Table of Contents

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

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

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

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(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.

​

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 726(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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 $745,685,497 as of June 30, 2021, based on the reported closing price of the common units as reported on The NASDAQ Stock Market LLC on such date.

As of August 26, 2022, 127,195,219 common units were outstanding.

Auditor Details:

​

Table of Contents

​

​

DOCUMENTS INCORPORATED BY REFERENCE: None

​

​

​

Table of Contents

​

Explanatory Note

Alliance Resource Partners, L.P. ("we," "us," or "our") is filing this Amendment No. 1 on Form 10-K/A ("Amended Filing") in order to amend our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, originally filed on February 25, 2022 ("Original Filing"), to provide amended disclosures pursuant to correspondence with the staff (the “Staff”) of the Securities and Exchange Commission ("SEC") in connection with the Staff’s review of new property disclosure requirements for publicly traded mining companies recently implemented by the SEC and reflected in our Original Filing for the first time. The following items were impacted by these amended disclosures and are hereby amended and restated in their entirety:

We are also including currently dated certifications by our Chief Executive Officer and Chief Financial Officer as Exhibits 31.3 and 31.4 under Section 302 of the Sarbanes-Oxley Act of 2002, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended.

​

Other than as expressly set forth above and except with respect to certain conforming changes made to our exhibit index, this Amended Filing does not, and does not purport to, update or restate the information in the Original Filing or reflect any events that have occurred after the Original Filing. Moreover, the information included in this Amended Filing does not update or otherwise affect the financial statements filed as part of the Original Filing. This Amended Filing should be read in conjunction with the Original Filing and our other filings with the SEC.

​

Table of Contents

​

TABLE OF CONTENTS

​

​

​

​

Table of Contents

​

​

Table of Contents

estimates.  As part of our internal controls, our geologists and engineers review the integrity, accuracy, and timeliness of the data provided to RESPEC that they considered in calculating their coal mineral resource and reserve estimates.  We also review the geologic data, mining assumptions, and methodology used by RESPEC to estimate our coal mineral resources and reserves.  Our geologists and engineers also met with RESPEC periodically during the year to discuss the assumptions and methods used in the coal mineral resource and reserve estimation process.

​

RESPEC, an independent third-party engineering firm, does not own an interest in any of our properties and is not employed on a contingent basis. RESPEC's Technical Report Summaries for each of our material mining operations are included as exhibits to this Annual Report on Form 10-K.

​

Summary of Coal Mineral Resources and Reserves

​

Coal Mineral Resources

​

Most of our coal properties designated as mineral resources are of thickness, quality, and mineability similar to that of the mineral reserves, and all are proximal to existing infrastructure such as power, water, transportation, facilities, etc.  However, we have not completed pre-feasibility or feasibility studies with respect to our coal properties designated as mineral resources, as is required to convert the mineral resources into mineral reserves. There is no certainty that all or any part of the mineral resources will be converted into mineral reserves.

​

The following table sets forth our coal mineral resources, exclusive of coal mineral reserves, at December 31, 2021:

​

​

At December 31, 2021, we had approximately 1.165 billion tons of coal mineral resources.  Tonnages are reported on a clean recoverable basis with pricing based on available third-party forecasts and historical pricing adjusted for quality at the end of 2021 in a range from $36.27 to $51.26 per short ton in the Illinois Basin and from $42.68 to $66.27 per short ton in the Appalachian Basin, which are the prices used by RESPEC to estimate the amount of coal mineral resources. All resources are classified as underground mineable in the exploration stage.    

​

Coal sales prices vary based on coal quality, access to transportation, and other factors at each location.  In the Illinois Basin, we have coal resources that are not associated with coal reserves and have different factors affecting the coal sales price.  In addition, we have coal reserves that do not have associated coal resources.  As a result, the Illinois Basin resources and the Illinois Basin reserves have different price ranges.

​

Coal Mineral Reserves

​

Reserves are assigned to our active operations and are (1) currently in production, (2) economically viable, and (3) meet the other requirements to be considered reserves as defined by the SEC.  

​

Table of Contents

The following table sets forth coal mineral reserve information, exclusive of the coal mineral resources above, at December 31, 2021, about our coal operations:

​

​

On December 31, 2021, we had approximately 547.1 million tons of coal mineral reserves.  Tonnages are reported on a clean recoverable basis with pricing based on available third-party forecasts and historical pricing adjusted for quality at the end of 2021 in a range from $36.08 to $44.01 per short ton in the Illinois Basin and from $42.68 to $66.27 per short ton in the Appalachian Basin, which are the prices used by RESPEC to estimate the amount of coal mineral reserves.  All reserves are classified as underground mineable in the production stage.  

​

Coal sales prices vary based on coal quality, access to transportation, and other factors at each location.  In the Illinois Basin, we have coal reserves that do not have associated coal resources. In addition, we have coal resources that are not associated with coal reserves and have different factors affecting the coal sales price.  As a result, the Illinois Basin reserves and the Illinois Basin resources have different price ranges.

​

Table of Contents

​

Individual Property Disclosures

​

We consider the following properties to be material based on multiple factors including, but not limited to, the property’s contribution to our overall business and financial condition. Please see Coal Mineral Resources and Coal Mineral Reserves sections above for information about the coal mineral resources and reserves held by these material properties.  In addition to the following information, Technical Report Summaries for these material properties with additional information are included as exhibits to this Annual Report on Form 10-K.    

​

Henderson/Union

​

The Henderson/Union Resources are located in Henderson and Union counties, Kentucky at 37°44'30"N, -87°46'07"W and currently have control in over 1,600 tracts encompassing over 127,000 acres. The property is controlled through both fee ownership and leases of the coal.  Existing and proposed facilities are on controlled land. The coal mineral resources are controlled by Alliance Resource Properties. The base leases are with private owners and WKY CoalPlay or its subsidiaries, which are related parties.  See "Item 8. Financial Statements and Supplementary Data—Note 21 – Related Party Transactions" for more information about our WKY CoalPlay transactions.  These base leases generally provide for a term that can be extended until exhaustion of the leased coal.  Local infrastructure is as follows:

​

Major Roads:  Interstates 69 and US-60,

Railroads:  None,

Airport:  Evansville Regional Airport (EVV),

Town:  Morganfield,

Docks:  River View, Hamilton 1, UC Processing, on the Ohio River,

Water:  Local municipalities and mine sources,

Electricity:  Kentucky Utilities (KU),

Personnel:  Regional.

Table of Contents

Description

​

The potential underground mine(s) would utilize room-and-pillar methods operating a heavy media, float/sink style preparation plant.  Exploration continues as needed to fulfill possible permitting and development requirements.  Multiple access points are available for development.  Access is available from the active River View mine, which began production in 2009.  All equipment, facilities, infrastructure, and underground development are in good working order and maintained to industry standards.  Access at the Hamilton and UC Coal, LLC sites are considered "brownfield" developments. Though some facilities and permitting are in place, significant upgrades to existing infrastructure and new construction would be needed to bring them into good working order that meets industry standards. The property associated with Henderson/Union has no book value as of December 31, 2021 but does have outstanding advanced royalties with WKY CoalPlay or its subsidiaries.  See "Item 8. Financial Statements and Supplementary Data—Note 21 – Related Party Transactions" for more information about advanced royalties that Henderson/Union has with WKY CoalPlay.

​

Though there is geographic overlap between the Henderson-Union and River View properties, the resources and reserves of each are associated with different coal seams or, if in the same seam, are separated by existing mine works or geologic features into distinct areas.  There is no overlap in the resource / reserve estimation.  

​

History

​

The Henderson/Union property contains resources in four seams, the West Kentucky No. 11 (WKY11), the West Kentucky No. 9 (WKY9), the West Kentucky No. 7 (WKY7), and the West Kentucky No. 6 (WKY6). Island Creek Coal Company ("Island Creek") operated mines in the area and controlled a portion of the property.  Under a joint venture, Texas Gas Service also controlled a large interest in the mineral rights.  Lastly, Peabody Coal Corporation ("Peabody") and Patriot Coal Corporation ("Patriot") operated mines in the area and controlled a portion of the reserves.  We consolidated control of the property through multiple transactions from 2005 through 2015.  Island Creek operated the Ohio #11 and Uniontown #9 mines.  Island Creek also operated the Hamilton #1 and #2 mines in Kentucky.  Peabody and

Table of Contents

later Patriot operated the Camp complex and Highland mines to the southeast and east.  Both the WKY9 and WKY11 seams were mined at these locations.  No mining has occurred on the property in the WKY7 or WKY6 seams.

​

Approximately 1,050 exploration holes have been drilled within and adjacent to the Henderson/Union area to assess thickness and mineability of the WKY11, WKY9, WKY7, and WKY6 seams. From these holes, over 410 samples were collected and analyzed to determine coal quality characteristics. Also, over 150 oil/gas well geophysical logs drilled by various companies have been interpreted to supplement the exploration drilling.  In general, all drilling has shown highly consistent coal seams of mineable thickness and quality for the high sulfur, thermal utility market.

​

Encumbrances

​

Our revolving credit facility is secured by, among other things, liens against certain Henderson/Union surface properties and coal leases. Documentation of such liens is of record in the Offices of the Henderson and Union County Clerks. Please read "Item 8. Financial Statements and Supplementary Data—Note 8 – Long-term Debt" for more information on our revolving credit facility.

​

The Kentucky Department of Natural Resources ("KYDNR"), Division of Mine Permits ("DMP") is responsible for review and issuance of all permits relative to coal mining and reclamation activities, and financial assurance of comprehensive environmental protection performance standards related to surface and underground coal mining operations. In addition to state mining and reclamation laws, operators must comply with various federal laws relevant to mining.

​

River View

​

River View is located in Union County, Kentucky at 37°45'37"N, -87°56'42"W and currently has approximately 54,250 underground acres permitted. The mine is controlled through both fee ownership and leases of the coal.  The coal mineral reserves are leased or held for lease to River View by Alliance Resource Properties.  River View either owns or controls the surface properties upon which its facilities are located including the preparation plant, refuse areas, mine offices, conveyor systems, shafts and slopes. The coal mineral reserves currently assigned to and controlled by River View are pursuant to a 2009 Coal Lease and Sublease Agreement from Alliance Resource Properties. The base leases are with private owners and generally provide for a term that can be extended until exhaustion of the leased coal.  Local infrastructure is as follows:

​

Major Roads:  Interstates 69 and US-60,

Railroads:  None,

Airport:  Evansville Regional Airport (EVV),

Town:  Morganfield,

Docks:  River View on the Ohio River,

Water:  Uniontown Water Department and mine sources,

Electricity:  Kentucky Utilities (KU),

Personnel:  Regional.

Table of Contents

​

Description

​

The underground mine is currently in production using room-and-pillar methods utilizing a heavy media, float/sink style preparation plant.  Exploration continues as needed to fulfill mining and permitting requirements.  The mine began production in 2009.  All equipment, facilities, infrastructure, and underground development are in good working order and maintained to industry standards.  Total book value of the property and any associated plant and equipment for River View as of December 31, 2021 was $199.3 million.

​

Though there is geographic overlap between River View and the Henderson-Union properties, the reserves and resources of each are associated with different coal seams or, if in the same seam, are separated by existing mine works or geologic features into distinct areas.  There is no overlap in the resource / reserve estimation.  

​

History

​

Island Creek operated mines in the area and controlled a portion of the property.  Under a joint venture, Texas Gas Service also controlled a large interest in the mineral rights.  Lastly, Peabody and Patriot operated mines in the area and controlled a smaller portion of the reserves.  We consolidated control of the property through multiple transactions from 2005 through 2015.  Island Creek operated the Ohio #11 and Uniontown #9 mines to the west of River View.  Island Creek also operated the Hamilton #1 and #2 mines to the southwest.  Peabody and later Patriot operated the Camp complex and Highland mines to the southeast and east.  Both the WKY9 and WKY11 seams were mined at these locations.

​

Approximately 630 exploration holes penetrate the WKY11 seam and about 450 holes penetrate the WKY9 seam within and adjacent to the River View resource/reserve area to assess thickness, quality, and mineability of the seams. River View has drilled over 80 holes on the property to supplement the historic data.  Also, over 300 oil/gas well geophysical logs drilled by various companies have been interpreted to supplement the exploration drilling.  

​

Table of Contents

Encumbrances

​

Our revolving credit facility is secured by, among other things, liens against certain River View surface properties and coal leases. Documentation of such liens is of record in the Office of the Union County Clerk. Please read "Item 8. Financial Statements and Supplementary Data—Note 8 – Long-term Debt" for more information on our revolving credit facility.

​

Accounts receivable generated from the sale of coal mined from this property are collateral for our accounts receivable securitization facility, evidenced by financing statements of record in the Office of the Union County Clerk.  Please read "Item 8. Financial Statements and Supplementary Data—Note 8 – Long-term Debt" for more information on our accounts receivable securitization facility.

​

The KYDNR, DMP is responsible for review and issuance of all permits relative to coal mining and reclamation activities, and financial assurance of comprehensive environmental protection performance standards related to surface and underground coal mining operations. In addition to state mining and reclamation laws, operators must comply with various federal laws relevant to mining.  All applicable permits for underground mining, coal preparation and related facilities, and other incidental activities have been obtained and remain in good standing.

​

Due to the level of geologic certainty, all resources were classified as either measured or indicated and were converted to reserves. There were no inferred resources associated with the property.

​

The River View mine had 223.3 million tons of coal mineral reserves at the end of 2020.  The year over year reconciliation is as follows:

​

​

Normal course adjustments are associated with numerous slight changes in the geologic model.

​

Hamilton

​

Hamilton, a longwall mine located in Hamilton County, Illinois at 38°10'12”N, -88°36'47"W, currently has approximately 10,500 underground acres and 1,300 surface acres permitted. The mine property is controlled through both fee ownership and leases of the coal. The coal mineral reserves and resources are leased or held for lease to Hamilton by Alliance WOR Properties, LLC ("Alliance WOR Properties"), a subsidiary of Alliance Resource Properties.  Hamilton either owns or controls the surface properties upon which its facilities are located including the preparation plant, refuse areas, mine offices, conveyor systems, shafts and slopes. Hamilton (or Alliance WOR Properties) currently controls approximately 53,348 acres of coal mineral reserves and resources and subsidence rights, and 1,400 acres of surface properties. The underlying base coal leases are with private owners and are comprised of a large number of leases originally taken by AMAX Coal Company and Old Ben Coal Company ("Old Ben") in the mid to late 1970’s and early 1980’s (the "Old Ben Leases"), leases acquired by Consolidation Coal Company in the late 1980’s (the "Consol Leases"), and

Table of Contents

subsequent leases taken directly by White Oak Resources, LLC or affiliated companies and/or Alliance WOR Properties. Local infrastructure is as follows:

​

Major Roads:  Interstates 64,

Railroads:  CSX and EVW,

Airport:  Evansville Regional Airport (EVV),

Electricity:  Wayne-White Electric Co-op (WWEC),

Personnel:  Regional.

​

​

Description

​

The underground mine is currently in production using longwall and room-and-pillar methods utilizing a heavy media, float/sink style preparation plant.  Exploration continues as needed to fulfill mining and permitting requirements.  The mine began production in 2014.  All equipment, facilities, infrastructure, and underground development are in good working order and maintained to industry standards.  Total book value of the property and any associated plant and equipment for Hamilton as of December 31, 2021 was $347.1 million.

​

History

​

There were no previous operations on the Hamilton reserves property prior to our predecessor, White Oak Resources LLC, who began construction of the mine in 2011.

​

Table of Contents

Over 180 exploration holes have been drilled in the Hamilton reserve area by other companies to assess thickness, quality, and mineability of the Herrin and Harrisburg seams. White Oak Resources LLC drilled over 90 holes in the reserve area starting in 2008.  Also, over 70 oil/gas well geophysical logs drilled by various companies have been interpreted to supplement the exploration drilling.  

​

Encumbrances

​

Our revolving credit facility is secured by, among other things, liens against certain Hamilton surface properties, coal leases and owned coal.  Documentation of such liens is of record in the Office of the Hamilton County Clerk.  Please read "Item 8. Financial Statements and Supplementary Data—Note 8 – Long-term Debt" for more information on our revolving credit facility.

​

The Consol Leases are encumbered by an overriding royalty payable to Sustainable Conservation, Inc. ("Sustainable") in the amount of the greater of $0.25 per ton or 0.75% of the average sales realization price received per ton, which sums can be credited against approximately $481,000.00 previously paid to Sustainable for the assignment of the Consol Leases.

​

The Illinois Department of Natural Resources, Land Reclamation Division is responsible for review and issuance of all permits relative to coal mining and reclamation activities, and financial assurance of comprehensive environmental protection performance standards related to surface and underground coal mining operations.  In addition to state mining and reclamation laws, operators must comply with various federal laws relevant to mining.  All applicable permits for underground mining, coal preparation and related facilities and other incidental activities have been obtained and remain in good standing.

​

Resources associated with Hamilton County are provided in the Coal Mineral Resources table above.

​

The Hamilton mine had 125.0 million tons of coal mineral reserves at the end of 2020.  The year over year reconciliation is as follows:

​

​

Normal course adjustments are associated with numerous slight changes in the geologic model.

​

Gibson South

​

Gibson South is located in Gibson County, Indiana at 38°18'22"N, 87°42'30"W and currently has approximately 23,350 underground acres permitted. The mine property is controlled through both fee ownership and leases of the coal.  Gibson South holds rights to approximately 21,600 gross acres of coal.  Leases generally have an initial term with automatic extensions for as long as mining operations are conducted within a described area.  Local infrastructure is as follows:

​

Table of Contents

Major Roads:  Interstates 69 and 64,

Railroads:  CSX and NS,

Airport:  Evansville Regional Airport (EVV),

Town:  Princeton,

Docks:  Mount Vernon on the Ohio River,

Water:  Gibson Water, Inc. and well water,

Electricity:  Western Indiana Energy REMC,

Personnel:  Regional.

​

Description

​

The underground mine is currently in production using room-and-pillar methods utilizing a heavy media, float/sink style preparation plant.  Exploration continues as needed to fulfill mining and permitting requirements.  The mine began production in 2014.  All equipment, facilities, infrastructure, and underground development are in good working order and maintained to industry standards.  Total book value of the property and any associated plant and equipment for Gibson South as of December 31, 2021 was $118.8 million.

​

History

​

In November 1997, pursuant to (a) Assignment of Underground Coal Leases, (b) Partial Assignment of Underground Coal Leases and (c) Special Corporate Warranty Deed, Old Ben conveyed to MAPCO Land & Development Corporation various coal leases and fee coal interests within a large property boundary located in Gibson County, Indiana.  MAPCO Land & Development Corporation changed its name to MAPCO Coal Land & Development Corporation, and MAPCO Coal Land & Development Corporation merged into Alliance Properties, LLC (“Alliance Properties”) effective August 4, 1999.  

​

Old Ben ran large exploration programs across multiple years to examine thickness, mineability, and quality, drilling a total of 137 holes.  Another 73 holes were drilled in the western area of the property by owners of an adjacent mine.

​

Table of Contents

After the original Old Ben acquisition, Alliance Properties and Gibson County Coal continued to acquire additional coal leases and fee coal interests in the area.  In addition, beginning in or around 2006, the leases originally acquired from Old Ben began to expire by their terms, and Alliance Properties/Gibson County Coal began a program of either amending the expiring leases or entering into new, direct leases with the coal owners.  Alliance Properties merged into Gibson County Coal on February 19, 2018.

​

Encumbrances

​

Our revolving credit facility is secured by, among other things, liens against certain Gibson County Coal surface properties, coal leases and owned coal.  Documentation of such liens is of record in the Office of the Recorder of Gibson County, Indiana.  Please read "Item 8. Financial Statements and Supplementary Data – Note 8 – Long-term Debt" for more information on our revolving credit facility.

​

Accounts receivable generated from the sale of coal mined from this property are collateral for our accounts receivable securitization facility, evidenced by financing statements of record in the Office of the Recorder of Gibson County, Indiana.  Please read "Item 8. Financial Statements and Supplementary Data—Note 8 – Long-term Debt" for more information on our accounts receivable securitization facility.

​

The Indiana Department of Natural Resources, Division of Reclamation is responsible for oversight of active coal mining and reclamation activities, and financial assurance of comprehensive environmental protection performance standards related to surface and underground coal mining operations.  In addition to state mining and reclamation laws, operators must comply with various federal laws relevant to mining.  All applicable permits for underground mining, coal preparation, and related facilities and other incidental activities have been obtained and remain in good standing.  

​

Due to the level of geologic certainty, all resources were classified as either measured or indicated and were converted to reserves. There were no inferred resources associated with the property.

​

The Gibson South mine had 54.7 million tons of coal mineral reserves at the end of 2020.  The year over year reconciliation is as follows:

​

​

Normal course adjustments are associated with numerous slight changes in the geologic model.

​

Tunnel Ridge

​

Tunnel Ridge, located at 40°09’17" N, -80°39’26"W, is an underground longwall mine in the Pittsburgh No. 8 seam of coal, and currently has approximately 20,890 underground acres permitted. The mine property is controlled through both fee ownership and leases of the coal.  The vast majority of the coal mined and to be mined by Tunnel Ridge is leased from the Joseph W. Craft III Foundation and the Kathleen S. Craft Foundation.  Please read "Item 8. Financial Statements and Supplemental Data - Note 21 – Related Party Transactions" for additional information on this lease.  Tunnel Ridge

Table of Contents

either owns or controls the surface properties upon which its facilities are located, including the preparation plant, refuse areas, mine offices, conveyor systems, shafts and slopes.  Local infrastructure is as follows:

​

Major Roads:  Interstate 70,

Railroads:  None,

Airport:  Pittsburgh International Airport (PIT),

Town:  Wheeling,

Docks:  Tunnel Ridge on the Ohio River,

Water:  Ohio County Water District and mine sources,

Electricity:  American Electric Power (AEP), West Penn Power (WPP)

Personnel:  Regional.

​

Description

​

The underground mine is currently in production using longwall and room-and-pillar methods utilizing a heavy media, float/sink style preparation plant.  Exploration continues as needed to fulfill mining and permitting requirements.  The mine began production in 2010.  All equipment, facilities, infrastructure, and underground development are in good working order and maintained to industry standards.  Total book value of the property and any associated plant and equipment for Tunnel Ridge as of December 31, 2021 was $238.8 million.

​

History

​

Valley Camp Coal Company ("Valley Camp") operated mines on the property prior to Tunnel Ridge's operations.

​

Table of Contents

Valley Camp drilled 24 exploration holes in and adjacent to the reserve area to check thickness, quality, and mineability of the Pittsburgh No. 8 seam.  Tunnel Ridge accounts for over 80 of the remaining holes.  Also, Tunnel Ridge has collected over 600 channel samples to supplement the exploration drilling.  

​

Encumbrances

​

Our revolving credit facility is secured by, among other things, liens against certain Tunnel Ridge surface properties, coal leases and owned coal.  Documentation of such liens is of record in the Office of the County Commission of Ohio County, West Virginia and the Office of the Recorder of Deeds of Washington County, Pennsylvania.  Please read "Item 8. Financial Statements and Supplementary Data—Note 8 – Long-term Debt" for more information on our revolving credit facility.

​

Accounts receivable generated from the sale of coal mined from this property are collateral for our accounts receivable securitization facility, evidenced by financing statements of record in the Office of the County Commission of Ohio County, West Virginia and the Office of the Recorder of Deeds of Washington County, Pennsylvania.  Please read "Item 8. Financial Statements and Supplementary Data—Note 8 – Long-term Debt" for more information on our accounts receivable securitization facility.

​

Tunnel Ridge is located on the West Virginia / Pennsylvania State boundary, operating in each state.  As such, regulatory requirements must be met pertaining to mining facilities located in each state.

​

For operations in West Virginia, the West Virginia Department of Environmental Protection ("WVDEP") is the regulatory authority over mining activities.  Within the WVDEP, the Division of Mining and Reclamation is responsible for review and issuance of all permits relative to coal mining and reclamation activities, and financial assurance of comprehensive environmental protection performance standards related to surface and underground coal mining operations.

​

For operations in Pennsylvania, the Pennsylvania Department of Environmental Protection (PADEP) is the regulatory authority over mining activities.  Within the PADEP, the Bureau of District Mining Operations is responsible for review and issuance of all permits relative to coal mining and reclamation activities, and financial assurance of comprehensive environmental protection performance standards related to surface and underground coal mining operations.  

​

Due to the level of geological certainty, all resources were classified as either measured or indicated and were converted to reserves. There are no inferred resources associated with the property.

​

The Tunnel Ridge mine had 64.0 million tons of coal mineral reserves at the end of 2020.  The year over year reconciliation is as follows:

​

​

Table of Contents

Oil & Gas Reserves

​

Our mineral interests are primarily located in three basins, which are also our areas of focus for future development.  These include the Permian (Delaware and Midland), Anadarko (SCOOP/STACK) and Williston (Bakken) Basins.  At December 31, 2021, we had approximately 42,000 developed and undeveloped net acres held at a weighted average royalty of 17.0%.  Our net acres standardized to 1/8th royalty equates to approximately 57,000 net royalty acres, including approximately 3,976 net royalty acres owned through our equity interest in AllDale III.  

​

The following table presents our estimated net proved oil & gas reserves, including our share of reserves owned through our equity interest in AllDale III, as of December 31, 2021 based on the reserve report prepared by our internal engineering team. The reserve report has been prepared in accordance with the rules and regulations of the SEC. All of our proved reserves included in the reserve report are located in the continental United States.

​

​

​

Estimates of reserves as of December 31, 2021 were prepared using product prices equal to the unweighted arithmetic average of the first-day-of-the-month market price for each month in the period from January through December 2021.  The average realized product prices weighted by production over the remaining lives of the properties are $63.57/Bbl for oil, $2.98/Mcf of natural gas and $21.13 per barrel of NGL.  These prices are adjusted for energy content, associated average differential and transportation deducts by producing area to arrive at the net realized prices by product.  For 2021, NGL prices averaged approximately 37% of the posted oil prices during the course of the year with an additional $3.49/Bbl deducted for transportation costs.

​

The following table summarizes our changes in proved undeveloped reserves (in MBOE):

​

​

As a mineral interest owner we have no transparency into or control over our operators' investments and operational progress to convert PUDs to proved developed producing reserves. We do not incur any capital expenditures or lease operating expenses in connection with the development of our PUDs, which costs are borne entirely by our operators. As a result, during the year ended December 31, 2021, we did not have any expenditures to convert PUDs to proved developed producing reserves.  PUDs that have not been developed within two years of permitting are reviewed and removed from proved reserves as necessary.  As of December 31, 2021 approximately 16.48% of our total proved reserves were classified as PUDs.

​

Evaluation and Review of Reserves

​

Numerous uncertainties are inherent in estimating reserve volumes and values, and the estimates are subject to change as additional information becomes available. The reserves actually recovered and the timing of production of the reserves may vary significantly from the original estimates.

​

Table of Contents

Under SEC rules, proved reserves are those quantities of oil & gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible–from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations–prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. If deterministic methods are used, the SEC has defined reasonable certainty for proved reserves as a "high degree of confidence that the quantities will be recovered." All of our proved reserves as of December 31, 2021 were estimated using a deterministic method. The estimation of reserves involves two distinct determinations. The first determination results in the estimation of the quantities of recoverable oil & gas and the second determination results in the estimation of the uncertainty associated with those estimated quantities in accordance with the definitions established under SEC rules. The process of estimating the quantities of recoverable oil & gas reserves relies on the use of certain generally accepted analytical procedures. These analytical procedures fall into three broad categories or methods:

​

​

These methods may be used singularly or in combination by the reserve evaluator in the process of estimating the quantities of reserves. The proved reserves for our properties were estimated by performance methods, analogy or a combination of both methods. Performance methods include, but may not be limited to, decline curve analysis, which utilized extrapolations of available historical production data. The analogy method was used where there were inadequate historical performance data to establish a definitive trend and where the use of production performance data as a basis for the reserve estimates was considered to be inappropriate.

​

To estimate economically recoverable proved reserves and related future net cash flows, our engineering team considered many factors and assumptions, including the use of reservoir parameters derived from geological, geophysical and engineering data which cannot be measured directly, economic criteria based on current costs and the SEC pricing requirements and forecasts of future production rates. To establish reasonable certainty with respect to our estimated proved reserves, the technologies and economic data used in the estimation of our proved reserves included production and well test data, downhole completion information, geologic data, electrical logs, and radioactivity logs.                        

​

Our 2021 year-end proved reserves were prepared by our internal engineering team.  Our engineering team works to ensure the integrity, accuracy, and timeliness of the data used to calculate our estimated proved reserves. Approximately 95% of our total 2021 year end proved reserve estimates were audited by NSAI. Our engineering team met with NSAI periodically during the period covered by the above referenced reserve report to discuss the assumptions and methods used in the reserve estimation process. Our engineering team provided historical information to NSAI for our properties, such as oil & gas production, well test data, and realized commodity prices. Our engineering team also provided ownership interest information with respect to our properties. Our internal petroleum engineer, primarily responsible for overseeing the petroleum reserves preparation, has over 20 years of engineering and operations experience in the oil & gas sector and a Bachelor of Science in Petroleum Engineering.

​

The preparation of our proved reserve estimates are completed in accordance with our internal control procedures. These procedures, which are intended to ensure reliability of reserve estimations, include the following:

​

​

NSAI, an independent third-party petroleum engineering firm, does not own an interest in any of our properties and is not employed on a contingent basis. When compared on a well-by-well basis, some of our estimates are greater and some are less than the NSAI estimates. NSAI is satisfied with our methods and procedures used to prepare the December 31, 2021 reserve estimates and future revenue, and noted nothing of an unusual nature that would cause NSAI to take

Table of Contents

exception with the estimates, in the aggregate, prepared by us. NSAI's audit report with the respect to our proved reserve estimates as of December 31, 2021 is included as an exhibit to this Annual Report on Form 10-K.

​

NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-2699. Within NSAI, the technical persons primarily responsible for auditing the estimates meet or exceed the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; both are proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines.

​