US regulator moves to block deal by St. Louis-based coal giants

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Trains are loaded with coal at dawn at Arch Coal's Black Thunder mine near Wright, Wyo. The trains never stop moving under the giant coal loadout silos that use a computerized system to load each car.

Trains are loaded with coal at dawn at Arch Coal’s Black Thunder mine near Wright, Wyo. The trains never stop moving under the giant coal loadout silos that use a computerized system to load each car. (J.B. Forbes/St. Louis Post-Dispatch/TNS)

ST. LOUIS – A U.S. government agency is pushing to block a proposed joint venture of Peabody Energy and Arch Coal, arguing that the partnership between the country’s two largest coal companies – both headquartered in the St. Louis area – would be bad for consumers.

The Federal Trade Commission announced Wednesday that it had filed an administrative complaint challenging the proposal to combine some of the companies’ assets in powerhouse coal-producing regions of the American West, such as Wyoming’s Powder River Basin.

“Whatever the product, the antitrust laws protect customers from mergers that lead to higher prices,” Ian Conner, director of the FTC’s Bureau of Competition, said in a 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.”

The coal companies said in a statement they intend to continue their pursuit of the joint venture, arguing customers actually stand to gain value from the arrangement.

“The proposed joint venture offers a clear and compelling path to strengthen both our and our customers’ ability to compete in today’s marketplace with electricity produced from coal,” said Peabody President and CEO Glenn Kellow. “We believe that the commission has reached an incorrect decision that should be rapidly remedied within the court system to allow customers and others to benefit from the combination.”

Arch CEO John Eaves called the need for the merger “self-evident.”

“The proposed joint venture promises to enhance the cost-competitiveness of our thermal (coal) operations,” he said.

The companies have said the joint venture, which was announced in June 2019, would “unlock synergies” of $820 million. The focus of the move would be the combination of Peabody’s North Antelope Rochelle Mine and Arch Coal’s Black Thunder mine – surface-mining operations near Wright, Wyoming. The properties border one another, and are the country’s two most productive coal mines, by far.

“This creates one operator that controls almost a third of U.S. coal production and two-thirds of Powder River Basin coal production,” Rob Godby, a professor of energy economics at the University of Wyoming, told the Post-Dispatch last year, after the proposal first emerged.

Godby said then he thought the proposal could win over regulators, given the intense competition facing the coal industry.

But he expected close regulatory scrutiny to follow.

“I’m sure it will raise some eyebrows,” Godby said. “There could be some people who think they’re trying to corner the market for Powder River Basin coal.”

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