7.NONCONTROLLING INTERESTS

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 (See Note 1 – Organization and Presentation) and an affiliate ownership interest in Cavalier Minerals (See Note 8 – Variable Interest Entities).

The following table summarizes the components of noncontrolling interests recorded in Partners’ Capital for the periods indicated:

	June 30,			December 31,
	2016			2015
	(in thousands)
Noncontrolling interests reflected in Partners’ Capital:
Affiliate (SGP)	$	(303,832)		$	(303,822)
Non-Affiliates (ARLP’s non-affiliate limited partners)	769,997			762,667
Affiliate (Cavalier Minerals) (See Note 8 – Variable Interest Entities)	3,881			2,585
Accumulated other comprehensive loss attributable to noncontrolling interests	(19,571)			(19,682)

Total noncontrolling interests	$		450,475	$	441,748

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 (See Note 11 – Compensation Plans).

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
			(in thousands)
Net income attributable to noncontrolling interest:
Affiliate (SGP)	$	12	$		12	$	18	$	26
Non-Affiliates (ARLP’s non-affiliate limited partners)	36,249		33,302			52,292		73,705
Affiliates (Cavalier Minerals)	(2)		(7)			(4)		(20)

	$	36,259	$	33,307		$	52,306	$	73,711

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

	Six Months Ended June 30,
	2016			2015
	(in thousands)
Distributions paid to noncontrolling interests:
Affiliate (SGP) (1)	$		28	$	32
Non-Affiliates (ARLP’s non-affiliate limited partners) (1)	50,008			57,851

	$	50,036		$	57,883

(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, 2016 and December 31, 2015 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, 2016 and 2015:

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

Balance at January 1, 2016	$	567,259	$	(14,875)	$	441,748	$	994,132
Net income	76,215		-		52,306		128,521
Other comprehensive income	-		145		111		256
Settlement of directors deferred compensation	(112)		-		(335)		(447)
Vesting of ARLP Long-Term Incentive Plan	-		-		(1,001)		(1,001)
Common unit-based compensation	131		-		6,382		6,513
Distributions on ARLP common unit-based compensation	-		-		(1,975)		(1,975)
Contributions to consolidated company from affiliate noncontrolling interest	-		-		1,300		1,300
Distributions to AHGP Partners	(90,393)		-		-		(90,393)
Distributions paid by consolidated partnership to noncontrolling interest	-		-		(48,061)		(48,061)

Balance at June 30, 2016	$	553,100	$	(14,730)	$	450,475	$	988,845

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

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