The Federal Trade Commission is challenging a proposed joint venture between Peabody Energy Corp. and Arch Coal Inc. that would reorganize the companies’ Powder River Basin coal operations under a single umbrella.
The FTC announced Wednesday morning that it’s filed a complaint against the joint venture, claiming that “the transaction will eliminate competition between Peabody and Arch Coal,” according to a press release announcing the move.
In essence, the FTC says the joint venture would give the nation’s two largest coal producers an unfair competitive advantage.
Because Peabody and Arch together control more than 60 percent of the Powder River Basin coal production and reserves, they would have an unfair advantage in a joint venture with a potential to raise prices on their customers, the complaint says.
“The complaint alleges that owners of power generation units designed to burn Southern Powder River Basin coal have high fixed costs, and these units cannot readily replace SPRB coal with natural gas, wind, sun or nuclear fuels,” the FTC says in its press release.
The FTC’s concern for how the joint venture could potentially impact coal-fired power generators shows a possible outcome if the plan were approved, but it’s not that realistic, said Rob Godby, associate dean of the Haub School of Environment and Natural Resources and deputy director of the University of Wyoming Center of Energy Regulation and Policy.
“The FTC’s concern seems to be that (those power companies) are a captive customer to this type of coal,” he said. “That fear they’re going to raise the price on them, there’s just not much room to do that.
“Coal is struggling to stay in the market. We know that. While it would be possible for this combined company to (fix prices at a higher rate), I would argue that’s probably not in their best interest. If you put your customers out of business, is that really a smart move?
“Given the conditions of the market, I would be skeptical that this would raise prices for the consumers.”
Since filing its joint venture proposal with federal regulators in June 2019, Peabody and Arch have maintained the consolidation would create efficiencies and cost savings that couldn’t be realized operating individually.
Those synergies include unlocking about $820 million in savings for the companies in combining their largest assets, the North Antelope Rochelle and Black Thunder mines, into a single operation. They also expect annual savings of about $120 million a year for the first decade of the joint venture.
During the company’s 2019 year-end report earlier this month, Peabody President and CEO Glenn Kellow said Arch and Peabody have submitted about 3.1 million pages of documentation, six white papers and have made four presentations to the FTC.
Both companies can fight the FTC’s challenge at an administrative trial scheduled to begin Aug. 11.
For now, the news of the agency’s 4-1 vote against the joint venture will not go over well for their financial health, said Benjamin Nelson, lead coal analyst for Moody’s.
“The FTC’s rejection of the proposed joint venture between Peabody Energy and Arch Coal is a credit negative development for both companies,” Nelson said in a statement reacting to the FTC’s challenge. “While the companies plan to challenge today’s decision, Moody’s expects that business conditions for coal producers in the Powder River Basin will remain extremely challenging in light of ongoing secular decline in the demand for thermal coal, low natural gas prices encouraging switching in the near-to-medium term and far fewer opportunities to export coal compared to other coal basins in part due to social opposition in the Pacific Northwest.”
Since the companies went public with their joint venture plan, many coal industry analysts and watchdogs have said it could be the best hope for the Powder River Basin to survive longer in an increasingly challenging marketplace.
That the FTC is challenging the joint venture “is actually probably bad news for Wyoming, because if anything, this merger would’ve created a more profitable, more stable company,” Godby said.
“From Wyoming’s perspective, in the short run this is probably good for the other companies in the basin in that they won’t have the super-competitor who would control well over 60% of the Powder River Basin output,” he said.
“But in the long term, this could potentially hurt the Powder River Basin, because this was one avenue to extend the life of the basin,” Godby added. “I’m not sure (price-fixing) is actually a realistic threat, and you can make a case that the potential benefits of this merger could outweigh the negative consequences.”
In a statement reacting to the FTC, Wyoming Gov. Mark Gordon criticized the agency's challenge as "a wrongheaded attempt to drive a nail into an industry which is struggling to adapt to a rapidly changing marketplace."
He said the joint venture won't change the fact that the nation's energy portfolio has been moving away from coal and including a more broad palate of wind, solar, natural gas and other sources.
The state of Wyoming "will be watching this court case closely," Gordon said.
Companies to fight FTC vote
Arch and Peabody intend to move forward with the joint venture, according to an Arch Coal press release reacting to the FTC’s announcement.
The case for combining assets “has only grown stronger in recent months,” the statement says, adding the companies “intend to continue to pursue creation of a joint venture to strengthen coal’s competitiveness with other energy sources.”
Arch CEO John W. Eaves said the need for a joint venture now is “self-evident” and that it will “create a stable, durable supply platform for our thermal customers even as we continue our organizational pivot towards global metallurgical markets.”
Kellow said both companies have made a thorough case for the joint venture.
“We have provided tremendous amounts of evidence to the FTC during an extensive review, fully demonstrating that coal, including Southern Powder River Basin coal, faces intense competition from natural gas and other alternative fuels.”
Peabody and Arch will fight the FTC’s decision in the federal court system and maintain that the agency “fails to reflect the true competitive nature of the current U.S. energy landscape,” according to the companies’ statement.
Early Wednesday morning stock trading shows that the FTC’s rejection of the joint venture caught some by surprise, Godby said.
Peabody was down nearly 10% in early trading and Arch down more than 4%.
That suggests the market expected the FTC to not delay or contest the joint venture, Godby said. It also might be a surprise because of President Donald Trump and his administration’s vocal pro-coal stance.
“The administration has been, at least publicly, very pro-coal,” Godby said. “So, if there was any kind of administration influence over the agencies and the Executive Branch, this would kind of fly in the face of that.”
Eleven young women sat waiting to apply for spots and possible jobs with Campbell County Health as certified nursing assistants, making the Monday trip despite a snowstorm and whiteout conditions.
It was the second local CNA Fair in a month hosted by Campbell County Health. The 11 women wanted to take advantage of the classes, paid for by CCH, and the job openings. If they complete the classes and pass their exams, they’ll have jobs — many of them at the Legacy Living and Rehabilitation Center, where the interviews were taking place.
The unique CNA Fairs are one way hospital officials hope to alleviate a shortage of CNAs, caregivers who ultimately have the most contact with patients.
“It’s a statewide shortage and we’re starting to see it in our facilities,” said Jessica Black with the CCH Human Resources Department. “It’s specifically for those who need to take the class (to become certified) and we’ll pay for the class.”
At a two-day January CNA Fair, the organization filled all available openings for the class. The fair Monday afternoon was aimed at the next CNA class.
The health organization may offer another fair in April or May to fill the seats for its third class, which starts in June, Black said.
“Depending on the need, we hope to do this for each class,” she said. “We want the classes as full as possible.”
It’s paying off
The fairs play a critical role, not just with the needs of residents at the Legacy, but also in finding people interested in starting a satisfying medical and health career, said Jonni Belden, vice president of continuing health services and manager at the Legacy.
“It provides those we hire with a really positive experience,” she said, adding that the Legacy has about a 60% retention rate.
They work hard and carry a lot of the workload, she said.
CNAs are responsible for maintaining patient hygiene, supporting doctors and nurses in medical procedures and technical treatments, patient charting and explaining care instructions to patients.
“The turnover in long-term care is always pretty high,” Belden said. “Nationally, this is becoming one of the big issues.
“This is one more tool in our toolbox. It is paying off. It helps fill our CNA classes and it’s not just at the Legacy.”
She said CNAs also work in the hospital’s medical/surgery department and Behavioral Health Services, along with other areas.
What do CNAs do?
It’s the lowest level of nursing, said Darla Parks, one of the CNA instructors who was signing up students for jobs and classes on an immediate basis at the fair Monday.
The CNA classes include Level 1 or basic, in which students have to attend three weeks of classes and pass with at least 80% proficiency on written and skills tests. The CNA candidates also have to pass a written test given by the Wyoming State Board of Nursing to earn certification. To qualify for the classes, a candidate has to be at least age 18 and have earned a high school diploma or equivalency.
There also are certified nursing aides (CNA-2) training classes for those age 18 and older with at least 1,500 hours on the job as a CNA and medication aides-C certification courses offered for CNA-2s. Those MA-C requirements include 80 hours of classroom instruction, 50 hours of online courses and 40 hours as a CNA-2 of one-to-one clinical experience, allowing them to give medications to stable patients.
“The CNAs have the most contact with a patient,” Parks said. “They do a lot. There’s a lot of day care and working with nurses and medical staff.
“It’s busy and it’s a tough job. They work hard.”
But they also establish important relationships with patients, she said. Because of that, some CNAs are eager to go to work every day, where they can truly make a difference in other people’s lives.
“They’re a vital part of our health care team,” Parks said.”There’s a shortage of them in our state and in our region. We pay better than other places.”
Among the benefits
While taking classes — paid for by CCH — people can earn $12.37 an hour. Once they receive certification, CNAs can earn $13.50 an hour, she said.
It’s a good start to a medical career, Parks said, adding that many people don’t realize that.
“Some don’t think of this as a career,” she said.
CCH has taken a unique approach to changing that.
CNA classes are planned this year on March 11-April 4, June 9-26, Sept. 8-Oct. 2, Nov. 9-Dec. 4 at CCH’s Pioneer Building, and at Gillette College from March 6-April 27 and June 5-July 24. The classes are limited to 24 students each.
Those who hope to earn CNA certification also have an opportunity to earn other certifications, up to five weeks of paid time off, child care and separate sick leave.
For more information, visit cchwyo.org/careers or call 307-688-1500.
Brenda Schladweiler was surprised. Gregg Blikre had a good excuse for the delay.
They were two of the six people with ties to Gillette and Campbell County and appointed by Gov. Mark Gordon to serve on state boards and commissions Tuesday who await confirmation by the state Senate.
Schladweiler, owner and founder of BKS Environmental Services Inc. in Gillette, was appointed to the Wyoming Industrial Siting Council by Gordon as a Democrat.
Except that she’s a longtime Republican in Campbell County. She even ran against state Rep. Scot Clem in the 2014 primary as a Republican, a seat he later won in the general election.
So the appointment by the governor was a surprise to her. Finally, Wednesday morning, she was able to speak to state officials about the governor’s action and accepted the position now that she can serve as a Republican.
“I was surprised and pleased, but it’s taken me a day to get to that point,” she said, adding that it likely will be a source of jokes in Campbell County for a while.
Two years ago, she checked into the possibility of serving on the Industrial Siting Council, but decided not to try because of the time commitment required and possible conflicts of interest.
Now, she said, the biggest issue was if she could serve as a Republican. Told that she could do so Wefnesday, she said she’s looking forward to doing so. The council has four hearings scheduled this year, starting with Kemmerer in April, and most of the issues involve transportation or are wind power related.
Blikre’s appointment to the Wyoming Community College Commission was delayed this year by sickness. The former state legislator didn’t begin attending meetings until later in the spring. His reappointment was approved Tuesday by the governor. It’s a position Blikre sought and fits the interest of the longtime Gillette College Foundation Board member and past chairman.
He said community colleges, and Gillette College in particular, are crucial for community development.
It also is an exciting time with the state Legislature allowing community colleges to award applied science bachelor degrees in their communities to serve older, site-bound, non-traditional students. Gillette College is on the second step of seeking a program to do just that after receiving the Community College Commission’s approval in a recent meeting.
“The Legislature is asking Wyoming to grow big time in a number of degrees,” he said. “It’s really exciting.
“I just really believe Gillette College and the community colleges are really important for our communities. That’s the most important thing to me. I wanted to serve that role in the state.”
Also appointed to the new Energy Authority Commission are two people with Gillette-area connections among the six new appointments. The Energy Authority will be a board serving after the combination of the Infrastructure Authority and the state’s Pipeline Authority into one entity as the Energy Authority in Wyoming.
Appointed to the Energy Authority was Wendy Hutchinson of Campbell County, who worked as the regulatory affairs manager for many years at Thunder Basin Coal Co.’s Black Thunder Mine near Wright before becoming senior vice president of external affairs for Millennium Bulk Terminals, a proposed coal export terminal on the Columbia River in Longview, Washington, to supply western coal to Asian markets.
A former president of the Women’s Mining Coalition, Hutchinson served for 10 years on the Wyoming Environmental Quality Council.
Also joining the Energy Authority board will be Ken Miller of Pennington County, South Dakota.
A longtime member of the Gillette Chamber Singers, Miller served for 23 years as department manager for Arch Coal’s Thunder Basin Coal Company in Wright, moving from engineering to operations.
He also served as president and CEO of Millennium Bulk Terminals in Washington, from where he retired, and served on the Wyoming Infrastructure Authority’s board.
Also appointed by the governor Tuesday were LaTosha Williamson of Campbell County on the state pharmacy board and Irma Kerns, who was re-appointed to the state’s Real Estate Commission.