the two companies, Lone Star Steel,

owned by Northwest Industries since 1959, and

CF&I Steel, owned by Crane Co. since 1969, are

discussed under The Steel Industry. Lone Star

currently owns seven Oklahoma leases and

CF&I owns one Colorado lease.

Resource Development Companies

Two resource development companies, firms

involved in the exploration and production of

more than one energy resource where no single

resource development program (such as coal,

oil, or uranium) predominates, own leases.

In May 1977, Mountain States Resource

Corp. obtained an 8,824-acre tract in Utah. It is

the sixth largest lease ever issued by the Department of Interior. The lease stems from a prospecting permit issued to an individual in 1968

and assigned to Mountain States 1 year later.

Mountain States, a small company founded in

1969, is involved in Western coal, oil and gas,

and uranium development.

Energy Reserves Group, Inc., is the second independent resource development company in

the survey. In 1979, it acquired four leases by

assignment from Coal Search Corp. The leases

were originally issued to individuals. Each lease

was assigned to two other individuals before acquisition by Coal Search in 1976. Energy Reserves Group bought Coal Search Corp. in part

to acquire the leases. The company mines coal

and uranium.

Banks

Two banks now hold leases. Carbon Emery

Bank obtained three Utah leases in 1969 when a
65

debtor which had used the leases as collateral,

defaulted on a loan. The Alaska State Bank has

owned one of the four outstanding Alaskan

leases since it was assigned to it from individuals

in 1972.

The Remaining 1980 Lessees

Eight more companies, not previously discussed in this report, now own Federal coal

leases. Eastern Associated Properties Corp., a

subsidiary of Eastern Gas and Fuel Associates,

shares ownership of a New Mexico lease with a

subsidiary of Texas Eastern Transmission C0.

27

Mining Systems Corp., a subsidiary of the

Washington based construction company,

Standard Equipment, Inc., obtained an Oklahoma lease by assignment from an independent

mini ng company in 1976. Leeco, Inc., a coal .

mining subsidiary of the diversified Kaneb Services, Inc., obtained a Kentucky lease de novo in

1975. Midcontinent Limestone Co., a limestone

mining company, obtained three Colorado

leases when it bought Coal Canyon, Inc., in

1972. Coal Canyon had acquired the leases as

an independent company by assignment in the

1960’s. Two companies primarily involved in

producing materials for petroleum drilling, Geo

Resources Exploration, Inc., and American ColV( )1 ved I n mar-l t I me, coal, 011, and g~ \ bu>)nesses.

loid Co., acquired single North Dakota leases de

novo in 1964 and still own them. Equipment

Rental Service of Salt Lake City, owned by the

land agent Malcolm McKinnon, owns partial interest in three leases in Utah, two with Coastal

States Energy Co. and one with Pacific Gas &

Electric. (See Electric Utilities and Oil and Natural Gas Pipeline Companies, pp. 21-28 and

48-51 for lease histories. ) Finally, Cooperative

Security Corp., owned by the Church of the

Latter Day Saints, obtained three Utah leases de

novo in the early 1960’s and retains ownership

today.

Other Lessees 1950-75

The following table lists lessees falling into

the other category in this survey which owned

leases at one or more of the six analysis dates

—1950, 1955, 1960, 1965, 1970, 1975—bu t

which currently do not hold leases.

Business activity

of controlling

Lessee Dates interest

Northwest Improvement

Co. . ................1950, 1955 Railroa d

Sapinero Uranium Co.. . . .1960, 1965 uranium

Mine Service Co. . . ......1965 Resource

accounting

S. E. Evans, Inc. . . . . . . . .1965, 1970, Construction

1975

Northern Wyoming Land

Co. . ................196 5 Ranching

Ruby Co. . .............1965 Diversified

Farmers Union Central

Exchange . . . . . . . . . . . . . 1970, 1975 Fuel procurement

Simplot Industries . . . . .. .1970, 1975 Diversified

Maneotis Sheep Co., .. ...1975 Ranching

Plateau Mining Co, . . . . . .1975 Uranium
APPENDIX

Methodology
APPENDIX

Methodology

This study of the ownership of existing Federal

coal leases was conducted between November 1979

and October 1980. Most of the data collection and

analysis was completed by May 1, 1980. A draft report was prepared in May 1980. Revisions and corrections were made between May and October in response to comments by reviewers and after the receipt of additional information gathered during telephone interviews and at OTA Task Force meetings

on the development prospects of Federal coal leases

in Santa Fe, N. Mex., Denver, Colo., and Cheyenne,

Wyo.

Data Collection

The core of this project was the collection of the

ownership histories of each of the 538 outstanding

Federal coal leases in 13 States. This study analyzes

the ownership histories of the currently valid coal

leases contained on a master list developed by OTA

from the Automated Coal Lease Data System maintained by the Department of Interior. A few leases

subsequently have been issued which are not included in this study. Also, this study does not examine coal leases which have been relinquished and

thus are no longer in existence. Every owner of

record at any time in the history of each presently

valid lease was identified.

The State Bureau of Land Management (BLM) offices are the primary repositories of lease ownership

information. Summaries of ownership data appear in

serial books maintained in BLM public records room.

More complete information is contained in voluminous case files which house correspondence, memoranda, and legal papers pertaining to each lease.

In October and November 1979, three trial data

collection trips were made: one to Denver and two to

Salt Lake City. The purpose of these trips was to gain

a familiarity with the public records, to identify and

resolve potential data collection problems, to organize data worksheets, and to collect a portion of

ownership information from the States with the largest number of outstanding leases. Proposed worksheets were reviewed and modified.

The actual lease histories for 523 of the 538 leases

were obtained during a 5-week field trip from midNovember through late December 1979. Serial pages

for each of the leases were examined. A serial page

records the date of lease assignments. The research

team discovered that when more than one owner has

held title to a lease at different times (true for 78 percent of the leases) or when more than one acreage

modification has taken place (true for about 30 percent of the leases), the accurate sequence of title

transfers and acreage changes often could not be

ascertained from the serial pages alone. Accurate information for these leases was obtained from a review of the case files themselves. ●

In addition to the case files and serial books, the

research team examined the corporate qualifications

statements for as many of the present and past lessees

as the BLM maintains records. These statements are

contained in files generally housed in the offices of

the land law examiners at each State BLM office.

The field trip covered leases in the States of

California, New Mexico, Oklahoma, Colorado,

Utah, Wyoming, Montana, and North Dakota. Lease

ownership data for 15 leases in other States were obtained by mail or phone interviews with BLM staff in

Fairbanks and Anchorage, Alaska, Portland, Oreg.,

and Alexandria, Va.

Lease ownership information was recorded on

worksheets, one for each lease.

Data Organization

In order to study the changes and trends in lease

ownership, seven key dates were selected for intensive study: January 2 of the years 1950, 1955, 1960,

1965, 1970, 1975, and 1980. Using the worksheets as

data sources, the leases existing at each of these key

dates were listed in ledger books. The ownership of

each lease at each of the key dates was recorded as

was the acreage of the lease at that time.

Analysis of this information enabled the research

team to determine the total number of leases in effect

at each of the seven dates, the total acreage under

lease, and a complete list of lessees. As mentioned

above, the total does not include all outstanding

leases at each key date; rather it includes only those

leases which are in existence now. Other leases in effect at one or more of the analysis dates, but subsequently relinquished, were not included in this study.

Lessee Analysis

The largest part of the analytical work in the study

consisted of placing each present and past lessee into

a category defined by its principal business activity

and organization at the time it held the lease. This

task was complicated because many leases have

changed hands a number of times over the past 30

69
—

70

years and because there have been many changes in

organization and business activity among the lessees

themselves. Each change was identified and dated,

and information about now defunct lessees was

unearthed.

Even without these changes, designations of the

principal business activities for many companies are

often difficult to make. Increasingly, lessees include

diversified companies involved in several businesses

with no clearly dominant activity. Also, divisions

between some categories—such as coal or oil versus

resource development-are somewhat arbitrary. Furthermore, recognizing the difference between a small

coal or metals company which has not mined for several years because of soft markets and a landholding

company which does not plan to mine is often a complicated task. To the extent possible, the percent of

total sales contributed by different business activities

was used as the determinant of principal lines of

business for lessees examined in this survey. For

private companies which do not publish financial reports or small companies with little or no current income, the research team attempted to assess their

business capabilities or intentions from interviews

and published materials of a nonfinancial nature.

The major source of information for this phase of

the study included the corporate qualification

statements at the BLM; company annual reports;

standard industry reference texts such as Moody’s

Public Utilities, Over the Counter, and Industrial

Guides; interviews with State government, BLM, and

U.S. Geological Survey officials, land law examiners,

and coal specialists; interviews with members of the

coal mining industry; and newspapers and periodicals such as the Wall Street ]ournal, Coal Age, and

Coal Outlook.

The corporate data collected in this section of the

study enabled the categorization of 99 percent of all

present and past coal lessees and their controlling interests.

Any business category whose members controlled

5 percent of the land under lease at any of the seven

analysis dates (either through lease ownership by an

independent corporation or through parent company

ownershi p of a lease) was identified for separate further analysis. Any lessee not falling clearly into an

identifiable business category, but which on its own

controlled 5 percent of leased land at any analysis

date, was also separated for individual attention. All

other lessees were combined into the other category.

The business activity categories and individual lessees

meeting the above criteria are:

Utilities;

Energy companies;

Steel companies;

Peabody Holding Co.;

Independent coal company;

Minor oil and gas companies;

Unincorporated individuals;

Natural gas pipeline companies;

Nonresource-related diversified companies;

Kemmerer Coal Co.;

Metals and mining companies;

Landholding companies; and

Other.

The criteria for categorization are explained in the

respective business activity subchapters.

Next, each coal lessee was categorized according to

its business organization, as follows:

Unincorporated individuals;

Independent corporations;

Subsidiary corporations; and

Multicorporate entities.

Lessees falling into the subsidiary or multicorporate

business organization were further divided into the

following categories:

Subsidiary coal mining companies;

Subsidiar y resource development companies;

Subsidiary landholding companies; and

Passive subsidiaries (i.e., no active employees).

Final Data Analysis

With the lease history and corporate information

in hand, it was possible to analyze lease ownership

patterns at each of the seven key analysis dates. Lists

of companies or individuals in each of the business

categories at each of the dates were made. The same

process was performed for business organizations,

The total number of leases and acreage falling into

each category was then tabulated. From this information, it was possible to analyze quantitativel y

changes in lease ownership by business activity and

organization in relative and absolute terms over

time.

Returning again to the worksheets, it was then

possible to investigate the acquisition routes for

leases eventually obtained by each business category.

The histories of coal leases include all transfers of

title and acreage modifications from the date of lease

issuance for competitive leases or the date of issuance

of prospecting permits from which preference-right

leases were derived until approximately the end of

1979. Several leases have been assigned since the

lease assignment histories were collected for this project. No lease assignments approved in 1980 were included in this report, However, changes in lessee

ownership through mergers and acquisitions which

have been widely publicized have been included as

comprehensivel y as possible in the lessee analysis

portion of the report.

‘JUS. gGovernment