"We allege that Arch Coal Inc.'s proposed purchase of Triton Coal Co. likely would significantly reduce market
competition for providers of Southern Powder River Basin coal, and result in higher coal prices," Miller said.
"That area provides nearly 98 per cent of the coal used by public utilities to generate electricity for Iowa homes and
businesses," he said. "Huge trains full of this coal roll into Iowa every single day. Any significant price increase for
Powder River Basin coal would have a very harmful effect on Iowa consumers and businesses, and the state economy."
The lawsuit was filed
today in Federal District Court in Washington, D.C., by Iowa, Illinois,
Kansas, Missouri, Arkansas, and Texas. The complaint seeks injunctions
against Arch Coal Inc. of St. Louis, MO; Triton Coal of Gillette, WY;
and Triton's parent company, New Vulcan Coal Holdings, of Fairview Heights,
IL. Missouri is leading the states' lawsuit. The six states are working
very closely with the Federal Trade Commission, which simultaneously filed
a separate lawsuit to block the proposed purchase of Triton Coal by Arch
"We allege the purchase is illegal under federal law," Miller said. The states said the merger of Arch Coal and Triton
would violate the Clayton Act, a federal law that prohibits anti-competitive practices, by eliminating direct competition,
increasing the likelihood that unilateral market power would be exercised, and decreasing the likelihood that producers
would develop additional mines.
The states said the acquisition, if allowed to go through, would result in the top three competitors controlling a very high
percentage of Southern Powder River coal (86% of overall coal production in 2003, and virtually all of the Basin's better
quality high-Btu coal.) Peabody, Kennecott and Arch already are the region's largest coal producers.
"The merger would reduce competition, increase the likelihood of coordinated interaction among the remaining coal
producers, and reduce the incentive to offer lower prices or expand coal production," Miller said.
"And there is no easy alternative to our use of Southern Powder River coal," he added. "Most coal-fired plants in Iowa are
designed or adapted for low-sulfur dioxide content coal from Wyoming and can't burn high-sulfur dioxide coal from other
regions without extensive and expensive reconfiguration."
One-third of all coal mined in the United States comes from the Southern Powder River Basin located in northeast
Wyoming, and the six states filing today's lawsuit use nearly half of all the coal from that region burned to generate
electricity nationwide. Southern Powder River coal has a strong economic advantage for several reasons, including its low
sulfur content, which makes it one of the few coals to comply with the 1990 Clean Air Act, its moderately high energy
content, and its exceptionally low mining costs.
The states said the structure of the Southern Powder River Basin coal market -- including the small number of competitors,
readily-available market information, and homogeneity of the product -- make coordination among competitors more
likely. They noted that Arch Coal has publicly supported limiting coal production from the region and has endorsed
reducing output in order to increase pricing.
"We are asking the Court to block Arch's purchase of Triton as anti-competitive and a violation of antitrust law," Miller
said. "We aim to protect our consumers from higher energy prices that likely would result from less competition in this
crucial source of coal used in our states."
UPDATE -- September 2004:
On August 16, 2004, the Federal District Court refused to block
the merger, as the States and FTC had sought. On August 20, 2004, the
Circuit Court of Appeals declined to stay the merger pending appeal, as the
States and FTC had sought. In September, the FTC and the States dismissed