BUSINESS

Feds reject merger of top U.S. coal companies

The Federal Trade Commission today moved to block America's two largest coal companies from merging in the nation's top coal region.

The commission filed an administrative complaint contesting the creation of a new coal company to centralize control of the dominant mines in the Powder River Basin.

Peabody Energy Corp. and Arch Coal Inc. pitched their joint venture as self-preservation. Coal demand has been shattered by the wave of coal-fired power plant retirements nationwide (Energywire, June 21, 2019).

But by a 4-1 vote, the FTC rejected the argument that coal companies' real competitors are natural gas and renewable energy, not each other.

"Whatever the product, the antitrust laws protect customers from mergers that lead to higher prices," the commission's Bureau of Competition director, Ian Conner, 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 new company would control seven mines, two in Colorado and five in Wyoming's Powder River Basin.

The commission argued that power plants that depend on the region's low-sulfur, low-emissions coal would not have any other real option.

In 2018, Arch and Peabody produced roughly five times more coal than any of the region's only other coal producers — the Navajo Transitional Energy Co., Eagle Specialty Materials LLC and Kiewit Corp.

"None is likely to increase output or otherwise compete more aggressively to sufficiently eliminate the harm from a post-Joint Venture price increase or output reduction," the commission wrote.

Peabody and Arch maintain that the commission missed the point that natural gas and renewables are driving coal off the grid.

"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," Peabody President and CEO Glenn Kellow said.

The FTC authorized its staff to file a temporary restraining order and preliminary injunction in the U.S. District Court for the Eastern District of Missouri to maintain the status quo.

The administrative trial is scheduled to begin Aug. 11.

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