Asset Retirement Obligations

NACoal's asset retirement obligations are principally for costs to dismantle certain mining equipment at the end of the life of the mine 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 the amounts 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 “Closed mine obligations” 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 Since Bellaire's properties are no longer active operations, no associated asset has been capitalized.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"), Bellaire was notified during 2004 that in order to obtain renewal of the permit Bellaire would be required to establish a mine water treatment trust (the "Mine Water Treatment Trust"). On October 1, 2010, Bellaire executed a Post-Mining Treatment Trust Consent Order and Agreement with the DEP which established the Mine Water Treatment Trust to provide a financial assurance mechanism in order to assure the long-term treatment of post-mining discharges. Bellaire funded the Mine Water Treatment Trust with $5.0 million. The fair value of the Mine Water Treatment assets are $7.2 million at December 31, 2014 and are legally restricted for purposes of settling the Bellaire asset retirement obligation. See Note 10 for further fair value disclosure.

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, 2013	$	15,070		$	16,416		$	31,486
Liabilities settled during the period	(316		)	(1,243		)	(1,559		)
Accretion expense	735			1,161			1,896
Revision of estimated cash flows	—			592			592
Balance at December 31, 2013	$	15,489		$	16,926		$	32,415
Liabilities acquired during the period	7,297			—			7,297
Liabilities settled during the period	(381		)	(1,128		)	(1,509		)
Accretion expense	379			1,183			1,562
Revision of estimated cash flows	1,448			606			2,054
Balance at December 31, 2014	$	24,232		$	17,587		$	41,819

The revision of estimated cash flows for the year ended December 31, 2014 is due to reclamation of Reed mines.