UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSI 

COMMISSIONERS: Joseph J. Simons, Chairman 

Noah Joshua Phillips 

Rohit Chopra 

Rebecca Kelly Slaughter 

Christine S. Wilson 

In the Matter of: 

Peabody Energy Corporation, 

a public company; 

DOCKET NO. 9391 

and 

Arch Coal, Inc., 

a public company. 

PEABODY ENERGY CORPORATION'S ANSWER AND AFFIRMATIVE DEFENSES 

Edward D. Hassi 

Leah S. Martin 

Debevoise & Plimpton LLP 

801 Pennsylvania Avenue N.W. 

Washington, D.C. 20004 

(202) 383-8000 

Michael Schaper 

J. Robert Abraham 

Tristan M. Ellis 

Debevoise & Plimpton LLP 

919 Third A venue 

New York, NY 10022 

(212) 909-6000 

Counsel f or Respondent Peabody Energy 

Corporation 

Corey W. Roush 

Gorav Jindal 

J. Matthew Schrnitten 

Akin Gump Strauss Hauer & Feld LLP 

2001 K. Street, N.W. 

Washington, DC 20006 

(202) 887-4000 
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PEABODY’S ANSWER AND AFFIRMATIVE DEFENSES 

Respondent Peabody Energy Corporation (“Peabody”) hereby answers plaintiff Federal 

Trade Commission’s (“FTC”) Complaint, related to the proposed joint venture (“Joint Venture”) 

between itself and Arch Coal, Inc. (“Arch”) (collectively with Peabody, “Respondents”), and 

asserts affirmative and other defenses. 

Any allegation in the Complaint that is not expressly admitted below is denied.1

PRELIMINARY STATEMENT 

The FTC’s challenge, brought over Commissioner Wilson’s dissent, is mired in the past. 

It ignores dynamics that have rocked the wholesale energy markets over the last 10-15 years, 

slashing thermal coal sales. Thermal coal, including coal mined in the Southern Powder River 

Basin (“SPRB”), competes directly with other U.S. energy forms used to generate electricity. A 

megawatt of electricity produced from SPRB coal is indistinguishable from one produced using 

any other energy source. So how do U.S. electricity markets choose between diverse electricity 

generating sources? Whether a generation unit fueled by coal, natural gas, solar array or wind 

turbines is called upon to supply electricity is decided by a marketplace that selects and rewards 

the lowest cost producer. When a light switch is flipped on, the demand for electricity is filled 

by the lowest cost units first, regardless of the fuel used to generate that electricity. The 

electricity markets force head-to-head competition between fuels. 

Coal, and SPRB coal in particular, is losing that competition at an unprecedented pace. 

The rise of hydraulic fracturing (“fracking”) has made cheap natural gas the fuel of choice for 

electricity generation in the U.S. And the growth of wind- and solar-powered electricity has 

 

1

 The Complaint contains section titles and organizational headings to which no response is required. To the extent 

that the headings may be construed to contain allegations of fact to which a response is required, Peabody denies all 

such allegations. 
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further displaced coal, including SPRB coal. Just a decade ago, thermal coal powered 50% of al

electricity generated in the United States. Together, natural gas and renewables now account fo

over 56% of all electricity generation. Monthly coal-fueled generation dipped below 20% of 

total electricity generation for the first time in 2019, and plant retirements and low natural gas 

prices have further reduced this share in early 2020. 

Specifically, coal production in the SPRB is down by more than 50% since 2008 and 

continues to fall as demand declines, leaving SPRB coal mines running well below capacity. 

U.S. electricity generation companies have stopped building coal-fueled generation plants 

entirely and have closed over 700 coal-fueled units since 2004. As the U.S. Energy Information

Administration (“EIA”) explained in December 2019 when it found a direct link between coal 

plant retirements and low natural gas prices: 

Sustained relatively low natural gas prices has allowed natural gas-fired 

generators to become more competitive with coal-fired units, leading to a general 

decline in using coal-fired capacity. A decline in use leads to a decline in 

revenues at a plant, which generally translates to lower operating margins, less 

ability to cover costs, and in many cases, retiring that capacity . . . . Because of 

more competitive natural gas prices, more advanced natural gas combined-cycle 

generators, and the increasing efficiency of the natural gas generator fleet, EIA 

expects more coal-fired generators to retire, especially within the next decade. 

According to AEO Reference case projections, almost 90 GW of coal-fired 

capacity will retire between 2019 and 2030.2

Energy companies recognize this dramatic shift. Their coal purchases have rapidly 

declined as efficient natural gas generating units permanently replace coal-fueled generators. 

They admit that “[n]atural gas prices are a primary driver of coal demand”3 and “[i]f the price of

natural gas is below $3-4, then natural gas economically displaces most powder river basin 

2

 U.S. Energy Info. Admin., U.S. Coal Plant Retirements Linked to Plants with Higher Operating Costs, Dec. 3, 

2019, https://www.eia.gov/todayinenergy/detail.php?id=42155. 

3

 NRG Energy, Inc., 2018 Annual Report (Form 10-K), at 48 (Feb. 28, 2019), 

https://www.sec.gov/Archives/edgar/data/1013871/000101387119000007/nrg201810-k.htm 
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[coal].”4 Natural gas prices are well below $3/mmBTU, and virtually every reputable third party 

projects that they will remain well below that mark for the foreseeable future. In fact, today, 

natural gas prices are below $2/mmBTU. As natural gas prices fall, generating electricity from 

coal becomes even more uneconomic. And renewable fuel sources like wind and solar are 

expected to continue to grow and displace coal throughout the U.S. The prospects for coal have 

deteriorated further in 2020. 

The parties cannot alter these forces. Instead, to compete, coal producers must lower 

their costs. Peabody and Arch have wrung costs out of their businesses, but they still struggle to 

compete with increasingly low-priced natural gas. They—and three of the other five companies 

mining coal in the SPRB—were forced into bankruptcy in recent years as a result of these 

dynamics. 

Peabody and Arch formed this Joint Venture to combine their mines in Colorado and the 

SPRB to lower their costs in an attempt to remain competitive in a declining market. Critically, 

the Joint Venture will dissolve a seven-mile border that separates their largest two mines, 

slashing costs across the supply chain. Highly skilled personnel, industry experts, and recent 

experience integrating two contiguous mines involving the very same mining complex 

substantiate the parties’ conservative estimates of over $1 billion in net present value of mergerspecific cost savings over the venture’s first ten years. These synergies are particularly 

necessary for the Joint Venture to remain competitive in today’s declining market. In sum, the 

Joint Venture will lower the parties’ costs thereby lowering prices to customers enabling coalfueled units to compete more effectively for dispatch against natural gas and renewables. 

4

Southern’s Current Outlook, Presentation by Chad Hewitt, Fuel Manager, at 25 (September 2015), 

https://training.ua.edu/almineral/_documents/ChadHewitt.pdf. 
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The FTC does not dispute these dynamics; in fact, stunningly, it ignores them. It asks 

this court to put blinders on and join the FTC in a “SPRB coal-only” world to block the Joint 

Venture. If the FTC prevails, it will prevent the Joint Venture from achieving those efficiencies 

and guarantee that SPRB coal will continue losing to natural gas and renewables. Delaying and 

ultimately prohibiting this Joint Venture will harm the parties and their employees, their 

customers, and consumers across the country that would benefit if their utilities were able to buy 

lower-priced coal, as the parties have already committed to do for their SPRB customers. 

Against this backdrop, Peabody hereby answers the specific allegations in the Complaint. 

Any allegation in the Complaint that is not expressly admitted below is denied. 

I. NATURE OF THE CASE 

1. Peabody admits that the Joint Venture would combine the coal mining and sales 

operations of their coal mines located in the Southern Powder River Basin. Peabody denies the 

remainder of Paragraph 1.5

2. Peabody admits that the SPRB is a large coal-bearing geological formation 

located in northeastern Wyoming and that Peabody extracts the coal and sells it, primarily to 

power plants. Peabody also admits that its customers purchase SPRB coal (although increasingly 

less so) for various reasons. Peabody denies the remainder of Paragraph 2. 

3. Peabody admits that public sources indicate that the Respondents produced more 

than 60% of all SPRB coal mined in 2018, but otherwise is without knowledge or information 

sufficient to form a belief as to the truth of the remaining allegations in the first and second 

sentence of Paragraph 3. Peabody denies the third sentence, states that the fourth sentence is an 

incomplete description of the Merger Guidelines, and denies the fifth sentence. 

 

5

 References to paragraph numbers in the Complaint correlate to the numbered paragraphs in the Complaint. 
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4. Peabody denies Paragraph 4 of the Complaint. 

5. Peabody admits that, to the extent new entry means greenfield entry of new 

producers of SPRB coal, such new entry is unlikely to occur in the near term under current 

market conditions. Peabody denies the remainder of Paragraph 5. 

6. Peabody denies Paragraph 6 of the Complaint. 

II. JURISDICTION 

7. Peabody avers that Paragraph 7 states legal conclusions to which no response is 

required. To the extent a response is required, Peabody admits it is engaged in commerce. 

8. Peabody avers that Paragraph 8 states legal conclusions to which no response is 

required. To the extent a response is required, Peabody admits the Joint Venture is a transaction. 

III. RESPONDENTS 

9. Peabody admits the first four sentences of Paragraph 9. Peabody admits the fifth 

sentence except that it sold 119.1 million tons of SPRB coal in 2018 and is without knowledge or 

information about the FTC’s meaning of “reserves” to respond. Peabody admits the sixth 

sentence as a correct description of Peabody’s production and revenues across the entire 

company’s portfolio two years ago but avers that the figures are misleading as stated. 

10. Peabody admits the first two sentences except that it is without knowledge or 

information sufficient about the meaning of “reserves.” Peabody is without knowledge or 

information sufficient to form a belief as to the truth of the allegations in the third and fourth 

sentences. 

IV. THE JOINT VENTURE 

11. Peabody admits Paragraph 11 of the Complaint. 
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V. RELEVANT MARKETS 

A. Relevant Product Market 

12. Peabody avers that Paragraph 12 states legal conclusions to which no response is 

required. To the extent a response is required, Peabody denies Paragraph 12 of the Complaint. 

13. Peabody is without knowledge or information sufficient to form a belief as to why 

all electric power producers choose to buy coal from the SPRB. Peabody admits that SPRB coal 

tends to be relatively close to the earth’s surface, that SPRB mines tend to yield subbituminous 

coal with a heat content typically that ranged from 8400 to 8800 BTU per pound, and that SPRB 

coal tends to have relatively low sulfur content. Peabody either is without knowledge or 

information sufficient about the remainder of the Paragraph 13, or avers that the figures are 

misleading as stated. 

14. Peabody denies Paragraph 14 of the Complaint. 

15. Peabody is without knowledge or information sufficient to form a belief as to the 

FTC’s meaning of the phrases “Industry and public recognition,” “[p]ublic sources of 

information” or “market participants and industry analysts.” To the extent a response is required, 

Peabody denies Paragraph 15 of the Complaint. 

16. Peabody denies Paragraph 16 of the Complaint except that it admits that 

customers may issue RFPs as part of a process to purchase thermal coal. 

17. Peabody admits that it knows the identity of the customers who issue RFPs to 

Peabody seeking to purchase SPRB coal, denies that it can “customize [its] bids based on a 

customer’s circumstances,” and is without knowledge or information sufficient to form a belief 

as to the remainder of the first sentence of Paragraph 17. Peabody admits the second sentence 

except that it is without knowledge or information sufficient to form a belief as to the truth of the 

allegation that greater distances typically result in greater shipping costs. Peabody is without 
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knowledge or information sufficient to form a belief as to the truth of the last sentence of 

Paragraph 17. 

18. Peabody denies the first sentence of Paragraph 18. Peabody is without knowledge 

or information sufficient to form a belief as to the truth of the second sentence of Paragraph 18. 

19. Peabody admits that public sources indicate that the total demand for SPRB coal 

in the economy has been falling over time but expect that there will continue to be sales in the 

future, but otherwise is without knowledge or information sufficient to form a belief as to the 

truth of the allegations in Paragraph 19. 

20. Peabody admits the first sentence of Paragraph 20 and denies the remainder. 

VI. RELEVANT GEOGRAPHIC MARKET 

21. Peabody avers that Paragraph 21 of the Complaint states legal conclusions to 

which no response is required. To the extent that it makes any assertion of fact, it is denied, 

except that Peabody admits that SPRB coal is mined in the SPRB. 

22. Peabody avers that the first sentence of Paragraph 22 of the Complaint states legal 

conclusions to which no response is required. To the extent that it makes any assertion of fact, it 

is denied. Peabody is without knowledge or information sufficient to form a belief as to the truth 

of the second sentence. 

23. Peabody avers that the first sentence of Paragraph 23 of the Complaint states legal 

conclusions to which no response is required. To the extent that it makes any assertion of fact, it 

is denied. Peabody is without knowledge or information sufficient to form a belief as to the truth 

of the second sentence but admits that SPRB coal is sold in each of the sixteen identified states, 

among others. Paragraph 23 is otherwise denied. 
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VII. MARKET CONCENTRATION AND THE JOINT VENTURE’S PRESUMPTIVE 

ILLEGALITY 

24. Peabody denies the first sentence of Paragraph 24. Peabody admits that public 

sources indicate that Respondents produced more than 60% of all SPRB coal mined in 2018 but 

otherwise is without knowledge or information sufficient to form a belief as to the truth of the 

allegations in the second sentence. 

25. Peabody admits that besides Peabody and Arch there are five others producers of 

SPRB coal but otherwise is without knowledge or information sufficient to form a belief as to the 

truth of the allegations in the first sentence. Peabody admits the second sentence. Peabody is 

without knowledge or information sufficient to form a belief as to the meaning of the phrase 

“meaningfully compete” and otherwise is without knowledge or information sufficient to form a 

belief as to the truth of the allegations in the third sentence. Peabody admits the fourth sentence. 

Peabody is without knowledge or information sufficient to form a belief as to the truth of other 

producers’ future scale or reserves, or the measure used to compare SPRB coal “reserves” but 

admits that public information would confirm the remainder of the fifth sentence. 

26. Peabody admits that the Merger Guidelines measure concentration using HHIs but 

denies that those Guidelines are binding on the agency, let alone courts. Peabody admits that the 

second, third and fourth sentences accurately summarize how “HHI” is described in the nonbinding Merger Guidelines. Peabody denies the remainder of Paragraph 26. 

VIII. ANTICOMPETITIVE EFFECTS 

27. Peabody denies Paragraph 27. 

28. Peabody denies Paragraph 28. 

29. Peabody denies Paragraph 29. 

30. Peabody denies Paragraph 30. 
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31. Peabody denies Paragraph 31. 

32. Peabody denies Paragraph 32. 

IX. LACK OF COUNTERVAILING FACTORS. 

A. Barriers to Entry and Expansion 

33. Peabody denies Paragraph 33. 

34. Peabody denies Paragraph 34. 

35. Peabody denies Paragraph 35. 

B. Efficiencies 

36. Peabody denies Paragraph 36. 

X. VIOLATION 

Count I – Illegal Agreement 

37. Peabody avers that no response is required to Paragraph 37. 

38. Peabody avers that Paragraph 38 states legal conclusions to which no response is 

required. To the extent a response is required, Peabody denies Paragraph 38 of the Complaint. 

Count II – Illegal Joint Venture 

39. Peabody avers that no response is required to Paragraph 39. 

40. Peabody avers that Paragraph 40 states legal conclusions to which no response is 

required. To the extent a response is required, Peabody denies Paragraph 40 of the Complaint. 

PEABODY’S AFFIRMATIVE DEFENSES 

Peabody asserts the following defenses, without assuming the burden of proof on such 

defenses that would otherwise rest with the Plaintiff: 

1. The Complaint fails to state a claim on which relief can be granted. 

2. Granting the relief sought is contrary to the public interest. 

3. The Complaint fails to allege a plausible relevant product market. 
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4. The Complains fails to allege a plausible geographic market. 

5. The Complaint fails to allege undue share in any plausibly defined relevant 

market. 

6. The Complaint fails to allege any plausible harm to competition. 

7. The Complaint fails to allege any plausible harm to consumers. 

8. The Complaint fails to allege any plausible harm to consumer welfare. 

9. Expansion by existing competitors, including non-coal sources of electricity, can 

be swift, likely, and sufficient such that it will ensure that there will be no harm to competition, 

consumers, or consumer welfare. 

10. Customers have a variety of tools available to ensure that they receive competitive 

pricing and terms. 

11. The Joint Venture will be procompetitive. It will result in substantial mergerspecific efficiencies, including cost synergies, which will allow Peabody and Arch to compete 

more effectively than they can alone against competition from other electricity-generating fuels, 

particularly natural gas and renewables. 

12. Peabody reserves the right to assert any other defenses, as they become known to 

it. 

NOTICE OF CONTEMPLATED RELIEF 

WHEREFORE, Peabody requests that the Administrative Law Judge enter a judgment in 

its favor as follows: 

A. The Complaint be dismissed with prejudice; 

B. None of the Complaint’s contemplated relief issue to the FTC; 

C. Any and all other relief as the Commission may deem just and proper. 
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Dated: March 11, 2020 Respectfully submitted,

/s/ Edward D. Hassi 

Edward D. Hassi 

Leah S. Martin 

Debevoise & Plimpton LLP 

801 Pennsylvania Avenue N.W. 

Washington, D.C. 20004 

(202) 383-8000 

Michael Schaper 

J. Robert Abraham 

Tristan M. Ellis 

Debevoise & Plimpton LLP 

919 Third Avenue 

New York, NY 10022 

(212) 909-6000 

Corey Roush 

Gorav Jindal 

J. Matthew Schmitten 

Akin Gump Strauss Hauer & Feld LLP 

2001 K. Street, N.W. 

Washington, DC 20006 

(202) 887-4000 

Counsel for Respondent Peabody Energy Corporation
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CERTIFICATE OF SERVICE 

I certify that on March 11, 2020, I filed the foregoing document electronically using the 

FTC’s E-Filing System, which will send notification of such filing to: 

April Tabor 

Acting Secretary 

Federal Trade Commission 

600 Pennsylvania Ave., N.W., Rm. H-113 

Washington, D.C. 20580 

The Honorable D. Michael Chappell 

Chief Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Ave., N.W., Rm. H-110 

Washington, D.C. 20580 

I also certify that I cause the foregoing documents to be served via email to: 

Daniel Matheson Stephen Weissman 

Amy E. Dobrzynski Michael Perry 

Federal Trade Commission William Lavery 

600 Pennsylvania Avenue, NW Matthew Adler 

Washington, DC 20580 Elisa Beneze 

(202) 326-2075 Jarad Daniels 

dmatheson@ftc.gov Steven Pett 

adobrzynski@ftc.gov Baker Botts LLP 

700 K Street, N.W. 

Complaint Counsel Washington, D.C. 20001 

Telephone: 202 639 1313 

Corey W. Roush stephen.weissman@bakerbotts.com 

Gorav Jindal michael.perry@bakerbotts.com 

J. Matthew Schmitten william.lavery@bakerbotts.com 

Akin Gump Strauss Hauer & Feld LLP matthew.adler@bakerbotts.com 

2001 K. Street, N.W. elisa.beneze@bakerbotts.com 

Washington, DC 20006 steven.pett@bakerbotts.com 

(202) 887-4000 

croush@akingump.com Counsel for Respondent Arch Coal, Inc. 

gjindal@akingump.com 

mschmitten@akingump.com 

Counsel for Respondent Peabody Energy 

Corporation 

Dated: March 11, 2020 By: /s/ Leah S. Martin 

 Leah S. Martin 
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 Counsel for Respondent Peabody 

 Energy Corporation 

 
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CERTIFICATE FOR ELECTRONIC FILING 

 I hereby certify that the electronic copy sent to the Secretary of the Commission is a true 

and correct copy of the paper original and that I possess a paper original of the signed document 

that is available for review by the parties and the adjudicator. 

Dated: March 11, 2020 By: /s/ Leah S. Martin 

 Leah S. Martin 
Notice of Electronic Service 

I hereby certify that on March 11, 2020, I filed an electronic copy of the foregoing Peabody Energy 

Corporation's Answer and Affirmative Defenses , with: 

D. Michael Chappell 

Chief Administrative Law Judge 

600 Pennsylvania Ave., NW 

Suite 110 

Washington, DC, 20580 

Donald Clark 

600 Pennsylvania Ave., NW 

Suite 172 

Washington, DC, 20580 

I hereby certify that on March 11, 2020, I served via E-Service an electronic copy of the foregoing Peabody 

Energy Corporation's Answer and Affirmative Defenses , upon: 

Stephen Weissman 

Partner 

Baker Botts LLP 

stephen.weissman@bakerbotts.com 

Respondent 

Michael Perry 

Partner 

Baker Botts LLP 

michael.perry@bakerbotts.com 

Respondent 

William Lavery 

Senior Associate 

Baker Botts LLP 

william.lavery@bakerbotts.com 

Respondent 

Matthew Adler 

Senior Associate 

Baker Botts LLP 

matthew.adler@bakerbotts.com 

Respondent 

Elisa Beneze 

Associate 

Baker Botts LLP 

elisa.beneze@bakerbotts.com 

Respondent 

Jarad Daniels 

Associate 

Baker Botts LLP 

jarad.daniels@bakerbotts.com 

Respondent 

Steven Pet 

Associate 

Baker Botts LLP 

steven.pet@bakerbotts.com 
Respondent 

Daniel Matheson 

Attorney 

Federal Trade Commission 

dmatheson@ftc.gov 

Complaint 

Amy E. Dobrzynski 

Attorney 

Federal Trade Commission 

adobrzynski@ftc.gov 

Complaint 

Edward D. Hassi 

Esq. 

Debevoise & Plimpton LLP 

thassi@debevoise.com 

Respondent 

Leah S. Martin 

Esq. 

Debevoise & Plimpton LLP 

lmartin@debevoise.com 

Respondent 

Michael Schaper 

Esq. 

Debevoise & Plimpton LLP 

mschaper@debevoise.com 

Respondent 

J. Robert Abraham 

Esq. 

Debevoise & Plimpton LLP 

jrabraham@debevoise.com 

Respondent 

Tristan M. Ellis 

Esq. 

Debevoise & Plimpton LLP 

tmellis@debevoise.com 

Respondent 

Gorav Jindal 

Akin Gump Strauss Hauer & Feld LLP 

gjindal@akingump.com 

Respondent 

Corey Roush 

Partner 

Akin Gump Strauss Hauer & Feld LLP 

croush@akingump.com 

Respondent 

Matthew Schmitten 

Akin Gump Strauss Hauer & Feld LLP 

mschmitten@akingump.com 

Respondent 
Edward Hassi 

Attorney