Transactions with Patriot Coal Corporation

12 Months Ended

Dec. 31, 2012

Guarantees [Abstract]

Guarantees

Transactions with Patriot Coal Corporation

On December 31, 2005, Arch entered into a purchase and sale agreement to sell mining complexes to Magnum Coal Company (“Magnum”). On July 23, 2008, Patriot Coal Corporation acquired Magnum from Arc Light Capital Partners. On July 9, 2012, Patriot Coal Corporation and certain of its wholly owned subsidiaries, including Magnum, (collectively, “Patriot”) filed voluntary petitions for reorganization under Chapter 11 of the U.S. Code in the U.S. Bankruptcy Court for the Southern District of New York ("Bankruptcy Court").

The Company has agreed to continue to provide surety bonds and letters of credit for certain Magnum obligations, primarily reclamation. The surety bonding amounts are mandated by the state and are not directly related to the estimated cost to reclaim the properties. At December 31, 2012, the Company had $34.4 million of surety bonds remaining related to Magnum properties, however Patriot Coal has posted letters of credit of $16.7 million in the Company’s favor.

On September 20, 2012, Patriot filed a motion with the Bankruptcy Court to reject a master coal sales agreement entered into on December 31, 2005 between the Company and Magnum, which was established in order to meet obligations under a coal sales agreement with a customer who did not consent to the assignment of their contract to Magnum. On December 18, 2012, the court accepted Patriot's motion to reject the master coal sales agreement. As a result of the court's decision, the Company accrued $58.3 million, which represents the discounted cash flows of the remaining monthly buyout amounts under the underlying coal sales agreement. The current liability for this obligation was $7.6 million at December 31, 2012.