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Asset Retirement Obligations | 9 Months Ended
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Sep. 30, 2020
Asset Retirement Obligation Disclosure [Abstract] |
Asset Retirement Obligations | Asset Retirement ObligationsThe Company’s obligations associated with the retirement of long-lived assets are recognized at fair value at the time the legal obligations are incurred. Upon initial recognition of a liability, a corresponding amount is capitalized as part of the carrying value of the related long-lived asset and is depreciated either by the straight-line method or the units-of-production method. The liability is accreted each period until the liability is settled or the asset is sold, at which time the liability is removed. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. The Company's asset retirement obligations are principally for costs to close its surface mines and reclaim the land it has disturbed as a result of its normal mining activities as well as for costs to dismantle certain mining equipment at the end of the life of the mine. Management’s estimate involves a high degree of subjectivity. In particular, the obligation’s fair value is determined using a discounted cash flow technique and is based upon mining permit requirements and various assumptions including credit adjusted risk-free-rates, estimates of disturbed acreage, life of the mine, reclamation costs, the application of various environmental laws and regulation and assumptions regarding equipment productivity. The Company reviews its asset retirement obligations at each mine site at least annually and makes necessary adjustments for permit changes and for revisions of estimates of the timing and extent of reclamation activities and cost estimates. The accretion of the liability is being recognized over the estimated life of each individual asset retirement obligation and is recorded in the line “Cost of sales” in the accompanying Unaudited Condensed Consolidated Statements of Operations. The associated asset is recorded in “Property, Plant and Equipment, net” in the accompanying Unaudited Condensed Consolidated Balance Sheets. The depreciation of the asset is recorded in the line “Cost of sales” in the accompanying Unaudited Condensed Consolidated Statements of Operations. A reconciliation of the Company's beginning and ending aggregate carrying amount of the asset retirement obligations is as follows:
|  | Coal Mining |  | NAMining |  | Unallocated Items |  | NACCO Consolidated
Balance at December 31, 2019 |  | $ | 19,015 |  |  | $ | 604 |  |  | $ | 17,240 |  |  | $ | 36,859 |
Liabilities incurred during the period |  | 9,809 |  |  | — |  |  | — |  |  | 9,809 |
Liabilities settled during the period |  | (5,957) |  |  | — |  |  | (562) |  |  | (6,519) |
Accretion expense |  | 1,296 |  |  | 28 |  |  | 1,023 |  |  | 2,347 |
Revision of estimated cash flows |  | 600 |  |  | — |  |  | — |  |  | 600 |
Balance at September 30, 2020 |  | $ | 24,763 |  |  | $ | 632 |  |  | $ | 17,701 |  |  | $ | 43,096 |
Asset retirement obligations are incurred at the time development of a new mine or mine area commences. During the third quarter of 2020, MLMC began development of a new mine area and as such, recorded an additional $9.8 million asset retirement obligation and a corresponding $9.8 million asset was capitalized as a component of Property, plant and equipment, net. The asset retirement obligation’s fair value was determined using a discounted cash flow technique and is based upon permit requirements and various estimates and assumptions that would be used by market participants, including estimates of disturbed acreage, reclamation costs and assumptions regarding equipment productivity. During the third quarter of 2020, the Company transferred the mine permits for certain Centennial mines to an unrelated third party. As of September 30, 2020, the Company has $10.7 million of surety bonds outstanding related to the mines associated with the transferred mine permits. The third party that acquired the mine permits is required as part of the transaction to transfer or replace $4.9 million of the Company's outstanding surety bonds during the fourth quarter of 2020 and transfer or replace the remaining $5.8 million of outstanding surety bonds as soon thereafter as it is able. If there is a claim under these surety bonds prior to the transfer or replacement of such bonds, the Company would be responsible to the surety company for any amounts it pays with respect to such claim, up to the amount of the outstanding surety bonds. As a result of the transfer of the mine permits, the Company was relieved of the associated mine reclamation obligations and therefore recorded a $4.8 million reduction to Centennial's asset retirement obligation, included in "Liabilities settled during the period" in the table above. In addition, as part of the transfer of the mine permits, the Company paid $1.9 million of cash, recorded $1.4 million in Other current assets for amounts owed to Centennial from the third-party acquirer, and recognized $1.9 million in Accounts payable and $2.4 million in Other long-term liabilities in the Unaudited Condensed Consolidated Balance Sheets. The liabilities are associated with amounts due to the third-party acquirer upon transfer or replacement of the surety bonds and a liability for the guarantee to stand ready to perform in the event there is a claim under the surety bonds. No payments have been required since the inception of these guarantees. Bellaire is a non-operating subsidiary of the Company with legacy liabilities relating to closed mining operations, primarily former Eastern U.S. underground coal mining operations. These legacy liabilities include obligations for water treatment and other environmental remediation that arose as part of the normal course of closing these underground mining operations. The accretion of the liability is recognized over the estimated life of the asset retirement obligation and is recorded in the line “Closed mine obligations” in the accompanying Unaudited Condensed Consolidated Statements of Operations. Since Bellaire's properties are no longer active operations, no associated asset has been capitalized. The fair value of Bellaire's Mine Water Treatment assets, which are recognized as a component of Other non-current assets on the Unaudited Condensed Consolidated Balance Sheets, are $10.3 million and $10.1 million at September 30, 2020 and December 31, 2019, respectively, and are legally restricted for purposes of settling the Bellaire asset retirement obligation. See Note 6 for further discussion of the Mine Water Treatment Trust.

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- Definition The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 410 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2175671 + Details
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