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agree to a new coal price which, in the parties’ views, reflected
the then market price for coal.
Santa Fe was required to maintain coal reserves adequate to
supply the quantity of coal called for under the WEF contract.
The WEF contract provided that any party subsequently acquiring
an interest in the Lee Ranch mine coal reserves “shall take such
interest subject to the dedication and reservation” of said
reserves. The contract also provided that the “dedication” was
not intended to be construed as a transfer to WEF of an interest
in the coal in place, but that it was “imposed as and * * *
[constituted] both an equitable servitude binding upon * * *
[Santa Fe] and * * * [its] successors and assigns and a covenant
running with * * * [Santa Fe’s] interest”.
The contract price was based on a complex formula that, to
some extent, was based on the variable and fixed costs incurred
by Lee Ranch mine in supplying coal under the contract. Under
the WEF contract, Santa Fe was the exclusive supplier of the
Escalante Station’s coal needs within minimum quantity and
quality standards, on an annual basis, with no limit on the
amount of coal that could be sold to WEF. The contract, however,
did contain an estimate of the Escalante Station’s requirements
as being .5 million to 2.3 million tons per year. Under the WEF
contract, Santa Fe had “the right to supply all of the Usage * *
* for each Year.” Santa Fe could not sell coal from the Lee
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Last modified: May 25, 2011