7.NONCONTROLLING INTERESTS

As required by FASB ASC 810, our noncontrolling ownership interest in consolidated subsidiaries is presented in the condensed consolidated balance sheet within partners’ capital as a separate component from the limited partners’ equity. In addition, consolidated net income includes earnings attributable to both the limited partners’ and the noncontrolling interests.

The noncontrolling interests balance is comprised of non-affiliate and affiliate ownership interests in the net assets of the ARLP Partnership that we consolidate (Note 1) and an affiliate ownership interest in Cavalier Minerals JV, LLC (“Cavalier Minerals”). The following table summarizes the components of noncontrolling interests recorded in Partners’ Capital for the periods indicated (in thousands):

	June 30,			December 31,
	2015			2014
Noncontrolling interests reflected in Partners’ Capital:
Affiliate (SGP)	$	(303,794	)	$	(303,788	)
Non-Affiliates (ARLP’s non-affiliate limited partners)	796,353			777,210
Affiliate (Cavalier Minerals)	1,592			465
Accumulated other comprehensive loss attributable to noncontrolling interests	(19,589		)	(20,391		)

Total noncontrolling interests	$	474,562		$	453,496

The noncontrolling interest designated as Affiliate (SGP) represents SGP’s 0.01% general partner interest in ARLP and 0.01% general partner interest in the Intermediate Partnership.

The noncontrolling interest designated as Non-Affiliates represents the limited partners’ interest in ARLP controlled through the common unit ownership, excluding the 31,088,338 common units of ARLP held by us. The total obligation associated with ARLP’s Long-Term Incentive Plan (“ARLP LTIP”), MGP Amended and Restated Deferred Compensation Plan for Directors (“MGP Deferred Compensation Plan”) and the Supplemental Executive Retirement Plan (“SERP”) are also included in the Non-Affiliates component of noncontrolling interest (Note 11).

On November 10, 2014 (the “Cavalier Formation Date”), the ARLP Partnership’s wholly owned subsidiary, Alliance Minerals, LLC (“Alliance Minerals”), and Bluegrass Minerals Management, LLC (“Bluegrass Minerals”) entered into a limited liability company agreement (the “Cavalier Agreement”) to form Cavalier Minerals. Cavalier Minerals was formed to indirectly acquire oil and gas mineral interests through its noncontrolling ownership interest in AllDale Minerals L.P. (“AllDale Minerals”). Alliance Minerals and Bluegrass Minerals committed funding of $48.0 million and $2.0 million, respectively, to Cavalier Minerals. Alliance Minerals’ contributions through December 31, 2014 to Cavalier Minerals totaled $11.5 million. During the three and six months ended June 30, 2015, Alliance Minerals contributed $11.2 million and $19.2 million, respectively, bringing the ARLP Partnership’s total investment in Cavalier Minerals to $30.7 million at June 30, 2015. The ARLP Partnership had a remaining commitment to Cavalier Minerals of $17.3 million at June 30, 2015, which it expects to fund over the next year. On July 1, 2015, the ARLP Partnership funded an additional $8.4 million of this commitment. The ARLP Partnership expects to fund the remaining commitment utilizing existing cash balances, future cash flows from operations, borrowings under credit and securitization facilities and cash provided from the issuance of debt or equity. Bluegrass Minerals, which is owned and controlled by an officer of ARH and is Cavalier Minerals’ managing member, contributed $1.6 million as of June 30, 2015 and has a remaining commitment of $0.4 million. Cavalier Minerals has committed to provide funding of $49.0 million to AllDale Minerals. Cavalier Minerals has and will continue to provide funding to AllDale Minerals using contributions from Alliance Minerals and Bluegrass Minerals (Note 8). Cavalier Minerals also reimburses Bluegrass Minerals for certain insignificant general and administrative costs incurred on behalf of Cavalier Minerals.

In accordance with the Cavalier Agreement, Bluegrass Minerals is entitled to receive an incentive distribution from Cavalier Minerals equal to 25.0% of all distributions (including in liquidation) after return of members’ capital reduced by certain distributions received by Bluegrass Minerals or its owner from AllDale Minerals Management, LLC (“AllDale Minerals Management”) (Note 8). Alliance Minerals’ ownership interest in Cavalier Minerals at June 30, 2015 was 96.0%. The remainder of the equity ownership is held by Bluegrass Minerals and is represented above as noncontrolling interest designated as Affiliate (Cavalier Minerals). As of June 30, 2015, Cavalier Minerals had not made any distributions to its owners. The ARLP Partnership has consolidated Cavalier Minerals’ financial results in accordance with FASB ASC 810, Consolidation. Based on the guidance in FASB ASC 810, the ARLP Partnership concluded that Cavalier Minerals is a variable interest entity (“VIE”) and it is the primary beneficiary because the ARLP Partnership’s consent is required for significant activities of Cavalier Minerals and due to Bluegrass Minerals’ relationship to the ARLP Partnership as described above. Bluegrass Minerals equity ownership of Cavalier Minerals is accounted for as noncontrolling ownership interest in our condensed consolidated balance sheets. In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling ownership interest in our condensed consolidated statements of income.

The following table summarizes net income attributable to each component of the noncontrolling interests for the periods indicated (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014
Net income attributable to noncontrolling interest:
Affiliate (SGP)	$	12		$	21	$	26		$	38
Non-Affiliates (ARLP’s non-affiliate limited partners)	33,302			59,690		73,705			107,562
Affiliates (Cavalier Minerals)	(7		)	–		(20		)	–

	$	33,307		$	59,711	$	73,711		$	107,600

The following table summarizes cash distributions paid by ARLP to each component of the noncontrolling interests for the periods indicated (in thousands):

	Six Months Ended June 30,
	2015		2014

Distributions paid to noncontrolling interests:
Affiliate (SGP) (1)	$	32	$	30
Non-Affiliates (ARLP’s non-affiliate limited partners) (1)	57,851		53,055

	$	57,883	$	53,085

(1)

Distributions paid to noncontrolling interests, in the table above, represent ARLP’s quarterly distributions in accordance with the ARLP partnership agreement.

The Affiliate (SGP) component of noncontrolling interests represents SGP’s cumulative investment basis in the net assets of the ARLP Partnership. After the consummation of the various transactions associated with the ARLP Partnership’s formation and initial public offering in 1999 (which included the contribution of net assets by SGP to the ARLP Partnership, the retention by SGP of debt borrowings assumed by ARLP and a distribution by ARLP to SGP), SGP’s investment basis in ARLP totaled $(303.9) million. SGP’s investment basis as of June 30, 2015 and December 31, 2014 also reflects the cumulative amount of nominal ARLP income allocations and distributions to SGP and nominal contributions by SGP to ARLP and the Intermediate Partnership to maintain its general partner interests.

The following tables present the change in Partners’ Capital for the six months ended June 30, 2015 and 2014 (in thousands):

	Alliance Holdings GP, L.P.
	Limited Partners’ Capital			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total Partners’ Capital

Balance at January 1, 2015	$	580,234		$	(15,456	)	$	453,496		$	1,018,274
Net income	126,480			-			73,711			200,191
Other comprehensive income	-			650			802			1,452
Settlement of directors deferred compensation	(177		)	-			-			(177		)
Vesting of ARLP Long-Term Incentive Plan	-			-			(2,719		)	(2,719		)
Common unit-based compensation	113			-			6,008			6,121
Distributions on ARLP common unit-based compensation	-			-			(1,363		)	(1,363		)
Contributions to consolidated company from affiliate noncontrolling interest	-			-			1,147			1,147
Distributions to AHGP Partners	(110,897		)	-			-			(110,897		)
Distributions paid by consolidated partnership to noncontrolling interest	-			-			(56,520		)	(56,520		)

Balance at June 30, 2015	$	595,753		$	(14,806	)	$	474,562		$	1,055,509

	Alliance Holdings GP, L.P.
	Limited Partners’ Capital			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total Partners’ Capital

Balance at January 1, 2014	$	500,070		$	(4,198	)	$	359,721		$	855,593
Net income	144,794			-			107,600			252,394
Other comprehensive loss	-			(52		)	(87		)	(139		)
Settlement of directors deferred compensation	(218		)	-			-			(218		)
Vesting of ARLP Long-Term Incentive Plan	-			-			(2,991		)	(2,991		)
Common unit-based compensation	155			-			5,290			5,445
Distributions on ARLP common unit-based compensation	-			-			(1,140		)	(1,140		)
Distributions to AHGP Partners	(100,271		)	-			-			(100,271		)
Distributions paid by consolidated partnership to noncontrolling interest	-			-			(51,945		)	(51,945		)

Balance at June 30, 2014	$	544,530		$	(4,250	)	$	416,448		$	956,728