Attorney General's News Release

April 1, 2004

Nixon leads six-state effort to block proposed merger of major producers of coal used to generate electricity

Jefferson City, Mo. — Attorney General Jay Nixon today led a six-state federal lawsuit to block a proposed merger between two of the major producers of coal from Wyoming's Powder River basin, the source of 96 percent of the coal used to generate electricity in Missouri. Nixon says the purchase of Triton Coal Co. by St. Louis-based Arch Coal Inc. would significantly reduce market competition for providers of Powder River coal and result in higher utility rates for consumers of electricity in Missouri.

"If allowed to go through, this merger would combine two of only four major producers of Powder River basin coal," Nixon says. "Without the competition of two major producers of this coal, the incentive to offer lower prices and develop or expand additional mines is gone."

Missouri is the lead state in a group that includes Arkansas, Illinois, Iowa, Kansas and Texas that filed a complaint for injunctions against Arch Coal; Triton Coal, of Gillette, Wyo.; and Triton's parent company, New Vulcan Coal Holdings, of Fairview Heights, Ill. The lawsuit, filed in federal district court in Washington, D.C., comes after the Federal Trade Commission, in a separate action on March 30, announced plans to seek a federal district court order to block the proposed transaction.

Nixon says 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.

One-third of all coal mined in the United States comes from the area of Wyoming known as the Southern Powder River Basin (SPRB), Nixon says, and the six states filing today's lawsuit use nearly half of all the SPRB coal burned to generate electricity nationwide. Three of the other plaintiff states besides Missouri — Arkansas, Iowa and Kansas — use SPRB coal as more than 95 percent of the coal burned to generate electricity.

Coal mined from this region has a strong economic advantage for several reasons, including a low sulfur content that makes it one of few coals to comply with the 1990 Clean Air Act; a moderately high energy content; and exceptionally low mining costs.

Nixon adds that the structure of the SPRB coal market — including a small number of competitors, readily available market information, and homogeneity of the product — make coordination among competitors more likely.

"Arch Coal has publicly supported limiting SPRB coal production and has endorsed reducing output in order to increase pricing," Nixon says. "This deal would only make coordination and collusion among producers easier."

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818