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RELATED-PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2020

RELATED-PARTY TRANSACTIONS

RELATED-PARTY TRANSACTIONS

21.RELATED-PARTY TRANSACTIONS

We have continuing related-party transactions with MGP and its affiliates. The Board of Directors and its conflicts committee ("Conflicts Committee") review our related-party transactions that involve a potential conflict of interest between our general partner or its affiliates and ARLP or its subsidiaries or any other partner of ARLP to determine that such transactions are fair and reasonable to ARLP. As a result of these reviews, the Board of Directors and the Conflicts Committee approved each of the transactions described below that had such potential conflict of interest as fair and reasonable to ARLP.

Affiliate Coal Lease Agreements

The following table summarizes advanced royalties outstanding and related payments and recoupments under our affiliate coal lease agreements:


					WKY CoalPlay
					Towhead			Webster			Henderson			WKY
		SGP/Craft Foundations			Coal			Coal			Coal			CoalPlay
					Henderson									Henderson
		Tunnel			& Union			Webster			Henderson			& Union
		Ridge			Counties, KY			County, KY			County, KY			Counties, KY			Total
		Acquired			Acquired			Acquired			Acquired			Acquired
		2005			December 2014			December 2014			December 2014			February 2015
	(in thousands)
As of January 1, 2018		$	3,000		$	10,684		$	5,356		$	7,566		$	6,387		$	32,993
Payments			—			3,597			2,570			2,520			2,131			10,818
Recoupment			(3,000)			(204)			(31)			—			(36)			(3,271)
Unrecoupable			—			—			(7,895)			—			—			(7,895)
As of December 31, 2018			—			14,077			—			10,086			8,482			32,645
Payments			4,500			3,597			2,568			2,521			2,131			15,317
Recoupment			(3,000)			(1,071)			—			—			(107)			(4,178)
Unrecoupable			—			—			(2,568)			—			—			(2,568)
As of December 31, 2019			1,500			16,603			—			12,607			10,506			41,216
Payments			3,000			3,597			2,568			2,522			2,132			13,819
Recoupment			(3,000)			(1,022)			—			—			(56)			(4,078)
Unrecoupable			—			—			(2,568)			—			—			(2,568)
As of December 31, 2020		$	1,500		$	19,178		$	—		$	15,129		$	12,582		$	48,389

SGP/Craft Foundations—In January 2005, we acquired Tunnel Ridge from ARH. In connection with this acquisition, we assumed a coal lease with SGP. Under the terms of the lease, Tunnel Ridge is required to pay an annual minimum royalty of $3.0 million. The lease expires the earlier of January 1, 2033 or upon the exhaustion of the mineable and merchantable leased coal. Tunnel Ridge incurred $6.1 million, $7.2 million and $6.0 million in earned royalties in 2020, 2019 and 2018 respectively. As of January 1, 2019 the property subject to this lease is owned by the Joseph W. Craft III Foundation and the Kathleen S. Craft Foundation, an undivided one-half interest each (the "Craft Foundations").

WKY CoalPlay—In February 2015, WKY CoalPlay entered into a coal lease agreement with Alliance Resource Properties, LLC ("Alliance Resource Properties") regarding coal reserves located in Henderson and Union Counties, Kentucky. The lease has an initial term of 20 years and provides for earned royalty payments to WKY CoalPlay of 4.0% of the coal sales price and annual minimum royalty payments of $2.1 million. All annual minimum royalty payments are recoupable from future earned royalties. Alliance Resource Properties also was granted an option to acquire the leased reserves at any time during a three-year period beginning in February 2018 for a purchase price that would provide WKY CoalPlay a 7.0% internal rate of return on its investment in these reserves taking into account payments previously made under the lease (See Note 12 – Variable Interest Entities).

In December 2014, WKY CoalPlay's subsidiaries, Towhead Coal Reserves, LLC and Henderson Coal Reserves, LLC entered into coal lease agreements with Alliance Resource Properties. The leases have initial terms of 20 years and provide for earned royalty payments of 4.0% of the coal sales price to both and annual minimum royalty payments of $3.6 million and $2.5 million, respectively. All annual minimum royalty payments for each agreement are recoupable from future earned royalties related to their respective agreements. Each agreement granted Alliance Resource Properties an option to acquire the leased reserves at any time during a three-year period beginning in December 2017 for a purchase price that would provide WKY CoalPlay a 7.0% internal rate of return on its investment in the reserves taking into account payments previously made under the leases. These options expired in December 2020. (See Note 12 – Variable Interest Entities).

In December 2014, WKY CoalPlay's subsidiary, Webster Coal Reserves, LLC entered into a coal lease agreement with Alliance Resource Properties. The lease has an initial term of 7 years and provides for earned royalty payments of 4.0% of the coal sales price and annual minimum payments of $2.6 million. The agreement grants Alliance Resource Properties an option to acquire the leased reserves at any time during a three year period beginning in December 2017 for

a purchase price that would provide WKY CoalPlay a 7.0% internal rate of return on its investment in the reserves taking into account payments previously made under the lease (See Note 12 – Variable Interest Entities). In the third quarter of 2019 it was determined that the balance of advanced royalties, the advance royalty payment in 2020 and the remaining advanced royalty payment expected in 2021 totaling $2.6 million, may not be recouped as a result of the reduction of the Dotiki’s economic mine life determined in 2018 and the subsequent ceasing of production in the third quarter of 2019. We accrued the expected future advance payments and recognized the charge in Asset Impairment expense in the third quarter of 2019. See Note 4 – Long-Lived Asset Impairments for more information.

Cavalier Minerals– As discussed in Note 12 – Variable Interest Entities, through our subsidiaries, we hold a non-economic managing member interest and a 96% non-managing member interest in Cavalier Minerals and, Bluegrass Minerals, a third party, holds a 4% non-managing member interest and a profits interest. See Note 13 – Investments for information on payments made and distributions received by Cavalier Minerals.