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Peabody Energy And Arch Coal Face Antitrust Lawsuit

The FTC fears a joint venture between the two largest coal miners in the U.S. would eliminate head-to-head competition and raise utilities prices for consumers. Feb. 26, 2020.
St. Louis Public Radio
The FTC fears a joint venture between the two largest coal miners in the U.S. would eliminate head-to-head competition and raise utilities prices for consumers.

The Federal Trade Commission announced Wednesday it has filed an antitrust lawsuit against St. Louis-based coal companies Peabody Energy and Arch Coal.

The federal suit challenges a proposed joint venture between the country’s two top coal producers to combine mining operations in the southern Powder River Basin and Colorado.

“Whatever the product, the antitrust laws protect customers from mergers that lead to higher prices. This joint venture would eliminate the substantial head-to-head competition between the two largest coal miners in the United States,” Ian Conner, director of the FTC’s Bureau of Competition, said in a statement.

Conner added that a lack of competition would likely raise coal prices for utilities providing electricity to consumers.

According to the complaint, if Peabody and Arch Coal go through with the deal, the joint entity would control more than 60% of coal production in the northeastern Wyoming area.

Mines in the southern Powder River Basin produce more than 40% of the nation’s coal.

It’s distinguishable from coal mined elsewhere — like the Illinois Basin and the Appalachian region — because of its low sulfur content and low cost of production, according to the complaint.

In a joint statement released Wednesday, Peabody and Arch Coal said they plan to carry out the deal, which they announced last summer. 

The companies said the case for combining their assets has grown stronger in recent months.

“We 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 other alternate fuels,” Peabody President and CEO Glenn Kellow said in a statement.

Arch Coal CEO John Eaves said in a statement that “the need for this combination is self-evident.” He added that it will increase cost-competitiveness of thermal operations.

The companies estimate the joint venture, in which Peabody would own 66.5% and Arch would own 33.5%, will result in annual cost savings of $120 million over an initial 10-year period.

The companies plan to litigate the FTC decision within the U.S. federal court system. A trial in a Washington, D.C., administrative court is set for Aug. 11. 

The FTC has authorized its staff to file a separate complaint for a temporary restraining order and preliminary injunction in the U.S. District Court for the Eastern District of Missouri. If granted, that would allow the agency to keep the deal from moving forward until the matter is resolved in court.

Follow Corinne on Twitter:@corinnesusan

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Corinne is the economic development reporter at St. Louis Public Radio.