Arch, Peabody Fire Back At Federal Trade Commission

Jul 8, 2020

Peabody's North Antelope Rochelle Mine is the largest coal mine in the world. The proposed joint venture would combine its operations with Arch's nearby Black Thunder mine.
Credit NASA

The two largest American coal producers have pushed back against the Federal Trade Commission's claim that a proposed merger would cause "anticompetitive harm" to the Powder River Basin. This latest filing comes after months of review in a Missouri federal court.

Peabody Energy and Arch Resources first announced their controversial plan to combine assets in 2019. By sharing control over seven mines in Wyoming and Colorado, the companies said they hoped to save $120 million in annual costs. Together, they would produce nearly 70% of coal in the Powder River Basin.

In February, the FTC requested a temporary stop to that plan. They argued the merger would create a monopoly over the coal industry, stifling competition and leading to higher prices for customers.

Peabody and Arch have now denied those claims. In last week's filing, they said consolidation was necessary in order to compete with natural gas and renewable energy. The companies also criticized the assumption that they would significantly raise prices. In the face of a declining thermal coal market, they said raising prices would be "irrational" and "self-defeating."

Energy economist Rob Godby agreed that a merger would not result in major price spikes. "If coal companies tried to exercise market power to raise prices, they would only hurt themselves in the long run," Godby said. "I would argue this merger is about cost savings, not trying to control a greater share of the market."

He also noted that the merger could lead to what he called a healthy decline, with greater transparency and stability from companies even as the market for coal shrinks. Without consolidation of the industry, Godby said, "There's just too many mines chasing too few customers."

According to Godby, continued overcapacity could lead to a lack of investment and the kinds of chaotic bankruptcies that the Powder River Basin has seen in the past.

The official trial to determine the future of the merger is expected to begin next month.