Feds Want To Halt Peabody-Arch 'Joint Venture'

The Federal Trade Commission on Wednesday filed a complaint in federal court alleging that a proposal between Peabody Energy and Arch Coal to combine two coal mines in Wyoming's Powder River Basin will eliminate competition between the two largest coal-mining companies in the U.S.

“Whatever the product, the antitrust laws protect customers from mergers that lead to higher prices," FTC Director of Bureau of Competition Ian Conner said in a written statement. "This joint venture would eliminate the substantial head-to-head competition between the two largest coal miners in the United States, and that loss of competition would likely raise coal prices to power-generating utilities that provide electricity to millions of Americans."

According to the complaint, Peabody and Arch Coal produced more than two-thirds of the coal mined in the Southern Powder River Basin.

Coal mined in the Powder River Basin is the lowest cost coal available to the nation's power plants. Further, the complaint says, power plants that burn PRB coal rarely switch to coal from other regions in the U.S.

"The Joint Venture would create a single entity with a dominant share of SPRB coal reserves, and a dominant share of sales to SPRB customers," the complaint says. "Post-Joint-Venture, the combined entity would control more than 60% of SPRB coal reserves and approximately 60% of SPRB coal production."

The two coal giants announced Wednesday that they intend to continue pursuing the "highly synergistic joint venture."

Peabody President and CEO Glenn Kellow said in a statement that the companies have "provided tremendous amounts of evidence to the FTC during an extensive review, fully demonstrating that coal, including Southern Powder River Basin coal, faces intense competition from natural gas and alternate fuels."

Kellow said the FTC's decision to file the complaint was incorrect.

Peabody and Arch intend to fight the FTC's decision in federal court in the coming months and allege that the trade commission has failed to "reflect the true competitive nature of the current U.S. energy landscape."

Arch and Peabody announced in June that the two companies intend to combine the Black Thunder and North Antelope Rochelle Coal Mines in Campbell County. The North Antelope Rochelle Mine is the largest coal mine in the world, according to Peabody.

The proposed joint venture also includes combining operations in Colorado.