CHARLESTON, W.Va. - Alpha Natural Resources said Tuesday it plans to buy rival Foundation Coal for about $1.4 billion in stock in a deal that would transform two regional companies into the nation's third-largest coal producer.

Foundation Coal shares jumped almost 18 percent in midday trading while Alpha Natural Resources shares fell almost 9 percent.

"This is exactly the sort of transformational combination that Alpha was talking about for some time and we believe that this is absolutely the right time to do it," Alpha Chief Executive Mike Quillen said during a conference call with securities analysts.

He said the companies have each consistently generated cash and together will "have one of the industry's strongest balance sheets and credit profiles."

Combined, the companies expect to have approximately $743 million in cash and available credit at a time when it's difficult to raise or borrow money. They also expect to cut annual costs $45 million by 2010.

Foundation Chief Executive James Roberts said the timing was right for creating a bigger coal company despite what he called growing opposition to coal from the Obama administration.

"We can't generate the energy we need without coal," Roberts said during the call.

He said coal generates about half the nation's electricity. "By everybody's estimates that amount is going to increase over the next 20 years," he said.

Under President Barack Obama, the Environmental Protection Agency has begun scrutinizing - and objecting to - permits for surface coal mines in the eastern U.S. and the Interior Department has taken steps to reverse a mining-friendly stream buffer regulation adopted late in the Bush administration.

Quillen said the deal dilutes his company's risk from environmental regulations. Alpha operates in West Virginia, Virginia, Kentucky and Pennsylvania, where resistance to surface mining is strongest. Besides operations in Appalachia, Foundation has mines in Wyoming, where surface mining faces less resistance.

"It does actually spread out the risk," Quillen said during the conference call. The Powder River Basin in Wyoming and Montana "is not under the same pressures that we are."

Alpha and other large coal companies routinely say they're scouting for acquisitions, but deals such as Teck Cominco's takeover of Fording Canadian Coal Trust last year and St. Louis-based Peabody Energy's purchase of Australia's Excel Coal in 2006 have been the exception. More common have been smaller deals such as Russian metals company Mechel OAO's recent purchase of Appalachian coal producer Bluestone Industries for $436 million plus 83.3 million preferred shares of stock.