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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____________TO_____________

COMMISSION FILE NO.: 0-26823

ALLIANCE RESOURCE PARTNERS, L.P.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

1717 South Boulder Avenue, Suite 400, Tulsa, Oklahoma 74119

(Address of Principal Executive Offices and Zip Code)

(918) 295-7600

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes  ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes    ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes   ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐ Yes    ☒ No

The aggregate value of the common units held by non-affiliates of the registrant (treating all executive officers and directors of the registrant, for this purpose, as if they may be affiliates of the registrant) was approximately $1,809,240,225 as of June 28, 2019, the last business day of the registrant's most recently completed second fiscal quarter, based on the reported closing price of the common units as reported on The NASDAQ Stock Market LLC on such date.

As of February 20, 2020, 127,195,219 common units were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

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GLOSSARY OF COAL TERMS

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The following are abbreviations and definitions of certain terms used in this document, some of which are defined by authoritative sources and others reflect those we commonly use in the coal industry:

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GLOSSARY OF OIL & GAS TERMS

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The following are abbreviations and definitions of certain terms used in this document, some of which are defined by authoritative sources and others reflect those we commonly use in the oil & gas industry:

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FORWARD-LOOKING STATEMENTS

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Certain statements and information in this Annual Report on Form 10-K may constitute "forward-looking statements."  These statements are based on our beliefs as well as assumptions made by, and information currently available to, us.  When used in this document, the words "anticipate," "believe," "continue," "estimate," "expect," "forecast," "may," "project," "will," and similar expressions identify forward-looking statements.  Without limiting the foregoing, all statements relating to our future outlook, anticipated capital expenditures, future cash flows and borrowings and sources of funding are forward-looking statements. These statements reflect our current views with respect to future events and are subject to numerous assumptions that we believe are reasonable, but are open to a wide range of uncertainties and business risks, and actual results may differ materially from those discussed in these statements.  Among the factors that could cause actual results to differ from those in the forward-looking statements are:

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If one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those described in any forward-looking statement.  When considering forward-looking statements, you should also keep in mind the risk factors described in "Item 1A. Risk Factors" below.  The risk factors could also cause our actual results to differ materially from those contained in any forward-looking statement.  We disclaim any obligation to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

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You should consider the information above when reading any forward-looking statements contained in this Annual Report on Form 10-K; other reports filed by us with the United States Securities and Exchange Commission ("SEC"); our press releases; our website http://www.arlp.com; and written or oral statements made by us or any of our officers or other authorized persons acting on our behalf.

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Significant Relationships Referenced in this Annual Report

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PART I

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ITEM 1.BUSINESS

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General

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Introduction

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We are a diversified natural resource company that generates income from coal production and oil & gas mineral interests located in strategic producing regions across the United States.  The primary focus of our business is to maximize the value of our existing mineral assets, both in the production of coal from our mining assets and the leasing and development of our oil & gas mineral ownership.  We believe that ARLP's diverse and rich resource base will allow ARLP to continue to create long-term value for unitholders.

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We are currently the second largest coal producer in the eastern United States with seven underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia as well as a coal-loading terminal in Indiana.  We manage and report our coal operations primarily under two regions, Illinois Basin and Appalachia.  We market our coal production to major domestic and international utilities and industrial users.  

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We currently own both mineral and royalty interests in approximately 1.4 million gross acres in premier oil & gas producing regions in the United States, primarily the Permian, Anadarko and Williston Basins.  While we own both mineral and royalty interests, we refer to them collectively as mineral interests throughout our discussions of our business as the majority of our holdings are mineral interests.  We market our mineral interests for lease to operators in those regions and generate royalty income from the leasing and development of those mineral interests.  Reserve additions and the associated cash flows are expected to increase from the development of our existing mineral interests and through acquisitions of additional mineral interests.

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In addition, we provide terminal services for the transloading of coal, and develop and market industrial and mining technology products and services.

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ARLP, a Delaware limited partnership, completed its initial public offering on August 19, 1999 and is listed on the NASDAQ Global Select Market under the ticker symbol "ARLP."  We are managed by our sole general partner, MGP, a Delaware limited liability company, which holds a non-economic general partner interest in ARLP.

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Simplification Transactions

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On July 28, 2017, the conflicts committee ("Conflicts Committee") of the board of directors ("Board of Directors") of MGP and AGP's board of directors approved a transaction to simplify our partnership structure.  Pursuant to that transaction, which closed on the same date, MGP contributed to ARLP all of its incentive distribution rights ("IDRs") and its 0.99% managing general partner interest in ARLP in exchange for 56,100,000 ARLP common units and a non-economic general partner interest in ARLP.  In conjunction with this transaction and on the same economic basis as MGP, SGP also contributed to ARLP its 0.01% general partner interest in both ARLP and the Intermediate Partnership in exchange for 28,141 ARLP common units collectively (the "Exchange Transaction").  

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On February 22, 2018, our Board of Directors and the board of directors of AHGP's general partner approved a simplification agreement (the "Simplification Agreement") pursuant to which, among other things, through a series of transactions (the "Simplification Transactions"):

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The Simplification Agreement and the transactions contemplated thereby were approved by the written consent of approximately 68% of the holders of AHGP common units outstanding as of April 25, 2018, the record date for the consent solicitation.  On May 31, 2018, ARLP, AHGP, and the other parties to the Simplification Agreement completed the transactions contemplated by the Simplification Agreement.

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Prior to the Simplification Transactions, MGP was a wholly owned indirect subsidiary of AHGP.  Alliance GP, LLC ("AGP"), which is indirectly wholly owned by Mr. Craft, was the general partner of AHGP prior to the Simplification Transactions and became the direct owner of MGP as a result of those transactions.  See discussions under Partnership Simplification regarding changes in ownership of ARLP and MGP as a result of the Exchange Transaction and Simplification Transactions.

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As part of the Simplification Transactions, (i) each AHGP common unit that was issued and outstanding at the effective time of the Simplification Transactions was canceled and converted into the right to receive a portion of the ARLP common units held by AHGP and its subsidiaries, and (ii) SGP became the sole limited partner in AHGP.  Each outstanding AHGP common unit, other than certain AHGP common units held by the Owners of SGP, converted into the right to receive approximately 1.4782 ARLP common units held by AHGP and its subsidiaries.  The remaining AHGP common units held by the Owners of SGP were canceled and converted into the right to receive 29,188,997 ARLP common units which equaled (i) the product of the number of certain AHGP common units held by the Owners of SGP multiplied by 1.4782, minus (ii) 1,322,388 ARLP common units.  In addition, ARLP issued 1,322,388 ARLP common units to the Owners of SGP in exchange for causing SGP to contribute to ARLP its remaining limited partner interest in AHGP, which included AHGP's indirect ownership of a 1.0001% general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal, resulting in an overall exchange ratio to the Owners of SGP equal to that of the other AHGP unitholders.  Upon the issuance of ARLP common units to the Owners of SGP in exchange for the limited partner interest in AHGP, ARLP became a) the sole limited partner of AHGP and b) through AHGP, the indirect owner of a 1.0001% general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal.  

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AllDale I & II Acquisition

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On January 3, 2019 (the "Acquisition Date"), ARLP acquired the general partner interests and all of the limited partner interests not owned by Cavalier Minerals JV, LLC ("Cavalier Minerals") in AllDale Minerals, LP ("AllDale I") and AllDale Minerals II, LP ("AllDale II", and collectively with AllDale I, "AllDale I & II") for $176.2 million, which was funded with cash on hand and borrowings under our revolving credit facility (the "AllDale Acquisition").  ARLP indirectly owns a 96.0% non-managing member interest and a non-economic managing member interest in Cavalier Minerals. The

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AllDale Acquisition provides ARLP with diversified exposure to industry leading operators and is consistent with our general business strategy to pursue accretive acquisitions.  

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Kodiak Redemption

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On January 26, 2019, Kodiak Gas Services, LLC ("Kodiak") provided notification that it intended to redeem our preferred interest for $135.0 million, which is inclusive of an early redemption premium.  On February 8, 2019, we received the cash proceeds of the redemption.

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Wing Acquisition

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On August 2, 2019, our subsidiary AR Midland, LP ("AR Midland") acquired from Wing Resources LLC and Wing Resources II LLC (collectively, "Wing") approximately 9,000 net royalty acres in the Midland Basin, with exposure to more than 400,000 gross acres (the "Wing Acquisition").  The Wing Acquisition enhanced our ownership position in the Permian Basin, expanded our exposure to industry leading operators, and furthered our business strategy to grow our Minerals segment.  Following the Wing Acquisition, we hold approximately 55,700 net royalty acres in premier oil & gas resource plays including net royalty acres from our investment in AllDale Minerals III, LP ("AllDale III").  See "Item 8.  Financial Statements and Supplementary Data—Note 3 – Acquisitions" for more information.

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The following diagram depicts our simplified organization and ownership as of December 31, 2019:

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Our internet address is http://www.arlp.com, and we make available free of charge on our website our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, Forms 3, 4 and 5 for our Section 16 filers and other documents (and amendments and exhibits, such as press releases, to such filings) as soon as reasonably practicable after we electronically file with or furnish such material to the SEC.  Information on our website or any other website is not incorporated by reference into this report and does not constitute a part of this report.

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The SEC maintains a website that contains reports, proxy and information statements, and other information for issuers, including us.  The public can obtain any documents that we file with the SEC at http://www.sec.gov.

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Coal Mining Operations

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Coal is used primarily for the generation of electric power and production of steel but is also used for chemical, food, and cement processing.  We produce bituminous coal from our underground mines that is sold to customers principally for electric power generation (thermal) and for production of steel (metallurgical).  We have established long-term relationships with customers through exemplary and consistent performance while operating our mines with an industry-leading safety record.

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At December 31, 2019, we had approximately 1.7 billion tons of coal reserves in Illinois, Indiana, Kentucky, Maryland, Pennsylvania and West Virginia.  We produce a diverse range of thermal and metallurgical coal with varying sulfur and heat contents, which enables us to satisfy the broad range of specifications required by our customers.  In 2019, we sold 39.3 million tons of coal and produced 40.0 million tons.  The coal we sold in 2019 was approximately 26.2% low-sulfur coal, 65.2% medium-sulfur coal and 8.6% high-sulfur coal.  In 2019, approximately 78.8% of our tons sold were purchased by United States electric utilities and 17.9% were sold into the international markets through brokered transactions.  The balance of our tons sold were to third-party resellers and industrial consumers.  For tons sold to United States electric utilities, 100% were sold to utility plants with installed pollution control devices.  The Btu content of our coal ranges from 11,400 to 13,200.

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The following chart summarizes our coal production by region for the last five years.

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The following map shows the location of our coal mining operations:

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We lease most of our coal reserves and generally have the right to maintain leases in force until the exhaustion of mineable and merchantable coal located within the leased premises or a larger coal reserve area.  These leases provide for royalties to be paid to the lessors at a fixed amount per ton or as a percentage of the sales price.  Many leases require payment of minimum royalties, payable either at the time of the execution of the lease or in periodic installments, even if

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no mining activities have begun.  These minimum royalties are normally credited against the production royalties owed to a lessor once coal production has commenced.

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Illinois Basin Operations

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Our Illinois Basin mining operations are located in western Kentucky, southern Illinois and southern Indiana. As of December 31, 2019, we had 2,280 employees, and we operate four active mining complexes in the Illinois Basin.

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Gibson Complex.  Our subsidiary, Gibson County Coal, LLC ("Gibson County Coal"), operates the Gibson South mine, located near the city of Princeton in Gibson County, Indiana.  The Gibson South mine is an underground mine and utilizes continuous mining units employing room-and-pillar mining techniques to produce low/medium-sulfur coal.  The Gibson South mine's preparation plant has throughput capacity of 1,800 tons of raw coal per hour.  Production from the Gibson South mine is shipped by truck on United States and state highways or transported by rail on the CSX Transportation, Inc. ("CSX") and Norfolk Southern Railway Company ("NS") railroads from the Gibson North rail loadout facility directly to customers or to various transloading facilities, including our Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") transloading facility, for barge delivery.  Production from the mine began in April 2014.

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Gibson County Coal also operates the Gibson North mine, an underground mine also located near the city of Princeton in Gibson County, Indiana.  The Gibson North mine began production in November 2000 and utilizes continuous mining units employing room-and-pillar mining techniques to produce low/medium-sulfur coal.  The Gibson North mine was idled in December 2015 in response to market conditions but resumed production in May 2018.  In November 2019, the Gibson North mine was again idled in response to market conditions.  The Gibson North mine's preparation plant has throughput capacity of 700 tons of raw coal per hour.  Production from the Gibson North mine is shipped by truck on United States and state highways or transported by rail on the CSX and NS railroads directly to customers or to various transloading facilities for barge delivery.  

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Hamilton Complex.  Our subsidiary, Hamilton County Coal, LLC ("Hamilton"), operates the Hamilton mine, located near the city of McLeansboro in Hamilton County, Illinois.  The Hamilton mine is an underground longwall mining operation producing medium/high-sulfur coal from the Herrin No. 6 seam. Initial development production from the continuous miner units began in 2013, longwall mining began in October 2014 and we acquired complete ownership and control in 2015.  Hamilton's preparation plant has throughput capacity of 2,000 tons of raw coal per hour.  Hamilton has the ability to ship production from the Hamilton mine via the CSX, Evansville Western Railway and NS rail directly to customers or to various transloading facilities, including our Mt. Vernon transloading facility, for barge deliveries.

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River View Complex.  Our subsidiary, River View Coal, LLC ("River View"), operates the River View mine, which is located in Union County, Kentucky and is currently the largest room-and-pillar coal mine in the United States.  The River View mine began production in 2009, and utilizes continuous mining units to produce medium/high-sulfur coal.  River View's preparation plant has throughput capacity of 2,700 tons of raw coal per hour.  Coal produced from the River View mine is transported by overland belt to a barge loading facility on the Ohio River.

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Warrior Complex.  Our subsidiary, Warrior Coal, LLC ("Warrior"), operates an underground mining complex located near the city of Madisonville in Hopkins County, Kentucky.  The Warrior complex was opened in 1985, and we acquired it in February 2003.  Warrior utilizes continuous mining units employing room-and-pillar mining techniques to produce medium/high-sulfur coal.  Warrior's preparation plant has throughput capacity of 1,200 tons of raw coal per hour.  Warrior's production is shipped via the CSX and Paducah & Louisville Railway, Inc. ("PAL") railroads and by truck on United States and state highways directly to customers or potentially to various transloading facilities, including our Mt. Vernon transloading facility, for barge deliveries.

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Mt. Vernon Transfer Terminal, LLC.  Our subsidiary, Mt. Vernon, leases land and operates a coal-loading terminal on the Ohio River at Mt. Vernon, Indiana.  Coal is delivered to Mt. Vernon by both rail and truck.  The terminal has a capacity of 8.0 million tons per year with existing ground storage of approximately 200,000 tons.  During 2019, the terminal loaded approximately 3.9 million tons for customers of Gibson County Coal and Hamilton.

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Alliance Resource Properties.  Alliance Resource Properties, LLC ("Alliance Resource Properties") and its subsidiaries own or control coal reserves that it leases to certain of our subsidiaries that operate our mining complexes.  In December 2014 and February 2015, WKY CoalPlay, LLC or its subsidiaries ("WKY CoalPlay"), which are related parties, entered into coal lease agreements with us regarding coal reserves located in Henderson and Union Counties, Kentucky

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("Henderson/Union Reserves") and Webster County, Kentucky.  For more information about the WKY CoalPlay transactions, please read "Item 8. Financial Statements and Supplementary Data — Note 20 – Related-Party Transactions."

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Dotiki Complex. Our subsidiary, Webster County Coal, LLC ("Webster County Coal"), operated Dotiki, an underground mining complex located near the city of Providence in Webster County, Kentucky.  The complex was opened in 1966, and we purchased the mine in 1971 and operated it until it ceased production in August 2019.  For information regarding Dotiki's' remaining coal reserves, please read "Item 2. Properties – Coal Reserves."

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Hopkins Complex.  The Hopkins complex, which we acquired in January 1998, is located near the city of Madisonville in Hopkins County, Kentucky.  Our subsidiary, Hopkins County Coal, LLC ("Hopkins County Coal") operated the Elk Creek underground mine until it ceased production in April 2016.  For information regarding Hopkins' remaining coal reserves, please read "Item 2. Properties Coal Reserves."

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Pattiki Complex.  Our subsidiary, White County Coal, LLC ("White County Coal"), operated Pattiki, an underground mining complex located near the city of Carmi in White County, Illinois. We began construction of the complex in 1980 and operated it until it ceased production in December 2016.  We have begun performing reclamation activities at the complex. For information regarding Pattiki's remaining coal reserves, please read "Item 2. Properties – Coal Reserves."

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Sebree - Onton Complex.  On April 2, 2012, we acquired substantially all of Green River Collieries, LLC's assets related to its coal mining business and operations located in Webster and Hopkins Counties, Kentucky, including the Onton No. 9 mining complex ("Onton mine").  The Onton mine was operated by our subsidiary, Sebree Mining, LLC ("Sebree").  The Onton mine was idled in November 2015 in response to market conditions. For information regarding Onton's remaining coal reserves, please read "Item 2. Properties – Coal Reserves."

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Appalachian Operations

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Our Appalachian mining operations are located in eastern Kentucky, Maryland and West Virginia.  As of December 31, 2019, we had 884 employees, and we operate three mining complexes in Appalachia with one mine currently under development.

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MC Mining Complex. The MC Mining Complex is located near the city of Pikeville in Pike County, Kentucky.  We acquired the mine in 1989.  Our subsidiary, MC Mining, LLC ("MC Mining"), owns the mining complex and controls the reserves, and our subsidiary, Excel Mining, LLC ("Excel") conducts all mining operations.  The underground operation utilizes continuous mining units employing room-and-pillar mining techniques to produce low-sulfur coal.  The preparation plant has throughput capacity of 1,000 tons of raw coal per hour.  Substantially all of the coal produced at MC Mining in 2019 met or exceeded the compliance requirements of Phase II of the Federal Clean Air Act ("CAA") (see "—Environmental, Health and Safety Regulations—Air Emissions" below).  Coal produced from the mine is shipped via the CSX railroad directly to customers or to various transloading facilities on the Ohio River for barge deliveries, or by truck via United States and state highways directly to customers or to various docks on the Big Sandy River for barge deliveries.  MC Mining's Excel Mine No. 4 is anticipated to deplete its reserves in 2020.

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Our subsidiary, Excel, has completed most development activity for MC Mining's Excel Mine No. 5 and currently anticipates transitioning employees and equipment to the new mine by mid-2020.  MC Mining controls the estimated 15 million tons of coal reserves assigned to the Excel Mine No. 5 and Excel will conduct all mining operations.  The underground operation will utilize continuous mining units employing room-and-pillar mining techniques to produce low-sulfur coal with an expected annual production capacity of 1.3 million tons.  MC Mining plans to utilize its existing underground mining equipment and preparation plant to produce and process coal from the Excel Mine No. 5 and expects to ship coal produced from the mine to various transloading facilities on the Ohio River and the Big Sandy River for barge deliveries or directly to customers via the CSX railroad and by truck.  We expect the development plan for the new Excel Mine No. 5 will provide a seamless transition from the current MC Mining operation.

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Mettiki Complex.  The Mettiki Complex ("Mettiki") comprises the Mountain View mine located in Tucker County, West Virginia operated by our subsidiary Mettiki Coal (WV), LLC ("Mettiki (WV)") and a preparation plant located near the city of Oakland in Garrett County, Maryland operated by our subsidiary Mettiki Coal, LLC ("Mettiki (MD)").  Mettiki (WV) began continuous miner development of the Mountain View mine in July 2005 and began longwall mining in November 2006.  The Mountain View mine produces medium-sulfur coal, which is transported by truck either to the Mettiki (MD) preparation plant for processing for shipment into the metallurgical coal market or otherwise, or directly to

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the coal blending facility at the Virginia Electric and Power Company Mt. Storm Power Station.  The Mettiki (MD) preparation plant has throughput capacity of 1,350 tons of raw coal per hour.  Coal processed at the preparation plant can be trucked to the blending facility at Mt. Storm or shipped via the CSX railroad, which provides the opportunity to ship into the domestic and international thermal and metallurgical coal markets.

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Tunnel Ridge Complex. Our subsidiary, Tunnel Ridge, LLC ("Tunnel Ridge"), operates the Tunnel Ridge mine, an underground longwall mine in the Pittsburgh No. 8 coal seam, located near Wheeling, West Virginia.  Tunnel Ridge began construction of the mine and related facilities in 2008.  Development mining began in 2010, and longwall mining operations began at Tunnel Ridge in May 2012.  The Tunnel Ridge preparation plant has throughput capacity of 2,000 tons of raw coal per hour.  Coal produced from the Tunnel Ridge mine is a medium/high-sulfur coal and is transported by conveyor belt to a barge loading facility on the Ohio River.  Tunnel Ridge has the ability through a third-party facility to transload coal from barges for rail shipment on the Wheeling and Lake Erie Railway with connections to the CSX and the NS railroads.

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Penn Ridge.  Our subsidiary, Penn Ridge Coal, LLC ("Penn Ridge"), holds coal reserves in Washington County, Pennsylvania, estimated to include approximately 61.5 million tons of proven and probable high-sulfur coal in the Pittsburgh No. 8 seam.  Development of the project is regulatory and market dependent, and its timing is open-ended pending obtaining all required regulatory approvals, sufficient coal sales commitments to support the project and final approval by the Board of Directors.

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Coal Marketing and Sales

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We sell coal to an established customer base through opportunities as a result of existing business relationships or through formal bidding processes.  As is customary in the coal industry, we have entered into long-term coal supply agreements with many of our customers.  These arrangements are mutually beneficial to our customers and us in that they provide greater predictability of sales volumes and sales prices.  Although many utility customers have appeared to favor a shorter-term contracting strategy, in 2019 approximately 78.5% and 78.3% of our sales tonnage and total coal sales, respectively, were sold under long-term contracts with committed term expirations ranging from 2020 to 2024.  As of February 14, 2020, our nominal commitment under contract was approximately 29.3 million tons in 2020, 18.4 million tons in 2021 and 6.7 million tons in 2022.  The commitment of coal under contract is an approximate number because a limited number of our contracts contain provisions that could cause the nominal commitment to increase or decrease; however, the overall variance to total committed sales is minimal.  The contractual time commitments for customers to nominate future purchase volumes under these contracts are typically sufficient to allow us to balance our sales commitments with prospective production capacity.  In addition, the nominal commitment can otherwise change because of reopener provisions contained in certain of these long-term contracts.

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The provisions of long-term contracts are the results of both bidding procedures and extensive negotiations with each customer.  As a result, the provisions of these contracts vary significantly in many respects, including, among other factors, price adjustment features, price and contract reopener terms, permitted sources of supply, force majeure provisions, and coal qualities and quantities.  A portion of our long-term contracts are subject to price adjustment provisions, which periodically permit an increase or decrease in the contract price, typically to reflect changes in specified indices or changes in production costs resulting from regulatory changes, or both.  These provisions, however, may not assure that the contract price will reflect every change in production or other costs.  Failure of the parties to agree on a price pursuant to an adjustment or a reopener provision can, in some instances, lead to early termination of a contract.  Some of the long-term contracts also permit the contract to be reopened for renegotiation of terms and conditions other than pricing terms, and where a mutually acceptable agreement on terms and conditions cannot be concluded, either party may have the option to terminate the contract.  The long-term contracts typically stipulate procedures for transportation of coal, quality control, sampling, and weighing.  Most contain provisions requiring us to deliver coal within stated ranges for specific coal characteristics such as heat, sulfur, ash, moisture, grindability, volatility and other qualities.  Failure to meet these specifications can result in economic penalties, rejection or suspension of shipments or termination of the contracts.  While most of the contracts specify the approved seams and/or approved locations from which the coal is to be mined, some contracts allow the coal to be sourced from more than one mine or location.  Although the volume to be delivered pursuant to a long-term contract is stipulated, the buyers often have the option to vary the volume within specified limits.  Coal contracts typically contain force majeure provisions allowing for the suspension of performance by either party for the duration of specified events.  Force majeure events include, but are not limited to, unexpected significant geological conditions and weather events that may disrupt transportation.  Depending on the language of the contract, some contracts may terminate upon an event of force majeure that extends for a certain period.

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The international coal market has been a substantial part of our business with indirect sales to end users in Europe, Africa, Asia, North America and South America.  Our sales into the international coal market are considered exports and are made through brokered transactions.  During the years ended December 31, 2019, 2018, and 2017, export tons represented approximately 17.9%, 27.8%, and 17.4% of tons sold, respectively.  We use the end usage point as the basis for attributing tons to individual countries. Because title to our export shipments typically transfers to our brokerage customers at a point that does not necessarily reflect the end usage point, we attribute export tons to the country with the end usage point, if known.    

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Reliance on Major Customers

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During 2019, we derived more than 10.0% of our total revenues from each of two customers, Louisville Gas and Electric Company and FirstEnergy Corp.  We did not derive 10.0% or more of our total revenues from any other individual customer during 2019.  For more information about these two customers, please read "Item 8. Financial Statement and Supplemental Data—Note 22 – Concentration of Credit Risk and Major Customers."

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Coal Competition

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The coal industry is intensely competitive.  The most important factors on which we compete are coal price, coal quality (including sulfur and heat content), reliability and diversity of supply, and transportation costs from the mine to the customer.  We are currently the second largest coal producer in the eastern United States.  Our principal competitors include CONSOL Energy, Inc., Contura Energy, Inc., Foresight Energy LP, Murray Energy, Inc., and Peabody Energy Corporation.  While a number of our competitors have been involved in reorganization in bankruptcy, these events have not resulted in a material diminution in available coal supply and there remains significant competition for ongoing coal sales.  We also compete directly with a number of smaller producers in the Illinois Basin and Appalachian regions.    

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In addition, we compete with companies that produce coal from one or more foreign countries.  We export a significant portion of our coal into the international coal markets and historically the prices we obtain for our export coal have been influenced by a number of factors, such as global economic conditions, weather patterns, and global supply and demand, among others.  Potential changes to international trade agreements, trade concessions, or other political and economic arrangements may benefit coal producers operating in countries other than the United States.  We may be adversely impacted on the basis of price or other factors by foreign trade policies or other arrangements that benefit competitors. In addition, coal is sold internationally in United States dollars and, as a result, general economic conditions in foreign markets and changes in foreign currency exchange rates may provide our foreign competitors with a competitive advantage.  If our competitors' currencies decline against the United States dollar or against foreign purchasers' local currencies, those competitors may be able to offer lower prices for coal to those purchasers. Furthermore, if the currencies of overseas purchasers were to significantly decline in value in comparison to the United States dollar, those purchasers may seek decreased prices for the coal we sell to them. Consequently, currency fluctuations could adversely affect the competitiveness of our coal in international markets, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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The prices we are able to obtain for our domestic sales of coal are primarily linked to coal consumption patterns of domestic electricity generating utilities, which in turn are influenced by economic activity, government regulations, weather, and technological developments, as well as the location, quality, price and availability of competing sources of fuel and alternative energy sources such as natural gas, nuclear energy, petroleum and renewable energy sources for electrical power generation.  Costs and other factors, such as safety and environmental considerations, have affected and may continue to affect the overall demand for coal as a fuel.  Competition from natural-gas fired plants that are relatively more efficient, less expensive to construct and less difficult to permit than coal-fired plants has displaced and may continue to displace a significant amount of coal-fired electric power generation in the near term, particularly from older, less efficient coal-fired powered generators.  Federal and state mandates for increased use of electricity derived from renewable energy sources could affect demand for our coal.  Such mandates, combined with other incentives to use renewable energy sources, such as tax credits, could make alternative fuel sources more competitive with coal.

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For additional information, please see "Item 1A. Risk Factors."  

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Coal Transportation

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Our coal is transported from our mining complexes to our customers by barge, rail, and truck.  Depending on the proximity of the customer to the mining complex and the transportation available for delivering coal to that customer, transportation costs can be a substantial part of the total delivered cost of a customer's coal.  As a consequence, the availability and cost of transportation constitute important factors in the marketability of coal.  We believe our mines are located in favorable geographic locations that minimize transportation costs for our customers, and in many cases we are able to accommodate multiple transportation options.  Our customers typically negotiate and pay the transportation costs from the mining complex to the destination, which is the standard practice in the industry.  Approximately 47.5% of our 2019 sales volume was initially shipped from the mining complexes by barge, 33.9% was shipped from the mining complexes by rail and 18.6% was shipped from the mining complexes by truck.  The practices of, rates set by and capacity availability of, the transportation company serving a particular mine or customer may affect, either adversely or favorably, our marketing efforts with respect to coal produced from the relevant mining complex.  With respect to our export volumes from the United States to other countries, we generally sell coal to our customers at an export terminal in the United States and we are responsible for the cost of transporting coal to the export terminals.  Our export customers generally negotiate and pay for the ocean vessel transportation.

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Mineral Interest Activities

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Our mineral interest business includes all activities related to the oil & gas mineral interests held by AR Midland and AllDale I & II and includes Alliance Minerals, LLC's ("Alliance Minerals") equity interests in both AllDale III and Cavalier Minerals.  AR Midland acquired its mineral interests in the Wing Acquisition.  Our mineral interests are primarily located in three basins, which are also our areas of focus for future development by operators.  These include the Permian (Delaware and Midland), Anadarko (SCOOP/STACK) and Williston (Bakken) Basins.  Our developed and undeveloped net acres standardized to a 1/8th royalty equate to approximately 55,700 net royalty acres, including 3,989 net royalty acres owned through our equity interests in AllDale III.

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When our mineral interests are leased, we typically receive an upfront cash payment, known as lease bonus, and we retain a mineral royalty, which entitles us to receive a fixed percentage of the revenue or production from the oil & gas produced from the acreage underlying our interests, free of lease operating expenses and capital costs.  A lessee can extend the lease beyond the initial lease term with continuous drilling, production, or other operating activities, or by making an extension payment. When production or drilling ceases, the lease terminates, allowing us to lease the exploration and development rights to another party.  As an owner of mineral interests, we incur the initial cost to acquire our interests but thereafter only incur our proportionate share of production and ad valorem taxes. Unlike owners of working interests in oil & gas properties, we are not obligated to fund drilling and completion costs or plugging and abandonment costs associated with oil & gas production.

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The following chart summarizes production of our mineral interests for the year ended December 31, 2019:

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The following map shows the location of our oil & gas mineral interests:

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In 2014, ARLP began to actively invest in oil & gas mineral interests in some of the nation's premier oil-rich basins.  Throughout 2019, ARLP has transitioned from a passive investor in mineral interests to an active and material participant in oil & gas minerals.

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Permian Basin—Delaware and Midland Basins

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The Permian Basin ranges from West Texas into southeastern New Mexico and is currently the most active area for horizontal drilling in the United States. The Permian Basin is further subdivided into the Delaware Basin in the west and the Midland Basin in the east. Based on geologic data and the ongoing development by operators, our mineral interests in the Permian Basin contain multiple producing zones of economic horizontal development including but not limited to the Wolfcamp, Spraberry, and Bone Spring formations.  Our recent purchase of acreage located entirely in the Permian Basin through the Wing Acquisition demonstrates our commitment to continued acquisition of mineral interests in the nation's highest growth oil & gas plays.

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Anadarko Basin—SCOOP and STACK Plays

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The SCOOP play (South Central Oklahoma Oil Province) is located in central Oklahoma in Grady, Garvin, Stephens, and McClain Counties. Based on geologic data and the ongoing development by operators, our mineral interests in the SCOOP play contain multiple producing zones of economic horizontal development including multiple Woodford benches and the Springer Shale. In addition, operators are also currently testing other formations in the area including the Sycamore, Caney, and Osage, which is also referred to as SCORE (Sycamore Caney Osage Resource Expansion). The STACK play (derived from Sooner Trend, Anadarko Basin, Canadian and Kingfisher Counties) is located in central Oklahoma in Kingfisher, Canadian, Caddo, and Blaine Counties. Based on geologic data and the ongoing development by operators,

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our mineral interests in the STACK play contain multiple producing zones of economic horizontal development including but not limited to the Meramec and Woodford formations.

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Williston Basin—Bakken

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The Williston Basin stretches from western North Dakota into eastern Montana. Based on geologic data and ongoing development by operators, our mineral interests contain multiple producing zones of economic horizontal development including the Bakken and Three Forks formations.

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Other

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Our other interests are comprised primarily of mineral interests owned in the Appalachia Basin that stretches throughout most of Ohio, West Virginia, Pennsylvania, and extends into other states.  The Appalachia Basin's most active plays in which we have acreage are the Marcellus Shale and Utica plays, which cover most of Pennsylvania, northern West Virginia, and eastern Ohio.  In addition to the interests held in the Appalachia Basin, we own a small amount of mineral interests in the Tuscaloosa Marine Shale play in Mississippi.  AllDale III also owns mineral interests in the Haynesville Shale formation located in northwest Louisiana.

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Minerals Competition

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There is intense competition for acquisition opportunities in the oil & gas industry, and we compete with other companies that have greater resources. Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions. Our ability to acquire additional mineral interests in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Many of our competitors not only own and acquire mineral interests but also explore for and produce oil & gas and, in some cases, carry on midstream and refining operations and market petroleum and other products on a regional, national or worldwide basis. By engaging in such other activities, our competitors may be able to develop or obtain information that is superior to the information that is available to us. In addition, because we have fewer financial and human resources than many companies in the oil & gas industry, we may be at a disadvantage in bidding for oil & gas properties. Further, oil & gas compete with other forms of energy available to customers, primarily based on price. These alternate forms of energy include electricity, coal and fuel oils. Changes in the availability or price of oil & gas or other forms of energy, as well as business conditions, conservation, legislation, regulations and the ability to convert to alternate fuels and other forms of energy may affect the demand for oil & gas.

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Minerals - Seasonal Nature of Business

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Generally, demand for oil increases during the summer months and decreases during the winter months while demand for natural gas increases during the winter and summer months and decreases during the spring and fall months. Certain buyers of natural gas use natural gas storage facilities and purchase some of their anticipated winter requirements during the summer, which can lessen seasonal demand fluctuations. Seasonal weather conditions and lease stipulations can limit drilling and producing activities and other oil & gas operations in a portion of our operating areas. These seasonal anomalies can pose challenges for our operators in meeting well drilling objectives and can increase competition for equipment, supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay operations.

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Other Operations

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Coal Brokerage

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As markets allow, Alliance Coal buys coal from our mining operations and outside producers principally throughout the eastern United States, which we then resell.  We have a policy of matching our outside coal purchases and sales to minimize market risks associated with buying and reselling coal.  In 2019, we made outside coal purchases for brokerage activity of 479,764 tons.

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Matrix Group

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Our subsidiaries, Matrix Design Group, LLC ("Matrix Design") and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD, and Alliance Design Group, LLC ("Alliance Design") (collectively the Matrix

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Design entities and Alliance Design are referred to as the "Matrix Group"), provide a variety of mining technology products and services for our mining operations and certain industrial and mining technology products and services to third parties.  Matrix Group's products and services include miner and equipment tracking systems and proximity detection systems.  We acquired Matrix Design in September 2006.

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Compression Investment

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On July 19, 2017, Alliance Minerals purchased $100 million of Series A-1 Preferred Interests from Kodiak, a privately held company providing large-scale, high-utilization gas compression assets to customers operating primarily in the Permian Basin.  On February 8, 2019, Kodiak redeemed the preferred interests held by Alliance Minerals for $135.0 million cash that is inclusive of an early redemption premium.

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Additional Services

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We develop and market additional services in order to establish ourselves as the supplier of choice for our customers.  Historically, and in 2019, outside revenues from these services were immaterial.

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Environmental, Health, and Safety Regulations

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Our coal operations, and those of the operators on the properties in which we hold oil & gas mineral interests, are subject to extensive regulation by federal, state, and local authorities on matters such as:

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Failure to comply with environmental laws and regulations may result in the assessment of administrative, civil and criminal sanctions, including monetary penalties, the imposition of strict, joint and several liability, investigatory and remedial obligations and the issuance of injunctions limiting or prohibiting some or all of the operations on our properties. The regulatory burden on fossil fuel industries increases the cost of doing business and consequently affects profitability. The trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment, and thus, any changes in environmental laws and regulations or re-interpretation of enforcement policies that result in more stringent and costly obligations could increase our or our mineral interest operators’ costs and adversely affect our performance.

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In addition, the utility industry is subject to extensive regulation regarding the environmental impact of its power generation activities, which has adversely affected demand for coal.  It is possible that new legislation or regulations may be adopted, or that existing laws or regulations may be differently interpreted or more stringently enforced, any of which could have a significant impact on our mining operations, our customers' ability to use coal, or the value of or amount of royalties received from our mineral interests. For more information, please see risk factors described in "Item 1A. Risk Factors" below.

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We are committed to conducting mining operations in compliance with applicable federal, state, and local laws and regulations.  However, because of the extensive and detailed nature of these regulatory requirements, particularly the regulatory system of the Mine Safety and Health Administration ("MSHA") where citations can be issued without regard

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to fault and many of the standards include subjective elements, it is not reasonable to expect any coal mining company to be free of citations.  When we receive a citation, we attempt to promptly remediate any identified condition.  While we have not quantified all of the costs of compliance with applicable federal and state laws and associated regulations, those costs have been and are expected to continue to be significant.  Compliance with these laws and regulations has substantially increased the cost of coal mining for domestic coal producers.

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Capital expenditures for environmental matters have not been material in recent years.  We have accrued for the present value of the estimated cost of asset retirement obligations and mine closings, including the cost of treating mine water discharge, when necessary.  The accruals for asset retirement obligations and mine closing costs are based upon permit requirements and the costs and timing of asset retirement obligations and mine closing procedures.  Although management believes it has made adequate provisions for all expected reclamation and other costs associated with mine closures, future operating results would be adversely affected if these accruals were insufficient.

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Mining Permits and Approvals

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Numerous governmental permits or approvals are required for mining operations.  Applications for permits require extensive engineering and data analysis and presentation, and must address a variety of environmental, health, and safety matters associated with a proposed mining operation.  These matters include the manner and sequencing of coal extraction, the storage, use, and disposal of waste and other substances and impacts on the environment, the construction of water containment areas, and reclamation of the area after coal extraction.  Meeting all requirements imposed by any of these authorities may be costly and time consuming, and may delay or prevent commencement or continuation of mining operations.

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The permitting process for certain mining operations can extend over several years and can be subject to administrative and judicial challenge, including by the public.  Some required mining permits are becoming increasingly difficult to obtain in a timely manner, or at all.  We cannot assure you that we will not experience difficulty or delays in obtaining mining permits in the future or that a current permit will not be revoked.

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We are required to post bonds to secure performance under our permits.  Under some circumstances, substantial fines and penalties, including revocation of mining permits, may be imposed under the laws and regulations described above.  Monetary sanctions and, in severe circumstances, criminal sanctions may be imposed for failure to comply with these laws and regulations.  Regulations also provide that a mining permit can be refused or revoked if the permit applicant or permittee owns or controls, directly or indirectly through other entities, mining operations that have outstanding environmental violations.  Although, like other coal companies, we have been cited for violations in the ordinary course of our business, we have never had a permit suspended or revoked because of any violation, and the penalties assessed for these violations have not been material.

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Mine Health and Safety Laws

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The operation of our mines is subject to the Federal Mine Safety and Health Act of 1977 ("FMSHA"), and regulations adopted pursuant thereto.  FMSHA imposes extensive and detailed safety and health standards on numerous aspects of mining operations, including training of mine personnel, mining procedures, blasting, the equipment used in mining operations, and numerous other matters.  MSHA monitors and rigorously enforces compliance with these federal laws and regulations.  In addition, most of the states where we operate have state programs for mine safety and health regulation and enforcement.  Federal and state safety and health regulations affecting the coal mining industry are perhaps the most comprehensive and rigorous system in the United States for protection of employee safety and have a significant effect on our operating costs.  Although many of the requirements primarily impact underground mining, our competitors in all of the areas in which we operate are subject to the same laws and regulations.

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FMSHA has been construed as authorizing MSHA to issue citations and orders pursuant to the legal doctrine of strict liability, or liability without fault, and FMSHA requires imposition of a civil penalty for each cited violation.  Negligence and gravity assessments, and other factors can result in the issuance of various types of orders, including orders requiring withdrawal from the mine or the affected area, and some orders can also result in the imposition of civil penalties.  FMSHA also contains criminal liability provisions.  For example, criminal liability may be imposed upon corporate operators who knowingly and willfully authorize, order, or carry out violations of the FMSHA, or its mandatory health and safety standards.

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The Federal Mine Improvement and New Emergency Response Act of 2006 ("MINER Act") significantly amended the FMSHA, imposing more extensive and stringent compliance standards, increasing criminal penalties and establishing

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a maximum civil penalty for non-compliance, and expanding the scope of federal oversight, inspection, and enforcement activities.  Following the passage of the MINER Act, MSHA has issued new or more stringent rules and policies on a variety of topics, including:

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MSHA continues to interpret and implement various provisions of the MINER Act, along with introducing new proposed regulations and standards.

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In 2014, MSHA began implementation of a finalized new regulation titled "Lowering Miner's Exposure to Respirable Coal Mine Dust, Including Continuous Personal Dust Monitors."  The final rule implemented a reduction in the allowable respirable coal mine dust exposure limits, requires the use of sampling data taken from a single sample rather than an average of samples, and increases oversight by MSHA regarding coal mine dust and ventilation issues at each mine, including the approval process for ventilation plans at each mine, all of which increase mining costs.  The second phase of the rule began in February 2016 and requires additional sampling for designated and other occupations using the new continuous personal dust monitor technology, which provides real time dust exposure information to the miner.  Phase three of the rule began in August 2016, and resulted in lowering the current respirable dust level of 2.0 milligrams per cubic meter to 1.5 milligrams per cubic meter of air.  Compliance with these rules can result in increased costs on our operations, including, but not limited to, the purchasing of new equipment and the hiring of additional personnel to assist with monitoring, reporting, and recordkeeping obligations. MSHA has published a request for information regarding engineering controls and best practices to lower miners’ exposure to respirable coal mine dust, which is currently set to close on July 9, 2022.  It is uncertain whether MSHA will present additional proposed rules, or revisions to the final rule, following the closing of the comment period for the current request for information.

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Additionally, in July 2014, MSHA proposed a rule addressing the "criteria and procedures for assessment of civil penalties."  Public commenters have expressed concern that the proposed rule exceeds MSHA's rulemaking authority and would result in substantially increased civil penalties for regulatory violations cited by MSHA.  MSHA last revised the process for proposing civil penalties in 2006 and, as discussed above, civil penalties increased significantly.  The notice-and-comment period for this proposed rule closed, and it is uncertain when, or if, MSHA will present a final rule addressing these civil penalties.

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In January 2015, MSHA published a final rule requiring mine operators to install proximity detection systems on continuous mining machines, over a staggered time frame ranging from November 2015 through March 2018.  The proximity detection systems initiate a warning or shutdown the continuous mining machine depending on the proximity of the machine to a miner.  MSHA subsequently proposed a rule requiring mine operators to also install proximity detection systems on other types of underground mobile mining equipment.  The comment period for this proposed rule closed on April 10, 2017, and it is uncertain when MSHA will promulgate a final rule addressing the issue of proximity detection systems on underground mobile mining equipment, other than continuous mining machines.

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In June 2016, MSHA published a request for information on Exposure of Underground Miners to Diesel Exhaust.  Following a comment period that closed in November 2016, MSHA received requests for MSHA and the National Institute for Occupational Safety and Health to hold a Diesel Exhaust Partnership to address the issues covered by MSHA's request for information.  The comment period for the request for information is scheduled to close in September 2020.  It is uncertain whether MSHA will present a proposed rule pertaining to exposure of underground miners to diesel exhaust, after completing its evaluation of the comments received.

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In June 2018, MSHA published a request for information on Safety Improvement Technologies for Mobile Equipment at Surface Mines and for Belt Conveyors at Surface and Underground Mines.  The comment period for the request for information has closed.  It is uncertain whether MSHA will present a proposed rule pertaining to safety improvement technologies for mobile equipment at surface mines or for belt conveyors at surface and underground mines.

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Subsequent to passage of the MINER Act, Illinois, Kentucky, Pennsylvania and West Virginia have enacted legislation addressing issues such as mine safety and accident reporting, increased civil and criminal penalties, and increased inspections and oversight.  Additionally, state administrative agencies can promulgate administrative rules and regulations affecting our operations.  Other states may pass similar legislation or administrative regulations in the future.

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Some of the costs of complying with existing regulations and implementing new safety and health regulations may be passed on to our customers.  Although we have not quantified the full impact, implementing and complying with these new federal and state safety laws and regulations have had, and are expected to continue to have, an adverse impact on our results of operations and financial position.

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Black Lung Benefits Act

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The Black Lung Benefits Act of 1977 and the Black Lung Benefits Reform Act of 1977, as amended in 1981 ("BLBA") requires businesses that conduct current mining operations to make payments of black lung benefits to current and former coal miners with black lung disease and to some survivors of a miner who dies from this disease.  The BLBA levied a tax on coal sold of $1.10 per ton for underground-mined coal and $0.55 per ton for surface-mined coal, but not to exceed 4.4% of the applicable sales price, in order to compensate miners who are totally disabled due to black lung disease and some survivors of miners who died from this disease, and who were last employed as miners prior to 1970 or subsequently where no responsible coal mine operator has been identified for claims.  The coal we sell into international markets is generally not subject to this tax.  In addition, the BLBA provides that some claims for which coal operators had previously been responsible are or will become obligations of the government trust funded by the tax.  The Revenue Act of 1987 extended the termination date of this tax from January 1, 1996, to the earlier of January 1, 2014, or the date on which the government trust becomes solvent.  The Emergency Economic Stabilization Act of 2008 extended these rates through December 31, 2018.  On January 1, 2019, the excise tax rates reverted to their original 1977 statutory levels of $0.50 per ton for underground-mined coal and $0.25 per ton for surface mined coal, but not to exceed 2% of the applicable sales price.  In December 2019, the excise tax rates were increased to their 2018 levels and that rate increase is set to expire on December 31, 2020.

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Workers' Compensation and Black Lung

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We provide income replacement and medical treatment for work-related traumatic injury claims as required by applicable state laws.  Workers' compensation laws also compensate survivors of workers who suffer employment related deaths.  We generally self-insure this potential expense using our actuary estimates of the cost of present and future claims.  In addition, coal mining companies are subject to federal legislation and various state statutes for the payment of medical and disability benefits to eligible recipients related to coal worker's pneumoconiosis, or black lung.  We also provide for these claims through self-insurance programs. Our pneumoconiosis benefits liability is calculated using the service cost method based on the actuarial present value of the estimated pneumoconiosis benefits obligation.  Our actuarial calculations are based on numerous assumptions including disability incidence, medical costs, mortality, death benefits, dependents, and discount rates.  For more information concerning our requirement to maintain bonds to secure our workers' compensation obligations, see the discussion of surety bonds below under "—Bonding Requirements."

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The revised BLBA regulations took effect in January 2001, relaxing the stringent award criteria established under previous regulations and thus potentially allowing new federal claims to be awarded and allowing previously denied claimants to re-file under the revised criteria.  These regulations may also increase black lung related medical costs by broadening the scope of conditions for which medical costs are reimbursable and increase legal costs by shifting more of the burden of proof to the employer.

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The Patient Protection and Affordable Care Act, enacted in 2010, includes significant changes to the federal black lung program retroactive to 2005, including an automatic survivor benefit paid upon the death of a miner with an awarded black lung claim and establishes a rebuttable presumption with regard to pneumoconiosis among miners with 15 or more years of coal mine employment that are totally disabled by a respiratory condition.  These changes have caused a significant increase in our costs expended in association with the federal black lung program.

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Surface Mining Control and Reclamation Act

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The Federal Surface Mining Control and Reclamation Act of 1977 ("SMCRA") and similar state statutes establish operational, reclamation and closure standards for all aspects of surface mining as well as many aspects of deep mining.  

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Although we have minimal surface mining activity and no mountaintop removal mining activity, SMCRA nevertheless requires that comprehensive environmental protection and reclamation standards be met during the course of and upon completion of our mining activities.

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SMCRA and similar state statutes require, among other things, that mined property be restored in accordance with specified standards and approved reclamation plans.  SMCRA requires us to restore the surface to approximate the original contours as contemporaneously as practicable with the completion of surface mining operations.  Federal law and some states impose on mine operators the responsibility for replacing certain water supplies damaged by mining operations and repairing or compensating for damage to certain structures occurring on the surface as a result of mine subsidence, a consequence of longwall mining and possibly other mining operations.  We believe we are in compliance in all material respects with applicable regulations relating to reclamation.

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In addition, the Abandoned Mine Lands Program, which is part of SMCRA, imposes a tax on all current mining operations, the proceeds of which are used to restore mines closed before 1977.  The tax for surface-mined and underground-mined coal is $0.28 per ton and $0.12 per ton, respectively.  We have accrued the estimated costs of reclamation and mine closing, including the cost of treating mine water discharge when necessary.  Please read "Item 8. Financial Statements and Supplementary Data—Note 18 – Asset Retirement Obligations."  In addition, states from time to time have increased and may continue to increase their fees and taxes to fund reclamation or orphaned mine sites and acid mine drainage control on a statewide basis.  

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Under SMCRA, responsibility for unabated violations, unpaid civil penalties and unpaid reclamation fees of independent contract mine operators and other third parties can be imputed to other companies that are deemed, according to the regulations, to have "owned" or "controlled" the third-party violator.  Sanctions against the "owner" or "controller" are quite severe and can include being blocked from receiving new permits and having any permits revoked that were issued after the time of the violations or after the time civil penalties or reclamation fees became due.  We are not aware of any currently pending or asserted claims against us relating to the "ownership" or "control" theories discussed above.  However, we cannot assure you that such claims will not be asserted in the future.

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In April 2015, the United States Environmental Protection Agency ("EPA") finalized rules on coal combustion residuals ("CCRs"); however, the final rule does not address the placement of CCRs in minefills or non-minefill uses of CCRs at coal mine sites.  OSM has announced their intention to release a proposed rule to regulate placement and use of CCRs at coal mine sites, but, to date, no further action has been taken.  These actions by OSM, potentially could result in additional delays and costs associated with obtaining permits, prohibitions or restrictions relating to mining activities, and additional enforcement actions.

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Bonding Requirements

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Federal and state laws require bonds to secure our obligations to reclaim lands used for mining, to pay federal and state workers' compensation, to pay certain black lung claims, and to satisfy other miscellaneous obligations.  These bonds are typically renewable on a yearly basis.  It has become increasingly difficult for us and for our competitors to secure new surety bonds without posting collateral.  In addition, surety bond costs have increased while the market terms of surety bonds have generally become less favorable to us.  It is possible that surety bond issuers may refuse to renew bonds or may demand additional collateral upon those renewals.  Our failure to maintain, or inability to acquire, surety bonds that are required by federal and state laws would have a material adverse effect on our ability to produce coal, which could affect our profitability and cash flow. For additional information, please see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Off-Balance Sheet Arrangements."

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Air Emissions

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The CAA and similar state and local laws and regulations regulate emissions into the air and affect coal mining, as well as oil & gas, operations.  The CAA imposes permitting requirements and, in some cases, requirements to install certain emissions control equipment, achieve certain emissions standards, or implement certain work practices on sources that emit various air pollutants.  The CAA also indirectly affects coal mining operations by extensively regulating the air emissions of coal-fired electric power generating plants and other coal-burning facilities.  There have been a series of federal rulemakings focused on emissions from coal-fired electric generating facilities.  Installation of additional emissions control technology and any additional measures required under applicable federal and state laws and regulations related to

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air emissions will make it more costly to operate coal-fired power plants and possibly other facilities that consume coal and, depending on the requirements of individual state implementation plans ("SIPs"), could make fossil fuels a less attractive fuel alternative in the planning and building of power plants in the future.  A significant reduction in fossil fuels’ share of power generating capacity could have a material adverse effect on our business, financial condition and results of operations.  Since 2010, utilities have completed or formally announced the retirement or conversion of almost 700 coal-fired electric generating units through 2030 in the United States.

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In addition to the greenhouse gas ("GHG") issues discussed below, the air emissions programs that may affect our operations or the operations of those on the properties in which we hold mineral interests, directly or indirectly, include, but are not limited to, the following:

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GHG Emissions

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Combustion of fossil fuels, such as the coal we produce and the oil & gas produced from our mineral interests, results in the emission of GHGs, such as carbon dioxide and methane.  Combustion of fuel for mining equipment used in coal production also emits GHGs.  Future regulation of GHG emissions in the United States could occur pursuant to future United States treaty commitments, new domestic legislation or regulation by the EPA.  Former President Obama expressed support for a mandatory cap and trade program to restrict or regulate emissions of GHGs and Congress has considered various proposals to reduce GHG emissions, and it is possible federal legislation could be adopted in the future.  Internationally, there is an international climate agreement (the "Paris Agreement") that does not create any binding obligations for nations to limit their GHG emissions but includes pledges to voluntarily limit or reduce future emissions.  These commitments could further reduce demand and prices for fossil fuels.  In November 2019, the United States announced its withdrawal from such agreement, effective November 4, 2020. However, the United States may subsequently decide to rejoin the Paris Agreement or another agreement at some point in the future. Moreover, many states, regions, and governmental bodies have adopted GHG initiatives and have or are considering the imposition of fees or taxes based on the emission of GHGs by certain facilities, including coal-fired electric generating facilities.  Others have announced their intent to increase the use of renewable energy sources, displacing coal and other fossil fuels.  Depending on the particular regulatory program that may be enacted, at either the federal or state level, the demand for coal could be negatively impacted, which would have an adverse effect on our operations.

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Even in the absence of new federal legislation, the EPA has begun to regulate GHG emissions under the CAA based on the United States Supreme Court's 2007 decision that the EPA has authority to regulate GHG emissions.  Although the United States Supreme Court's holding did not expressly involve the EPA's authority to regulate GHG emissions from stationary sources, such as coal-fueled power plants, the EPA has determined on its own that it has the authority to regulate GHG emissions from power plants and issued a final rule which found that GHG emissions, including carbon dioxide and methane, endanger both the public health and welfare.

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On September 20, 2013, the EPA issued NSPS for carbon dioxide emissions from new fossil fuel-fired power plants.  This rule was finalized in 2015 and was immediately challenged by multiple parties.  In August 2017, this rule was stayed by a federal appeals court to allow the Trump administration's EPA to review the NSPS rule.  It is likely than any repeal or revisions to the NSPS will be subject to legal challenges as well.  Future implementation of the NSPS is uncertain at this time.

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In August 2015, the EPA issued its final Clean Power Plan ("CPP") rules that establish carbon pollution standards for power plants, called CO2 emission performance rates.  Judicial challenges led the United States Supreme Court to grant a stay in February 2016 of the implementation of the CPP before the United States Court of Appeals for the District of Columbia ("Circuit Court") even issued a decision.  Additionally, in October 2017 the EPA proposed to repeal the CPP, although the final outcome of this action and the pending litigation regarding the CPP is uncertain at this time.   The EPA subsequently proposed the ACE rule to replace the CPP with a rule that utilizes heat rate improvement measures as the "best system of emission reduction". The ACE rule adopts new implementing regulations under the CAA to clarify the roles of the EPA and the states, including an extension of the deadline for state plans and EPA approvals; and, the rule revises the NSR permitting program to provide EGUs the opportunity to make efficiency improvements without triggering NSR permit requirements. In June 2019, the EPA published the final repeal of the Clean Power Plan and promulgation of the ACE rule.  The EPA's attempts to replace the CPP with the ACE rule are currently subject to litigation, and we cannot predict the final outcome.

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Notwithstanding the ACE rule, these requirements have led to premature retirements and could lead to additional premature retirements of coal-fired generating units and reduce the demand for coal.  Congress has not currently adopted legislation to restrict carbon dioxide emissions from existing power plants and it is unclear whether the EPA has the legal authority to regulate carbon dioxide emissions from existing and modified power plants as proposed in the NSPS and CPP.  Substantial limitations on GHG emissions could adversely affect demand for the coal we produce or the oil & gas produced from our mineral interests.

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There have been numerous protests of and challenges to the permitting of new fossil fuel infrastructure, including power plants and pipelines, by environmental organizations and state regulators for concerns related to GHG emissions.  For instance, various state regulatory authorities have rejected the construction of new coal-fueled power plants based on the uncertainty surrounding the potential costs associated with GHG emissions from these plants under future laws limiting the emissions of carbon dioxide.  In addition, several permits issued to new coal-fueled power plants without limits on

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GHG emissions have been appealed to the EPA's Environmental Appeals Board.  In addition, over thirty states have currently adopted "renewable energy standards" or "renewable portfolio standards," which encourage or require electric utilities to obtain a certain percentage of their electric generation portfolio from renewable resources by a certain date.  Several states have announced their intent to have renewable energy comprise 100% of their electric generation portfolio.  Other states may adopt similar requirements, and federal legislation is a possibility in this area.  To the extent these requirements affect our current and prospective customers, or those of our mineral interest producers, they may reduce the demand for fossil fuel energy, and may affect long-term demand for our coal and the oil & gas producers from the properties in which we hold mineral interests.  Finally, while the United States Supreme Court has held that federal common law provides no basis for public nuisance claims against utilities due to their carbon dioxide emissions, the Court did not decide whether similar claims can be brought under state common law.  As a result, despite this favorable ruling, tort-type liabilities remain a concern.

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In addition, environmental advocacy groups have filed a variety of judicial challenges claiming that the environmental analyses conducted by federal agencies before granting permits and other approvals necessary for certain coal activities do not satisfy the requirements of the National Environmental Policy Act ("NEPA").  These groups assert that the environmental analyses in question do not adequately consider the climate change impacts of these particular projects.  In January 2020, the CEQ issued a proposed revision to NEPA regulations that seeks to clarify the extent to which direct, indirect, and cumulative environmental impacts from a proposed project, including GHG emissions, should be examined under NEPA; however, the final form or impact of any such revisions is uncertain at this time.

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Many states and regions have adopted GHG initiatives and certain governmental bodies have or are considering the imposition of fees or taxes based on the emission of GHG by certain facilities, including coal-fired electric generating facilities.  For example, in 2005, ten Northeastern states entered into the Regional Greenhouse Gas Initiative agreement ("RGGI"), calling for implementation of a cap and trade program aimed at reducing carbon dioxide emissions from power plants in the participating states.  The members of RGGI have established in statutes and/or regulations a carbon dioxide trading program.  Auctions for carbon dioxide allowances under the program began in September 2008.  Since its inception, several additional northeastern states and Canadian provinces have joined RGGI as participants or observers.  In 2019, New Jersey and Pennsylvania each announced they were joining RGGI.

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Following the RGGI model, five Western states launched the Western Regional Climate Action Initiative to identify, evaluate, and implement collective and cooperative methods of reducing GHG in the region to 15% below 2005 levels by 2020.  These states were joined by two additional states and four Canadian provinces and became collectively known as the Western Climate Initiative Partners. However, as of 2020, only California and the Canadian provinces of British Columbia, Novia Scotia, and Quebec.  Nevertheless, it is likely that these regional efforts will continue based on current trends and concerns related to the reduction of GHG emissions.

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It is possible that future international, federal and state initiatives to control GHG emissions could result in increased costs associated with fossil fuel production and consumption, such as costs to install additional controls to reduce carbon dioxide emissions or costs to purchase emissions reduction credits to comply with future emissions trading programs.  Such increased costs for fossil fuel consumption could result in some customers switching to alternative sources of fuel, or otherwise adversely affect our operations and demand for our products, or those of the operators of our mineral interests, which could have a material adverse effect on our business, financial condition, and results of operations Finally, activists may try to hamper fossil fuel companies by other means, including pressuring financing and other institutions into restricting access to capital, bonding and insurance, as well as pursuing tort litigation for various alleged climate-related impacts.

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Water Discharge

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The Federal Clean Water Act ("CWA") and similar state and local laws and regulations regulate discharges into certain waters, primarily through permitting.  Section 404 of the CWA imposes permitting and mitigation requirements associated with the dredging and filling of certain wetlands and streams.  The CWA and equivalent state legislation, where such equivalent state legislation exists, affect coal mining operations that impact such wetlands and streams.  Although permitting requirements have been tightened in recent years, we believe we have obtained all necessary permits required under CWA Section 404 as it has traditionally been interpreted by the responsible agencies.  However, mitigation requirements under existing and possible future "fill" permits may vary considerably.  For that reason, the setting of post-mine asset retirement obligation accruals for such mitigation projects is difficult to ascertain with certainty and may increase in the future.  For more information about asset retirement obligations, please read "Item 8. Financial Statements

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and Supplementary Data—Note 18 - Asset Retirement Obligations."  Although more stringent permitting requirements may be imposed in the future, we are not able to accurately predict the impact, if any, of such permitting requirements.

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In order for us or the operators of the properties in which we hold oil & gas mineral interests to conduct certain activities, an operator may need to obtain a permit for the discharge of fill material from the United States Army Corps of Engineers ("Corps of Engineers") and/or a discharge permit from the state regulatory authority under the state counterpart to the CWA.  Our coal mining operations typically require Section 404 permits to authorize activities such as the creation of slurry ponds and stream impoundments.  The CWA authorizes the EPA to review Section 404 permits issued by the Corps of Engineers, and in 2009, the EPA began reviewing Section 404 permits issued by the Corps of Engineers for coal mining in Appalachia.  Currently, significant uncertainty exists regarding the obtaining of permits under the CWA for coal mining operations in Appalachia due to various initiatives launched by the EPA regarding these permits.

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The EPA also has statutory "veto" power over a Section 404 permit if the EPA determines, after notice and an opportunity for a public hearing, that the permit will have an "unacceptable adverse effect."  In January 2011, the EPA exercised its veto power to withdraw or restrict the use of a previously issued permit for Spruce No. 1 Surface Mine in West Virginia, which is one of the largest surface mining operations ever authorized in Appalachia.  This action was the first time that such power was exercised with regard to a previously permitted coal mining project.  A challenge to the EPA's exercise of this authority was made in the United States District Court for the District of Columbia and in March 2012, that court ruled that the EPA lacked the statutory authority to invalidate an already issued Section 404 permit retroactively.  In April 2013, the D.C. Circuit Court of Appeals reversed this decision and authorized the EPA to retroactively veto portions of a Section 404 permit.  The United States Supreme Court denied a request to review this decision.  Any future use of the EPA's Section 404 "veto" power could create uncertainly with regard to our continued use of current permits, as well as impose additional time and cost burdens on future operations, potentially adversely affecting our coal revenues.  In addition, the EPA initiated a preemptive veto prior to the filing of any actual permit application for a copper and gold mine based on fictitious mine scenario. The implications of this decision could allow the EPA to bypass the state permitting process and engage in watershed and land use planning.  In June 2018, the EPA Administrator issued a memorandum directing the EPA's Office of Water to promulgate draft regulations eliminating the use of the EPA's Section 404 authority before a Section 404 permit application has been filed, or after a permit has been issued.  To date, the EPA has not issued a proposed rule.

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Total Maximum Daily Load ("TMDL") regulations under the CWA establish a process to calculate the maximum amount of a pollutant that an impaired water body can receive and still meet state water quality standards, and to allocate pollutant loads among the point and non-point pollutant sources discharging into that water body.  Likewise, when water quality in a receiving stream is better than required, states are required to conduct an antidegradation review before approving discharge permits. The adoption of new TMDL-related allocations or any changes to antidegradation policies for streams near our coal mines could require more costly water treatment and could adversely affect our coal production.

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Considerable legal uncertainty exists surrounding the standard for what constitutes jurisdictional waters and wetlands subject to the protections and requirements of the CWA. A 2015 rulemaking by the EPA to revise the standard was quickly challenged and nationwide implementation was blocked by a federal appeals court. Should the 2015 rule take effect, or should a different rule expanding the definition of what constitutes a water of the United States be promulgated as a result of the EPA and the Corps of Engineers' rulemaking process, we could face increased costs and delays due to additional permitting and regulatory requirements and possible challenges to permitting decisions.  In December 2018, the EPA and the Corps of Engineers issued a proposed rule to "determine the scope of 'waters of the United States' "subject to federal jurisdiction.  This proposal would lessen the number of waterbodies subject to the CWA as compared to the 2015 Rule. In January 2020, the EPA finalized its rule regarding the scope of "Waters of the United States." Litigation surrounding these developments is ongoing and we cannot predict the outcome at this time.

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Hazardous Substances and Wastes

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The Federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), otherwise known as the "Superfund" law, and analogous state laws, impose liability, without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release of a "hazardous substance" into the environment.  These persons include the owner or operator of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site.  Persons who are or were responsible for the release of hazardous substances may be subject to joint and several liability under CERCLA for the costs of cleaning up releases of hazardous substances and natural resource damages.  Some products used in coal

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mining operations generate waste containing hazardous substances.  We are currently unaware of any material liability associated with the release or disposal of hazardous substances from our past or present mine sites.

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The Federal Resource Conservation and Recovery Act ("RCRA") and analogous state laws impose requirements for the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and non-hazardous wastes. Many mining wastes are excluded from the regulatory definition of hazardous wastes, and coal mining operations covered by SMCRA permits are by statute exempted from RCRA permitting. Similarly, most wastes associated with the exploration, development, and production of oil & gas are exempt from regulation as hazardous wastes under RCRA, though these wastes typically constitute “solid wastes” that are subject to less stringent non-hazardous waste requirements. However, it is possible that RCRA could be amended or the EPA or state environmental agencies could adopt policies to require such wastes to become subject to more stringent storage, handling, treatment, or disposal requirements, which could impose significant additional costs on the operators of the properties in which we own oil & gas mineral interests. RCRA also allows the EPA to require corrective action at sites where there is a release of hazardous substances.  In addition, each state has its own laws regarding the proper management and disposal of waste material.  While these laws impose ongoing compliance obligations, such costs are not believed to have a material impact on our operations.

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RCRA impacts the coal industry in particular because it regulates the disposal of certain coal combustion by-products ("CCB").  On April 17, 2015, the EPA finalized regulations under RCRA for the disposal of CCB.  Under the finalized regulations, CCB is regulated as "non-hazardous" waste and avoids the stricter, more costly, regulations under RCRA's "hazardous" waste rules.   While classification of CCB as a hazardous waste would have led to more stringent restrictions and higher costs, this regulation may still increase our customers' operating costs and potentially reduce their ability to purchase coal.

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On November 3, 2015, the EPA published the final rule Effluent Limitations Guidelines and Standards ("ELG"), revising the regulations for the Steam Electric Power Generating category which became effective on January 4, 2016. The rule sets the first federal limits on the levels of toxic metals in wastewater that can be discharged from power plants, based on technology improvements in the steam electric power industry over the last three decades. The combined effect of the CCB and ELG regulations has forced power generating companies to close existing ash ponds and will likely force the closure of certain older existing coal burning power plants that cannot comply with the new standards.  In November 2019, the EPA proposed revisions to the 2015 ELG rule and announced proposed changes to regulations for the disposal of coal ash in order to reduce compliance costs.  It is unclear what impact these regulations will have on the market for our products.

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Endangered Species Act

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The federal Endangered Species Act ("ESA") and counterpart state legislation protect species threatened with possible extinction. The United States Fish and Wildlife Service (the "USFWS") works closely with the OSM and state regulatory agencies to ensure that species subject to the ESA are protected from potential impacts from mining-related and oil & gas exploration and production activities.  If the USFWS were to designate species indigenous to the areas in which we operate as threatened or endangered, or to redesignate a species from threatened to endangered, we or the operators of the properties in which we hold oil & gas mineral interests could be subject to additional regulatory and permitting requirements, which in turn could increase operating costs or adversely affect our revenues.

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Other Environmental, Health and Safety Regulations

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In addition to the laws and regulations described above, we are subject to regulations regarding underground and above ground storage tanks in which we may store petroleum or other substances.  Some monitoring equipment that we use is subject to licensing under the Federal Atomic Energy Act. Water supply wells located on our properties are subject to federal, state, and local regulation.  In addition, our use of explosives is subject to the Federal Safe Explosives Act.  We are also required to comply with the Federal Safe Drinking Water Act, the Toxic Substance Control Act, and the Emergency Planning and Community Right-to-Know Act.  The costs of compliance with these regulations should not have a material adverse effect on our business, financial condition or results of operations.

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Employees

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To conduct our operations, as of December 31, 2019, we employed 3,602 full-time employees, including 3,164 employees involved in active mining operations, 247 employees in other operations, and 191 corporate employees.  Our work force is entirely union-free.

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ITEM 1A.RISK FACTORS

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Risks Inherent in an Investment in Us

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Cash distributions are not guaranteed and may fluctuate with our performance and other external factors.

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The amount of cash we can distribute to holders of our common units or other partnership securities each quarter principally depends on the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

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