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.

On July 31, 2015, NACoal's management and Board of Directors approved cessation of coal production at its Centennial mines in Alabama. NACoal ceased coal production at Centennial during the fourth quarter of 2015. The decision was made as a result of worsening conditions in the Alabama and global coal markets and the adverse effect regulatory changes had on Centennial’s business. As a result of this decision, revisions were made to Centennial's asset retirement obligations due to revised estimated cash flows and the timing of those cash flows, resulting in a $7.5 million charge during the third quarter of 2015.

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 Since Bellaire's properties are no longer active operations, no associated asset has been capitalized.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, 2015 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 Company's beginning and ending aggregate carrying amount of the asset retirement obligations are as follows:



	NACCO Consolidated
Balance at January 1, 2014	$	32,415
Liabilities acquired during the period	7,297
Liabilities settled during the period	(1,509		)
Accretion expense	1,562
Revision of estimated cash flows	2,054
Balance at December 31, 2014	$	41,819
Liabilities settled during the period	(7,835		)
Accretion expense	2,361
Revision of estimated cash flows	7,247
Balance at December 31, 2015	$	43,592

Asset retirement obligations totaled $43.6 million at December 31, 2015, of which, $3.8 million is included on the line "Other current liabilities" and $39.8 million on the line "Asset retirement obligations" in the Consolidated Balance Sheets.