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LONG-LIVED ASSET IMPAIRMENTS

12 Months Ended

Dec. 31, 2020

4.	LONG-LIVED ASSET IMPAIRMENTS

During the year ended December 31, 2020, we recorded $25.0 million of non-cash asset impairment charges in our Illinois Basin segment due to sealing our idled Gibson North mine, resulting in its permanent closure, and a decrease in the fair value of certain mining equipment at our idled operations and greenfield coal reserves as a result of weakened coal market conditions.

During the year ended December 31, 2019, we recorded an asset impairment charge of $15.2 million in our Illinois Basin segment due to the cessation of coal production at our Dotiki mine, effective August 16, 2019, in an effort to focus on maximizing production at our lower-cost mines in the segment. We adjusted the carrying value of Dotiki's assets from $35.9 million to its fair value of $25.8 million and accrued $5.1 million with respect to scheduled payments to WKY CoalPlay for leased coal reserves from which we may not receive future economic benefit. See Note 12 – Variable Interest Entities for more information about WKY CoalPlay.

During the year ended December 31, 2018, due to the reduction of Dotiki’s economic mine life, we recorded a $34.3 million impairment charge when we adjusted the carrying value of Dotiki's assets from $85.3 million to its fair value of $51.0 million. We also had a decrease in the fair value of an option entitling us to lease certain coal reserves, which resulted in an impairment charge of $6.2 million. Both of these impairment charges were incurred in our Illinois Basin segment.

The fair values of the impaired assets were determined using a combination of market and income approaches, both of which represent Level 3 fair value measurements under the fair value hierarchy. The fair value analysis used assumptions of marketability of certain assets as well as discounted cash flows over the remaining life of the assets.

With the uncertainty related to energy demand as a result of weak electricity demand and an oversupply and lack of storage for oil and natural gas during the quarter ended March 31, 2020 (the "First Quarter"), both due in part to the COVID-19 pandemic and other market and production factors impacting both our coal mining operations and our mineral interests activities, we performed recoverability tests during the First Quarter using undiscounted cash flows based on our estimate of sales volume and prices, operating margins and capital expenditures from information available to us and

determined we would be able to recover the costs of our assets, excluding the impaired assets discussed above. Amid cost reduction efforts, increased customer commitments for coal, a modest recovery in commodity futures prices and increased clarity into production levels by operators of our oil & gas mineral interests during the year, we determined impairment of our long-lived assets subsequent to the First Quarter was not necessary. The cash flow estimates used in our impairment assessments, by their very nature, are dependent on conditions that could materially change in future periods based on new information. If in future periods changes to these estimates were to materially reduce our expected cash flows, additional impairments could be necessary.

See Note 2 – Summary of Significant Accounting Policies – Long-Lived Asset Impairment for more information on our accounting policy for asset impairments.