Commitments and Contingencies

Environmental Matters

The Company is subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the construction and operation of its plants, mines and other facilities and with respect to remediating environmental conditions that may exist at its own and other properties.

The Company believes that it is in substantial compliance with federal, state and local environmental laws and regulations. The Company accrues for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and can be reasonably estimated. As of December 31, 2017 (Successor) and December 31, 2016 (Successor), there were no accruals for environmental matters other than asset retirement obligations for mine reclamation.

Miscellaneous Litigation

From time to time, the Company is party to a number of lawsuits arising in the ordinary course of their businesses. The Company records costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the Company’s future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. As of December 31, 2017 (Successor) and December 31, 2016 (Successor), there were no items accrued for miscellaneous litigation.

Indemnifications

In the ordinary course of business, the Company entered into a contractual arrangement under which the Company has agreed to indemnify a third party to such arrangement from any losses arising from certain events as specified in the particular contracts, which may include, for example, litigation or claims relating to past performance. The Company had accrued $0.3 million as of December 31, 2017 (Successor) and December 31, 2016 (Successor), which is included in other long-term liabilities. The remaining maximum exposure under this arrangement is $0.2 million.

Commitments and Contingencies—Other

The Company is party to various transportation and throughput agreements with rail and barge transportation providers and the Alabama State Port Authority. These agreements contain annual minimum tonnage guarantees with respect to coal transported from the mine sites to the Port of Mobile, Alabama, unloading of rail cars or barges, and the loading of vessels. If the Company does not meet its minimum throughput obligations, which are based on annual minimum amounts, it is required to pay the transportation providers or the Alabama State Port Authority a contractually specified amount per metric ton for the difference between the actual throughput and the minimum throughput requirement. At December 31, 2017 (Successor), the Company had no liability recorded for minimum throughput requirements. At December 31, 2016 (Successor), the Company had accrued a liability of $2.1 million as a result of not meeting the required minimums, which is included in accrued expenses on the Balance Sheet.

Lease and Royalty Obligations

The Company’s leases are primarily for mining equipment and automobiles. At December 31, 2017 (Successor) the total cost of assets under capital leases was $9.9 million. Accumulated amortization on assets under capital leases was $1.6 million. Amortization expense for capital leases is included in depreciation and depletion expense. Future minimum payments under non-cancellable capitalized leases as of December 31, 2017 (Successor) were as follows (in thousands):



	Capitalized Leases
2018	$	5,313
2019	471
2020	—
2021	—
2022	—
Total	5,784
Less: amount representing interest	(34		)
Present value of minimum lease payments	$	5,750

At December 31, 2016 (Successor), the Company had no future minimum payments due under non-cancellable operating and capital leases.

A substantial amount of the coal that the Company mines is produced from mineral reserves leased from third-party land owners. These leases convey mining rights to the Company in exchange for royalties to be paid to the land owner as either a fixed amount per ton or as a percentage of the sales price. Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves. Coal royalty expense was $93.3 million, $17.5 million, $3.6 million, and $28.3 million for the year ended December 31, 2017 (Successor), nine months ended December 31, 2016 (Successor), the three months ended March 31, 2016 (Predecessor), and the year ended December 31, 2015 (Predecessor), respectively.