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to the buyer/utility. Respondent also points out that under
neither contract did the utility have the right to go onto the
Lee Ranch land and extract coal. Instead, respondent contends
Peabody had to mine and supply the coal required by the utility’s
power plant. Accordingly, respondent concludes that the supply
contracts are not real property but contracts to sell personal
property. See Townsend v. State ex rel. State Highway Dept., 871
P.2d 958, 959 (N.M. 1994) (observing that though mineral-in-place
interests constitute real property, the underlying minerals are
transformed into personal property when the mineral or physical
substance is severed from the land).
C. Analysis of Coal Supply Contracts Under New Mexico Law
We begin our analysis by noting that the supply contracts
are contracts for the sale of goods under New Mexico law. In
addition, each contract created a servitude obligating Santa Fe
and subsequent owners of the Lee Ranch mine to extract and supply
coal to the power plant. We conclude that under New Mexico law,
the supply contract servitudes constitute real property
interests, for reasons we will discuss.
1. Status as Contracts for the Sale of Goods
Minerals in place (i.e., minerals lying unworked beneath or
on the surface of the land) are considered part of that land, and
an interest in minerals in place is real property for purposes of
New Mexico law. Interests in minerals in place can be separately
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