Asset Retirement Obligations

12 Months Ended

Dec. 31, 2011

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation Disclosure

Asset Retirement Obligations

NACoal's asset retirement obligations are principally for costs to dismantle certain mining equipment as well as for costs to close its surface mines and reclaim the land it has disturbed as a result of its normal mining activities. The Company determined the amounts of these obligations based on estimates adjusted for inflation, projected to the estimated closure dates, and then discounted using a credit-adjusted risk-free interest rate. 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 Consolidated Statements of Operations. The associated asset is recorded in “Property, Plant and Equipment, net” in the accompanying Consolidated Balance Sheets.

Bellaire Corporation (“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 Company determined the amounts of these obligations based on estimates adjusted for inflation and then discounted using a credit-adjusted risk-free interest rate. The accretion of the liability is recognized over the estimated life of the asset retirement obligation and is recorded in the line “Other” in the accompanying Consolidated Statements of Operations. Since Bellaire's properties are no longer active operations, no associated asset has been capitalized.

In connection with Bellaire's normal permit renewal with the Pennsylvania Department of Environmental Protection ("DEP"), it was notified during 2004 that in order to obtain renewal of the permit it would be required to establish a mine water treatment trust (the "Trust"). On October 1, 2010, Bellaire executed a Post-Mining Treatment Trust Consent Order and Agreement (“Consent”) with the DEP which established the Trust to provide a financial assurance mechanism in order to assure the long-term treatment of post-mining discharges. Bellaire has agreed to initially fund the Trust with approximately $5.0 million. Bellaire funded $2.5 million during 2010 upon execution of the Consent and the remaining $2.5 million in 2011.

A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligations are as follows:

	NACoal			Bellaire			NACCO Consolidated
Balance at January 1, 2010	$	4.2		$	13.3		$	17.5
Liabilities incurred during the period	0.7			—			0.7
Liabilities settled during the period	—			(0.8		)	(0.8		)
Accretion expense	0.4			0.9			1.3
Revision of estimated cash flows	(0.2		)	0.5			0.3
Balance at December 31, 2010	5.1			13.9			19.0
Liabilities settled during the period	—			(0.8		)	(0.8		)
Accretion expense	0.4			0.9			1.3
Revision of estimated cash flows	—			(0.4		)	(0.4		)
Balance at December 31, 2011	$	5.5		$	13.6		$	19.1