Edgar Filing: ARCH COAL INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant [X]

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[_] Preliminary Proxy Statement

[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

ARCH COAL, INC.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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[X] No fee required.

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SEC 1913 (3-99)

[LOGO OF ACI ARCH COAL, INC.]

CityPlace One, Suite 300
St. Louis, Missouri 63141
(314) 994-2700

March 26, 2001

To Our Stockholders:

You are cordially invited to attend the Annual Meeting of Stockholders of
Arch Coal, Inc. which will be held at our headquarters at CityPlace One, St.
Louis, Missouri, in the lower level auditorium, on Thursday, April 26, 2001,
at 10:00 a.m., local time. The formal Notice of the Annual Meeting, the Proxy
Statement and a proxy card accompany this letter.

We hope that you will be present at the meeting. Whether or not you plan to
attend, please cast your vote by telephone or on the Internet, or complete,
sign and return the enclosed proxy card in the postage-prepaid envelope, also
enclosed. The prompt execution of your proxy will be greatly appreciated.

Arch Coal's Annual Report for 2000 is also enclosed.

Sincerely yours,

/s/ James R. Boyd
James R. Boyd
Chairman of the Board

/s/ Steven F. Leer
Steven F. Leer
President and Chief Executive
Officer

[LOGO OF ARCH COAL, INC.]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

DATE: Thursday, April 26, 2001

TIME: 10:00 a.m., local time

PLACE: CityPlace One
Lower Level Auditorium
St. Louis, Missouri 63141

Matters to be Voted on:

. Election of four directors

. Approval of Arch Coal's incentive compensation plan

. Ratification of the appointment of Ernst & Young LLP as principal
independent auditors for the year 2001

. Any other matters if properly raised

Only stockholders of record at the close of business on March 12, 2001 may
vote at the meeting. Your vote is important. Whether you plan to attend the
annual meeting or not, please cast your vote by phone or on the internet, or
complete, date and sign your proxy card and return it in the envelope
provided. If you attend the meeting and prefer to vote in person, you may do
so even if you have previously voted by proxy. Directions to the annual
meeting are printed on the back cover of this proxy statement.

/s/ Robert G. Jones

Robert G. Jones
Vice President -- Law and Secretary

March 26, 2001

Table Of Contents

Page
No.
----

Information About the Annual Meeting....................................... 1

Election of Directors (Proxy Item No. 1)................................... 4
Structure of the Board................................................... 4
Nominee For a Two-Year Term That Will Expire in 2003..................... 5
Nominees For a Three-Year Term That Will Expire in 2004.................. 5
Directors Whose Terms Will Expire in 2002................................ 5
Directors Whose Terms Will Expire in 2003................................ 5
Board Meetings and Committees............................................ 6
Audit Committee Report................................................... 6
Compensation of Directors................................................ 7

Ownership of Arch Coal Common Stock........................................ 8
Ownership by Directors and Executive Officers............................ 9
Ownership by Others...................................................... 9

Compensation of Executive Officers and Other Information................... 9
Report of the Personnel and Compensation Committee....................... 9
Summary Compensation Table............................................... 14
Stock Option Grants...................................................... 14
Stock Option Exercises................................................... 14
Long-Term Incentive Plan Award........................................... 15
Pension Plans............................................................ 15
Employment Agreements.................................................... 16
Beneficial Ownership Reporting Compliance................................ 16
Stock Price Performance Graph............................................ 17

Approval of Arch Coal's Incentive Compensation Plan (Proxy Item No. 2)..... 18
Ratification of Independent Auditors (Proxy Item No. 3).................... 18

Additional Information..................................................... 18
Information About Stockholder Proposals.................................. 18
Multiple Copies of Annual Report to Stockholders......................... 19

PROXY STATEMENT
FOR THE
ARCH COAL, INC.
2001 ANNUAL MEETING OF STOCKHOLDERS

Information About the Annual Meeting

Why Am I Receiving These Proxy Materials?

Arch Coal's Board of Directors is soliciting proxies to be voted at the
2001 Annual Meeting of Stockholders. This proxy statement includes information
about the issues to be voted upon at the meeting.

On March 26, 2001, we began mailing these proxy materials to all
stockholders of record at the close of business on March 12, 2001. On this
date, there were 43,433,760 shares of Arch Coal common stock outstanding. As
required by Delaware law, a list of stockholders entitled to vote at the
annual meeting will be available at the annual meeting and for 10 days prior
to the meeting, during normal business hours, at Arch Coal's offices,
CityPlace One, Suite 300, St. Louis, Missouri 63141.

What Am I Voting On?

We are aware of three items to be voted on by stockholders at the annual
meeting:

. Election of four directors: Frank M. Burke, Steven F. Leer, Robert G.
Potter and Theodore D. Sands;

. Approval of Arch Coal's incentive compensation plan; and

. Ratification of Ernst & Young as the company's independent auditors for
2001.

How Many Votes Do I Have?

You have one vote for each share of Arch Coal common stock that you owned
at the close of business on March 12, 2001, the record date. These shares
include:

. Shares held directly in your name as the "stockholder of record";

. Shares held for you as the beneficial owner through a broker, bank, or
other nominee in "street name"; and

. Shares credited to your account in the Arch Coal, Inc. Employee Thrift
Plan or the Mingo Logan Savings Plan.

If I Am A Stockholder Of Record, How Can I Vote My Shares?

You can vote by proxy or in person.

How Do I Vote By Proxy?

If you are a stockholder of record, you may vote your proxy by telephone,
Internet, or mail. Our telephone and Internet voting procedures are designed
to authenticate stockholders by using individual control numbers. Voting by
telephone or Internet will help Arch Coal reduce costs.

. Voting Your Proxy by Telephone

In the U.S. and Canada, you can vote your shares by telephone by calling
the toll-free telephone number on your proxy card. Telephone voting is
available 24 hours a day, 7 days a week up through the day before the
meeting. Easy-to-follow voice prompts allow you to vote your shares and
confirm that your instructions have been properly recorded. If you vote
by telephone, you do not need to return your proxy card.

. Voting Your Proxy By Internet

You can also choose to vote via the Internet. The web site for Internet
voting is on your proxy card. Internet voting is also available 24 hours
a day, 7 days a week up through the day before the meeting. If you vote
via the Internet, you do not need to return your proxy card.

. Voting Your Proxy By Mail

If you choose to vote by mail, simply mark your proxy card, date and
sign it, and return it to in the postage-paid envelope provided.

If you vote by proxy using any of these three methods, the persons named on
the card (your "proxies") will vote your shares in the manner you indicate.
You may specify whether your shares should be voted for all, some, or none of
the nominees for director and whether your shares should be voted for or
against the other proposals. If you vote by telephone or Internet and choose
to vote with the recommendation of Arch Coal's Board of Directors, or if you
vote by mail, sign your proxy card, and do not indicate specific choices, your
shares will be voted:

. "FOR" the election of all four nominees for director;

. "FOR" approval of Arch Coal's incentive compensation plan; and

. "FOR" ratification of the appointment of the principal independent auditors
for 2001.

If any other matter is presented, your proxies will vote in accordance with
their best judgment. At the time this proxy statement went to press, we knew
of no matters that needed to be acted on at the annual meeting other than
those discussed in this proxy statement.

If you wish to give a proxy to someone other than the persons named on the
enclosed proxy card, you may strike out the names appearing on the card and
write in the name of any other person, sign the proxy, and deliver it to the
person whose name has been substituted.

May I Revoke My Proxy?

If you give a proxy, you may revoke it in any one of three ways:

. Submit a valid, later-dated proxy;

. Notify Arch Coal's Secretary in writing before the annual meeting that
you have revoked your proxy; or

. Vote in person at the annual meeting.

How Do I Vote In Person?

If you are a stockholder of record, you may cast your vote in person at the
annual meeting.

If I Hold Shares In Street Name, How Can I Vote My Shares?

You can submit voting instructions to your broker or nominee. In most
instances, you will be able to do this over the Internet, by telephone, or by
mail. Please refer to the voting instruction card included in these materials
by your broker or nominee.

How Do I Vote My Shares Held In Arch Coal's Automatic Dividend Reinvestment
And Stock Purchase Plan?

If you are a participant in the Automatic Dividend Reinvestment and Stock
Purchase Plan for stockholders of Arch Coal, your proxy will also serve as an
instruction to vote the whole shares you hold under this plan in the manner
indicated on the proxy. If your proxy is not received, your shares held in the
plan will not be voted.

How Do I Vote My Arch Coal Common Stock Held In The Employee Thrift Plan Or
The Mingo Logan Savings Plan?

If you are both a registered stockholder of Arch Coal and a participant in
its Employee Thrift Plan or the Mingo Logan Savings Plan, you will receive a
single proxy card that covers shares of Arch Coal common stock

credited to your plan account as well as shares of record registered in
exactly the same name. Accordingly, your proxy card also serves as a voting
instruction for the trustee of the plan. If your plan account is not carried
in exactly the same name as your shares of record, you will receive separate
proxy cards for individual and plan holdings. If you own shares through one of
these plans and you do not return your proxy by Friday, April 20, 2001, the
trustee will vote your shares in the same proportion as the shares that are
voted by the other participants in the plan. The trustee will also vote
unallocated shares of Arch Coal common stock held in the plan in direct
proportion to the voting of allocated shares in the plan for which voting
instructions have been received unless doing so would be inconsistent with the
trustee's duties.

Is My Vote Confidential?

Yes. Voting tabulations are confidential.

What Vote Is Required To Approve Each Proposal?

Election of Four Directors The nominees who receive the most votes for the
(Proxy Item No. 1) available positions will be elected. If you do
not vote for a particular nominee, or you
indicate "withhold authority to vote" for a
particular nominee on your proxy card, your
vote will not count either "for" or "against"
the nominee.

Approval of Arch Coal's The affirmative vote of a majority of the
Incentive Compensation Plan shares present in person or by proxy at the
(Proxy Item No. 2) annual meeting is required to approve the
Company's incentive compensation plan. If you
"abstain" from voting, it will have the same
effect as if you voted "against" this proposal.

Ratification of Appointment of The affirmative vote of a majority of the
Independent Auditors shares present in person or by proxy at the
(Proxy Item No. 3) annual meeting is required to ratify the
appointment of the principal independent
auditors for 2001. If you "abstain" from
voting, it will have the same effect as if you
voted "against" this proposal.

In order to have a valid stockholder vote, a stockholder quorum must exist
at the annual meeting. A quorum will exist when stockholders holding a
majority of the outstanding shares of Arch Coal stock are present at the
meeting, either in person or by proxy.

If a broker indicates on its proxy that it does not have authority to vote
certain shares held in "street name" on particular proposals, the shares not
voted ("broker non-votes") will have no effect on these proposals. Broker non-
votes occur when brokers do not have discretionary voting authority on certain
proposals under the rules of the New York Stock Exchange and the beneficial
owner has not instructed the broker how to vote on these proposals.

Who Is Paying The Costs Of Soliciting These Proxies?

Arch Coal is paying the cost of preparing, printing, and mailing these
proxy materials. We will reimburse banks, brokerage firms, and others for
their reasonable expenses in forwarding proxy materials to beneficial owners
and obtaining their instructions. A few officers and employees of Arch Coal
may also participate in the solicitation, without additional compensation.

Where Can I Find The Voting Results Of The Meeting?

We intend to announce preliminary voting results at the meeting. We will
publish the final results in our Quarterly Report on Form 10-Q for the first
quarter of 2001. You can obtain a copy of the Form 10-Q by logging on to our
website at www.archcoal.com, by calling the Securities and Exchange Commission
at (800) SEC-0330 for the location of the nearest public reference room, or
through the EDGAR system at http://www.sec.gov.

Can I Receive Future Stockholder Communications Over the Internet?

Yes. You may consent to access future stockholder communications (e.g.,
annual reports, proxy statements, and interim communications) from us or on
our behalf over the Internet instead of receiving those documents in the mail.
Providing such communications over the Internet will reduce our printing and
postage costs and the number of paper documents you would otherwise receive.
If you give your consent, in the future, when, and if, material is available
over the Internet, you will receive notification which will contain the
Internet location of the material. There is no cost to you for this service
other than charges you may incur from your Internet provider, telephone and/or
cable company. Once you give your consent, it will remain in effect until you
inform us otherwise. To give your consent, if your shares are registered in
your name, follow the prompts when you vote by telephone or over the Internet.
If you vote by mail, check the appropriate box located at the bottom of the
proxy card. If your shares are registered in the name of a nominee, follow the
directions provided by such nominee if this option is available.

ELECTION OF DIRECTORS

(PROXY ITEM NO. 1)

Structure Of The Board

Our Restated Certificate of Incorporation and by-laws provide for a Board
of Directors that is divided into three classes as equal in size as possible.
The classes have three-year terms, and the term of one class expires each year
in rotation at that year's annual meeting. The size of the Board can be
changed by a two-thirds vote of the entire Board and is currently set at
twelve members, to be reduced to ten members as of the annual meeting date.
Vacancies on the Board may be filled by persons elected by a majority of the
remaining directors. A director elected by the Board to fill a vacancy, or a
new directorship created by an increase in the size of the Board, serves for
the remainder of the full term of the class of directors in which the vacancy
or newly created directorship occurred. As a matter of policy, the Board will
submit the nomination of a director elected to fill a vacancy to the vote of
the company's stockholders at the next annual meeting.

Arch Coal's Board of Directors has nominated:

. Mr. Frank Burke for election as a director to fill a vacancy in the
class of directors whose terms will expire in 2003; and

. Three individuals for election as directors for a three-year term that
will expire in 2004: Mr. Steven F. Leer, Mr. Robert G. Potter and Mr.
Theodore D. Sands.

All nominees other than Mr. Potter are currently serving as directors of
the company.

Mr. Philip W. Block and Mr. Thomas L. Feazell, both current members of the
Board whose terms expire in 2001, are not standing for re-election. The
remaining members of the Board recognize with appreciation the contribution
Mr. Block and Mr. Feazell have made to the company through their years of
service as directors.

The Board is not aware that any nominee named in this proxy statement will
be unwilling or unable to serve as a director. If, however, a nominee is
unavailable for election, your proxy authorizes us to vote for a replacement
nominee if the Board names one. As an alternative, the Board may reduce the
number of directors to be elected at the meeting.

Nominee For A Two-Year Term That Will Expire In 2003:

FRANK M. BURKE, 61, has been a director of Arch Coal since September 2000.
He has served as Chairman, Chief Executive Officer and Managing General
Partner of Burke, Mayborn Company, Ltd., a private investment and consulting
company since 1984. Mr. Burke is also a director of Kaneb Services, Inc.,
Kaneb Pipe Line Partners, LP and Avidyn, Inc. (formerly Medical Control,
Inc.).

Nominees For A Three-Year Term That Will Expire In 2004:

STEVEN F. LEER, 48, has been President and Chief Executive Officer and a
director of Arch Coal since 1992. He is also a director of the Norfolk
Southern Corporation and Chairman of the Center for Energy and Economic
Development and the National Coal Council.

ROBERT G. POTTER, 62, was Chairman and Chief Executive Officer of Solutia
Inc., a producer and marketer of a variety of high performance chemical-based
materials, from 1997 to his retirement in 1999. Mr. Potter served for 32 years
with Monsanto Company (now Pharmacia Corporation) prior to its spin-off of
Solutia in 1997, most recently as the Chief Executive of its chemical
businesses. Mr. Potter is a Director of Stepan Company and of some private
companies of which he is also an investor.

THEODORE D. SANDS, 55, has been a director of Arch Coal since 1999 and,
since February 1999, has served as President of HAAS Capital, LLC, a private
consulting and investment company. Mr. Sands is also a director of Mosiac
Group, Inc., Protein Sciences Corporation and Terra Nitrogen Corporation. Mr.
Sands served as Managing Director, Investment Banking for the Global
Metals/Mining Group of Merrill Lynch & Co. from 1982 until February 1999.

Your Board of Directors recommends a vote "For" these nominees.

Directors Whose Terms Will Expire in 2002:

JAMES R. BOYD, 54, Chairman of the Board, has been a director of Arch Coal
since 1990. He has served as Senior Vice President and Group Operating Officer
of Ashland Inc., a multi-industry company with operations in chemicals, motor
oil, car care products and highway construction, since 1989.

DOUGLAS H. HUNT, 48, has been a director of Arch Coal since 1995 and, since
May 1995, has served as director of Acquisitions of Petro-Hunt, LLC, a private
oil and gas exploration and production company.

A. MICHAEL PERRY, 63, has been a director of Arch Coal since 1998. He has
served as Chairman of Bank One, West Virginia, N.A. since 1993 and as its
Chief Executive Officer since 1983. Mr. Perry is also a director of Champion
Industries, Inc.

Directors Whose Terms Will Expire in 2003:

IGNACIO DOMINIGUEZ URQUIJO, 55, has been a director of Arch Coal since 1998
and, since June 1998, has been Chief Executive Officer and Administrator of
Carboex, S.A., a fuel trading firm belonging to Endesa Group, the leading
Spanish utility company, and Senior Vice President of Endesa Group. Mr.
Dominguez was the General Manager of SE.PI, a Spanish government holding
group, from July 1996 to June 1998 and served as Director and General Manager
for Processing Industries of TENEO, a Spanish government holding group, and
its predecessor, I.N.I., from 1992 to July 1996.

ROBERT L. HINTZ, 70, has been a director of Arch Coal since 1997 and, since
1989, has been Chairman of the Board of R.L. Hintz & Associates, a management
consulting firm. Mr. Hintz was a director of Ashland Coal, Inc., from 1993 to
its merger with Arch Coal in 1997. He is a director of Chesapeake Corporation.

JAMES L. PARKER, 63, has been a director of Arch Coal since 1995. He was
President of Hunt Petroleum Corporation, a private oil and gas exploration and
production company, from 1990 until his retirement in February 2001 and since
1994 has been President and a director of Hunt Coal Corporation, a subsidiary
of Hunt Petroleum.

Board Meetings and Committees

The Board of Directors met four times in 2000. In addition to meetings of
the full Board, directors attended meetings of Board committees. Each director
attended at least 75% of the aggregate Board meetings and meetings of
committees of which he is a member. A description of each committee and its
current membership follows.

Committee on Directors

Members: Mr. Parker (Chairman) and Mr. Boyd, Mr. Hintz, Mr. Leer and Mr.
Perry

The Committee on Directors met three times during 2000. Its functions
include the recruitment and recommendation to the Board of Directors of
nominees for directors, the oversight of the annual evaluation of directors
and the review and recommendation of the directors' compensation program.

Finance Committee

Members: Mr. Sands (Chairman) and Mr. Dominguez, Mr. Leer, Mr. Parker and
Mr. Perry

The Finance Committee met five times in 2000. This Committee reviews and
approves fiscal policies relating to Arch Coal's financial structure,
including its debt, cash and risk management. It also reviews and recommends
to the Board appropriate action with respect to significant financial matters,
major capital expenditures and acquisitions, and funding policies of Arch
Coal's employee benefit plans.

Personnel and Compensation ("P&C") Committee

Members: Mr. Hunt (Chairman) and Mr. Block, Mr. Boyd, Mr. Dominguez, Mr.
Feazell and Mr. Sands

The P&C Committee met four times during 2000. The duties of this Committee
include the approval of the compensation of executive officers of Arch Coal
and its subsidiaries above specified dollar levels and the selection of
participants and awards under Arch Coal's incentive plans. The P&C Committee
also establishes policies regarding compensation, position evaluations,
transfers and terminations. In addition, it provides oversight of Arch Coal's
retirement, savings and other benefit plans.

Audit Committee

Members: Mr. Hintz (Chairman) and Mr. Burke, Mr. Dominguez, Mr. Hunt and
Mr. Perry

The Audit Committee met four times during 2000. Its primary responsibility
is to oversee the company's financial reporting process on behalf of the Board
including evaluating, recommending and, if necessary, replacing Arch Coal's
independent auditors, reviewing year-end and interim financial statements and
the adequacy and effectiveness of internal accounting and financial controls.
The Audit Committee is composed solely of independent directors and operates
under a written charter adopted by the entire Board (attached as Exhibit A to
this proxy statement).

Audit Committee Report

Management is responsible for Arch Coal's internal controls and the
financial reporting process while the independent auditors are responsible for
expressing an opinion on the conformity of the company's audited financial
statements with generally accepted accounting principles (GAAP). In this
context, the Audit Committee has met with and held discussions with management
and with Arch Coal's internal and independent auditors.

The Audit Committee reviewed with the company's internal and independent
auditors the overall scope and plans for their respective audits. The Audit
Committee also met with the auditors, with and without management present, to
discuss the results of their examinations and their evaluations of Arch Coal's
internal controls. The

Committee also reviewed with the independent auditors their judgment as to the
quality, and not just the acceptability, of the company's accounting
principles and financial controls and such other matters as are required to be
discussed with the Audit Committee under generally accepted auditing
standards. In addition, the Audit Committee discussed with the independent
auditors the auditors' independence from management and Arch Coal including
the matters in the written disclosures required by the Independence Standards
Board and whether the provision of non-audit services to the company by the
firm is compatible with maintaining auditor independence. Finally, the
Committee received management representation that the company's consolidated
financial statements were prepared in accordance with GAAP.

During 2000, Ernst & Young charged fees for services rendered to the
company as follows:

SERVICE FEE
------- --------

Audit.......................................................... $476,680
Information systems design and implementation.................. -0-
All other services (including tax services).................... $941,826

In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2000 for filing with the Securities and
Exchange Commission. The Audit Committee and the Board of Directors have also
recommended, subject to stockholder ratification, the selection of Ernst &
Young as Arch Coal's independent auditors for 2001.

AUDIT COMMITTEE
Robert L. Hintz, Chairman
Frank M. Burke
Ignacio Dominguez
Douglas H. Hunt
A. Michael Perry

Compensation of Directors

Directors who are Arch Coal employees do not receive payment for their
services as directors. The following table displays all components of
compensation for non-employee directors:

AMOUNT OF
FORM OF COMPENSATION COMPENSATION
-------------------- ------------

Annual Board Retainer*........................................ $55,000
Annual Retainer for Committee Chairman........................ $ 4,000
Board Attendance Fee (each meeting)........................... $ 1,250
Committee Attendance Fee (each meeting)....................... $ 1,250
New Director Fee**............................................ $30,000

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* At least $30,000 of the annual retainer is subject to mandatory deferral
under Arch Coal's Outside Director's Deferred Compensation Plan into a
hypothetical investment in Arch Coal stock and is payable in cash upon the
director's termination of service.

** New directors receive an additional $30,000 during their first year of
service on the Board. This additional amount is subject to mandatory
deferral under the Deferred Compensation Plan.

Mr. Dominguez serves as a director of the company pursuant to an agreement
among the company, Ashland and his employer, Carboex, S.A. At Mr. Dominguez's
request, all directors fees earned by him are paid directly to Carboex.

Arch Coal also pays for each director's costs of attending Board meetings
and, under the Arch Coal, Inc. Director Matching Gift Program, the company
donates $2.00 for each dollar contributed by directors to accredited
institutions of higher education up to a maximum of $6,000 each year. Non-
employee directors do not have a retirement plan nor do they participate in
the company's benefit plans.

Ownership By Directors and Executive Officers

The following table shows Arch Coal common stock owned beneficially by the
company's directors and executive officers as of March 1, 2001. In general,
"beneficial ownership" includes those shares a person has the power to vote,
or the power to transfer, and stock options that are exercisable currently or
become exercisable within 60 days. Except as otherwise noted, each person has
sole voting and investment power over his shares.

SHARES
UNDERLYING
OPTIONS PERCENTAGE
EXERCISABLE OF
SHARES OF WITHIN 60 OUTSTANDING
BENEFICIAL OWNER COMMON STOCK DAYS TOTAL SHARES
---------------- ------------ ----------- --------- -----------

Philip W. Block, Director(/1/).. 1,400 -0- 1,400 *
James R. Boyd, Chairman of the
Board and Director(/1/)(/2/)... 33,738 -0- 33,738 *
Frank M. Burke, Director(/3/)... 54,671 -0- 54,671 *
Ignacio Dominguez Urquijo,
Director(/4/).................. 1,640,000 -0- 1,640,000 3.8%
Thomas L. Feazell,
Director(/1/)(/2/)(/3/)........ 12,992 -0- 12,992 *
Robert L. Hintz, Director(/3/).. 4,364 -0- 4,364 *
Douglas H. Hunt, Director(/3/).. 18,139 -0- 18,139 *
Steven F. Leer, President, CEO
and Director(/2/)(/5/)......... 19,187 88,333 107,520 *
James L. Parker,
Director(/3/)(/6/)............. 2,203,023 -0- 2,203,023 5.2%
A. Michael Perry, Director(/3/). 9,643 -0- 9,643 *
Theodore D. Sands,
Director(/3/)(/7/)............. 33,859 -0- 33,859 *
C. Henry Besten, Vice
President--Strategic
Marketing(/5/)................. 25,255 64,333 89,588 *
John W. Eaves, Senior Vice
President--Marketing(/5/)...... 1,370 35,333 36,703 *
Robert W. Shanks, Vice
President--Operations(/5/)..... 1,448 35,333 36,781 *
Kenneth G. Woodring, Executive
Vice President(/5/)............ 13,457 81,499 94,956 *
All directors and executive
officers of Arch Coal as a
group (20 persons)(/8/)........ 4,078,435 523,800 4,602,235 10.6%

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* Less than one percent of the outstanding shares.
(/1/) Includes shares held under Ashland's 401(k) plan in the following
amounts: Mr. Block--500; Mr. Boyd--52; and Mr. Feazell--2,784.
(/2/) Includes shares held jointly with such person's spouse in the following
amounts: Mr. Boyd--1,045; Mr. Feazell--226; and Mr. Leer--1,010 and
2,955 shares held by Mr. Feazell's spouse.
(/3/) Includes shares held under the Director Deferred Compensation Plan in
the following amounts: Mr. Burke--4,671; Mr. Feazell--3,364; Mr. Hintz--
3,364; Mr. Hunt--7,139; Mr. Parker--3,364; Mr. Perry--3,364; and Mr.
Sands--8,859.
(/4/) Consists of shares held by Carboex as of March 1, 2001. Mr. Dominguez is
an executive officer of Carboex, and to the extent he may be deemed to
be a control person of Carboex, he may be deemed to be a beneficial
owner of shares owned by Carboex. Mr. Dominguez disclaims beneficial
ownership of such shares.
(/5/) Includes shares held under Arch Coal's Employee Thrift Plan in the
following amounts: Mr. Leer--18,177; Mr. Besten--20,093; Mr. Eaves--
1,370; Mr. Shanks--1,198; and Mr. Woodring--2,350 and 3,445 shares held
by Mr. Besten under Arch Coal's Deferred Compensation Plan.
(/6/) Includes 2,199,659 shares owned by Hunt Coal Corporation. Mr. Parker is
a director and executive officer of Hunt Coal Corporation, and he may be
deemed to share voting and dispositive power with respect to the shares
of common stock owned by Hunt Coal. Mr. Parker disclaims beneficial
ownership of such shares.
(/7/) Includes 25,000 shares held by HAAS Capital, LLC, of which Mr. Sands is
a general partner.
(/8/) Includes 46,083 shares held by executive officers under Arch Coal's
Employee Thrift Plan and 3,445 shares held by executive officers under
Arch Coal's Deferred Compensation Plan.

Ownership By Others

The following table shows all persons or entities that Arch Coal knows were
"beneficial owners" of more than five percent of Arch Coal common stock on
March 1, 2001 and is based on filings made by such owners with the Securities
and Exchange Commission or on information provided by the company's transfer
agent.

SHARES OF PERCENT OF
BENEFICIAL OWNER COMMON STOCK CLASS*
---------------- ------------ ----------

Citigroup Inc.**
399 Park Avenue
New York, NY 10043..... 2,151,588 5.1%

Dimensional Fund
Advisors Inc.**
12299 Ocean Avenue,
11th Floor
Santa Monica, CA 90401. 2,126,714 5.1%

Hunt Coal Corporation
5000 Thanksgiving Tower
Dallas, Texas 75201.... 2,199,659 5.2%

Merrill Lynch & Co.,
Inc. **
(on behalf of Merrill
Lynch Investment
Managers)
World Financial Center,
North Tower
250 Vesey Street
New York, NY 10381..... 2,002,945 5.0%

Salomon Smith Barney
Holdings Inc.**
SSB Citi Fund Management
LLC**
388 Greenwich Street
New York, NY 10013..... 4,221,451 9.7%

--------
* Percentage of the company's outstanding shares of common stock on March 1,
2001.
** These entities have disclaimed beneficial ownership of the shares
attributed to them pursuant to the U.S. securities laws.

COMPENSATION OF EXECUTIVE OFFICERS

Report of the Personnel and Compensation Committee

The P & C Committee

The P&C Committee is comprised entirely of non-employee directors and has
the responsibility for reviewing and approving changes to Arch Coal's
executive compensation policies and programs. The Committee also approves all
compensation payments to the Chief Executive Officer and other executive
officers, except for grants of stock-based compensation, which are approved by
the Board of Directors as a whole.

The members of the Committee are free from interlocking or other
relationships that could create a conflict of interest.

Compensation Principles

Arch Coal's compensation program for executives consists of three key
elements:

. A base salary;

. A performance-based annual bonus; and

. A long-term incentive program consisting of periodic grants of both
stock options and performance shares or units.

The fundamental objective of Arch Coal's executive compensation program is
to attract, retain and motivate key executives to enhance long-term
profitability and stockholder value. Arch Coal's compensation program meets
this objective by:

. Providing for a level of base compensation that is competitive with
other similarly sized publicly-traded companies, with particular
emphasis on those in mining and extractive industries;

. Providing total compensation opportunities which are comparable to the
opportunities provided by a group of peer companies of similar size and
diversity to Arch Coal in analogous or related businesses (the
"compensation peer group"), as well as general industry indices. The
compensation peer group companies utilized for analyzing compensation
comparisons are currently the same companies as utilized in the
performance graph shown on page 17;

. Linking the compensation of Arch Coal executives to the operating and
financial performance of the company by making significant elements of
each executive's compensation sensitive to the company's overall
performance;

. Emphasizing variable pay and long-term incentives at more senior levels
of the company; and

. Rewarding executives for both the short and long-term enhancement of
stockholder value.

Annual Base Salary

The Committee periodically directs the conduct of a study comparing the
company's compensation program and levels to the marketplace. As a result of a
study conducted in late 1999, the Committee determined that compensation
levels for some of its executive officers were significantly below competitive
market median levels. In an effort to move salaries closer to the market, base
salaries for executives were adjusted in February 2000. Prior to this
adjustment, salaries for the CEO and other executive officers had not been
adjusted since 1997. The Committee will continue to monitor the
competitiveness of executive salary levels and anticipates future adjustments
to respond to changing market conditions.

Annual Incentive Bonus

Incentive Compensation Plan

The company's incentive compensation plan provides opportunities for key
executives of Arch Coal to earn annual incentive compensation based upon the
successful achievement of individual and company financial and operating
performance objectives. Approximately two hundred employees were eligible to
participate in the plan in 2000.

A participant's maximum annual incentive opportunity is based upon his or
her level of participation in the bonus plan. The incentive opportunity
increases based upon an executive's potential to affect operations or
profitability. The maximum incentive opportunity in 2000 for the Chief
Executive Officer was 125% of base salary while the maximum incentive
opportunity for the other executives, including the other executive officers
named in this proxy statement, was 80% to 100% of base salary.

Awards for corporate employees, including the CEO, are based on overall
corporate and individual performance. Awards to operating subsidiary employees
are based on a combination of corporate, subsidiary and individual
performance. Company performance is determined by comparing the company's
actual performance against objective performance measures, which are
established by the Board at the beginning of each calendar year. These
performance measures, which are weighed equally, are:

. earnings per share (EPS);

. adjusted earnings before interest, taxes, depreciation, and amortization
(adjusted EBITDA);

. cost reduction; and

. debt reduction.

Company performance is weighted more at senior levels in the organization;
however, all participants in the program have an individual performance factor
which is based upon an evaluation of the extent to which an individual has
successfully discharged his duties during the year. All award payments are
subject to the review and approval of the Committee.

2000 Incentive Bonuses

The table below shows key measures of Arch Coal's financial performance for
2000 compared to 1999:

(in millions except percentages and per share data) 2000 1999(/1/)
--------------------------------------------------- ------- ---------

Net income (loss)..................................... (12.7) (346.3)
Income from operations................................ 74.0 (327.0)
Debt.................................................. 1,150.8 1,181.0
Adjusted EBITDA(/2/).................................. 315.2 325.9
Earnings (loss) per share............................. (0.33) (9.02)
Total Shareholder Return (TSR)........................ 28.8% (31.7)%

--------
(/1/Arch)Coal's results for 1999 included the effect of a write down in the
carrying value of certain eastern coal properties and related assets.
(/2/Income)(loss) from operations before the effect of changes in accounting
principles and extraordinary items, asset impairment and restructuring
charges, net interest expense, income taxes, depreciation, depletion and
amortization for Arch Coal, its subsidiaries and its ownership percentage
in its equity investments.

The company's performance in 2000 resulted in a partial bonus pay out based
on the corporate performance measures referenced above. The Chief Executive
Officer and other executives earned a bonus for corporate performance under
the plan equal to 64.58% of their maximum incentive opportunity. In addition,
the Chief Executive Officer and other executives were eligible to receive an
award of up to 10% of their maximum incentive opportunity based on individual
performance.

Long-Term Incentives

The Committee has determined that a long-term incentive opportunity for
each of Arch Coal's executive officers should be delivered through awards of
stock options and phantom performance shares. The Committee intends that these
long-term incentive opportunities be competitive and based on actual company
performance.

Stock Options

Arch Coal's employee stock option program is a long-term plan designed to
link executive compensation with increased stockholder value. A target value
has been established for each executive officer and other key employees of
Arch Coal. This target helps to establish the range of stock options to be
granted periodically to key employees. At the discretion of the Board of
Directors, awards can be made that deviate from these general guidelines.

All stock options are granted with an exercise price equal to the closing
price of common stock on the date of grant. Vesting of stock options generally
occurs over a period of three years; however, options will immediately vest
upon a change in control of Arch Coal or upon an employee's death, retirement
or disability.

In 1999, the Board of Directors determined that it was appropriate to grant
stock options to the Chief Executive Officer, the other executives, and all
other stock option recipients of two times the normal level. The Committee
felt this would create a significant incentive for immediate and sustained
improvement in corporate

performance and would serve as a retention device for the key employees of the
corporation. This grant was made by the Board with the understanding that no
grants of stock options would be made in 2000. Consequently, with the
exception of one executive officer who began his employment with the company
during 2000 and two persons who were promoted to executive positions in 2000,
no executive officers received stock option grants in 2000.

Phantom Performance Shares

On December 19, 1997, phantom performance shares were granted under the
Stock Incentive Plan covering a four-year performance period beginning January
1, 1998. Performance shares can be earned based upon Arch Coal's total
stockholder return (TSR) relative to two external benchmarks: the compensation
peer group and the Standard & Poor's (S&P's) 400 mid-cap index. Each of these
performance factors is weighted equally at 50%. In order for a payout to be
generated under the performance share grants, the TSR over the 4-year period
must be at least equal to or greater than either the median TSR of the
compensation peer group or the 25th percentile of the S&P's 400 mid-cap index.
Maximum payouts will be generated if Arch Coal's TSR is at least equal to the
75th percentile level of each group. The number of performance shares granted
were based upon the employee's responsibility level, performance and salary.

On February 24, 2000, phantom performance shares were granted under the
Stock Incentive Plan covering a four-year performance period beginning January
1, 2000. Performance shares can be earned based upon Arch Coal's TSR relative
to two external benchmarks: the compensation peer group and the S&P's 400 mid-
cap index. Each of these performance factors is weighted equally at 50%. In
order for a payout to be generated under the performance share grants, the TSR
over the 4-year period must be at least equal to or greater than either the
median TSR of the compensation peer group or the 25th percentile of the S&P's
400 mid-cap index. Maximum pay outs will be generated if Arch Coal's TSR is at
least equal to the 50th percentile for the S&P's 400 mid-cap index, and is at
least equal to the 75th percentile for the compensation peer group. The number
of performance shares granted was based upon the employee's responsibility
level, performance and salary. Two-thirds of the performance share grant is
earned based on the performance metrics discussed above. The balance of the
performance shares (one-third) will be paid out in cash to the Chief Executive
Officer and other the executive officers named in this proxy statement at the
end of the 4-year performance cycle, subject to plan provisions.

Payments with respect to phantom performance shares earned during the four-
year performance period may be made wholly or partially in cash, or wholly or
partially in shares of Arch Coal common stock, at the discretion of the Board
of Directors and as permitted by applicable securities laws. The Board of
Directors can adjust, in its discretion, the performance measures established
and may adjust any payments earned during any performance period downward
based upon poor performance or such other factors as the Committee deems
appropriate.

Deductibility of Compensation

Under Section 162(m) of the Internal Revenue Code, Arch Coal is subject to
the loss of the deduction for compensation in excess of $1 million paid to one
or more of the executive officers named in this proxy statement. This
deduction can be preserved if Arch Coal complies with certain conditions in
the design and administration of its compensation programs.

The P&C Committee will make reasonable efforts, consistent with sound
executive compensation principles and the needs of Arch Coal, to ensure that
all future amounts paid to its executive officers will be fully deductible by
the company.

Other Plans

Arch Coal maintains a Deferred Compensation Plan pursuant to which certain
executives can defer base and annual incentive compensation. Arch Coal also
maintains an Employee Thrift Plan, a Cash Balance Pension

Plan, insurance and other benefit plans for its employees. Executives
participate in these plans on the same terms as other eligible employees,
subject to any legal limits on the amounts that may be contributed by or paid
to executives under the plans.

Compensation of the Chief Executive Officer

Mr. Leer's base salary was adjusted to $500,000 in 2000, representative of
an annualized increase of approximately 10% per year over the past three
years. The Committee determined that this salary adjustment was appropriate to
begin to make up the shortfall between Mr. Leer's former base salary level and
the median of the compensation peer group, in order to more closely fulfill
the compensation philosophy established by the Committee.

For 2000, Mr. Leer's maximum incentive opportunity under Arch Coal's annual
incentive compensation plan was 125% of his base salary, or $625,000. As
described above, the corporation's performance in 2000 resulted in a bonus pay
out based on corporate performance to the Chief Executive Officer of 64.58% of
his maximum incentive opportunity. In addition, based on the Committee's
evaluation of the CEO's performance, the Committee awarded the CEO an
additional pay out of 8.6% of his maximum incentive opportunity for individual
performance.

General

This report is submitted by the P&C Committee with respect to all matters
set forth in the report, except for those matters related to stock options and
performance shares, and by the entire Board of Directors, but only with
respect to stock options and performance shares. Mr. Leer excused himself from
Board meetings and abstained from voting with respect to all matters relating
to stock-based compensation.

In summary, the Committee and the Board believe that the total compensation
opportunities provided to Arch Coal's executive officers create a strong
linkage and alignment with the long-term best interest of Arch Coal and its
stockholders.

Personnel and Arch Coal, Inc.
Compensation Committee Board of Directors
---------------------- ------------------

Douglas H. Hunt, Chairman James R. Boyd, Chairman
Thomas L. Feazell Philip W. Block
Philip W. Block Frank M. Burke
Ignacio Dominguez Urquijo Ignacio Dominguez Urquijo
James R. Boyd Thomas L. Feazell
Theodore D. Sands Robert L. Hintz
Douglas H. Hunt
Steven F. Leer
James L. Parker
A. Michael Perry
Theodore D. Sands

SUMMARY COMPENSATION TABLE

The following table is a summary of compensation information for each of
the last three years for the Chief Executive Officer and each of the other
four most highly compensated executive officers, based upon annual salary for
the year 2000:

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION(/1/) OPTION COMPENSATION(/2/)
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS(#) ($)
------------------ ---- ------ ------- ----------------- ------------ -----------------

Steven F. Leer.......... 2000 500,000 457,344 3,639 -0- 26,277
President & Chief
Executive 1999 400,000 178,000 1,297 70,000 24,000
Officer 1998 400,000 -0- -- 35,000 24,000
C. Henry Besten(/3/).... 2000 215,000 175,269 -- -0- 12,195
Vice President--
Strategic 1999 190,000 67,640 -- 26,500 11,400
Marketing 1998 190,000 -0- -- 13,250 11,400
John W. Eaves........... 2000 275,000 201,231 171 -0- 13,393
Senior Vice President-- 1999 190,000 70,300 -- 26,500 11,400
Marketing 1998 190,000 -0- -- 13,250 11,400
Robert W. Shanks........ 2000 250,000 153,750 4,326 -0- 10,200
Vice President--
Operations 1999 225,000 80,100 9,334 26,500 13,500
1998 225,000 -0- -- 13,250 13,500
Kenneth G. Woodring..... 2000 350,000 251,213 4,139 -0- 9,669
Executive Vice
President-- 1999 300,000 106,800 10,567 30,000 18,000
Operations 1998 300,000 -0- 2,491 15,000 16,707

--------
(/1/) Represents tax reimbursement payments.
(/2/) This amount represents: (1) contributions made to the applicable
Employee Thrift Plan for 1998, 1999 and 2000, (2) contributions by Arch
Coal under its ERISA Forfeiture Plan for 1998 and (3) credits made under
Arch Coal's Deferred Compensation Plan for 1999 and 2000. All
contributions to the Employee Thrift Plan and ERISA Forfeiture Plan were
made during the listed year. All credits pursuant to the Deferred
Compensation Plan were made in the following year.
(/3/) Mr. Besten was also Acting Chief Financial Officer from January 26, 2000
to December 1, 2000.

Stock Option Grants

None of named executive officers received stock option grants in 2000
because they each received enhanced stock option grants in 1999.

Stock Option Exercises

None of the named executive officers exercised stock options in 2000. The
table below sets forth the following information with respect to the status of
their options as of December 31, 2000:

. The total number of exercisable and unexercisable stock options held at
December 31, 2000; and

. The aggregate dollar value of in-the-money unexercised options at
December 31, 2000.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)*
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------

Steven F. Leer.............. 65,003/69,997 40,112/200,513
C. Henry Besten............. 65,501/26,499 15,183/75,910
John W. Eaves............... 26,501/26,499 15,183/75,910
Robert W. Shanks............ 26,501/26,499 15,183/75,910
Kenneth G. Woodring......... 81,501/29,999 24,999/85,934

--------
* Calculated based on the closing stock price of the company's common stock
on December 29, 2000 of $14.125.

Long-Term Incentive Plan Award

The following sets forth the number of performance shares awarded to each
of the named executive officers under the Stock Option Plan in 2000, as
described on page 12 of this proxy statement. The performance period with
respect to such awards is January 1, 2000 through December 31, 2003:

NUMBER OF PERFORMANCE
NAME SHARES GRANTED
---- ---------------------

Steven F. Leer..................................... 145,700
C. Henry Besten.................................... 38,900
John W. Eaves...................................... 53,000
Robert W. Shanks................................... 47,200
Kenneth G. Woodring................................ 69,200

Pension Plans

On January 1, 1998, Arch Coal combined and replaced both Arch Coal's and
Ashland Coal's pension plans with a new Cash Balance Pension Plan. The
benefits of a participating individual under one of the former plans were
vested as of that date and his or her cash balance account was credited with
the present value of his or her earned pension benefit, payable at age 65.
Salaried employees hired after January 1, 1998 become vested after three years
of employment. On an annual basis (or a shorter period if a participant's
employment is terminated), each participant's account is credited with the
following:

. contribution credits equal to a percent of total pay;

. transition credits for a period equal to a participant's credited
service under the prior pension plan as of December 31, 1997 (to a
maximum of 15 years from December 31, 1997); and

. interest credits based on one-year treasury yields plus 1%.

The percentage amounts of the contribution and transition credits, which
are shown in the following chart, are based on the participant's age at year
end:

CONTRIBUTION CREDITS TRANSITION CREDITS
AGE AT YEAR END AS% OF TOTAL PAY* AS% OF TOTAL PAY**
--------------- -------------------- ------------------

Under 30........................... 3.0% 1.0%
30 to 34........................... 4.0% 1.0%
35 to 39........................... 4.0% 2.0%
40 to 44........................... 5.0% 3.0%
45 to 49........................... 6.0% 4.0%
50 to 54........................... 7.0% 4.0%
55 and over........................ 8.0% 4.0%

--------
* Plus an additional 3% of pay above the Social Security wage base.
** Total pay means regular salary plus annual incentive bonus payments.

As of December 31, 2000, the estimated annual annuities (based on one-year
treasury yields) payable at age 65 to executive officers named in this proxy
statement are as follows:

ESTIMATED ANNUAL
NAME PAYMENTS*
---- ----------------

Steven F. Leer.......................................... $438,278
C. Henry Besten......................................... $144,863
John W. Eaves........................................... $231,248
Robert W. Shanks........................................ $253,118
Kenneth G. Woodring..................................... $229,837

--------
* Assumes the executive officer works until age 65, annual base compensation
remains unchanged from 2000, and that future incentive compensation is
equal to the average of that awarded over the last four years. The interest
rate used for determining the annuity was 5.8%. The interest credits for
2001 and future years was 7.01%.

Employment Agreements

Each executive officer has an employment agreement with Arch Coal that
requires the company to continue the executive's salary and benefits for one
year if he is terminated by the company without cause. If, however, he resigns
for good reason or is terminated without cause within two years after a change
in control of the company, then, depending upon his position, he would receive
a payment equal to up to three-times the highest annual compensation
(including incentive compensation) he received during the prior three years.
In addition, certain benefits would continue for up to three years depending
upon the benefit and position held by the executive.

Section 16(a) Beneficial Ownership Reporting Compliance

Under the securities laws, Arch Coal's directors, executive officers and
any persons beneficially holding more than ten percent of the company's common
stock are required to report their ownership of the common stock and any
changes in that ownership to the SEC and the New York Stock Exchange. Specific
due dates for these reports have been established and Arch Coal is required to
report in this proxy statement any failure to file by these dates. All of
these filing requirements were satisfied in 2000. In making these statements,
Arch Coal has relied on copies of the reports that its executive officers and
directors have filed with the SEC.

Stock Price Performance Graph

The graph below compares the cumulative total return to stockholders (stock
price appreciation plus reinvested dividends) on the company's common stock
with the cumulative total return on two indices: a peer group and the Standard
& Poor's (S&P) 400 Index. The graph assumes that:

. You invested $100 in the company's common stock and in each indicia at
the closing price on January 1, 1995;

. all dividends were reinvested; and

. you continued to hold your investment through December 31, 2000.

12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- -------- --------

Arch Coal*................ 100 134 134 85 58 74
Peer Group**.............. 100 107 75 49 79 60
S&P 400 Index............. 100 119 156 188 215 272

* Performance shown in the graph and chart for Arch Coal prior to the
company's merger with Ashland Coal, Inc. on July 1, 1997 is attributable
to Ashland Coal.
** Peer companies include: Consol Energy, Inc., Freeport-McMoran Copper &
Gold Inc., Newmont Mining Corporation, The Pittston Company and Southern
Peru Copper Corporation.

APPROVAL OF ARCH COAL'S INCENTIVE COMPENSATION PLAN

(PROXY ITEM NO. 2)

We are asking you to approve the company's incentive compensation plan, the
material terms of which are described under the heading "Annual Incentive
Bonus--Incentive Compensation Plan" in the Report of the Personnel
Compensation Committee on page 10 of this proxy statement. Section 162(m) of
the Internal Revenue Code requires stockholder approval of the plan in order
for the company to obtain an income tax deduction for compensation paid over
$1 million to one or more of the executive officers named in this proxy
statement. If the plan is approved, it will meet the stockholder approval
requirements of Section 162(m) until 2006 unless the plan terms are materially
amended in which case we would again ask for stockholder approval.

Your Board of Directors recommends that you vote "FOR" approval of Arch Coal's
Incentive Compensation Plan

RATIFICATION OF INDEPENDENT AUDITORS

(PROXY ITEM NO. 3)

We are asking you to ratify the Board's appointment of Ernst & Young LLP as
principal independent auditors to examine the consolidated financial
statements of the company and its subsidiaries for the year 2001. The Audit
Committee recommended the selection of Ernst & Young to the Board. Ernst &
Young has acted as Arch Coal's independent auditors since 1997, is
knowledgeable about the company's operations and accounting practices and is
well qualified to act as auditor.

Although we are not required to seek your approval of this appointment, the
Board believes it to be sound corporate practice to do so. If you do not
ratify the appointment of independent auditors, the Audit Committee will
investigate the reasons for your rejection and the Board will reconsider the
appointment.

Representatives of Ernst & Young do not plan to make a formal statement at
the annual meeting. However, they will attend the meeting and be available to
respond to appropriate questions.

Your Board of Directors recommends that you vote "FOR" the ratification of the
appointment of Ernst & Young LLP as independent auditors for 2001

ADDITIONAL INFORMATION

Information About Stockholder Proposals

If you wish to submit proposals for possible inclusion in our 2002 proxy
materials, we must receive them on or before November 26, 2001. Proposals
should be mailed to:

Arch Coal, Inc.
CityPlace One
Suite 300
St. Louis, Missouri 63141
Attention: Robert G. Jones, Vice President--Law and Secretary

If you wish to nominate directors and/or propose proper business from the
floor for consideration at the 2001 Annual Meeting of Stockholders, our by-
laws provide that:

. You must notify Arch Coal's Secretary in writing;

. Your notice must have been received at Arch Coal's headquarters not
earlier than February 3, 2001 and not later than February 23, 2001; and

. Your notice must contain the specific information required in our by-
laws.

We will send copies of these requirements to any stockholder who writes to
us requesting this information. Please note that these three requirements
apply only to matters that you wish to bring before your fellow stockholders
at the 2001 Annual Meeting without submitting them for possible inclusion in
our 2001 proxy materials.

Multiple Copies Of Annual Report To Stockholders

If more than one copy of Arch Coal's Annual Report is currently being sent
to your address, we will discontinue the mailing of reports on the accounts
you select if you mark the designated box on the appropriate proxy card, or
follow the prompts when you vote if you are a stockholder of record voting by
telephone or Internet.

At least one account must continue to receive the Annual Report either by
mail or through the Internet. Mailing of dividends, dividend reinvestment
account statements, and any special notices will not be affected by your
election to discontinue future duplicate mailings of the Annual Report. To
discontinue or resume the mailing of an Annual Report to an account, you may
call EquiServe at 1-888-987-6588.

If you own common stock through a bank, broker or other nominee and receive
more than one Arch Coal Annual Report, please contact the holder of record to
eliminate duplicate mailings.

ROBERT G. JONES
Vice President--Law and Secretary

March 26, 2001

EXHIBIT A

AUDIT COMMITTEE CHARTER

Organization:

This charter governs the operations of the Audit Committee (the
"Committee") of the Board of Directors (the "Board") of Arch Coal, Inc. (the
"Company"). The Committee shall review and reassess the charter at least
annually. The Charter, and any revisions shall be subject to the approval of
the Board. The Committee shall be appointed by the Board and shall be
comprised of at least three directors, each of whom are independent of
management and the Company. Members of the Committee shall be considered
independent if they have no relationship to the Company that may interfere
with the exercise of their independence from management and the Company. All
Committee members shall be financially literate and at least one member of the
Committee shall have accounting or related financial management expertise, as
the Board interprets such qualifications in its business judgment.

The Committee will have at least three scheduled meetings each year, plus
additional meetings as circumstances require. A majority of the members of the
Committee will constitute a quorum for the transaction of business. The
Committee will keep minutes of its meetings, and will regularly report to the
Board on its activities, making recommendations as appropriate.

Role of the Committee:

The Committee shall provide assistance to the Board in fulfilling its
oversight responsibilities to the stockholders, potential stockholders, and
the investment community, including the Security Exchange Commission and the
New York Stock Exchange. The Committee will take appropriate actions to set
the overall corporate tone for quality financial reporting, sound internal
controls and compliance with the law. The Committee will maintain free and
open communications between the independent auditors, internal auditors, and
management of the Company. The Committee shall have the authority to
investigate any matters within the scope of its responsibilities and shall be
empowered to retain independent counsel, accountants or others to assist in
any such investigation.

Responsibilities:

The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of their activities to the Board. Management is responsible for
preparing the Company's financial statements and the independent auditors are
responsible for auditing the Company's financial statements. As set forth in
the Internal Audit Charter, the Company's Internal Auditor is responsible for
providing the Audit Committee and management with an independent evaluation of
the efficiency and effectiveness the Company's internal controls.

The Committee's primary responsibilities shall consist of the following:

. The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Committee, as representatives of the
stockholders. The Committee shall have the ultimate authority and
responsibility to evaluate and, if appropriate, replace the independent
auditors. The Committee shall discuss with the auditors their
independence from management and the Company and the matters included in
the written disclosures required by the Independence Standards Board.
Annually, the Committee shall review and recommend to the Board the
selection of the Company's independent auditors, subject to
stockholders' approval.

. The Committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits, including the adequacy of staffing and compensation. Also, the
Committee shall discuss with management, the internal auditors, and the
independent auditors the

A-1

adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk, and
legal and ethical compliance programs. The Committee shall meet
separately with the internal auditors and independent auditors, with and
without management present, to discuss the results of their
examinations.

. The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the Committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards. The chair of the Committee
may represent the entire committee for the purposes of this review.

. The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K (or the annual report to stockholders if distributed prior
to the filing of Form 10-K), including their judgment about the quality,
not just the acceptability, of accounting principles, the reasonableness
of significant judgments, and the clarity of the disclosures in the
financial statements. Additionally, the Committee shall discuss the
results of the annual audit and any other matters required to be
communicated to the Committee by the independent auditors under
generally accepted auditing standards.

Approved and Adopted by the Board of
Directors
May 3, 2000

A-2

[LOGO OF ARCH COAL, INC. APPEARS HERE]

Annual Meeting of Stockholders

CityPlace One
Lower Level Auditorium
St. Louis, Missouri 63141
(314) 994-2700

Directions to the Arch Coal, Inc. Annual Meeting
of Stockholders:

From Downtown St. Louis: Take Interstate 64 West
to 270 North. Exit at Olive Boulevard. Take Olive
Boulevard East to CityPlace Drive. North on
CityPlace Drive to Arch Coal's headquarters at
CityPlace One.

From Lambert International Airport: Take Highway
70 West to 270 South. Exit at Olive Boulevard.
Take Olive Boulevard East to CityPlace Drive.
North on CityPlace Drive to Arch Coal's
headquarters at CityPlace One.

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2001 ANNUAL MEETING OF STOCKHOLDERS
CITYPLACE ONE, LOWER LEVEL AUDITORIUM
ST. LOUIS, MISSOURI 63141
APRIL 26, 2001 AT 10:00 A.M., CENTRAL TIME

The undersigned hereby appoints STEVEN F. LEER and ROBERT G. JONES, and each of
them, with power of substitution, as the proxy of the undersigned to represent
the undersigned and to vote all shares of common stock which the undersigned
would be entitled to vote, if personally present at the Annual Meeting of
Stockholders of Arch Coal, Inc. to be held at its headquarters at CityPlace One,
St. Louis, Missouri, at 10:00 a.m. on Thursday, April 26, 2001, and at any
adjournments thereof, with all powers the undersigned would possess if present
at such meeting on the matters set forth on the reverse side hereof and all
other matters properly coming before the meeting.

If the undersigned is a participant in the Arch Coal, Inc. Employee Thrift Plan
(including pursuant to the Mingo Logan Savings Plan), and this proxy card is
received on or before April 20, 2001, then this card also provides voting
instructions to the trustee of such plan to vote at the Annual Meeting, and any
adjournments thereof, all shares of Arch Coal common stock held in the
undersigned's plan account as specified upon the matters set forth on the
reverse side hereof and all other matters properly coming before the meeting.
If the undersigned is a participant in one of these plans and does not instruct
the trustee by April 20, 2001, then the trustee will vote the undersigned's plan
account shares in proportion to the votes of the other participants in that
plan. In addition, the trustee will vote unallocated shares in the plan in
direct proportion to voting by allocated shares for which instructions have been
received.

PLEASE SEE REVERSE SIDE FOR INFORMATION ON VOTING YOUR PROXY BY TELEPHONE OR
INTERNET. You are encouraged to specify your choices by marking the
appropriate boxes, SEE REVERSE SIDE, and mailing in your ballot or by voting by
telephone or Internet. If you vote by mail, you need not mark any boxes if you
wish to vote in accordance with the Board of Directors' recommendations. The
Proxies cannot vote your shares unless you vote.

--------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL

[X] Please mark your votes as in this example.

This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR all proposals.
Your Board of Directors recommends a vote FOR all proposals.

1. Election of Directors

Frank M. Burke For [_] Withheld [_] 2. Approval of Arch Coal Inc.'s For [_] Against [_] Abstain [_]
Incentive Compensation Plan
Steven F. Leer For [_] Withheld [_]
3. Ratification of Ernst & Young LLP For [_] Against [_] Abstain [_]
Robert G. Potter For [_] Withheld [_] as independent auditors for 2001

Theodore D. Sands For [_] Withheld [_]

I consent to receive future stockholder communications over the Internet [_]

I wish to discontinue duplicate mailings on this account [_]

I plan to attend the Annual Meeting [_]

SIGNATURE(S)________________________ DATE_____________________________

NOTE: Please sign exactly as your name or names appear on this proxy card, and
when signing as attorney, executor, administrator, trustee or guardian, give
your full title as such. If a corporation, please sign in full corporate name by
an authorized officer. If a partnership, please sign in full partnership name by
an authorized person.

--------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL

Arch Coal, Inc. encourages you to vote your shares electronically by telephone
or through the Internet. This will eliminate the need to return your proxy card.
To vote your shares by telephone or through the Internet, you must use the
control number printed in the box above, just below the perforation, to access
the system.

The EquiServe Vote by Telephone and Vote by Internet systems can be accessed 24-
hours a day, seven days a week up through the day before the meeting.

TO VOTE BY TELEPHONE:

. Using a touch-tone phone call Toll-free: 1-877-PRX-VOTE (1-877-779-8683)
. From outside the United States, call direct: 1-201-536-8073

TO VOTE BY INTERNET:

. Log on to the Internet and go to the website: http://www.eproxyvote.com/aci

Note: If you vote over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be responsible.

If you vote your shares electronically, there is no need for you to mail back
your proxy card.

YOUR VOTE IS IMPORTANT.
THANK YOU FOR VOTING YOUR SHARES.