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Competition in the U.S. Energy Industry







Finally, we need to return to a consideration of a public policy position with respect to future coal-coal mergers. There is a trend toward larger capital requirements both for mines serving the electric utility market and those scheduled to produce coal for gasification projects. Since market demands, industry structure, and scale economies all point to the need for fairly large producing units in coal, public policy ought not to be overly restrictive with respect to coal-coal mergers. One can make a case for improving the viability of the industry and the level of competition therein if producing units are larger. Such a policy, however, should not provide for blanket approval of coal-coal mergers. Each case will require a careful examination of the structure of buyers and sellers in the relevant geographical market to determine whether the potential advantages to the parties merging are outweighed by the injury to competition that such a merger might entail.

NOTES

Footnote :

1. In the following analysis only General Dynamics Co. which owns the Freeman-United Electric Coal Company's coal operations is neither a petroleum or mining company. Freeman and United Electric were originally acquired by Materials Service Company, producer and distributor of aggregate materials and cement products. Materials Service was later merged into General Dynamics.

Footnote :

2. Hereafter we use "coal" and "bituminous coal" synonymously.

Footnote :

3. We exclude captive mines—those controlled by steel and electric utility companies.

Footnote :

4. Coal Mine Directory, Keystone Coal Industry Manual.

Footnote :

5. "Coal: Prospects and Problems," speech by Herbert S. Richey at the National Energy Forum, Washington, D.C., September 23, 1971.

Footnote :

6. Continental Oil Co., Listing application to the New York Stock Exchange, #A-23648, August 30, 1966, p. 4.

Footnote :

7. "Artificial Restraints on Basic Energy Sources," p. A445, in Concentration by Competing Raw Fuel Industries in the Energy Market and Its Impact on Small Business, Hearings before the Subcommittee on Special Small Business Problems of the House Select Committee on Small Business, 92nd Congress, 1st Session, July 12, 13, 14, 15, 20, 22, 1971.

Footnote :

8. The St. Joe Minerals acquisition of A.T. Massey Coal Co. and Houston Natural Gas Company's purchase of Zeigler Coal Co. are pending at the time this is written.

Footnote :

9. The Kennecott case is summarized in Fortune, September, 1971, pp. 98-101, 140-42.

Footnote :

10. Hearings, op. cit., pp. 37-45.

Footnote :

11. Ibid., p. 38.

Footnote :

12. Hearings, op. cit., Vol. 2, p. 11.