**Exhibit 10.86.1**
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[*] Indicates that the confidential portion has been omitted from this filed exhibit and filed separately with
      the Securities and Exchange Commission
```

**AMENDMENT THREE TO UNDERGROUND COAL SALES AGREEMENT**

**THIS AMENDMENT THREE TOUNDERGROUND COAL SALES AGREEMENT** ("Amendment Three"), by and between SANJUAN COAL COMPANY, a Delaware corporation (referred to herein as "SJCC") andPUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation, and TUCSONELECTRIC POWER COMPANY, an Arizona corporation (collectively referred to hereinas the "Utilities") (with SJCC and Utilities herein sometimes collectivelyreferred to as "Parties"), amends that certain Underground Coal Sales Agreementdated August 31, 2001 as amended (the "UG-CSA") between SJCC and the Utilities.

###### RECITALS

###### **WHEREAS**, the Parties wishto restate Section 8.3 "Coal Processing Component" of the UG-CSA. 

**NOW THEREFORE**, inconsideration of the terms, covenants and agreements contained in thisAmendment Three and for other good and valuable consideration, the Utilitiesjointly and severally agree with SJCC as follows:

**AGREEMENT**

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

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

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

Processing CIEmin= [*]

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

Processing CIEmin [divided by *]

** **

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

----

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

Public Service Company of New Mexico

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

 

Tucson Electric Power Company

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

 

San Juan Coal Company

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

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# CONSENT OF GUARANTOR

BHP Minerals International Inc., a Delaware corporation,(formerly BHP-Utah International Inc.), the guarantor of the obligations of SanJuan Coal Company under the Underground Coal Sales Agreement pursuant to theGuarantee dated September 25, 2001 (the Guarantee"), hereby consents to theforegoing Amendment Three to the Underground Coal Sales Agreement and agreesthat all references in the Guarantee to the Underground Coal Sales Agreementshall be deemed to be references to the Underground Coal Sales Agreement asamended by this Amendment Three.

BHP Minerals International, Inc.

By:       /s/ Earl K. Moore                                                        Name:       Earl K. Moore                                                       Title:          CEO & President                                                                        Date:    May10, 2005                                     

 

 

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

 

 

 

(Corporate Seal)