10-K 1 a2014-q4x12312014x10xk.htm 10-K 2014 - Q4 - 12.31.2014 - 10-K
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
 
 
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
       For the fiscal year ended December 31, 2014
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission File Number 001-13711

WALTER ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
 
13-3429953
(I.R.S. Employer Identification No.)
3000 Riverchase Galleria, Suite 1700, Birmingham, Alabama
 (Address of principal executive offices)
 
35244
(Zip Code)
 Registrant's telephone number, including area code: (205) 745-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class 
 
Name of Exchange on Which Registered 
Common Stock, par value $0.01
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer ý
 
Non-accelerated filer o
 (Do not check if a smaller
reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The aggregate market value of voting stock held by non-affiliates of the registrant, based on the closing price of the Common Stock on June 30, 2014, the registrant's most recently completed second fiscal quarter, as reported by the New York Stock Exchange, was approximately $356.8 million.
Number of shares of common stock outstanding as of January 31, 2015: 71,980,646
Documents Incorporated by Reference
Applicable portions of the Proxy Statement for the 2015 Annual Meeting of Stockholders of the Company are incorporated by reference in Part III of this Form 10-K.
 

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2014 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS


 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes statements of our expectations, intentions, plans and beliefs that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies. We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should" and similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:
unfavorable economic, financial and business conditions;

a substantial or extended decline in pricing or demand;

failure of our customers to honor or renew contracts;

our ability to collect payments from our customers;

inherent difficulties and challenges in the coal mining industry that are beyond our control;

title defects preventing us from (or resulting in additional costs for) mining our mineral interests;

concentration of our mining operations in a limited number of areas;

a significant reduction of or loss of purchases by our largest customers;

unavailability or uneconomical transportation for our coal;

significant competition and foreign currency fluctuation;

significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components;

work stoppages, labor shortages and other labor relations matters within our operations and those of our suppliers and customers;

our ability to hire and retain a skilled labor force;

our obligations surrounding reclamation and mine closure;

inaccuracies in our estimates of coal reserves;

our ability to develop or acquire coal reserves in an economically feasible manner;

challenges to our licenses, permits and other authorizations;

failure to meet project development and expansion targets;

challenges associated with operating in foreign jurisdictions;

challenges associated with environmental, health and safety laws and regulations;


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regulatory requirements associated with federal, state, local and provincial regulatory agencies, and such agencies' authority to order temporary or permanent closure of our mines;

increased focus by regulatory authorities on the effects of surface coal mining on the environment;

climate change concerns;

our operations' impact on the environment;

our indebtedness;

our ability to sustain our business and the enterprise, to generate cash for our financial obligations, to refinance our indebtedness or to obtain additional financing;

our ability to incur additional indebtedness;

restrictions in our existing and future debt agreements;

events beyond our control that may result in an event of default under one or more of our debt instruments;

downgrades in our credit ratings;

failure to obtain or renew surety bonds on acceptable terms, which could affect our ability to secure reclamation and coal lease obligations;

costs associated with our pension and benefits, including post-retirement benefits;

costs associated with our workers' compensation and certain medical and disability benefits;

adverse rulings in current or future litigation;

our ability to attract and retain key personnel;

volatility in the price of our common stock;

our ability to continue to meet the listing requirements of the New York Stock Exchange;

our ability to pay regular dividends to our stockholders;

potential terrorist attacks and threats and escalation of military activity in response to such attacks;

potential cyber-attacks or other security breaches; and

other factors, including the other factors discussed in Item 1A, "Risk Factors," as updated by any subsequent periodic reports or other documents that we file with the Securities and Exchange Commission ("SEC").
When considering forward-looking statements made by us in this Annual Report on Form 10-K, or elsewhere, such statements speak only as of the date on which we make them. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements herein after the date of this Annual Report on Form 10-K, except as may be required by law. In light of these risks and uncertainties, stockholders should keep in mind that any forward-looking statement made in this Annual Report on Form 10-K or elsewhere might not occur.

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GLOSSARY OF SELECTED MINING TERMS

Anthracite coal.    A hard natural coal containing few volatile hydrocarbons that burns slowly and gives intense heat almost without flame.
Ash.    Impurities consisting of silica, iron, alumina and other incombustible matter that are contained in coal. Since ash increases the weight of coal, it adds to the cost of handling and can affect the burning characteristics of coal.
Assigned reserves.    Coal that is planned to be mined at an operation that is currently operating, currently idled or for which permits have been submitted and plans are eventually to develop the mine and begin mining operations.
Bituminous coal.    A common type of coal with moisture content less than 20% by weight. It is dense and black and often has well-defined bands of bright and dull material.
British thermal unit ("Btu").    A measure of the thermal energy required to raise the temperature of one pound of pure liquid water one degree Fahrenheit at the temperature at which water has its greatest density (39 degrees Fahrenheit).
Coal seam.    Coal deposits occur in layers. Each layer is called a "seam."
Coke.    A hard, dry carbon substance produced by heating coal to a very high temperature in the absence of air. Coke is used in the manufacture of iron and steel. Its production results in a number of useful by-products.
Compliant coal.    Coal which, when burned, emits 1.2 pounds or less of sulfur dioxide per million Btus, as required by Phase II of the Clean Air Act.
Continuous miner.    A machine used in underground mining to cut coal from the seam and load onto conveyers or shuttle cars in a continuous operation. In contrast, a conventional mining unit must stop extracting in order to begin loading.
Continuous mining.    A form of underground mining that cuts the coal from the seam and loads the coal on to a conveyor system continuously, thus eliminating the separate cycles of cutting, drilling, shooting and loading.
Hard coking coal.    Hard coking coal is a type of metallurgical coal that is a necessary ingredient in the production of strong coke. It is evaluated based on the strength, yield and size distribution of coke produced from such coal, which is dependent on the rank and plastic properties of the coal. Hard coking coals trade at a premium to other coals due to their importance in producing strong coke and because they are a limited resource.
Industrial coal.    Coal generally used as a heat source in the production of lime, cement, or for other industrial uses.
Longwall mining.    A form of underground mining that employs a shearer with two rotating drums pulled mechanically back and forth across a long exposed coal face. A hydraulic system supports the roof of the mine while the drums are mining the coal. Conveyors move the loosened coal to an underground mine conveyor that transports coal to the surface. Longwall mining is the most efficient underground mining method.
Metallurgical ("met") coal.    The various grades of coal with suitable carbonization properties to make coke or to be used as a pulverized injection ingredient for steel manufacture, including hard coking coal (see definition above), semi-soft coking coal ("SSCC") and PCI coal (see definition below). Also known as "met" coal, its quality depends on four important criteria: (1) volatility, which affects coke yield; (2) the level of impurities, including sulfur and ash, which affect coke quality; (3) composition, which affects coke strength; and (4) other basic characteristics that affect coke oven safety. Met coal typically has particularly high Btu characteristics but low ash and sulfur content.
Nitrogen dioxide (NO2).    A generic term for the mono-nitrogen oxides. They are produced from the reaction of nitrogen and oxygen gases in the air during combustion, especially at high temperatures. It is produced as a byproduct of coal combustion. In areas of high motor vehicle traffic the amount of nitrogen oxides emitted into the atmosphere can be significant and contribute to smog.
Overburden.    Layers of earth and rock covering a coal seam. In surface mining operations, overburden must be removed prior to coal extraction.
PCI Coal.    Coal used by steelmakers for pulverized coal injection (PCI) into blast furnaces to use in combination with the coke used to produce steel. The use of PCI allows a steel maker to reduce the amount of coke needed in the steel making process.

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Preparation plant.    Preparation plants are usually located on a mine site, although one plant may serve several mines. A preparation plant is a facility for crushing, sizing and washing coal to remove impurities and prepare it for use by a particular customer. The washing process has the added benefit of removing some of the coal's sulfur content.
Probable reserves.    Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
Proven reserves.    Reserves for which: (a) quantity is computed from dimensions revealed in outcrops (part of a rock formation that appears at the surface of the ground), trenches, workings or drill holes; (b) grade and/or quality are computed from the results of detailed sampling; and (c) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
Recoverable reserves.    Tons of mineable coal that can be extracted and marketed after deduction for coal to be left behind within the seam (i.e. pillars left to hold up the ceiling, coal not economical to recover within the mine, etc.) and adjusted for reasonable preparation and handling losses.
Reclamation.    The process of restoring land and the environment to their original or otherwise rehabilitated state following mining activities. The process commonly includes "recontouring" or reshaping the land to its approximate original appearance, restoring topsoil and planting native grass and ground covers. Reclamation operations are usually underway before the mining of a particular site is completed. Reclamation is closely regulated by both state and federal law.
Reserve.    That part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination.
Roof.    The stratum of rock or other mineral above a coal seam; the overhead surface of a coal working place.
Sulfur.    One of the elements present in varying quantities in coal that contributes to environmental degradation when coal is burned. Sulfur dioxide is produced as a gaseous by-product of coal combustion.
Surface mine.    A mine in which the coal lies at or near the surface and can be extracted by removing the covering layer of soil (see "Overburden") without tunneling underground. According to the World Coal Association, approximately 67% percent of total U.S. coal production comes from surface mines.
Thermal coal.    Coal used by power plants and industrial steam boilers to produce electricity, steam or both. It generally is lower in Btu heat content and higher in volatile matter than metallurgical coal.
Tons.    A "short" or net ton is equal to 2,000 pounds; a "metric" ton is equal to approximately 2,205 pounds; a "long" or British ton is equal to 2,240 pounds. Unless otherwise indicated, the metric ton is the unit of measure referred to in this document. The international standard for quoting price per ton is based in U.S. dollars per metric ton.
Unassigned reserves.    Coal that is likely to be mined in the future, but which is not considered "Assigned reserves."
Underground mine.    Also known as a "deep" mine, it is usually located several hundred feet or more below the earth's surface. An underground mine's coal is typically removed mechanically and transferred by shuttle car, conveyor and hoist to the surface. According to the World Coal Association, underground mines account for about one-third of annual U.S. coal production.


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PART I
Item 1.    Business
Unless we have indicated otherwise, or the context otherwise requires, references in this report to "Walter Energy", the "Company", "we", "us" and "our" or similar terms are to Walter Energy, Inc. and its consolidated subsidiaries.
Introduction and History
We are a leading producer and exporter of metallurgical coal for the global steel industry from underground and surface mines with mineral reserves located in the United States ("U.S."), Canada and the United Kingdom ("U.K."). We also extract, process, market and/or possess mineral reserves of thermal coal and anthracite coal, as well as produce metallurgical coke and coal bed methane gas. We trace our roots back to 1946 when Jim Walter began a homebuilding business in Tampa, Florida. Although initially focused on homebuilding, the company Mr. Walter founded later became Jim Walter Corporation and branched out into different businesses, including the 1972 development of four underground coal mines in the Blue Creek coal seam near Brookwood, Alabama. In 1987 a group of investors that included Jim Walter formed a new company, subsequently named Walter Industries, Inc., and the following year completed a leveraged buyout of most of the businesses of Jim Walter Corporation. In 1997, Walter Industries, Inc. began trading on the New York Stock Exchange. In 2009 we closed our Homebuilding business, spun off our Financing business and certain other businesses and closed others to focus on the operations related to mining. With our remaining businesses concentrated in coal and natural gas, we changed our name to Walter Energy, Inc. in April 2009.
On April 1, 2011, we completed the acquisition of all the outstanding common shares of Western Coal Corp. ("Western Coal"). The acquisition included high quality metallurgical coal mines in Northeast British Columbia (Canada), high quality metallurgical coal and compliant thermal coal from mines in West Virginia (U.S.), and high quality anthracite coal and compliant thermal coal from the mines in South Wales (U.K.). The acquisition of Western Coal substantially increased our reserves available for future production, the majority of which is metallurgical coal, and created a diverse geographical footprint with strategic access to high-growth steel-producing countries in both the Atlantic and Pacific basins. We report all of our operations located in the U.S. under the U.S. Operations segment. We report our mining operations located in Northeast British Columbia and South Wales under the Canadian and U.K. Operations segment.
On May 6, 2011, we acquired mineral rights of Blue Creek metallurgical coal reserves to the Northwest of our existing Alabama mines from a subsidiary of Chevron Corporation. The mineral leases form the core of the Blue Creek Energy Project which is a planned new underground metallurgical coal mine. In addition, we acquired Chevron Corporation's existing North River thermal coal mine in Fayette and Tuscaloosa Counties of Alabama and a barge load-out facility near the Port of Mobile terminal in Mobile, Alabama. The North River Mine closed in the fourth quarter of 2013 when we completed mining its economically recoverable reserves and on August 25, 2014, the Company completed the sale of the Blue Creek coal terminal in Mobile.
Overview
Our primary business, the mining and exporting of metallurgical coal for the steel industry, is conducted by two business segments: our U.S. Operations and our Canadian and U.K. Operations.
The U.S. Operations segment includes the operations of our underground mines, surface mines, coke plant and natural gas operations located in Alabama and our underground and surface mining operations located in West Virginia. Our Alabama mining operations primarily mine metallurgical coal from both underground and surface mines. At our Alabama No. 4 and No. 7 underground mining operations we mine high quality metallurgical coal from the Blue Creek coal seam. These Alabama underground mines are 1,400 to 2,100 feet underground, making them some of the deepest vertical shaft coal mines in North America. Metallurgical coal mined from the Blue Creek coal seam contains very low sulfur, has strong coking properties and high heat value making it ideally suited as a coking coal for steel makers. The Alabama surface operations also mine thermal coal for sale to industrial and electric utility customers. Our Alabama mining operations have convenient access to the Port of Mobile, Alabama through barge and railroad transportation allowing us to minimize our transportation costs. In 2014, the Alabama mining operations produced 7.3 million metric tons of metallurgical coal and 185 thousand metric tons of thermal coal.
The U.S. Operations segment also extracts methane gas, principally from the Blue Creek coal seam. Our natural gas business represents one of the most extensive and comprehensive commercial programs for coal seam degasification in the country, producing approximately 31 million cubic feet of gas daily from over 1,748 wells.
We also own underground and surface mines located in West Virginia, which produce both metallurgical coal and thermal coal. The West Virginia mining operations lie within the Appalachian coal-producing region. The Gauley Eagle operations,

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which consist of underground and surface mines, were idled in 2012 and the Maple Coal Company operations consist of an active underground and surface mining operation that mine metallurgical and thermal coal. As of December 31, 2014, the Company determined that the idled Gauley Eagle operations met the criteria to be classified as held for sale and recorded an impairment charge of $28.5 million to reduce the carrying value of these assets to their fair value less costs to sell. Our Gauley Eagle mining operations operate a rail-loading facility and our Maple Coal mining operations utilize an extensive network of public roads and independent river terminals along the Kanawha River to transport coal to our customers. In 2014, the West Virginia mining operations produced approximately 399 thousand metric tons of metallurgical coal and 436 thousand metric tons of thermal coal.
The Canadian operations consist of three surface mines that produce hard coking and low-volatile PCI coals in Northeast British Columbia (the Wolverine Mine, the Brule Mine, and the Willow Creek Mine). The Wolverine Mine was idled in April 2014 and the Brazion operations (which include the Company's Brule and Willow Creek mines) were idled in June 2014. The Company will continue to operate the preparation plant at the Willow Creek Mine to complete the processing of coal inventory that has already been mined. The Canadian mines are located adjacent to or nearby existing infrastructure established for the Northeast British Columbia coalfields, including established rail and road networks that are available all year round. Coal produced from the mines is shipped by rail to a coal terminal facility at the Port of Prince Rupert, British Columbia. Our U.K. operations consist of an underground development mine located in South Wales that produces anthracite coal, which can be sold as low-volatile PCI coal. All coal mined is processed at the Company's preparation plants where both road and rail coal transportation are available. In 2014, the Canadian and U.K. mining operations produced 563 thousand metric tons of hard coking coal and 1.0 million metric tons of low-volatile PCI coal.
Financial results of our business segments are provided within Note 20 of "Notes to Consolidated Financial Statements" included in this Annual Report on Form 10-K.
Business Strategy
Our objective is to increase stockholder value through sustained earnings growth and free cash flow generation. Our key strategies to achieve this objective are described below:
Increasing Metallurgical Coal Production Capacity.    Full year 2014 metallurgical coal production was 9.3 million metric tons, of which 89.2% was hard coking coal and the remainder low-volatile PCI, compared to 84% of hard coking coal production in 2013. We believe we are well positioned to increase production when market conditions warrant. Our long-term production growth is expected to be balanced between existing production assets and growth assets such as Blue Creek Energy, Belcourt-Saxon and Aberpergwm.
Capitalizing on Favorable Long-Term Industry Dynamics.    Although coal prices have been volatile over the past several years, we believe the long-term fundamentals of the global metallurgical coal industry are favorable. Given our premium product and diverse operations, we believe we are well positioned to capitalize on the expected growth by delivering high quality metallurgical coal to the European, Asian and Latin American markets.
Focusing on Reducing Costs.    We seek to maintain our focus on reducing costs. In 2014, we reduced average cash costs of sales per metric ton of consolidated metallurgical coal by 13.0% and overall operating costs by 15.6% as compared to 2013.
Ability to Provide a Mix of Coal Types and Quantities to Satisfy Our Customers' Needs Across a Variety of Geographic Markets.    By having the ability to produce a variety of metallurgical coal types in three different countries with direct access to Atlantic and Pacific markets, we are able to source and blend our coal from multiple mines to meet the specific needs of our customers. Our broad geographic scope and mix of coal qualities provide us with opportunities to work with leading steel producers across the globe and provide premium met coal to regions with high and/or growing demand for our coal.
Upholding Our Commitment to Excellence in Safety and Environmental Stewardship.    We intend to maintain our strong record of operating safe mines and achieving environmental excellence. In addition, our ability to minimize workplace incidents and environmental violations improves our operating efficiency, which directly improves our cost structure and operational performance.
The Coal Industry
Coal has many important uses world-wide. The most significant uses of coal are in electricity generation, steel production, cement manufacturing and as a liquid fuel. According to the World Coal Association ("WCA"), since 2000, global coal consumption has grown faster than any other fuel. The five largest coal consumption countries are China, the U.S., India, Russia and Japan. These five countries account for approximately 76% of global coal consumption. Important coal consumption industries include steel mills, alumina refineries, paper manufacturers and the chemical and pharmaceutical industries. Several chemical products can be produced from the by-products of coal. Refined coal tar is used in the manufacture

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of chemicals, such as creosote oil, naphthalene, phenol and benzene. Ammonia gas recovered from coke ovens is used to manufacture ammonia salts, nitric acid and agricultural fertilizers. Thousands of different products have coal or coal by-products as components including soaps, aspirins, solvents, dyes, plastics and fibers, such as rayon and nylon.
Coal reserves, primarily thermal, are available in almost every country worldwide, with recoverable reserves in approximately 70 countries. According to the WCA it has been estimated that there are over 861 billion tons of proven coal reserves worldwide, which is enough coal to last approximately 112 years at current rates of consumption. The largest coal reserves are in the U.S., Russia, China and India. Coal's appeal is that it is readily available from a wide variety of sources; its prices have been lower and more stable than oil and gas prices over the long-term; and it is likely to remain the most affordable fuel available for power generation in many developing and industrialized nations for several decades to come.
According to the Energy Information Administration's ("EIA") short-term energy outlook, U.S. coal production increased by 1.0%, or an estimated 10 million short tons, to 994 million short tons in 2014. U.S. coal production is expected to decline in both 2015 and 2016, to 984 million short tons and 977 million short tons, respectively.
Coal is traded all over the world, with coal shipped significant distances by sea to reach certain markets. According to the WCA, over the last 20 years, seaborne trade of thermal coal has increased on average by approximately 7% each year and seaborne coking coal trade has increased by 1.6% per year. The largest exporters of coal in 2013 were Indonesia, Australia, Russia and the United States. Per the WCA, the leading exporters of metallurgical coal for steel making were Australia, the United States and Canada. According to the EIA, U.S. coal exports in 2014 are estimated at 98 million short tons, a 17.1% decline from 118 million short tons in 2013. The decline was primarily a result of slowing world coal demand growth, lower international coal prices, and increasing coal output in other coal-exporting countries. The EIA does not anticipate improvement in global market conditions in 2015, and U.S. coal exports are anticipated to fall to 83 million metric tons, which would be the lowest since 2010.
Coal and Steel
Steel is one of the most efficient modern construction materials. Steel offers the highest strength-to-weight ratio of any commonly-used material and is exceptionally durable. Steel is an essential material used in the construction sector and is used to build high-rise buildings, bridges, tunnels and viaducts. Steel is also used in the transport sector to build railroads, trains, airplanes, ships and cars. Steel is a key material for building energy infrastructure such as electricity pylons, offshore oil platforms, hydroelectric power stations and wind turbines.
Global steel production is dependent on coal. According to the WCA, steel use increased worldwide between 2003 and 2013 by approximately 65%. Approximately 1.2 billion tons of coal is used in global steel production, which is around 15% of total coal consumption worldwide, and around 70% of global steel production relies directly on inputs of metallurgical coal. The top five steel producing countries were China, Japan, the United States, India and South Korea. In 2014, approximately 1.7 billion metric tons of steel was produced globally, compared to 1.6 billion metric tons in 2013. The two main steel production processes are via a blast furnace—basic oxygen furnace and an electric arc furnace.
The integrated steel making process is dependent on high quality metallurgical coal to produce coke. Metallurgical coal is converted to coke by driving off impurities to leave almost pure carbon. The physical properties of coking coal cause the coal to soften, liquefy and then re-solidify into hard but porous lumps when heated in the absence of air. The coking process consists of heating coking coal to around 1,000-1,100 degrees Celsius in the absence of oxygen to drive off volatile compounds. This process results in a hard porous material, called coke, which is used in the production of iron and steel. During the iron-making process, a blast furnace is fed with iron ore, coke, other minerals and air, which causes the coke to burn, melting the iron. The iron is then combined with varying amounts of steel scrap in a basic oxygen furnace, which uses carbon content of coke to make liquid steel. The steel industry uses coking coal which is distinguishable from other types of coal by its characteristics of lower volatility, lower sulfur and ash content, higher Btu value and favorable coking characteristics (higher coke strength). According to the WCA, on average this process uses 0.85 tons of coal to produce 1 ton of steel or 0.97 tons of recycled steel and 0.17 tons of coal to produce 1 ton of steel and approximately 70% of global steel is produced using the integrated steel making process via a blast furnace—basic oxygen furnace.
The electric arc furnace process, or mini-mill, does not involve iron-making. It reuses existing steel, avoiding the need for raw materials and their processing. The furnace is charged with steel scrap, but it can also include some direct reduced iron ("DRI") or pig iron for chemical balance. Electric arc furnaces do not use coal as a raw material, but many are reliant on the electricity generated by coal-fired power plants elsewhere in the grid. On average, this process takes 880 kilograms of recycled steel and 150 kilograms of coal to produce 1 ton of crude steel. Approximately 28% of steel is produced in electric arc furnaces.

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Coal Characteristics
Coal is a combustible, sedimentary, organic rock, which is composed mainly of carbon, hydrogen and oxygen. It is formed from vegetation, which has been consolidated between other rock strata and altered by the combined effects of pressure and heat over millions of years to form coal seams. According to the WCA, coal is a far more plentiful fuel than oil or gas, with an excess of 100 years of coal supply remaining worldwide. Coal is generally classified as either metallurgical coal or thermal coal (also known as steam and industrial coal). Sulfur, ash and moisture content as well as coking characteristics are key attributes in grading metallurgical coal while heat value, ash and sulfur content are important variables in rating thermal coal. We currently mine, process, market and ship coal with the characteristics described below.
Heat Value:    The heating value of coal is supplied by its carbon content and volatile matter and commonly measured in British thermal units ("Btus"). Coal deposits are generally classified into four categories, ranging from lignite, subbituminous, bituminous and anthracite, reflecting their response to increasing heat and pressure. We primarily mine bituminous coal which is used to make coke and PCI coal for the steel industry and can also be used to generate electricity with a heating value ranging between 10,500 and 15,500 Btus per pound. Anthracite coal has the highest carbon content and a heat value nearing 15,000 Btus per pound. Approximately 89% of our proven and probable reserves have heat value characteristics above 13,500 Btus per pound, which make it very desirable to our customers.
Sulfur Content:    Although sulfur content can differ from seam to seam, approximately 97% of our estimated 392.7 million metric tons of proven and probable reserves are low sulfur coals, which are preferred by our customers. Low sulfur coals have a sulfur content of 1.5% or less. Coal produces undesirable sulfur dioxide when it burns, the amount of which depends on the concentration of sulfur in the coal as well as the chemical composition of the coal itself.
Ash and Moisture Content:    Ash is the residue that remains after the combustion of coal. Low ash is desirable because businesses must dispose of ash after the coal is used. High moisture content decreases the heat value of the coal and increases the coal's weight, both of which are undesirable. Our metallurgical coal, particularly the coal from the Blue Creek seam in Alabama, has a low ash rating and moisture content which is highly desirable to our customers.
Coking Characteristics (metallurgical coal only):    Two important coking characteristics are coke strength and volatility. Volatility of coking coal is used to determine the percentage of coke that a given type of coal would produce. This measure is known as coke yield. A low volatility results in a higher coke yield. Our metallurgical coal, particularly the coal from the Blue Creek seam in Alabama, has both a high rating for coke strength as well as a low measure of volatility.
Types of Coal
Metallurgical coal is classified into three major categories: hard coking coal ("HCC"), semi-soft coking coal, and PCI. Coking coals are the basic ingredients for the manufacturing of metallurgical coke. PCI coal is not used in coke making but is rather injected directly into the lower region of blast furnaces to supply both energy and carbon for iron reduction. The use of PCI can be a substitute for some of the metallurgical coke that would otherwise have been used.
Thermal and industrial coal is the most abundant form of coal and is commonly referred to as steam coal. Such coal has a relatively high heat value and has long been used for steam generation in electric power and industrial boiler plants.
Anthracite coal is commonly used as a reduction agent for various applications such as briquetting, charcoal and iron ore pellets. Due to our low production levels of anthracite thus far, we have been selling anthracite primarily as a fuel in either hand fired stoker or automatic stoker furnaces. Once the Aberpergwm mine development is completed, our intent is to sell anthracite coal into the PCI coal market. Anthracite is a crossover coal and has been successfully used in the PCI coal market.
Coal Mining Methods
We mine coal using both underground and surface mining methods. The mining methods that we employ are determined by the geological characteristics of our coal reserves.
Underground Mining:    We employ underground mining methods when our coal reserves are located deep beneath the surface. Our underground mines typically use the two different mining techniques of longwall mining and room-and-pillar mining. In 2014, approximately 76% of the coal we produced was from underground mining operations.
In longwall mining, mechanized shearers are used to cut and remove the coal from long rectangular blocks of medium to thick coal seams called panels. Continuous miners are used to develop access to these coal blocks. After the coal is removed, it drops onto a conveyor system that takes the coal to production shafts or slopes where it is hoisted to the surface. In longwall mining, mobile hydraulic powered roof supports, called shields, hold up the roof throughout the extraction process. This method of mining has proven to be more efficient than other mining methods with an extraction rate of nearly 100 percent. The equipment is, however, more expensive than that for other conventional mining methods and cannot be used in all geological

8


circumstances. In longwall mining, only the gate entries are bolted. The longwall panel is allowed to collapse behind the shields which hold the roof as coal is extracted and the shields progress through the coal block.
Underground mining with longwall technology drives greater production efficiency, improved safety, higher coal recovery and lower production costs. We currently operate three longwall mining systems at our Alabama underground mining operations for primary production and two to four continuous miner sections in each mine for the development of main and longwall panel entries. Our operating plan is a longwall to continuous miner production ratio of approximately 80% to 20%.
In room-and-pillar mining, a network of rooms are cut into the coal seam by remote-controlled continuous miners, while also leaving a series of coal pillars to support the mine roof. Shuttle cars and battery coal haulers transport coal to conveyor belt systems for further transportation to the surface. Ultimate seam recovery is typically less than that achieved with longwall mining as the pillars left behind as part of this mining method can constitute up to 40% of the total coal seam. We employ this method to mine smaller blocks of coal where longwall mining is not feasible.
Surface Mining:    We employ surface mining methods when our coal reserves are located close to the surface. In 2014, approximately 24% of the coal we produced came from surface mining operations, primarily within Canada.
Surface mining involves removing the topsoil followed by a process of drilling and blasting overburden covering the coal seam with explosives. The overburden is then removed with heavy earth-moving equipment such as power shovels, excavators and loaders exposing the coal seam. Once exposed, the coal seam is extracted and loaded into haul trucks for transportation to preparation plants or load-out facilities. After the coal is removed, as part of our normal mining and reclamation activities we use the topsoil and overburden removed at the beginning of the process to backfill the excavated coal pits and disturbed areas. Once we replace the overburden and topsoil, we reestablish vegetation and plant life into the reclaimed area and make other improvements that provide local community and environmental benefits. Ultimate seam recovery for surface mining typically exceeds 80% and is dependent on overburden, coal thickness, geological factors, and equipment used.
Description of Our Business
We operate our business through two principal business segments of the U.S. Operations and Canadian and U.K. Operations. Our business segment financial information is included in Note 20 within the "Notes to Consolidated Financial Statements" included herein. We currently operate 5 active coal mines, a coke plant and a coal bed methane extraction operation. For a comprehensive summary of all of our coal properties and of our coal reserves and production levels, see the tables summarizing our coal reserves and production in "Item 2. Properties" contained within this Annual Report on Form 10-K.
The following map shows the major locations of our mining operations and ports:
U.S. Operations
The U.S. Operations segment includes hard coking coal and thermal coal mines in both Alabama and West Virginia, a coke plant in Alabama, and coal bed methane extraction operations also located in Alabama. Our U.S. Operations' metallurgical coal production totaled 7.7 million metric tons and thermal coal production totaled 621 thousand metric tons in 2014.
Alabama Operations:    Our mining operations in Alabama consist of two underground hard coking coal mines in Southern Appalachia's Blue Creek coal seam (the No. 7 Mine and the No. 4 Mine) and one surface hard coking and thermal coal mine (the Choctaw Mine).

9


Our Alabama underground mining operations are headquartered in Brookwood, Alabama and as of December 31, 2014 were estimated to have approximately 188.9 million metric tons of recoverable reserves located in west central Alabama between the cities of Birmingham and Tuscaloosa. Operating at approximately 2,000 feet below the surface, the No. 4 and No. 7 mines are two of the deepest underground coal mines in North America. The coal is mined using longwall extraction technology with development support from continuous miners. We extract coal primarily from Alabama's Blue Creek seam, which contains high-quality bituminous coal. Blue Creek coal offers high coking strength with low coking pressure, low sulfur and low-to-medium ash content with high Btu values that can be sold either as hard coking coal (used to produce coke) or as compliance thermal coal (used by electric utilities because it meets current environmental compliance specifications). Pricing for hard coking coal has historically been significantly higher than for that of compliance thermal coal.
The coal from our No. 4 and 7 mines is currently sold as a high quality low and mid-vol hard coking coal. Based on forecasted production levels and the reserves that can be economically and legally extracted as of December 31, 2014, we estimate the life of mine for No. 4 and 7 mines to be 19 and 15 years, respectively. In May 2011 we acquired mineral rights for approximately 68 million additional metric tons of recoverable Blue Creek hard coking coal reserves located to the northwest of our No. 4 Mine. The related mineral leases are expected to form the core of the Blue Creek Energy Project which is for the development of a new underground hard coking coal mine that has an estimated life of 40 to 45 years. Mines No. 4 and No.7 are located near Brookwood, Alabama, and are serviced by CSX rail. Both mines also have access to our barge load-out facility on the Black Warrior River. Service via both rail and barge culminates in delivery to the Port of Mobile, where shipments are exported to our international customers via ocean vessels. Approximately 92% of the hard coking coal sales from our Alabama underground mining operations consist of sales to international customers.
A coal producer is typically responsible for transporting the coal from the mine to an export coal-loading facility. Exported coal is usually sold at the loading port, with the buyer responsible for further transportation from the port to their location. Our Alabama mines are conveniently located near both river barge load-out facilities and CSX railroad transportation with direct access to the Port of Mobile, minimizing our transportation costs.
Our Alabama natural gas operations extract and sell coal bed methane gas from the coal seams owned or leased by the Company and others. This business includes conventional gas wells, pipeline infrastructure and related equipment located adjacent to our existing underground mining and coal bed methane business. These wells degasify methane from our existing underground mines and the area where our new Blue Creek Energy Mine will be located. As of December 31, 2014, we had 1,748 wells that produced approximately 11.2 billion cubic feet of natural gas in 2014. The degasification operations have improved mining operations and safety by reducing methane gas levels in our mines.
In 2014, we operated one surface mine in Alabama. The Choctaw Mine is located near Parrish in Walker County, Alabama and produces thermal and hard coking coal. The mine has an onsite rail facility serviced by Norfolk Southern rail. Additionally, access to Highway 269 provides delivery access to local customers via truck. During the fourth quarter of 2014, we sold our Flat Top surface mine located in Adamsville, Alabama and recognized a gain of $5.6 million on the sale of this development mine. The gain is included in miscellaneous income in the Consolidated Statements of Operations.
Additionally, we operate the Walter Coke Plant, located in Birmingham, Alabama. The plant's major product line is metallurgical coke, which includes coke for furnace and foundry applications. Foundry coke is marketed to ductile iron pipe plants and foundries producing castings, such as for the automotive and agricultural equipment industries. Furnace coke is sold to the domestic steel industry for producing steel in blast furnaces. The plant utilizes up to 120 coke ovens with a capacity to annually produce up to 381,000 tons of metallurgical coke and is the second largest merchant foundry coke producer in the United States.
West Virginia Operations:    We acquired four mines on two properties in West Virginia through the acquisition of Western Coal on April 1, 2011. The mines on these properties produce both hard coking and thermal coal. The two properties are the Gauley Eagle and Maple properties and each has underground and surface mines. The Maple Coal mines are located in Fayette and Kanawha counties and the Gauley Eagle mines are located in Nicholas and Webster counties of West Virginia. These mines are estimated to contain approximately 44.8 million metric tons of recoverable reserves within the Appalachian coal-producing region as of December 31, 2014. The Maple underground coal mine operates in the Eagle coal seam and employs the room-and-pillar mining method with continuous miners to produce premium high volatile coking coal, which can be used in the steelmaking process. Due to the challenges in the short-term market outlook and the weak backdrop in demand, we curtailed production at the Maple underground mine in the fourth quarter of 2012. The Gauley Eagle underground mine also employs the room-and-pillar mining method to produce a semi-soft coking coal, which can be used in the steelmaking process or as a premium low-sulfur thermal coal. Coal produced at the Maple and Gauley Eagle surface mines is primarily sold in the thermal market. The Gauley Eagle underground mine and surface mine were idled in 2012 due to economic conditions and remained idle throughout 2013 and 2014. As of December 31, 2014, the Company determined that the idled Gauley Eagle operations, which contain approximately 13.7 million metric tons of recoverable reserves, met the criteria to be classified as held for sale and recorded an impairment charge of $28.5 million to reduce the carrying value of these assets to their fair value

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less costs to sell. At forecasted production levels, we estimate the current reserves in the West Virginia properties to have a 20-25 year life.
Coal from the Gauley Eagle and Maple mines is either transported by highway trucks, rail cars or by barge on river systems to our customers. Maple's coal is shipped by highway trucks direct to the customer or to the Kanawha River where it can be trans-loaded into barges or into rail cars. Maple's rail transportation provides access to regional and off shore markets on the eastern U.S. seaboard. Barge transportation provides river access to regional and offshore costumers through the Gulf of Mexico via the Mississippi River or Tennessee-Tombigbee River systems. Gauley Eagle's coal is shipped by trucks direct to the customer or to our Cowen, West Virginia rail-load out facility for regional and offshore markets from the eastern U.S. seaboard. Gauley Eagle and Maple also share barge loading facilities on the Kanawha River which provides opportunities to market customized quality blends. The transportation infrastructure and strategic location of the mines near its customers, ensures continuous and reliable delivery of our products.
The coking coal produced by our West Virginia operations is sold to domestic coke plants and international steel mills, while the thermal coal is sold domestically to regional electrical power plants on the eastern U.S. seaboard. Production comes from approximately 20 mineable seams which allow us to blend coal to many quality specifications that our customers request.
Canadian and U.K. Operations
Canadian Operations:    The Canadian mining operations consist of three surface metallurgical coal mines in Northeast British Columbia's coalfields (the Wolverine Mine, the Brule Mine, and the Willow Creek Mine). Within British Columbia, the Company holds the right to two large multi-deposit coal property groups: the Wolverine group, including the Perry Creek (Wolverine Mine), EB and Hermann deposits; and the "Brazion Group", including the Brule Mine and the Willow Creek Mine and less explored portions of these properties and adjacent properties. We also have a 50% interest in the Belcourt-Saxon multi-deposit coal property groups described below.
Our Canadian surface mining operations are located in Northeast British Columbia near the district municipalities of Tumbler Ridge and Chetwynd. Our Canadian operations are estimated to have approximately 133.4 million metric tons of recoverable metallurgical coal reserves including 91.3 million metric tons at potential future mine sites as of December 31, 2014. The Wolverine Mine is located near the district municipality of Tumbler Ridge and produces a high grade hard coking coal. We estimate the current reserves in the Wolverine Mine to have a life of 4 years. Future projects at Wolverine include the EB and Hermann surface mines which are expected to each have lives of 10 years. The Brule Mine is located near the district municipality of Chetwynd and produces a premium grade low-volatile PCI coal. We expect the Brule Mine to have a life of at least 8 years. The Willow Creek Mine, also located near the district municipality of Chetwynd, produces metallurgical coal with production plans of one third hard coking coal and two thirds low-volatile PCI coal over the mine's life which is currently expected to have a life of at least 10 years if running at full production. The Willow Creek Mine includes a processing plant and a load-out facility that serves our Brule Mine.
The Wolverine Mine was idled in April 2014 and the Brazion operations (which include the Company's Brule and Willow Creek mines) were idled in June 2014. The Company will continue to operate the preparation plant at the Willow Creek Mine to complete processing of coal inventory that has already been mined.
A key strategic advantage of the Canadian operations is the proximity to existing infrastructure. Our wholly-owned properties are located near rail and port infrastructure that is operational throughout the year. The rail line covers approximately 590 miles from our mines to the Port of Prince Rupert, British Columbia. From the port facility, shipments are exported to our international customers via ocean vessels. This combined infrastructure provides cost effective and reliable delivery of our products to our customers.
The metallurgical coal produced by our Canadian operations is sold to international customers located primarily in Asia to meet the demand for steel produced in the region. Our Wolverine Mine's hard coking coal has been a key coke oven blend component with many of the leading steel mills in Asia. The Brazion Group low-volatile PCI coal is ranked as a premium PCI coal and can replace up to 30% of the coke requirement in a blast furnace. These high quality metallurgical coals, in conjunction with the infrastructure present in Northeast British Columbia, provide us with an opportunity to grow and diversify our customer base.
Additionally, we have a 50% interest in the Belcourt Saxon Coal Limited Partnership which includes two multi-deposit metallurgical coal properties comprising approximately 28.5 million metric tons of recoverable reserves which are located approximately 40 to 80 miles south of our Wolverine Mine. We believe that the area has the potential to support significant mining operations and we expect that the partnership will develop these properties in the future.

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Mine planning is progressing for the proposed EB and Hermann mines located near our existing Wolverine Mine. These mines have approximately 23.8 million metric tons of recoverable high quality metallurgical coal reserves. Exploration has been completed within the proposed mining areas.
U.K. Operation:    Our U.K. mining operation consists of an active underground mine located in South Wales.
Our U.K. underground operation is estimated to have approximately 15.5 million metric tons of recoverable reserves as of December 31, 2014. The U.K. operation's primary activity has been the development and expansion of the Aberpergwm underground coal mine located at Glynneath in the Neath Valley. In the fall of 2011, we stopped continuous miner development operations to allow us to focus our attention on completing the new drift opening. While we were able to complete the upper section of the drift during 2012, due to challenges related to an oversupply of coal and decreased demand, we took steps to reduce development spending in this U.K. mine until market conditions improve. These steps have slowed the development of the drift opening. This mine produces anthracite coal, which can be sold as a low-volatile PCI coal.
The U.K. operation is well located to take advantage of improved demand from U.K. steel mills and the European export market upon recovery of the global economy. Coal is processed in the operation's preparation plant and loaded at a nearby rail load-out facility or transported to customers by road. In 2014, the mine supplied thermal coal into the cement market and anthracite coal for various commercial purposes.
Coal Preparation and Blending
Our coal mines have preparation and blending facilities convenient to each mine. The coal preparation and blending facilities receive, blend, process and ship coal that is produced from the mines. Using these facilities, we are able to ensure a consistent quality and efficiently blend our coal to meet our customers' specifications.
Marketing, Sales and Customers
Coal prices differ substantially by region and are impacted by many factors including the overall economy, demand for steel, demand for electricity, location, market, quality and type of coal, mine operation costs and the cost of customer alternatives. The major factors influencing our business are the global economy and demand for steel. Our Alabama operations' high quality Blue Creek coal and our Canadian operations' high quality hard coking coal are considered among the highest quality coals in the world and are preferred as a base coal in our customers' blends. The low-volatile PCI coal previously produced by our Canadian operations has proven itself in the marketplace as a desired source for our Asian steel makers. Our marketing strategy is to focus on international markets mostly in Europe, South America and Asia where we have a transportation cost advantage and where our coal is in demand.
The breakdown of tons sold for 2014, 2013 and 2012 is set forth in the table below:
 
Metallurgical
Coal Sales
 
Thermal Coal Sales
(in 000's metric tons)
Tons
 
% of Total Sales
Volume
 
Tons
 
% of Total Sales
Volume
2014
9.7

 
91
%
 
1.0

 
9
%
2013
10.9

 
86
%
 
1.7

 
14
%
2012
10.4

 
76
%
 
3.3

 
24
%
The breakdown of the Company's metallurgical coal sales by international destination were as follows:
 
For the years ended
December 31,
 
2014
 
2013
 
2012
Europe
45
%
 
43
%
 
48
%
Asia
15
%
 
29
%
 
33
%
South America
13
%
 
16
%
 
16
%
We focus on long-term customer relationships where we have a competitive advantage. We sell most of our metallurgical coal under fixed price supply contracts primarily with pricing terms of three months and volume terms of up to one year. Some of our sales of metallurgical coal can, however, occur in the spot market as dictated by available supply and market demand.

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The Company's revenues by destination for the year ended December 31, 2014, 2013, and 2012, were as follows:

 
For the years ended December 31,
(in thousands)
2014
 
2013
 
2012
Europe
$
633,912

 
$
726,743

 
$
922,727

North America
371,594

 
363,761

 
532,078

Asia
213,318

 
495,074

 
633,162

South America
181,292

 
275,053

 
311,928

Australia
7,229

 

 

Total
$
1,407,345

 
$
1,860,631

 
$
2,399,895

For the years ended December 31, 2014, 2013, and 2012, we derived approximately 29%, 33%, and 27% of our total sales revenues from sales to our five largest customers. During the year ended December 31, 2014 and 2012, no single customer accounted for more than 10% or more of our consolidated revenues. During the year ended December 31, 2013, ArcelorMittal accounted for $233.5 million, or 12.6%, of consolidated revenues from sales in our U.S. and Canadian and U.K. Operations.
Our thermal coal is primarily marketed to customers in the United States, generally under long-term contracts.
Trade Names, Trademarks and Patents
The names of each of our subsidiaries are well established in the respective markets they serve. Management believes that customer recognition of such trade names is of significant importance and our subsidiaries have numerous trademarks. Management does not believe, however, that any one such trademark is material to our individual segments or to the business as a whole.
Competition
Virtually all of our metallurgical coal sales are exported. Our major competitors are businesses that sell into our core business areas of Europe, Asia and South America. We primarily compete with producers of premium metallurgical coal from Australia, Canada and the United States. The principal factors on which we compete are coal prices at the port of delivery, coal quality and characteristics, customer relationships and the reliability of supply. The demand for our hard coking coal is significantly dependent on the general global economy and the worldwide demand for steel. Although there are significant challenges in the current difficult economy, we believe that we have competitive strengths in our business areas that provide us with distinct advantages.
Suppliers
Supplies used in our business include petroleum-based fuels, explosives, tires, conveyance structure, ventilation supplies, lubricants and other raw materials as well as spare parts and other consumables used in the mining process. We use third-party suppliers for a significant portion of our equipment rebuilds and repairs, drilling services and construction. We believe adequate substitute suppliers are available and we are not dependent on any one supplier. We continually seek to develop relationships with suppliers that focus on reducing our costs while improving quality and service.
Competitive Strengths
Strong Record of Safety and Environmental Stewardship.    We have a strong record of operating safe mines and in achieving environmental excellence, which leads to increased productivity and improved financial performance. Our highest priority is the safety, health and well-being of our employees. Our safety culture is at the core of all of our operations as we work each day to further reduce safety incidents by focusing on policy awareness and accident prevention. We teach and encourage safe behavior in a variety of ways, which include training, observation, self-evaluation, personal involvement and commitment, incident evaluation, technology enhancements and rewards and incentives.
Leading "Pure-Play" Metallurgical Coal Producer.    We are a leading, publicly traded producer and exporter of metallurgical coal for the global steel industry. We had total coal reserves of 392.7 million metric tons as of December 31, 2014, which primarily consists of high quality, premium metallurgical coal. We expect 2015 metallurgical coal production to be between 8.0 million and 8.5 million metric tons. We believe we are well positioned to increase production when market conditions warrant.

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Premium, High Quality Product.    Blue Creek coal from our Alabama mining operations is recognized to be among the highest quality coals in the world. The high quality characteristics of our Blue Creek coals make it ideally suited for use by major steel mills around the world. The low-volatile PCI coal from the Canadian operations has also been widely accepted by customers.
Attractive Industry Dynamics.    We expect that international demand for our metallurgical coal will increase in the future, driven by favorable projected global growth trends and the high quality of our coal compared to many other coal producing regions around the world. Metallurgical coal demand is underpinned by projected growth in world steel production projected by the World Steel Association of 2.0% in 2015.
Sales and Geographic Diversification.    We currently operate five active coal mines, a coke plant and a coal bed methane extraction operation located in Alabama and West Virginia. Our U.S. Operations provide us access to the Atlantic seaborne market and although currently idled our Canadian operations provide us access to the Pacific seaborne market which provides important diversity in terms of reserves, production, markets, transportation and labor. We believe the diversity of our operations and reserves also provides us with a significant advantage over competitors with operations and reserves in a single coal producing region as it allows us to diversify our customer base. This geographic diversification also allows us to source the high quality coals we produce from multiple sources and to blend to meet the exact specifications of our customers. In addition, with access to both the Atlantic and the Pacific markets, we believe that we are well positioned to take advantage of any growth in the seaborne coal market and to supply metallurgical coal to Latin America, Asia and Europe.
Significant Organic Growth Opportunities.    We believe that our organic growth opportunities in metallurgical coal are well balanced between existing production assets and growth development projects such as Aberpergwm, Blue Creek Energy and Belcourt Saxon. As the demand for high quality metallurgical coal in the global marketplace grows, we expect that we will be able to provide customers with increasing quantities of premium metallurgical coal.
Port Capacity and Low Cost Transportation Infrastructure.    We believe we have sufficient port capacity to ship all of our current production and forecasted production growth. We have an agreement with the Port of Mobile in Alabama through July 31, 2026 with current capacity of approximately 6.5 million metric tons per year and the ability to add additional capacity as needed. Canada's Ridley Terminals, located in the Port of Prince Rupert utilized by our Canadian operations, maintain an 18 million metric tons capacity per year with the potential to expand to 24 million metric tons per year. We have an agreement with the Ridley Terminal through December 31, 2023. We are able to minimize transportation costs due to the close proximity of our mines to ports and our own transportation infrastructure. Our principal mines in our Alabama operations are located a relatively short distance from the Port of Mobile and are serviced by CSX rail. We also have port access through our barge load-out facility on the Black Warrior River. Because customers for our Alabama hard coking coal are primarily in Europe and South America, we are able to ship our coal quickly and at a relatively favorable cost. Our Canadian operations are located on Canadian National rail lines, minimizing transportation costs to the Ridley Terminals.
Highly Regarded and Experienced Management Team.    Our top six officers have an average of more than 30 years of experience. Our management team has demonstrated a history of increasing productivity, reducing mining costs and maintaining strong customer relationships. We are committed to the safety and well-being of our employees and communities, respecting the environment in which we do business, the continued growth of the Company's assets, and putting in place a conservative capital structure while creating long-term stockholder value.
We Maintain Excellent Relationships With Our Customers.    Customers want high quality products, delivered on a timely basis at a fair price. Given our premium products and our production and transportation efficiencies, we have historically been able to reliably deliver premium products at competitive prices on a timely basis. As a result, we have maintained excellent relationships with our customers over many years.
Environmental and Other Regulatory Matters
Our businesses are subject to numerous federal, state, local and provincial laws and regulations with respect to matters such as permitting and licensing, employee health and safety, reclamation and restoration of property and protection of the environment. In the United States, environmental laws and regulations include, but are not limited to, the federal Clean Air Act and its state and local counterparts with respect to air emissions; the Clean Water Act and its state counterparts with respect to water discharges; the Resource Conservation and Recovery Act and its state counterparts with respect to solid and hazardous waste generation, treatment, storage and disposal, as well as the regulation of underground storage tanks; and the Comprehensive Environmental Response, Compensation and Liability Act and its state counterparts with respect to releases, threatened releases and remediation of hazardous substances. In Canada, the Company's operations are primarily regulated by provincial legislation, with some regional and federal authorizations required. Applicable environmental laws and regulations include, but are not limited to, the federal Fisheries Act with respect to protection of fish and fish habitat; the federal Species at Risk Act with respect to protection of identified species at risk; the British Columbia Wildlife Act and Forest and Range

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Practices Act with respect to protection of identified wildlife species; the British Columbia Environmental Assessment Act with respect to conditions of applicable environmental assessment certificates and potential provincial environmental assessment processes; the Canadian Environmental Assessment Act of 2012 with respect to potential federal environmental assessment processes; the British Columbia Mines Act (including the Health, Safety and Reclamation Code); the British Columbia Environmental Management Act and associated regulations with respect to waste discharges, air emissions, hazardous waste disposal and contaminated sites and spills; and the British Columbia Greenhouse Gas Reduction Act with respect to reporting greenhouse gas emissions. Other environmental laws and regulations require reporting, even though the impact of that reporting is unknown. Compliance with these laws and regulations may be costly and time-consuming and may delay commencement, continuation or expansion of exploration or production at our operations. These laws are constantly evolving and are becoming increasingly stringent. The ultimate impact of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that certain implementing regulations for these environmental laws have not yet been promulgated and in certain instances are undergoing revision. These laws and regulations, particularly new legislative or administrative proposals (or judicial interpretations of existing laws and regulations) related to the protection of the environment, could result in substantially increased capital, operating and compliance costs and could have a material adverse effect on our operations and/or our customers' ability to use our products.
We strive to conduct our mining, natural gas and coke operations in compliance with all applicable federal, provincial, state and local laws and regulations. However, due in part to the extensive and comprehensive regulatory requirements, along with changing interpretations of these requirements, violations occur from time to time in our industry and at our operations. In recent years, expenditures for regulatory or environmental obligations in the United States have been mainly for safety or process changes, although some expenditures continue to be made at several facilities to comply with ongoing monitoring or investigation obligations. Expenditures relating to environmental compliance are a major cost consideration for our operations and environmental compliance is a significant factor in mine design, both to meet regulatory requirements and to minimize long-term environmental liabilities. To the extent that these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, operating results will be reduced. We believe that our major North American competitors are confronted by substantially similar conditions and thus do not believe that our relative position with regard to such competitors is materially affected by the impact of environmental laws and regulations. However, the costs and operating restrictions necessary for compliance with environmental laws and regulations may have an adverse effect on our competitive position with regard to foreign producers and operators who may not be required to undertake equivalent costs in their operations. In addition, the specific impact on each competitor may vary depending on a number of factors, including the age and location of its operating facilities, applicable legislation and its production methods.
Permitting and Approvals
Numerous governmental permits and approvals are required for mining operations. We are required to prepare and present to federal, state, provincial and local authorities data pertaining to the effect or impact that any proposed exploration project for production of coal or gas may have upon the environment, the public and our employees. In addition, we must also submit a comprehensive plan for mining and reclamation upon the completion of mining operations. The requirements are costly and time-consuming and may delay commencement or continuation of exploration, production or expansion at our operations. Typically we submit necessary mining permit applications several months, or even years, before we anticipate mining a new area.
Our coking operation is subject to numerous regulatory permits and approvals, including air and water permits. These permits subject us to certain monitoring and reporting requirements.
Applications for permits and permit renewals at our mining, coking and gas operations are subject to public comment and may be subject to litigation from third parties seeking to deny issuance of a permit or to overturn the applicable agency's grant of the permit application, which may also delay commencement, continuation or expansion of our mining, coking and gas operations. Further, regulations provide that applications for certain permits or permit modifications in the United States can be delayed, refused or revoked if an officer, director or a stockholder with a 10% or greater interest in the entity is affiliated with or is in a position to control another entity that has outstanding permit violations. In the current regulatory environment, we anticipate approvals will take even longer than previously experienced, and some permits may not be issued at all. Significant delays in obtaining, or denial of, permits could have a material adverse effect on our business.
U.S. Operations
Mine Safety and Health
The Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"), and the Mine Improvement and New Emergency Response Act of 2006 (the "MINER Act"), as well as regulations adopted under these federal laws, impose rigorous safety and health standards on mining operations. Such standards are

15


comprehensive and affect numerous aspects of mining operations, including, but not limited to: training of mine personnel, mining procedures, ventilation, blasting, use of mining equipment, dust and noise control, communications and emergency response procedures. MSHA monitors compliance with these laws and standards by regularly inspecting mining operations and taking enforcement actions where MSHA believes there to be non-compliance. These federal mine safety and health laws and regulations have a significant effect on our operating costs.
The MINER Act mandated increased regulations in some of the areas listed above, and some of those regulations are now effective. The MINER Act and other legislative and regulatory initiatives, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") passed by the U.S. Congress and signed into law on July 21, 2010, are still ongoing. While the Dodd-Frank Act is focused primarily on the regulation and oversight of financial institutions, it also provides for regulatory compliance requirements related to mining safety and health matters. Section 1503 of the Dodd-Frank Act requires public companies that own or operate a "coal or other mine" in the United States to include certain specified disclosures regarding health and safety violations that may have previously been considered immaterial in their periodic reports filed under the Exchange Act. Section 1503 of the Dodd-Frank Act also requires a reporting company operating coal mines or with subsidiaries that operate coal mines to file a Current Report on Form 8-K upon receipt of written notice from MSHA of an imminent danger order under Section 107(a) of the Mine Act or of any warning from MSHA that the mine either has a pattern of health or safety violations, or has the potential for such a pattern. See Exhibit 95 to this Annual Report on Form 10-K for information concerning mine safety violations and other regulatory matters pursuant to the requirements of Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K (17 CFR 229.104).
Workers' Compensation and Black Lung
We are insured for workers' compensation benefits for work related injuries that occur within our U.S. operations. We retain exposure for the first $1 million to $2 million per accident for all of our U.S. subsidiaries and are insured above the deductible for statutory limits, with the exception of Jim Walter Resources located in Alabama, where we retain any amount of exposure in excess of $15 million per accident. Workers' compensation liabilities, including those related to claims incurred but not reported, are recorded principally using annual valuations based on discounted future expected payments using historical data of the operating subsidiary or combined insurance industry data when historical data is limited. In addition, certain of our subsidiaries are responsible for medical and disability benefits for black lung disease under the Federal Coal Mine Health and Safety Act of 1969 and the Mine Act, as amended, and are self-insured against black lung related claims. We perform periodic evaluations of our black lung liability, using assumptions regarding rates of successful claims, discount factors, benefit increases and mortality rates, among others. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Financial Condition" for further information on assumptions utilized.
Surface Mining Control and Reclamation Act
The Surface Mining Control and Reclamation Act of 1977 ("SMCRA") requires that comprehensive environmental protection and reclamation standards be met during the course of and following completion of mining activities. Permits for all mining operations must be obtained from the Federal Office of Surface Mining Reclamation and Enforcement or, where state regulatory agencies have adopted federally approved state programs under the SMCRA, the appropriate state regulatory authority. In Alabama, the Alabama Surface Mining Commission reviews and approves SMCRA permits, and the West Virginia Department of Environmental Protection reviews and approves SMCRA permits in West Virginia.
SMCRA permit provisions include requirements for coal prospecting, mine plan development, topsoil removal, storage and replacement, selective handling of overburden materials, mine pit backfilling and grading, subsidence control for underground mines, surface drainage control, mine drainage and mine discharge control, treatment and revegetation. These requirements seek to limit the adverse impacts of coal mining and more restrictive requirements may be adopted from time to time.
Before a SMCRA permit is issued, a mine operator must submit a bond or otherwise secure the performance of reclamation obligations. The Abandoned Mine Land Fund, which is part of SMCRA, imposes a general funding fee on all coal produced. The proceeds are used to reclaim mine lands closed or abandoned prior to 1977. On December 7, 2006, the Abandoned Mine Land Program was extended for another 15 years.
SMCRA stipulates compliance with many other major environmental statutes, including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act.
On December 12, 2008, the Office of Surface Mining (OSM) finalized rulemaking regarding the interpretation of the stream buffer zone provisions of SMCRA, which confirmed that excess spoil from mining and refuse from coal preparation could be placed in permitted areas of a mine site that constitute waters of the United States. On July 9, 2014, the U.S. District Court for the District of Columbia ("D.C.") declined an appeal by environmental groups that the court's decisions to vacate the

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2008 Bush-era stream buffer zone rule. The court decision was based on the fact that the U.S. Fish & Wildlife Service was not consulted with respect to possible effects on endangered species under terms of the Endangered Species Act. The rule had been challenged by environmental groups and was stayed and litigation held in abeyance since 2010 pending the OSM out-of-court settlement agreement to amend or replace the 2008 rule by June 29, 2012, but that date was missed and a new rule is still under consideration. The vacatur means that the 1983 Reagan-era rule is again in place, which requires coal companies to keep operations 100 feet from streams or otherwise minimize any damage.
We accrue for future reclamation costs anticipated for mine closures. Estimates of our total reclamation and mine-closing liabilities are based upon permit requirements and our experience related to similar activities. The amounts recorded are dependent upon a number of variables, including the estimated future retirement costs, estimated proven reserves, assumptions involving profit margins, inflation rates, timing of reclamation expenditures, and the assumed credit-adjusted risk-free interest rates. Furthermore, these obligations are typically unfunded. If these accruals are insufficient or our liability in a particular year is greater than currently anticipated, our future operating results could be adversely affected. As of December 31, 2014, we had accrued $53.4 million for our asset retirement obligations for all of our U.S. mining operations, most of which will be incurred at our underground mining operations near the end of the mines' lives. As of December 31, 2014, we had accrued $112.3 million for all our of asset retirement obligations.
Surety Bonds/Financial Assurance
We use surety bonds, trusts and letters of credit to provide financial assurance for certain transactions and business activities. Federal and state laws require us to obtain surety bonds to secure payment of certain long-term obligations including mine closure or reclamation costs and other miscellaneous obligations. The bonds are renewable on a yearly basis.
Surety bond rates have increased in recent years and the market terms of such bonds have generally become less favorable. In addition, the number of companies willing to issue surety bonds has decreased. Bonding companies may also require posting of collateral, typically in the form of letters of credit to secure the surety bonds. As of December 31, 2014, we had outstanding surety bonds with parties for post-mining reclamation at all of our U.S. mining operations totaling $69.9 million, and $7.5 million for miscellaneous purposes. As of December 31, 2014, we maintained letters of credit totaling $32.4 million to secure these surety bonds.
Climate Change
Global climate change continues to attract considerable public and scientific attention, with widespread concern about the impacts of human activity, especially the emission of greenhouse gases ("GHGs") such as carbon dioxide and methane. Combustion of fossil fuels, primarily related to thermal coal and methane gas, results in the creation of carbon dioxide that is emitted into the atmosphere by coal and gas end-users. Further, some of our operations, such as coal mining and coke production, directly emit GHGs. Laws and regulations governing emissions of GHGs have been adopted by foreign governments, including the European Union and member countries, individual states in the United States and regional governmental authorities. Further, numerous proposals have been made and are likely to continue to be made at the international, national, regional and state levels of government that are intended to limit emissions of GHGs by enforceable requirements and voluntary measures.
In April 2009, in response to a 2007 U.S. Supreme Court decision, the Environmental Protection Agency ("EPA") proposed findings that emissions of GHGs from motor vehicles are contributing to air pollution, which in turn is endangering the public health and welfare. These proposed findings made final in December 2009 set in motion the process for the EPA to regulate GHGs from mobile sources, and resulted in some initial regulation of GHGs from stationary sources under the Clean Air Act. The EPA's findings focus on six GHGs, including carbon dioxide and nitrous oxide (which are emitted from coal combustion) and methane (which is emitted from coal beds). Although the EPA has stated a preference that GHG reduction be based on new federal legislation rather than through agency regulation pursuant to the existing Clean Air Act, the EPA is nonetheless taking steps to regulate many sources of GHGs without further legislation (see Clean Air Act below). It is difficult to predict reliably how such regulation will develop and when or whether it will take effect as the EPA's finalized findings that underpin such regulation are the subject of a number of lawsuits. Also, legislative bills have been introduced in Congress that would, if enacted, prevent the EPA from regulating GHGs under the Clean Air Act.
The U.S. EPA, under President Obama’s Climate Action Plan, has been working on an approach to cut carbon pollution from power plants. In 2013, the EPA proposed standards to limit carbon pollution from new power plants. In 2014, the EPA proposed the Clean Power Plan to limit carbon pollution from existing power plants as well as proposed standards to limit carbon pollution from modified and reconstructed power plants. The EPA plans to issue final rules on these standards in 2015. A major coal company, joined by Attorneys General from nine states filed a complaint asking the D.C. Circuit Court of Appeals to block the EPA from proceeding with the proposal. Twelve state Attorneys General filed another suit in the D.C. Circuit, arguing that the EPA’s proposed rules are the result of an allegedly illegal settlement with environmental groups in 2010. 

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The EPA releases annual GHG reports that are filed by approximately 6,700 entities with GHG emissions over 25,000 tons per year. The data is available to the public online in a form similar to Toxic Release Inventory data (i.e., searchable by state, industry sector and source). A three-judge panel of the U.S. Court of Appeals in Washington ruled that the EPA properly concluded that GHGs are pollutants that endanger human health and that opponents do not have the legal right to challenge rules determining when states and industries must comply with regulations curtailing these emissions.
In November 2014, the U.S. and China announced a bilateral agreement to reduce GHG emissions. The U.S. agreed to reduce GHGs by 26-28% below 2005 levels by 2025. China pledged to stabilize its GHG emissions by 2030, to be accomplished in part by increasing its percentage of renewable energy sources such as solar and wind to 20% of the nation's total energy production.

In October 2014, the leaders of the 28 European Union countries agreed to a commitment to reduce GHG emissions by 40% from 1990 levels by 2040 and to adopt a non-binding goal of 27% use of renewable energy resources by 2030. Some exceptions were provided to secure approval of all EU members, and the reductions by some sectors participating in the existing Emission Trading System, such as utilities and heavy industry, will need to be greater than 40% to accommodate lower goals for other sectors, such as the agricultural and services industries, to achieve the overall 40% goal. The current goal was to reduce GHGs by 20% from 1990 levels by 2020.

The 20th Conference of the Parties (COP-20) of the United Nations Framework Convention on Climate Change (UNFCCC) in Lima, Peru concluded with only a loose agreement that would lead to a new climate change pact intended to be finalized in 2015 in Paris. The text of the "Lima Call for Climate Action" established six main principles for the 2015 agreement: mitigation, adaptation, finance, technology development and transfer, capacity building, and transparency - but did not clearly define those terms and left many details to be worked out in two subsequent meetings leading up to the Paris talks.

Coal bed methane must be expelled from our underground coal mines for mining safety reasons. Our gas operations extract coal bed methane from our underground coal mines prior to mining. With the exception of some coal bed methane which is vented into the atmosphere when the coal is mined, much of the methane is captured and sold into the natural gas market and used as a clean fuel. If regulation of GHG emissions does not exempt the release of coal bed methane, we may have to curtail coal production, pay higher taxes, or incur costs to purchase credits that allow us to continue operations as they now exist at our underground coal mines. In 2009, Jim Walter Resources partnered with Biothermica Technologies to capture and mitigate the methane that is vented into the atmosphere as a result of the mining process. This project resulted in the listing of the project with the Climate Action Reserve on February 2, 2010, a national offsets program working to ensure integrity, transparency and financial value in the U.S. carbon market by establishing regulatory-quality standards for the development, quantification and verification of GHG emissions reduction projects in North America. If regulation of GHGs does not give us credit for capturing methane that would otherwise be released into the atmosphere at our coal mines, any value associated with our historical or future credits could be reduced or eliminated.
Additional laws or regulations regarding GHG emissions or other actions to limit GHG emissions could result in the primary fuel source of energy production switching from coal, or to a lesser degree natural gas, to other fuel sources. Alternative non-fossil fuels could become more attractive than coal, or to a lesser degree natural gas, in order to reduce GHG emissions. This could result in a reduction in the demand for coal, and to a lesser degree natural gas, and therefore negatively impacting our revenues as well as reduce the value of our reserves (although switching to a cleaner alternative fuel could increase demand for our natural gas, which emits less GHGs when burned than an equivalent quantity of coal). The anticipation of such requirements could also lead to reduced demand for some of our products. Additional GHG laws or regulations could also increase our costs, such as those to produce natural gas and manufacture coke. Although the potential impacts on us of additional climate change regulation are difficult to reliably quantify, they could be material.
Clean Air Act
The federal Clean Air Act ("CAA") and comparable state laws that regulate air emissions affect coal mining and coking operations both directly and indirectly. Direct impacts on coal mining may occur through permitting requirements and/or emission control requirements relating to particulate matter, such as fugitive dust, or fine particulate matter measuring 2.5 micrometers in diameter or smaller. The CAA indirectly affects our mining operations and directly affects our coking operations by extensively regulating the air emissions of sulfur dioxide, nitrogen oxides, mercury and other compounds emitted by coal-fired utilities, steel manufacturers and coke ovens. As described below, proposed regulations would also subject GHG emissions to regulation under the CAA.
The CAA requires, among other things, the regulation of hazardous air pollutants through the development and promulgation of Maximum Achievable Control Technology ("MACT") Standards. The EPA has developed various industry-specific MACT standards pursuant to this requirement. The CAA requires the EPA to promulgate regulations establishing

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emission standards for each category of Hazardous Air Pollutants. The EPA must also conduct risk assessments on each source category that is already subject to MACT standards and determine if additional standards are needed to reduce residual risks.
Our coking facility is subject to certain MACT standards and National Emissions Standards for Hazardous Air Pollutants ("NESHAPS"). Relative to MACT, these standards apply to pushing, quenching and under-firing stacks and went into effect in April 2006. Concerning NESHAPS, the standards include Coke Oven NESHAPS (1993), Benzene NESHAPS and Benzene Waste NESHAPS, which were enacted in the early 1990's. The portion of NESHAPS that applies to coke ovens addresses emissions from charging, coke oven battery tops and coke oven doors. With regard to this standard, Walter Coke chose the LAER (Lowest Achievable Emissions Rate) track, and therefore is not required to comply with residual risk until 2020.
The CAA also requires the EPA to develop and implement National Ambient Air Quality Standards ("NAAQS") for criteria pollutants, which include sulfur dioxide, particulate matter, nitrogen oxides and ozone. Areas that are not in compliance with these standards, referred to as non-attainment areas, must take steps to reduce emission levels. Individual states must identify the sources of emissions and develop emission reduction plans. These plans may be state-specific or regional in scope. It is anticipated that the EPA's fine particle programs will affect many power plants, especially coal-fueled power plants and all plants in non-attainment areas, and could result in significant costs; however, it is impossible to estimate the magnitude of these costs at this time as state and federal agencies are still developing regulations for the programs and implementation.
In December 2014, the EPA published proposed revisions to the ozone ambient air quality standards. The proposal would lower the existing 8-hour primary (health-based) 75 parts per billion ("ppb") standard to a level in the 65-70 ppb range. The proposal also solicits comments on retaining the current 75 ppb standard or lowering the standard to 60 ppb. The agency is also proposing a revised secondary (welfare-based) standard at the same level, mainly to protect vegetation. The EPA intends to issue final ozone standards by October 1, 2015. A lower ozone ambient air quality standard will likely result in additional emission control expenditures at coal-fueled power plants and may adversely affect the demand for thermal coal.

In May 2014, the U.S. Court of Appeals for the D.C. Circuit upheld the EPA's 2013 fine particulate ("PM-2.5") standard, which had been challenged by numerous industry groups that claimed the reduction of the annual PM-2.5 standard from 15 to 12 micrograms per cubic meter ("ìg/m3") was not justified by the health effects research. In September 2014, the EPA sent the Office of Management and Budget ("OMB") its proposed rule for implementation of the annual PM-2.5 standard of 12 micrograms per cubic meter published in January 2013. The rule would establish various requirements for states to follow for developing implementation plans to achieve the standards, including definitions of reasonably available control technology and best available controls, and deadlines for submitting those plans. The EPA's regulatory schedule called for a final rule in October 2015. A lower PM-2.5 air quality standard will likely result in additional emission control expenditures and may adversely affect the demand for coal.
In January 2010, the EPA set a new one-hour Nitrogen Dioxide ("NO2") standard and retained the annual average. The new standard must be taken into account when permitting new or modified major sources of NO2 emissions such as fossil-fueled power plants, boilers, and a variety of manufacturing operations. In January 2012, the EPA designated all areas of the country as "unclassifiable/attainment" for the 2010 NO2 NAAQS. The available air quality data show that all monitored areas in the country meet the 2010 NO2 NAAQS for 2008-2010. EPA has released its plan for reviewing the NO2 ambient air standard that includes the agency's Clean Air Scientific Advisory Committee recommendation to take into account near-road NO2 levels and how other air pollutants might confound the health effects of NO2. The plan calls for a final rulemaking on whether to revise the NO2 standard by August 2017. Additional emission control expenditure may be required at coal-fueled power plants and may adversely affect the demand for coal.
In June 2010, the EPA revised the NAAQS for Sulfur Dioxide ("SO2") by establishing a new one-hour standard and revoking the existing 24-hour and annual standards. In August 2012, the EPA published a rule extending the deadline for designating areas not attaining the standard to June 2013 and required state implementation plans by 2014 and standards to be met by August 2017. In November 2014, the EPA published a notice of the availability of its integrated review document that contains plans for the review of health-based air quality criteria in consideration of a revision of the current 1-hour primary SO2 ambient air quality standard of 75 ppb. The plan calls for the proposal of a new standard by October 2018 and a final rule by July 2019. Additional emission control expenditures may be required at coal-fueled power plants and may adversely affect the demand for coal.
In December 2011, the EPA approved a rule to reduce emissions of toxic air pollutants from power plants. Specifically, the mercury and air toxics standards for power plants will reduce emissions from new and existing coal and oil-fired eclectic utility steam generating units. The required reduction in emissions may require the installation of additional control technology or the implementation of other measures, including trading of emission allowances and transitioning to alternative clean fuels. These reductions in permissible emission levels will likely make it more costly to operate coal-fired power plants and may adversely affect the demand for coal. The EPA has proposed to update emission limits for new power plants under the Mercury and Air Toxics Standards ("MATS"). The new proposed standards affect only new coal- and oil-fired power plants that will be

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built in the future. The proposal, issued in November 2012, does not change the final emission limits for existing power plants. The EPA says that it has reconsidered the new source limits for MATS based on new information and analysis that became available to the agency after the rule was finalized. The EPA says that it projects that the proposed updates will result in no significant change in costs, emission reductions or health benefits from MATS. The EPA is also proposing to revise and clarify requirements that apply during periods of startup and shutdown in MATS and startup and shutdown for particulate matter in the Utility New Source Performance Standards ("NSPS"), and is proposing other minor technical corrections. In March 2013, the EPA finalized updates to certain emission limits for new power plants under MATS. In White Stallion Energy Center LLC v. EPA and Utility Air Regulatory Group v. EPA, which challenge MATS and the new Utility NSPS, respectively, the Court ruled in favor of EPA. The lawsuit challenged the EPA's MATS Rule, which establishes national standards for hazardous air pollutant emissions from coal- and oil-fired electric utility steam generating units, contending the EPA erred in determining it was "appropriate and necessary" to regulate mercury emissions from power plants without regard to the cost. In November 2014, the U.S. Supreme Court agreed to hear an appeal of the original 2010 rule, which was upheld in a decision by the U.S. Court of Appeals for the D.C. Circuit.
Clean Water Act
The federal Clean Water Act ("CWA") and corresponding state laws affect our operations by imposing restrictions on discharges of wastewater into creeks and streams. These restrictions, more often than not, require us to pre-treat the wastewater prior to discharging it. Permits requiring regular monitoring and compliance with effluent limitations and reporting requirements govern the discharge of pollutants into regulated waters. Our mining and coking operations maintain water discharge permits as required under the National Pollutant Discharge Elimination System program of the CWA, and conduct their operations to be in compliance with such permits. We believe that we have obtained all permits required under the CWA and corresponding state laws and are in substantial compliance with such permits. However, new requirements under the CWA and corresponding state laws may cause us to incur significant additional costs that could adversely affect our operating results.
In March 2014, the EPA and the U.S. Army Corps of Engineers ("USACE") jointly proposed a rule defining the scope of waters protected under the CWA. The proposal would revise regulations that have been in place for more than 25 years. Revisions are proposed in light of the 2001 and 2006 Supreme Court rulings that interpreted the regulatory scope of the CWA more narrowly than previously, but created uncertainty about the precise effect of the Court’s decisions. The EPA projects that a final rule will be promulgated in April 2015.
Resource Conservation and Recovery Act
The Resource Conservation and Recovery Act ("RCRA") and corresponding state laws establish standards for the management of solid and hazardous wastes generated at our various facilities. Besides affecting current waste disposal practices, the RCRA also addresses the environmental effects of certain past hazardous waste treatment, storage and disposal practices. In addition, the RCRA also requires certain of our facilities to evaluate and respond to any past release, or threatened release, of a hazardous substance that may pose a risk to human health or the environment.
The RCRA may affect coal mining operations by establishing requirements for the proper management, handling, transportation and disposal of solid and hazardous wastes. Currently, certain coal mine wastes, such as earth and rock covering a mineral deposit (commonly referred to as overburden) and coal cleaning wastes, are exempted from hazardous waste management under the RCRA. Any change or reclassification of this exemption could significantly increase our coal mining costs.
In December 2014, the EPA released the text of a final power plant coal ash disposal rule. The rule regulates coal ash as a solid waste under Subtitle D of RCRA . The rule requires closure of sites that fail to meet prescribed engineering standards, requires regular inspections of impoundments, establishes limits on the location of new sites, and requires immediate remediation and closure of unlined ponds that are polluting ground water. However, the rule gives states flexibility on how to implement and enforce the rule and allows citizen suits to be filed against coal ash pond operators. The rule does not regulate closed coal ash impoundments unless located at active power plants.
Our coking operations entered into a RCRA Section 3008(h) Administrative Order on Consent (Order) with an effective date of September 24, 2012 with the EPA. The objectives of the 2012 Order are to perform Corrective Measure Studies, implement remedies, if necessary, and implement and maintain institutional controls, if necessary, at the Walter Coke facility. As of December 31, 2014, the Company had an amount accrued that is probable and can be reasonably estimated for the costs to be incurred in order to identify and define remediation actions, as well as to perform certain remediation tasks that can be quantified. The amount of this accrual is not material to the financial statements. While it is probable that the Company will incur additional future costs to remediate environmental liabilities at the Walter Coke facility, the amount of such additional costs cannot be reasonably estimated at this time. For additional information regarding significant enforcement actions, capital

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expenditures and costs of compliance, see Part I, "Item 3. Legal Proceedings" and "Environmental Matters" in Note 16 of "Notes to Consolidated Financial Statements" included in this Annual Report on Form 10-K.
Comprehensive Environmental Response, Compensation and Liability Act
The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") and similar state laws affect our coal mining and coking operations by, among other things, imposing investigation and cleanup requirements for threatened or actual releases of hazardous substances. Under CERCLA, joint and several liability may be imposed on operators, generators, site owners, lessees and others regardless of fault or the legality of the original activity that caused or resulted in the release of the hazardous substances. Although the EPA excludes most wastes generated by coal mining and processing operations from the hazardous waste laws, the universe of materials and wastes governed by CERCLA is broader than "hazardous waste" and as such even non-hazardous wastes can, in certain circumstances, contain hazardous substances, which if released into the environment are governed by CERCLA. Alabama's version of CERCLA mirrors the federal version with the important difference that there is no joint and several liability. Liability is consistent with one's contribution to the contamination. In addition, the disposal, release or spilling of some products used by coal and coking companies in operation, such as chemicals, could trigger the liability provisions of CERCLA or similar state laws because, at that point they are deemed to be waste and the activity, even though inadvertent, is deemed to constitute disposal or a covered CERCLA release. Thus, we may be subject to liability under CERCLA and similar state laws for properties that (1) we currently own, lease or operate, (2) we, our predecessors, or former subsidiaries have previously owned, leased or operated, (3) sites to which we, our predecessors or former subsidiaries, sent waste materials, and (4) sites at which hazardous substances from our facilities' operations have otherwise come to be located.
In 2011, the EPA notified Walter Coke in the form of a General Notice Letter that it proposed that the offsite remediation project ("35th Avenue Superfund Site") be classified and managed as a Superfund site under CERCLA allowing other Potentially Responsible Parties ("PRPs") to potentially be held responsible. Under CERCLA authority, the EPA proceeded directly with the offsite sampling work and deferred any further enforcement actions or decisions. In September 2013, the EPA sent an "Offer to Conduct Work" letter to Walter Coke and four other PRPs notifying them that the EPA had completed sampling at 1,100 residential properties and that 400 properties exceeded Regional Removal Management Levels (RML's) and offered the PRPs an opportunity to cleanup 50 Phase I properties. The Company has notified the EPA that it has declined the Offer to Conduct Work. In August 2014, the EPA sent an “Offer to Conduct Work” letter to Walter Coke and five other PRPs and offered the PRPs an opportunity to cleanup 30 Phase II properties. The Company has notified the EPA that it has declined the Offer to Conduct Work. In September 2014, the EPA proposed to add the 35th Avenue Superfund Site to the National Priorities List ("NPL"). The EPA has accepted and is reviewing comments to the proposed listing.
As of December 31, 2014, the Company had an amount accrued that is probable and can be reasonably estimated for the costs to be incurred to identify and define remediation actions, as well as to perform certain remediation tasks which can be quantified. The amount of this accrual is not material to the financial statements. While it is probable that the Company will incur additional future costs to remediate environmental liabilities at the Walter Coke facility, the amount of such additional costs cannot be reasonably estimated at this time. For additional information regarding significant enforcement actions, capital expenditures and costs of compliance, see Part I, "Item 3. Legal Proceedings" and "Environmental Matters" in Note 16 of "Notes to Consolidated Financial Statements" included in this Annual Report on Form 10-K.
Canadian and U.K. Operations
Endangered Species Legislation
We have operations within Canada that may be affected by ongoing and proposed planning to protect certain species that are listed as threatened under the Federal Species at Risk Act. The Species at Risk Act prohibits killing, harming, harassing, capturing or taking an individual of a wildlife species that is listed as threatened or endangered, and also makes it an offense to damage or destroy that species' residence, meaning a den, nest or other similar area or place that is occupied or habitually occupied by one or more individuals of their species during all or part of their life cycles. Furthermore, where a threatened or endangered species critical habitat has been identified under the Species at Risk Act, the Act prohibits any person from destroying any part of that critical habitat. The Species at Risk Act applies to federal lands and to species under federal jurisdiction (fish and migratory birds), but under certain circumstances, the provisions of the Species at Risk Act may be extended by the federal government to apply on provincial lands.
The provincial Minister of Environment pursuant to the British Columbia Forest and Range Practices Act may categorize certain species of wildlife as being species at risk, regionally important wildlife or ungulate species for which an ungulate winter range is required. Such "Identified Wildlife" is managed under the Identified Wildlife Management Strategy ("IWMS"), an initiative of the Ministry of Environment in partnership with the Ministry of Forests and Range. The IWMS provides for the

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management of identified species, which may entail restoration of previously occupied habitats, particularly for those species most at risk, and the establishment of wildlife habitat areas and objectives and ungulate winter ranges and objectives.
The species of the highest concern in respect of our operations is the caribou, though we continue to consider the impacts of our operations on other threatened species in the area. While we take great care to cause little or no impact on caribou in the area of our operations, protection of caribou and their habitat has attracted significant attention in areas where we operate due to the drastic reduction in caribou herd numbers in those areas. Delays in obtaining new or amended permits and mining tenures in areas frequented by caribou could have a significant impact on the continued development of our Canadian operations. In 2013, the province issued its Implementation Plan for the Ongoing Management of South Peace Northern Caribou in British Columbia which required caribou migration and monitoring plans for certain industrial development activities within certain high-elevation winter habitat. In 2014, the Committee on the Status of Endangered Wildlife in Canada published Recovery Strategy for the Woodland Caribou, Southern Mountain population (the “Recovery Strategy”) under the Species at Risk Act. The Recovery Strategy sets overall population and distribution targets based on recent capacity of annual ranges to support caribou and partially identifies critical habitat necessary to meet those objectives. Further critical habitat identification will follow upon completion of the habitat studies contemplated by the Recovery Strategy. Currently, this identification of critical habitat only affects federal lands. Under the Species at Risk Act, the Minister of the Environment and the Minister Responsible for the Parks Canada Agency must complete one or more action plans under the Recovery Strategy by December 31, 2017.
As a result of this regulatory regime, we anticipate making certain in-lieu payments to offset the impact of our industrial activity in the Northern Caribou habitat regions. This is expected to increase startup costs for the EB Mine expansion of the Wolverine Mine.
Environmental Management Act
The Environmental Management Act requires us to obtain permits to introduce "waste" into the environment, including air contaminants, effluent and hazardous and solid waste. Permits requiring regular monitoring and compliance with waste discharge limitations and reporting requirements govern the discharge of various substances into the environment, including air and water. We have all permits required under the Environmental Management Act and corresponding regulations and are in substantial compliance with such permits, subject to the considerations relating to selenium, nitrate and sulphate levels described below and to one charge under this Act relating to a release of sediment and debris in April 2011 described in the Fisheries Act section below.
We are currently not meeting revised provincial water quality guidelines relating to selenium, nitrate and sulphate levels at the Brule Mine, and are cooperating with the British Columbia Ministry of Environment to reduce selenium levels and other contaminants of concern in our effluent to meet these guidelines. As a result, we are considering various alternatives for water management and treatment at the Brule Mine, which could lead to significantly increased compliance costs at the operation and increased bonding requirements.
The Environmental Management Act and the Contaminated Sites Regulation also affect our operations by imposing investigation and cleanup requirements for contaminated sites. Part 5 of the Environmental Management Act provides for the "Remediation of Mineral Exploration Sites and Mines" and gives general jurisdiction to the Chief Inspector of Mines, who is also responsible for the reclamation requirements imposed under the Mines Act and the Mine Code. The Contaminated Sites Regulation governs any contamination at "non-core areas," such as maintenance shops, storage facilities and crushing or processing plants, as well as the disposal, release or spilling of some chemical products used by coal and coking companies in their operations. Under the Contaminated Sites Regulation, joint and several liability may be imposed on current operators or owners of a site, previous operators or owners of a site, producers or transporters of a substance that caused contamination and others regardless of fault or the legality of the original activity that caused or resulted in the release of the hazardous substances.
First Nations Considerations
Canadian law recognizes the existence of Aboriginal and Treaty rights, including Aboriginal title to lands. The Canadian courts have confirmed that when the federal and provincial governments contemplate conduct that may adversely affect the Aboriginal or Treaty rights of a First Nation, they must consult with and accommodate the First Nation. In the regulatory context, the government's duty to consult may be triggered by a variety of decisions, including the decision to issue or amend a permit. In order to meet their duties to consult and accommodate in this context, the federal and provincial governments require a company seeking a new or amended permit or other authorization to engage and consult with the First Nation about the potential effects of granting the requested authorization. Based on this process, the company is then expected to assist the government in determining what accommodations, if any, of the First Nation's rights by the company may be necessary prior to granting the requested authorization.

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As we are governed by a significant number of permits in British Columbia and anticipate the need to both obtain new permits and amend existing permits in connection with our current and future operations, the government's duty to consult with First Nations may impact future operations. If the federal or provincial government determines that it has a duty to consult in a permitting matter, the consultation process could create significant delays and additional costs relating to the eventual issuance or amendment of the relevant permit. Further, where a federal or provincial government fails to meet its duty to consult in granting a government permit or authorization, such a failure may expose our permits and authorizations to judicial review, lengthy court processes and the risk of cancellation of the government permit or authorization.
We strive to build beneficial relationships with the First Nations in our areas of operation and participate in any consultation process that relates to our operations. The duty to consult is an obligation of the government; however, procedural aspects are delegated to proponents and the consultation process would not progress without our involvement and our strong interest in ensuring that the process is carried out effectively and comprehensively. We are committed to engaging with First Nations in a meaningful way and devote significant time and resources to working proactively and cooperatively with local First Nations to acknowledge and address their concerns.
Fisheries Act
The Fisheries Act (Canada) regulates and provides protection for fish and fish habitat. The Fisheries Act prohibits the harmful alteration, disruption or destruction of fish habitat without authorization, as well as the deposit of deleterious substances (as defined in the legislation) into waters frequented by fish. These offenses could attract fines of up to $6.0 million Canadian dollars ("CAD") for each day that an offense continues and up to $12 million CAD for a second or subsequent offense. Liability under the Fisheries Act is for owners of the property or substance, as well as their directors, officers, agents, tenants, occupiers, partners or persons actually in charge of the property or substance.
In March 2013, a charge was laid by British Columbia's Environmental Crown Counsel against us for alleged violations of the Federal Fisheries Act associated with an April 2011 release of sediment and debris into Willow Creek from the forest service road leading to the Willow Creek Mine. We were also charged with an offense under the provincial Environmental Management Act alleging that we introduced waste into the environment and failed to comply with the requirements of our permit. In July 2014, the Crown dropped all charges under the Federal Fisheries Act. We plead guilty to one charge under the Environmental Management Act and agreed to pay a $5,000 CAD fine and $70,000 CAD to the Habitat Conservation Trust Foundation. This matter is now resolved.
Provincial and Federal Environmental Assessment Acts
Projects and project expansions of certain types and sizes are subject to provincial or federal environmental assessment processes, or both. Environmental assessment processes give consideration to a wide range of environmental and socio-economic impacts, and may result in denial of a project or expansion, or an approval of a project or expansion subject to terms and conditions.
Our Canadian operations have been subject to an environmental assessment under the provincial Environmental Assessment Act. Each project was issued an environmental assessment certificate that sets out the criteria according to which the project must be designed and constructed, along with a schedule that sets out the commitments we have made to address concerns raised through the environmental assessment process. If, for any reason, our operations are not conducted in accordance with the environmental assessment certificate, our operations may be temporarily suspended until such time as our operations are brought back into compliance.
Any significant changes to our current operations or further development of our properties in British Columbia may trigger a federal or provincial environmental assessment or both. In particular, the proposed project amendments at the EB Mine have the potential to trigger either or both a provincial or federal environmental assessment. An additional environmental assessment, including the requirement for a substantive public review and First Nations consultation process, could result in significant delays for the operation.
Our environmental assessment certificate in respect of our Hermann Mine project was scheduled to expire in November 2013; however, we have applied for and received a one-time five year extension of this environmental assessment certificate. As a result, in order to maintain this certificate we must substantially start the project by November 24, 2018.
Mines Act and the Health, Safety and Reclamation Code for Mines in British Columbia (the "Mine Code")
Our Canadian operations require Mines Act permits outlining the details of the work at the mine and a program for the conservation of cultural heritage resources and for the protection and reclamation of the land and watercourses affected by the mine. The Chief Inspector of Mines may issue a permit with conditions, including requiring that the owner, agent, manager or permittee give security in an amount and form specified by the Chief Inspector for mine reclamation and to provide for the

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protection of watercourses and cultural heritage resources affected by the mine. The reclamation security may be applied towards mine closure or reclamation costs and other miscellaneous obligations if permit conditions are not met. Detailed reclamation and closure requirements are contained in the Mine Code.
Under the Mines Act and the Mine Code, we have filed mine plans and reclamation programs for each of our operations. We accrue for reclamation costs to be incurred related to the operation and eventual closure of our mines once they have reached the end of their life. Additionally, under the terms of each mine permit, we are required to submit an updated mine plan every five years. We submitted updated five year mine plans for Wolverine Mine and Brule Mine in 2013.
Estimates of our total reclamation liabilities are based upon permit requirements and our experience for similar activities. As of December 31, 2014, we accrued $56.7 million for our asset retirement obligations for all our Canadian mining operations.
As of December 31, 2014, we had posted letters of credit for post-mining reclamation, as required by our Mines Act permits, totaling $20.7 million.
Climate Change
While initially a signatory to the December 1997 Kyoto Protocol that established a set of GHG emission targets for developed countries, Canada withdrew from the Kyoto Protocol at the Conference of Parties 17 of the United Nations Framework Convention on Climate Change in December 2011. While the government of Canada has a previously stated goal of reducing Canada's total GHG emissions by 17 percent from 2005 levels by 2020, it is largely relying on voluntary programs and subsidies. The Canadian government has also publicly stated that any legislative action to reduce GHG emissions at the federal level must be integrated with U.S. legislation. While there are currently no federal emissions targets affecting the Company's operations, the Company is currently required to report its emissions from the Wolverine Mine, and may in the future be required to report emissions for its other Canadian operations, pursuant to the federal Canadian Environmental Protection Act ("CEPA"). This Act requires operators of facilities emitting greater than 50,000 metric tons per year of carbon dioxide equivalent to report emissions annually. Thus far, federal climate change law and policy has reflected a minimalist approach to federal regulation, but the potential exists for the federal government to exercise additional regulation-making authority in the future.
In British Columbia, the provincial government has legislated targets of GHG emissions reductions of 33% below 2007 emissions levels by 2020 and 80% below 2007 emissions levels by 2050. British Columbia has also imposed a carbon tax on fuel since 2008. In November 2009, the provincial government enacted a reporting regulation that requires facilities emitting greater than 10,000 metric tons of carbon dioxide equivalent per year to register and report emissions annually for periods beginning on January 1, 2010. Each of the Company's Canadian operations is required to report emissions under the provincial legislation.
Although the costs currently associated with emissions reporting under federal and provincial legislation are not material, the implementation of emissions targets or the proposed provincial cap and trade system may result in material future financial impacts on our Canadian operations. As in the United States, it is unclear in the current political climate (both federally and provincially) whether emissions reductions programs will be enacted and if so, when it would be enacted or what the program would require as well as any impact such enactment may have on our operations. Any such impact could have a significant adverse impact on our operations.
U.K. Environmental Laws
Our operations in Wales are subject to certain environmental laws and regulations of the United Kingdom, including the Environmental Protection Act 1990, Environment Act 1995, Environmental Permitting Regulations 2010 and Town and Country Planning Act 1990. The costs of compliance with these environmental laws have not had a material impact on our results of operations in the most recently completed financial year and we do not expect that compliance with these laws will have a material impact on our results of operations in the current or future financial years. As of December 31, 2014, we have accrued approximately $2.3 million for our asset retirement obligations at all of our U.K mining operations. Further, as of December 31, 2014, we had posted cash bonds for post-mining reclamation totaling approximately $2.2 million for our U.K. operations.
Other Environmental Laws
We are required to comply with numerous other federal, state, provincial and local environmental laws and regulations in addition to those previously discussed. These additional laws include the Endangered Species Act, the Safe Drinking Water Act, the Toxic Substance Control Act, the Emergency Planning and Community Right-to-Know Act, the British Columbia Water Act and the British Columbia Forest Act.

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Seasonality
Our primary business is not materially impacted by seasonal fluctuations. Demand for coal is generally more heavily influenced by other factors such as the general economy, interest rates and commodity prices.
Employees
As of December 31, 2014, we employed approximately 2,680 employees, of whom approximately 1,840 were hourly employees and 840 were salaried employees. As of December 31, 2014, unions represented approximately 1,560 employees under collective bargaining agreements, of which approximately 1,326 were covered by a contract with the United Mine Workers of America that expires on December 31, 2016.
Additional Information
We were incorporated in Delaware in 1987. Our principal executive offices are located at 3000 Riverchase Galleria, Suite 1700, Birmingham, Alabama 35244, and our telephone number at that address is (205) 745-2000.
We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments thereto available on our website at www.walterenergy.com without charge as soon as reasonably practical after filing these reports or furnishing these reports to the SEC. We also make available through our website other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act. We do not intend for information contained on our website to be part of this Annual Report on Form 10-K. Additionally, we also provide, without charge, a copy of our Annual Report on Form 10-K to any stockholder by mail. Requests should be sent to Walter Energy, Inc., Attention: Shareholder Relations, 3000 Riverchase Galleria, Suite 1700, Birmingham, Alabama 35244. You may read and copy any document that the Company files at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public on the SEC's website at http://www.sec.gov.
Executive Officers of the Registrant
Incorporated by reference into this Part I is the information set forth in Part III, "Item 10. Directors, Executive Officers and Corporate Governance."

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Item 1A.    Risk Factors
Our business is subject to general risks and uncertainties that could materially adversely affect our business, financial condition, results of operations or stock price. Additional risks and uncertainties not currently known to us or that we may deem immaterial may also materially adversely affect our business, financial condition, results of operations or stock price.
Risks Related to Our Current Continuing Operations
Unfavorable global economic, financial and business conditions may adversely affect our businesses.
The global financial markets have been experiencing volatility and disruption over the last several years. These markets have experienced, among other things, volatility in security prices, commodities and currencies, diminished liquidity and credit availability, rating downgrades and declining valuations of certain investments. Weaknesses in global economic conditions have had an adverse effect and could have a material adverse effect on the demand for our coal, coke and natural gas products and on our sales, pricing and profitability. We are not able to predict whether the global economic conditions will continue, worsen or the impact that these events may have on our operations and the industry in general.
Our businesses may suffer as a result of a substantial or extended decline in pricing, demand and other factors beyond our control, which could negatively affect our operating results and cash flows.
Our businesses are cyclical and have experienced significant difficulties in the past. Our financial performance depends, in large part, on varying conditions in the international and domestic markets that we serve, which fluctuate in response to various factors beyond our control. The prices at which we sell our coal, coke and natural gas are largely dependent on prevailing market prices for those products. We have experienced significant price fluctuations in our coal, coke and natural gas businesses, and we expect that such fluctuations will continue. Demand for, and therefore the price of, coal, coke and natural gas are driven by a variety of factors, including, but not limited, to the following:
the domestic and foreign supply and demand for coal;

the quantity and quality of coal available from competitors;

adverse weather, climatic and other natural conditions, including natural disasters;

domestic and foreign economic conditions, including economic slowdowns;

global and regional political events;

legislative, regulatory and judicial developments, environmental regulatory changes and changes in energy policy and energy conservation measures that could adversely affect the coal industry, such as legislation limiting carbon emissions or providing for increased funding and incentives for the use of alternative energy sources;

capacity, reliability, availability and cost of transportation and port facilities, and the proximity of available coal to such transportation and port facilities; and

market price fluctuations for emission allowances.
In addition, reductions in the demand for metallurgical coal caused by reduced steel production by our customers, increases in the use of substitutes for steel (such as aluminum, composites or plastics) and the use of steel-making technologies that use less or no metallurgical coal can significantly affect our financial results and impede growth. Demand for thermal coal is primarily driven by the price of thermal coal as it compares to that of natural gas and the consumption patterns of the domestic electric power generation industry, which in turn is influenced by demand for electricity and technological developments. We estimate that a 10% decrease in the price of metallurgical coal for the full year 2014 would have resulted in an increase in our pre-tax loss by $111.5 million.
The failure of our customers to honor or renew contracts could adversely affect our business.
A significant portion of the sales of our coal, coke and natural gas are to long-term customers. The success of our businesses depends on our ability to retain our current customers, renew our existing customer contracts and solicit new customers. Our ability to do so generally depends on a variety of factors, including the quality and price of our products, our ability to market these products effectively, our ability to deliver on a timely basis and the level of competition that we face. If current customers do not honor current contract commitments, or if they terminate agreements or exercise force majeure provisions allowing for the temporary suspension of performance, our revenues will be adversely affected. If we are

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unsuccessful in renewing contracts with our long-term customers and they discontinue purchasing coal, coke or natural gas from us or renew contracts on terms less favorable than in the past, or if we are unable to sell our coal, coke or natural gas to new customers on terms favorable to us, our revenues could suffer significantly.
Our ability to collect payments from our customers could be impaired if their creditworthiness deteriorates.
Our ability to receive payment for coal, coke and natural gas sold and delivered depends on the continued creditworthiness of our customers. If we determine that a customer is not creditworthy, we may not be required to deliver coal, coke or natural gas sold under the customer's sales contract. If this occurs, we may decide to sell the customer's coal, coke or natural gas on the spot market, which may be at prices lower than the contracted price, or we may be unable to sell the coal, coke or natural gas at all. Furthermore, the bankruptcy of any of our customers could materially and adversely affect our financial position. In addition, competition with other coal, coke or natural gas suppliers could cause us to extend credit to customers on terms that could increase the risk of payment default.
Coal mining is subject to inherent risks and is dependent upon many factors and conditions beyond our control, which may cause our profitability and our financial position to decline.
Coal mining is subject to inherent risks and is dependent upon a number of conditions beyond our control that can affect our costs and production schedules at particular mines. These risks and conditions include, but are not limited to:
variations in geological conditions, such as the thickness of the coal seam and amount of rock embedded in the coal deposit and variations in rock and other natural materials overlying the coal deposit;
mining, process and equipment or mechanical failures and unexpected maintenance problems;
adverse weather and natural disasters, such as heavy rains or snow, flooding and other natural events affecting the operations, transportation or customers;
environmental hazards, such as subsidence and excess water ingress;
delays and difficulties in acquiring, maintaining or renewing necessary permits or mining rights;
availability of adequate skilled employees and other labor relations matters;
unexpected mine accidents, including rock-falls and explosions caused by the ignition of coal dust, natural gas or other explosive sources at our mine sites or fires caused by the spontaneous combustion of coal or similar mining accidents; and
competition and/or conflicts with other natural resource extraction activities and production within our operating areas, such as coalbed methane extraction or oil and gas development.
These risks and conditions could result in damage to or the destruction of our mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and legal liability. For example, an explosion and fire occurred in our Alabama underground No. 5 Mine in September 2001. This accident resulted in the deaths of thirteen employees and caused extensive damage to the mine. Our insurance coverage may not be available or sufficient to fully cover claims that may arise from these risks and conditions.
We have also experienced adverse geological conditions in our mines, such as variations in coal seam thickness, variations in the competency and make-up of the roof strata, fault-related discontinuities in the coal seam and the potential for ingress of excessive amounts of methane gas or water. We are not able to quickly increase production at one mine to offset an interruption in production at another mine. Such adverse conditions may increase our cost of sales and reduce our profitability, and may cause us to decide to close a mine. Any of these risks or conditions could have a negative impact on our profitability, the cash available from our operations or our financial position.
Defects in title of any real property or leasehold interests in our properties or associated coal and gas reserves could limit our ability to mine or develop these properties or result in significant unanticipated costs.
Our right to mine some of our coal reserves and extract natural gas may be materially adversely affected by defects in title or boundaries. We may not adequately verify title to our leased properties or associated coal or gas reserves until we have committed to developing those properties or coal or gas reserves. We may not commit to developing property or coal or gas reserves until we have obtained necessary permits and completed exploration. Any challenge to our title could delay the development of the property and could ultimately result in the loss of some or all of our interest in the property or coal or gas reserves and could increase our costs. In addition, if we mine or conduct our natural gas operations on property that we do not

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own or lease, we could incur liability for such mining and gas operations. Some leases have minimum production requirements or require us to commence mining or gas operations in a specified term to retain the lease. Failure to meet those requirements could result in losses of prepaid royalties and, in some rare cases, could result in a loss of the lease itself.
Currently we have significant mining operations located predominately in central Alabama and northeast British Columbia, making us vulnerable to risks associated with having our production concentrated in two geographic areas.
Our mining operations are primarily geographically concentrated in central Alabama and Northeast British Columbia. As a result of this concentration, we may be disproportionately exposed to the impact of delays or interruptions in production caused by significant governmental regulation, transportation capacity constraints, curtailment of production, extreme weather conditions, natural disasters or interruption of transportation or other events that impact these areas. Our Northeast British Columbia operations were idled in 2014. We will continue to operate the preparation plant at the Willow Creek mine to complete processing of coal inventory that has already been mined.
A significant reduction of, or loss of, purchases by our largest customers could adversely affect our profitability.
For the year ended December 31, 2014, we derived approximately 29% of our total sales revenues from sales to our five largest customers. We expect to renew, extend or enter into new supply agreements with these and other customers; however, we may be unsuccessful in obtaining such agreements with these customers and these customers may discontinue purchasing coal from us. If any of our major customers were to significantly reduce the quantities of coal they purchase from us and we are unable to replace these customers with new customers, or if we are otherwise unable to sell coal to those customers or on terms favorable to us, our profitability could suffer significantly.
If transportation for our coal becomes unavailable or uneconomic for our customers, our ability to sell coal could suffer.
Transportation costs can represent a significant portion of the total cost of coal to be delivered to the customer and, as a result, overall price increases in our transportation costs could make our coal less competitive with the same or alternative products from competitors with lower transportation costs. We typically depend upon overland conveyor, trucks, rail or barges to transport our products. Disruption of any of these transportation services due to weather related problems, which are variable and unpredictable; strikes or lock-outs; accidents; transportation delays or other events could impair our ability to supply our products to our customers, thereby resulting in lost sales and reduced profitability.
All of our U.S. metallurgical mines are served by only one rail carrier, which increases our vulnerability to these risks, although our access to barge transportation partially mitigates that risk. In addition, the majority of the metallurgical coal produced by our Alabama underground mining operations is sold to coal customers who typically arrange and pay for transportation through the state-run docks at the Port of Mobile, Alabama to the point of use. As a result, disruption at the docks, port congestion and delayed coal shipments may result in demurrage fees to us. If this disruption were to persist over an extended period of time, demurrage costs could significantly impact our profits. In addition, there are limited cost effective alternatives to the port. Similar to the U.S. operations, substantially all of the coal produced by our Canadian operations is exported to port facilities by one railway for which there are limited alternatives. Additionally, all of our Canadian export sales are loaded through one port facility, for which there are limited cost-effective alternatives. The cost of securing additional facilities and services of this nature could significantly increase transportation and other costs. An interruption of rail or port services could significantly limit our ability to operate and, to the extent that alternate sources of port and rail services are available, could increase transportation and port costs significantly. Further, the inconsistent nature of the shipping industry could affect our revenues as a result of delays of ocean vessels and could significantly affect our costs and relative competitiveness compared to the supply of coal and other products from our competitors.
Significant competition and foreign currency fluctuations could harm our sales, profitability and cash flows.
The consolidation of the coal industry over the last several years has contributed to increased competition among coal producers. Some of our competitors have significantly greater financial resources than we do. This competition may affect domestic and foreign coal supply and associated prices and impact our ability to retain or attract coal customers. In addition, our metallurgical coal business faces competition from foreign producers that sell their coal in the export market. The general economic conditions in foreign markets and changes in currency exchange rates are factors outside of our control that may affect international coal prices. If our competitors' currencies decline against our local currency or against our customers' currencies, those competitors may be able to offer lower prices to our customers. Furthermore, if the currencies of our overseas customers were to significantly decline in value in comparison to the U.S. dollar, which our sales contracts are based on, those customers may seek decreased prices for the coal that we sell to them. In addition, these factors may negatively impact our collection of trade receivables from our customers. These factors could reduce our profitability or result in lower coal sales.
Expenses from our Canadian operations are typically incurred and paid in Canadian dollars and our United Kingdom operations revenues and expenses are incurred and paid in British pounds. We have elected not to adopt a formal foreign

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currency hedging strategy and as a result any significant fluctuation in foreign exchange rates could adversely affect our financial position and operating results.
Our businesses are subject to risk of cost increases and fluctuations and delay in the delivery of raw materials, mining equipment and purchased components.
Our businesses require significant amounts of raw materials, mining equipment and labor. As a result, shortages or increased costs of raw materials, mining equipment and labor could adversely affect our business or results of operations. Our coal mining operations rely on the availability of steel, petroleum products and other raw materials for use in various mining operations. The availability and market prices of these materials are influenced by various factors that are beyond our control. Over the last year petroleum prices have fluctuated significantly and pricing for steel scrap has fluctuated markedly. Any inability to secure a reliable supply of these materials or shortages in raw materials used in the operation and manufacturing of mining equipment or replacement parts could negatively impact our operating results.
Work stoppages, labor shortages and other labor relations matters may harm our business.
The majority of employees of our underground mining operations in Alabama are represented by the United Mine Workers of America ("UMWA"). Normally, our negotiations with the UMWA follow the national contract negotiated with the UMWA by the Bituminous Coal Operators Association. Our collective bargaining agreement currently in place expires on December 31, 2016. At our coking operation in Birmingham, Alabama, our employees are represented by the United Steelworkers of America, and the current contract expires on December 6, 2015. We experienced a strike at our coke facilities at the end of 2001 that lasted eight months.
While our Canadian operations are currently idled, during normal operations, a majority of our employees at our Wolverine and Willow Creek mining operations in Canada are also unionized. The Wolverine employees are represented by the United Steelworkers of America, Local 1-424, and our current collective bargaining agreement with the employees for that location expires on July 31, 2015. The employees at our Willow Creek mining operations are represented by Christian Labour Association of Canada ("CLAC"), and although our current collective bargaining agreement with CLAC for that location expired on November 30, 2014, we are currently in negotiations.
Future work stoppages, labor union issues or labor disruptions at our operations, and those of key customers or service providers could impede our ability to produce and deliver our products, to receive critical equipment and supplies or to collect payment. This may increase our costs or impede our ability to operate one or more of our operations.
We require a skilled workforce to run our business. If we cannot hire qualified people to meet replacement or expansion needs, we may not be able to achieve planned results.
Efficient coal mining using modern techniques and equipment requires skilled laborers with mining experience and proficiency as well as qualified managers and supervisors. The demand for skilled employees sometimes causes a significant constriction of the labor supply resulting in higher labor costs. When coal producers compete for skilled miners, recruiting challenges can occur and employee turnover rates can increase, which negatively affect operating efficiency and costs. If a shortage of skilled workers exists and we are unable to train and retain the necessary number of miners, it could adversely affect our productivity, costs and ability to expand production.
We have reclamation and mine closure obligations. If the assumptions underlying our accruals are inaccurate, we could be required to expend greater amounts than anticipated.
The SMCRA and counterpart state laws and regulations in the United States; the Mines Act and the Reclamation Code for Mines in British Columbia, Canada; and the Environmental Protection Act 1990, Environment Act 1995, Environmental Permitting Regulations 2010 and Town and Country Planning Act 1990 in the U.K. have established operational, reclamation and closure standards for all aspects of surface mining as well as most aspects of deep mining. We accrue for reclamation costs associated with final mine closure. Estimates of our total reclamation and mine-closing liabilities are based upon permit requirements and our experience for similar activities. The amounts recorded are dependent upon a number of variables, including the estimated timing and amounts of future retirement costs, estimated proven reserves, assumptions involving profit margins, inflation rates and the assumed credit-adjusted risk-free interest rates. Furthermore, these obligations are unfunded. If these accruals are insufficient or our liability in a particular year is greater than currently anticipated, our future operating results could be adversely affected. As of December 31, 2014, we had accrued $112.3 million for all our asset retirement obligations.

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Inaccuracies in our estimates of our coal reserves could result in decreased profitability from lower than expected revenues or higher than expected costs.
Our future performance depends on, among other things, the accuracy of our estimates of our proven and probable coal reserves. Reserve estimates are based on a number of sources of information, including engineering, geological, mining and property control maps, our operational experience of historical production from similar areas with similar conditions and assumptions governing future pricing and operational costs. We update our estimates of the quantity and quality of proven and probable coal reserves at least annually to reflect the production of coal from the reserves, updated geological models and mining recovery data, the tonnage contained in new lease areas acquired and estimated costs of production and sales prices. There are numerous factors and assumptions inherent in estimating coal quantities, qualities and costs to mine, including many factors beyond our control such as the following:
quality of the coal;
geological and mining conditions, which may not be fully identified by available exploration data and/or may differ from our experiences in areas where we currently mine;
the percentage of coal ultimately recoverable;
the assumed effects of regulation, including the issuance of required permits, taxes, including severage and excise taxes and royalties, and other payments to governmental agencies;
assumptions concerning the timing of the development of the reserves; and
assumptions concerning the equipment and operational productivity, future coal prices, operating costs, including for critical supplies such as fuel, tires and explosives, capital expenditures and development and reclamation costs.
As a result, estimates of the quantities and qualities of economically recoverable coal attributable to any particular group of properties, classifications of reserves based on risk of recovery, estimated cost of production, and estimates of future net cash flows expected from these properties as prepared by different engineers or by the same engineers at different times, may vary materially due to changes in the above factors and assumptions. Actual production recovered from identified reserve areas and properties, and revenues and expenditures associated with our mining operations may vary materially from estimates. Any inaccuracy in our estimates related to our reserves could result in decreased profitability from lower than expected revenues and/or higher than expected costs.
Our inability to develop coal reserves in an economically feasible manner or our inability to acquire additional coal reserves may adversely affect our business.
Our long-term profitability depends in part on our ability to cost effectively mine and process coal reserves that possess the quality characteristics desired by our customers. As we mine, our coal reserves decline. As a result, our future success depends upon our ability to develop or acquire additional coal reserves that are economically recoverable. We may not be able to obtain adequate economically recoverable replacement reserves when we require them. If available, replacement reserves may not be available at favorable prices or we may not be capable of mining those reserves at costs that are comparable with our existing coal reserves.
Additionally, we may not be able to accurately assess the geological characteristics of reserves that we now own or subsequently acquire, which may adversely affect our profitability and financial condition. Exhaustion of reserves at particular mines also may have an adverse effect on our operating results that is disproportionate to the percentage of overall production represented by those mines. Our ability to acquire other reserves in the future could be limited by, our financial position, restrictions under our existing or future debt agreements, competition from other coal companies for attractive properties or the lack of suitable acquisition candidates available on commercially reasonable terms, among other factors. If we are unable to replace or increase our coal reserves on acceptable terms, our production and revenues will decline as our reserves are depleted and our future profits will be detrimentally impacted.
Canadian licenses, permits and other authorizations may be subject to challenges based on Aboriginal or Treaty rights.
Canadian judicial decisions have recognized the continued existence of Aboriginal and Treaty rights in Canada, including title to lands continuously used or occupied by Aboriginal groups. Our Northeast British Columbia operations are located within Treaty 8 territory, to which nine First Nations in British Columbia are signatories. Current operations are in or near the traditional territories of the West Moberly, Saulteau and Halfway River First Nations, and the McLeod Lake Indian Band. The Province of British Columbia has signed an Economic Benefits Agreement and related land and resource use agreements with several of the First Nations, including the West Moberly First Nation, over the last few years. The Treaty 8, as well as the

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Economic Benefits Agreement and related agreements, establish First Nations rights and define roles for their involvement in land and resource use. As a means of protecting Treaty and Aboriginal rights, as well as undetermined aboriginal rights, Canadian courts continue to confirm a duty to consult with Aboriginal groups when the Crown has knowledge of existing rights or the potential existence of an Aboriginal right, such as title or hunting rights, and contemplates conduct that might adversely impact such First Nations rights. As issues relating to Aboriginal and Treaty rights and consultation continue to be heard, developed and resolved in Canadian courts, we will continue to cooperate, communicate and exchange information and views with Aboriginal groups and government, and participate with the Crown in its consultation processes with Aboriginal groups in order to foster good relationships and minimize risks to our mineral rights and operational plans. Due to their complexity, it is not expected that the issues regarding Aboriginal and Treaty rights or consultation will be finally resolved in the short term and, accordingly, the impact of these issues on mineral resources and on our mining operations is unknown at this time. We believe in building mutually beneficial and lasting relationships with local First Nations whose Treaty rights or potential Aboriginal rights overlap with our areas of operations. We are in the process of further formalizing our relationships with local First Nations through agreements that generally seek to increase First Nations' participation in our planning and operational activities. Should a dispute arise between the First Nations and the Crown, it could significantly restrict our ability to operate and transport coal within the region. Also, such action could have a detrimental impact on our financial condition and results of operations as well as on our customers.
Failure to meet our project development and expansion targets could have a material adverse effect on our business.
There can be no assurance that we will be able to manage an expansion of our operations effectively or that our current personnel, systems, procedures and controls will be adequate to support our operations. Any failure of management to effectively manage our growth and development could have a material adverse effect on our business, financial condition and results of operations.
Our targets are subject to the completion of planned operational goals on time and within budget, and are dependent on the effective support from our personnel, systems, procedures and controls. Any failure of these may result in delays in the achievement of operational targets with a consequent material adverse impact on our business, operations and financial performance.
Our operations in foreign jurisdictions are subject to risks and uncertainties that may have a negative impact on our profitability.
We operate and sell to customers in a number of foreign countries where there are added risks and uncertainties due to the different economic, cultural and political environments. We face risks in securing additional property licenses, as the process for obtaining these is likely to be different from that in the U.S. Such risks could result in failed attempts to obtain licenses that would have consumed management time and financial resources. We also face risks from trade barriers, exchange controls and material changes in taxation which could negatively impact our ability to sell into foreign markets, as well as our profitability.
Extensive environmental, health and safety laws and regulations impose significant costs on our operations and future regulations could increase those costs, limit our ability to produce or adversely affect the demand for our products.
Our businesses are subject to numerous federal, state, provincial and local laws and regulations with respect to matters such as:
permitting and licensing requirements;
employee health and safety, including:
occupational safety and health;
mine health and safety;
workers' compensation;
black lung;
reclamation and restoration of property;
environmental laws and regulations, including:
greenhouse gases and climate change;
air quality standards;

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water quality standards;
management of materials generated by mining and coking operations;
the storage, treatment and disposal of wastes;
remediation of contaminated soil and groundwater; and
protection of human health, plant-life and wildlife, including endangered species, and emergency planning and community right to know.
Compliance with these regulations may be costly and time-consuming and may delay commencement or interrupt continuation of exploration or production at one or more of our operations. These laws are constantly evolving and becoming increasingly stringent. The ultimate impact of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that certain implementing regulations for these laws have not yet been promulgated and in certain instances are undergoing revision. These laws and regulations, particularly new legislative or administrative proposals (or judicial interpretations of existing laws and regulations), could result in substantially increased capital, operating and compliance costs and could have a material adverse effect on our operations and/or our customers' ability to use our products. In addition, the coal industry in the U.S. is affected by significant legislation mandating certain benefits for current and retired coal miners.
We strive to conduct our mining, natural gas and coke operations in compliance with all applicable federal, provincial, state and local laws and regulations. However, due in part to the extensive and comprehensive regulatory requirements, along with changing interpretations of these requirements, violations occur from time to time in our industry and at our operations. In recent years, expenditures at our U.S. operations for regulatory or environmental obligations have been mainly for safety or process changes. Although it is not possible at this time to predict the final outcome of these rule-making and standard-setting efforts, it is possible that the magnitude of these changes will require an unprecedented compliance effort on our part, could divert management's attention, and may require significant expenditures. To the extent that these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, operating results will be detrimentally impacted. We believe that our major North American competitors are confronted by substantially similar conditions and thus do not believe that our relative position with regard to such competitors is materially affected by the impact of environmental laws and regulations. However, the costs and operating restrictions necessary for compliance with environmental laws and regulations, which is a major cost consideration for our operations, may have an adverse effect on our competitive position with regard to foreign producers and operators who may not be required to undertake equivalent costs in their operations. In addition, the specific impact on each competitor may vary depending on a number of factors, including the age and location of its operating facilities, applicable state or provincial legislation and its production methods.
Federal, state, local or provincial regulatory agencies have the authority to order certain of our mines to be temporarily or permanently closed under certain circumstances, which could materially and adversely affect our ability to meet our customers' demands.
Federal, state, local or provincial regulatory agencies have the authority under certain circumstances following significant health and safety incidents, such as fatalities, to order a mine to be temporarily or permanently closed. If this occurred, we may be required to incur capital expenditures to re-open the mine. In the event that these agencies order the closing of our mines, our coal sales contracts generally permit us to issue force majeure notices, which suspend our obligations to deliver coal under these contracts; however, our customers may challenge our issuances of force majeure notices. If these challenges are successful, we may have to purchase coal from third-party sources, if available, to fulfill these obligations or incur capital expenditures to re-open the mines and/or negotiate settlements with the customers, which may include price reductions, the reduction of commitments, and the extension of time for delivery or terminate customers' contracts. Any of these actions could have a material adverse effect on our business and results of operations.
Increased focus by regulatory authorities on the effects of coal mining on the environment and recent regulatory developments related to coal mining operations could make it more difficult or increase our costs to receive new permits or to comply with our existing permits to mine coal or otherwise adversely affect us.
Regulatory agencies are increasingly focused on the effects of coal mining on the environment, particularly relating to water quality, which has resulted in more rigorous permitting requirements and enforcement efforts.
Section 404 of the CWA requires mining companies to obtain USACE permits to place material in streams for the purpose of creating slurry ponds, water impoundments, refuse areas, valley fills or other mining activities. As is the case with other coal mining companies, our construction and mining activities require Section 404 permits. The issuance of permits to construct valley fills and refuse impoundments under Section 404 of the CWA has been the subject of many court cases and

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increased regulatory oversight, resulting in additional permitting requirements that are expected to delay or even prevent the opening of new mines. Stringent water quality standards for materials such as selenium have recently been issued. We have begun to incorporate these new requirements into our current permit applications; however, there can be no guarantee that we will be able to meet these or any other new standards with respect to our permit applications.
In April 2010, the EPA issued comprehensive guidance to provide clarification as to the water quality standards that should apply when reviewing CWA permit applications for Appalachian surface coal mining operations. This guidance establishes threshold conductivity levels to be used as a basis for evaluating compliance with narrative water quality standards. To obtain necessary permits, we and other mining companies are required to meet these requirements. The U.S. District Court for the District of Columbia ruled that the EPA overstepped its statutory authority under the CWA and SMCRA, and infringed on the authority reserved to state regulators under those statutes when it issued the guidance. The EPA appealed the decision and the D.C. Circuit Court reversed the ruling and upheld the EPA's guidance document relating to such permits, against challenges from the mining industry and two states.
Additionally, in January 2011, the EPA rescinded a federal CWA permit held by another coal mining company for a surface mine in Appalachia citing associated environmental damage and degradation. While our operations are not directly impacted, this could be an indication that other surface mining water permits could be subject to more substantial review in the future. A federal judge reversed the decision by the EPA to revoke the permit and the EPA appealed the decision. On April 23, 2013, the D.C. Circuit ruled that the EPA has the power under the CWA to retroactively veto a section 404 dredge and fill permit "whenever" it makes a determination about certain adverse effects, even years after the USACE has granted the permit to an applicant. The owner of the coal mine, coal industry groups and others, including several states petitioned the U.S. Supreme Court to review and reverse the ruling; on March 24, 2014, the Court denied the petitions for review. In September 2014, the D.C. District Court ruled again in the EPA’s favor and the coal mining company has appealed the decision.
On March 25, 2014, the EPA and the USACE jointly proposed a rule defining the scope of waters protected under the CWA. The proposal would revise regulations that have been in place for more than 25 years. Revisions are proposed in light of 2001 and 2006 Supreme Court rulings that interpreted the regulatory scope of the CWA more narrowly than previously, but created uncertainty about the precise effect of the Court’s decisions. The public comment period for the proposed rule closed November 14, 2014. The EPA projects that a final rule will be promulgated in April 2015.
It is unknown what future changes will be implemented to the permitting review and issuance process or to other aspects of mining operations, but the increased regulatory focus, future laws and judicial decisions and any other future changes could materially and adversely affect all coal mining companies.
Regulatory agencies in Canada are also increasingly focused on the effects of coal mining on the environment, particularly as it relates to water quality and to wildlife habitat. The British Columbia Ministry of Environment updated its selenium guidelines in 2014, which could affect water quality issues and effluent discharge standards. Expansion of existing coal mines and development of new coal mines in northeast British Columbia have also been the focus of consideration with respect to the effects on caribou habitat, particularly in areas where caribou have been identified as a threatened species under the federal Species at Risk Act. It is unknown what future changes will be implemented to the permitting review and issuance process or to other aspects of surface mining operations in British Columbia, but the increased regulatory focus, future laws and judicial decisions and any other future changes could materially and adversely affect all coal mining companies operating in British Columbia, including us.
In particular, in each jurisdiction in which we operate, we will incur additional permitting and operating costs, could be unable to obtain new permits or maintain existing permits and could incur fines, penalties and other costs, any of which could materially adversely affect our business. If surface coal mining methods are limited or prohibited, it could significantly increase our operational costs and make it more difficult to economically recover a significant portion of our reserves. In the event that we cannot increase the price we charge for coal to cover the higher production costs without reducing customer demand for our coal, there could be a material adverse effect on our financial condition and results of operations. In addition, increased public focus on the environmental, health and aesthetic impacts of surface coal mining could harm our reputation and reduce demand for coal.
Climate change concerns could negatively affect our results of operations and cash flows.
The combustion of fossil fuels, such as the coal, coke and natural gas that we produce results in the creation of carbon dioxide that is currently emitted into the atmosphere by end-users. Further, some of our operations emit GHGs directly, such as methane release resulting from coal mining and carbon dioxide during our coke production. Carbon dioxide is considered a GHGs and is a major source of concern with respect to global warming, also known as climate change. Climate change continues to attract public and scientific attention and increasing government attention is being paid to reducing GHG emissions.

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There are many legal and regulatory approaches currently in effect or being considered to address GHGs, including possible future U.S. treaty commitments, new federal or state legislation that may impose a carbon emissions tax or establish a "cap and trade" program, and regulation by the U.S. EPA.
The U.S. EPA, under President Obama’s Climate Action Plan, has been working on an approach to cut carbon pollution from power plants. In 2013, the EPA proposed standards to limit carbon pollution from new power plants. In 2014, the EPA proposed the Clean Power Plan to limit carbon pollution from existing power plants as well as proposed standards to limit carbon pollution from modified and reconstructed power plants. The EPA plans to issue final rules on these standards in 2015. A major coal company, joined by Attorneys General from nine states filed a complaint asking the D.C. Circuit Court of Appeals to block the EPA from proceeding with the proposal. Twelve state Attorneys General filed another suit in the D.C. Circuit, arguing that the EPA’s proposed rules are the result of an allegedly illegal settlement with environmental groups in 2010. 
In November 2014, the U.S. and China announced a bilateral agreement to reduce GHG emissions. The U.S. agreed to reduce GHGs by 26-28% below 2005 levels by 2025. China pledged to stabilize its GHG emissions by 2030, to be accomplished in part by increasing its percentage of renewable energy sources such as solar and wind to 20% of the nation's total energy production.
Canadian legal and regulatory approaches include both federal and provincial regulations requiring the reporting of GHG emissions. Both the federal and provincial level governments are considering the implementation of GHG regulatory structures such as a "cap and trade" program and emissions trading. These programs could force reductions in total GHG emissions on an industry or facility basis. In British Columbia, the government imposes a carbon emissions tax with scheduled increases.
These existing laws and regulations or other current and future efforts to stabilize or reduce GHG emissions, could adversely impact the demand for, price of and value of our products and reserves. Passage of additional state, provincial, federal or foreign laws or regulations regarding GHG emissions or other actions to limit GHG emissions could result in users switching from coal to other alternative clean fuel substitutes. The anticipation of such additional requirements could also lead to reduced demand for some of our products. Alternative clean fuels, including non-fossil fuels, could become more attractive than coal in order to reduce GHG emissions, which could result in a reduction in the demand for coal, and therefore our revenues. As our operations also emit GHGs directly, current or future laws or regulations limiting GHG emissions could increase our own costs. Although the potential impacts on us of additional climate change regulation are difficult to reliably quantify, they could be material.
Our operations may impact the environment or cause exposure to hazardous substances and our properties may have environmental contamination, which could result in material liabilities to us.
Our operations currently use hazardous materials and generate hazardous wastes from time to time. We could become subject to claims for toxic torts, natural resource damages and other damages as well as for the investigation and cleanup of soil, surface water, groundwater and other media. Such claims may arise, for example, out of conditions at sites that we currently own or operate, as well as at sites that we previously owned or operated, or may acquire. Our liability for such claims may be joint and several, so that we may be held responsible for more than our share of the contamination or other damages, or even for the entire amount of damages assessed.
We maintain extensive coal refuse areas and slurry impoundments at our mining complexes. Such areas and impoundments are subject to extensive regulation. Slurry impoundments have been known to fail, releasing large volumes of coal slurry into the surrounding environment. Structural failure of an impoundment can result in extensive damage to the environment and natural resources, such as bodies of water that the coal slurry reaches, as well as create liability for related personal injuries, property damages and injuries to wildlife. Some of our impoundments overlie mined out areas, which can pose a heightened risk of failure and the assessment of damages arising out of such failure. If one of our impoundments were to fail, we could be subject to substantial claims for the resulting environmental contamination and associated liability, as well as for related fines and penalties.
Drainage flowing from or caused by mining activities can be acidic with elevated levels of dissolved metals, a condition referred to as "acid mine drainage" ("AMD"). Treatment of AMD can be costly. Although we do not currently face material costs associated with AMD, it is possible that we could incur significant costs in the future.
These and other similar unforeseen impacts that our operations may have on the environment, as well as exposures to hazardous substances or wastes associated with our operations, could result in costs and liabilities that could materially and adversely affect us.
See also "Environmental and Other Regulatory Matters" in "Item 1—Business" of this Annual Report on Form 10-K.

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Other Business Risks
Our substantial indebtedness could adversely affect our financial position and our ability to meet our obligations under our debt instruments.
We have a significant amount of indebtedness. As of December 31, 2014, we had indebtedness of approximately $978.2 million outstanding under a $2.7 billion credit agreement ("Credit Agreement"), $970.0 million of 9.50% senior secured notes due 2019, $388.0 million of 9.875% senior notes due 2020, $450.0 million of 8.50% senior notes due 2021 and $350.0 million 11.0%/12.0% senior secured PIK toggle notes due 2020 (together referred to as the "Notes"). Under the repayment schedule relating to the Credit Agreement, we will not be required to make mandatory principal payments until 2018. In addition, the excess cash flow provision, as defined in the Credit Agreement, will be applied if certain conditions are met, requiring us to reduce the principal balance of the indebtedness. We may be unable to generate sufficient cash flow from operations and future borrowings, or other financing may be unavailable in a sufficient amount, to enable us to fund our future financial obligations or our other liquidity needs.
Our substantial indebtedness could make it more difficult for us to borrow money in the future and may reduce the amount of money available to finance our operations and other business activities and may have other detrimental consequences, including the following:
requiring us to dedicate a substantial portion of our cash flow from operations to the payment of principal, premium, if any, and interest on our debt, which will reduce funds available for other purposes;
limiting our ability to obtain additional financing to fund growth for areas such as working capital and capital expenditure needs, or our ability to meet debt service requirements or other cash requirements;
exposing us to the risk of increased interest costs if the underlying interest rates rise on our existing credit facility or other variable rate debt;
making it more difficult to obtain surety bonds, letters of credit or other financing, particularly during periods in which credit markets are weak;
causing a decline in our credit ratings;
limiting our ability to compete with companies that are not as leveraged and that may be better positioned to withstand economic downturns;
limiting our ability to acquire new coal reserves and/or plant and equipment needed to conduct operations; and
limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we compete and general economic and market conditions.
If we further increase our indebtedness, the related risks that we now face, including those described above, could intensify.
In addition, the Credit Agreement and the indentures governing the Notes contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt. For additional information on the covenants under our Credit Agreement, see "Management's Discussion and Analysis and Results of Operations—Analysis of Material Covenants."
Our ability to generate the significant amount of cash needed to service our debt and financial obligations, to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness depends on our ability to generate cash in the future. We are subject to general economic, climatic, industry, financial, competitive, legislative, regulatory and other factors that are beyond our control. In particular, economic conditions have caused the price of coal to fall and our revenue to decline and in the future could cause the price of coal to remain at current levels or fall, which may have an adverse effect on our operations, liquidity, ability to remain in compliance with our covenants in our Credit Agreement, and our ability to service our indebtedness. As a result, we may need to refinance all or a portion of our indebtedness on or before maturity. Our ability to refinance our debt or obtain additional financing will depend on, among other things:

our financial condition at the time;


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restrictions in the agreements governing our indebtedness; and

other factors, including conditions in the financial and capital markets or coal industry.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Credit Agreement and the indentures governing the Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise capital from debt or equity financings to repay other indebtedness when it becomes due. Additionally, we may not be able to consummate such dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.

In addition, we conduct a substantial portion of our operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment or otherwise. Unless they are guarantors of the Notes or other indebtedness, our subsidiaries do not have any obligation to pay amounts due to our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to or be permitted to make distributions to enable us to make payments in respect to our indebtedness. Each subsidiary is a distinct legal entity and under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the Credit Agreement and the indentures governing the Notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries we may be unable to make required principal and interest payments on our indebtedness.

We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. If our operations do not generate sufficient cash flows, and additional borrowings or refinancing are not available to us, we may not have sufficient cash to enable us to meet all of our obligations.

If we cannot make scheduled payments on our debt or are not in compliance with our covenants and are not able to amend those covenants, we will be in default and holders of the Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Credit Agreement could terminate their commitments to loan money, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. If we are not able to generate sufficient cash flow from operations, we may need to seek an amendment to our Credit Agreement and the indentures governing our Notes to prevent us from potentially being in breach of our covenants.
Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.
We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the Credit Agreement and the indentures governing the Notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If new debt is added to our current debt levels, the related risks that we now face could intensify.
Restrictions in our existing and future debt agreements could limit our growth and our ability to respond to changing conditions.
The Credit Agreement, the indentures governing the Notes, and agreements governing our other indebtedness contain a number of significant covenants in addition to covenants restricting the incurrence of additional debt. These covenants limit our ability, among other things, to:
pay certain dividends or distributions on our capital stock or to repurchase our capital stock;
repurchase subordinated debt;
make certain investments;
create certain liens on our assets to secure debt;
merge or to enter into other business combination transactions;
enter into certain transactions with affiliates; and

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transfer and sell assets.
Our Credit Agreement requires us, among other things, to maintain certain financial ratios. These restrictions may also limit our ability to obtain future financings, withstand a future downturn in our business or the economy in general, or otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of the limitations that the restrictive covenants under the Credit Agreement and the indentures governing the Notes impose on us.
A breach of any covenant in the Credit Agreement, the indentures governing the Notes, or the agreements governing our other indebtedness would result in a default under that agreement after any applicable grace periods. A default, if not waived, could result in acceleration of the debt outstanding under the agreement and in a default with respect to, and acceleration of, the debt outstanding under any other debt agreements. The accelerated debt would become immediately due and payable. If that should occur, we may not be able to make all of the required payments or borrow sufficient funds to refinance it. Even if new financing were then available, it may not be on terms that are acceptable to us.
A "change in control" under the Credit Agreement, which may occur as a result of events beyond our control, would result in an event of default that could materially and adversely affect our results of operations and our financial condition.
A "change in control" as defined in our Credit Agreement is considered an event of default and is deemed to occur when any person or group beneficially owns 35% or more of our common stock or where our Board of Directors ceases to consist of a majority of continuing directors. Upon a change in control, the lenders could elect to declare due and payable immediately all amounts due, including principal and accrued interest. We may be unable to prevent a change in control from occurring at a time when we are unable to repay or refinance such indebtedness and the holders of such debt could proceed against the collateral securing that indebtedness. In addition, a change of control under our Credit Agreement could also result in an event of default under one or more of our other debt instruments.
Changes in our credit ratings could adversely affect our costs and expenses.
Any downgrade in our credit ratings could adversely affect our ability to borrow and result in more restrictive borrowing terms, including increased borrowing costs and more restrictive covenants. This could affect our internal cost of capital estimates and therefore impact operational and investment decisions.
Failure to obtain or renew surety bonds on acceptable terms could affect our ability to secure reclamation and coal lease obligations and, therefore, our ability to mine or lease coal.
Federal, state and provincial laws require us to obtain surety bonds or post other financial security to secure performance or payment of certain long-term obligations, such as mine closure or reclamation costs, federal and state workers' compensation costs, coal leases and other obligations. We may have difficulty procuring or maintaining our surety bonds. Our bond issuers may demand higher fees or additional collateral, including letters of credit or other terms less favorable to us upon those renewals. Because we are required by state and federal law to have these bonds in place before mining can commence or continue, our failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect our ability to mine or lease coal. That failure could result from a variety of factors, including lack of availability, higher expense or unfavorable market terms, the exercise by third party surety bond issuers of their right to refuse to renew the surety and restrictions on availability of collateral for current and future third party surety bond issuers under the terms of our financing arrangements.
Our expenditures for pensions and benefits, including postretirement benefits, are significant and could be materially higher than we have predicted if our underlying assumptions prove to be incorrect.
We provide a range of benefits to our employees and retirees, including pensions and postretirement healthcare. We record annual amounts relating to these plans based on calculations specified by generally accepted accounting principles, which include various actuarial assumptions. As of December 31, 2014, we estimated that our pension plans' aggregate projected benefit obligation had a present value of approximately $316.5 million, and the fair value of plan assets was approximately $244.6 million. As of December 31, 2014, we estimated that our postretirement health care and life insurance plans' aggregate projected benefit obligation had a present value of approximately $598.4 million and such benefits are not required to be funded. With respect to the funding obligations for our pension plans, we must make minimum cash contributions on a quarterly basis. Weakening of the economic environment and uncertainty in the equity markets may cause investment income and the values of investment assets held in our pension trust to decline and to lose value. As a result, in such circumstances we may be required to increase the amount of cash contributions we make into the pension trust in the future in order to meet the funding level requirements of the Pension Protection Act of 2006 (Pension Act). We do not have a required minimum funding requirement in fiscal year 2015. We have estimated these obligations based on assumptions described under the heading "Critical Accounting Estimates—Employee Benefits" in Part II, "Item 7. Management's Discussion and Analysis of

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Financial Condition and Results of Operations," and in the "Notes to Consolidated Financial Statements" included in this Annual Report on Form 10-K. Assumed health care cost trend rates, discount rates, expected return on plan assets and salary increases have a significant effect on the amounts reported for the pension and health care plans. If our assumptions do not materialize as expected, cash expenditures and costs that we incur could be materially higher. Moreover, regulatory changes could increase our obligations to provide these or additional benefits.
Beginning in 2018, the 2010 healthcare legislation as currently written will impose a 40% excise tax on employers to the extent that the value of their healthcare plan coverage exceeds certain dollar thresholds. We anticipate that certain government agencies will provide additional regulations or interpretations concerning the application of this excise tax. Until these regulations or interpretations are published, it is impractical to reasonably estimate the ultimate impact of the excise tax on our future healthcare costs or postretirement benefit obligations. We have incorporated changes to our actuarial assumptions to determine our postretirement benefit obligations utilizing preliminary estimates and basic assumptions around the pending interpretations of these regulations.
In addition, certain of our subsidiaries participate in multiemployer pension and healthcare plan trusts established for represented employees. Contributions to these funds could increase as a result of future collective bargaining with the UMWA , a shrinking contribution base as a result of the insolvency of other coal companies who currently contribute to these funds, failure of the plans to meet the Employee Retirement Income Security Act of 1974 ("ERISA") minimum funding requirements, lower than expected returns on pension fund assets, actions taken by, or other funding deficiencies.
We face risks and uncertainties by participating in the 1974 UMWA Pension Plan ("the 1974 Pension Plan"). All assets contributed to the plan are pooled and available to provide benefits for all participants and beneficiaries. As a result, contributions made by our subsidiaries benefit the employees of other employers. If the 1974 Pension Plan fails to meet ERISA's minimum funding requirements or fails to develop and adopt a rehabilitation plan, a nondeductible excise tax of five percent of the accumulated funding deficiency may be imposed on an employer's contribution to this multi-employer pension plan. As a result of the 1974 Pension Plan entering "critical" status, the Pensions Act requires a surcharge of 5% of the contributions otherwise required under the current collective bargaining agreement be contributed which will increase the contribution rate. Subject to certain exceptions, the surcharge will increase to 10% per hour on July 1, 2015. Additionally as a result of the 1974 Pension Plan's "critical" status, Federal law requires pension plans to adopt a rehabilitation plan aimed at restoring the financial health of the plan. The law permits pension plans to reduce, or even eliminate, benefits called "adjustable benefits" as part of a rehabilitation plan.
Under current law governing multi-employer defined benefit plans, if we withdrew from the 1974 Pension Plan or if the plan trustees were to terminate the plan, the currently underfunded multi-employer defined benefit plan would require us to make payments to the plan which would approximate the proportionate share of the multiemployer plan's unfunded vested benefit liabilities at the time of the withdrawal.
We have no current intention to withdraw from any multiemployer pension plan, but if we were to do so, under the ERISA , as amended, we would be liable for a proportionate share of the plan's unfunded vested benefit liabilities upon our withdrawal. Through June 30, 2014, our estimated withdrawal liability for the multiemployer pension plans amounted to $661.2 million.
We are responsible for portions of our workers' compensation and certain medical and disability benefits, and greater than expected claims could reduce our profitability.
We are responsible for portions of our workers' compensation benefits for work-related injuries. Workers' compensation liabilities, including those related to claims incurred but not reported, are recorded principally using annual valuations based on discounted future expected payments using historical data of the specific subsidiary or combined insurance industry data when historical data is limited. In addition, certain of our subsidiaries are responsible for medical and disability benefits for black lung disease under the Federal Coal Mine Health and Safety Act of 1969 and the Federal Mine Safety and Health Act of 1977, as amended, and are self-insured for portions of this liability against black lung related claims. We perform periodic evaluations of our black lung liability, using assumptions regarding rates of successful claims, discount factors, benefit increases and mortality rates, among others. See additional information under the heading "Critical Accounting Estimates—Employee Benefits" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report on Form 10-K.
If the number or severity of claims increases, or we are required to accrue or pay additional amounts because the claims prove to be more severe than our original assessment, our operating results could be reduced.

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We may be subject to litigation, the disposition of which could negatively affect our profitability and cash flow in a particular period, or have a material adverse effect on our business, financial condition and results of operations.
Our profitability or cash flow in a particular period could be affected by an adverse ruling in any litigation currently pending in the courts or by litigation that may be filed against us in the future. In addition, such litigation could have a material adverse effect on our business, financial condition and results of operations. For information regarding our current significant legal proceedings, see Part I, "Note 10—Income Taxes" and "Note 16—Commitments and Contingencies" to the "Notes to Consolidated Financial Statements" included in this Annual Report on Form 10-K.
Our executive officers and other key personnel are important to our success and the loss of one or more of these individuals could harm our business.
Our executive officers and other key personnel have significant experience in the businesses in which we operate and the loss of certain of these individuals could harm our business. Although we have been successful in attracting qualified individuals for key management and corporate positions in the past, as our business develops and in the current challenging environment, there can be no assurance that we will continue to be successful in attracting and retaining a sufficient number of qualified personnel in the future. The loss of key management personnel could harm our ability to successfully manage our business functions, prevent us from executing our business strategy and have an adverse effect on our results of operations and cash flows.
The price of our common stock may be volatile and may be affected by market conditions beyond our control.
Our share price has and is likely to fluctuate in the future because of the volatility of the stock market in general and a variety of factors, many of which are beyond our control, including:
general global economic conditions that impact infrastructure activity, including interest rate and currency movements and the effect this could have on commodity prices for our products;
quarterly variations in actual or anticipated results of our operations;
speculation in the press or investment community;
changes in financial estimates by securities analysts;
actions or announcements by our competitors or customers;
actions by our principal stockholders;
trading volumes of our common stock;
regulatory actions;
litigation;
U.S. and international economic, legal and regulatory factors unrelated to our performance;
loss or gain of a major customer;
additions or departures of key personnel; and
future issuances of our common stock.
Market fluctuations have and could continue to result in extreme volatility in the share price of our common stock, which could cause a decline in the value of our stock. Price volatility may be greater if the public float and trading volume of shares of our common stock is low. In addition, if our operating results and net income fail to meet the expectations of stock analysts and investors, we may experience an immediate and significant decline in the trading price of our stock.
If we cannot meet the New York Stock Exchange continued listing requirements, the NYSE may delist our common stock.
 
Our common stock is currently listed on the NYSE. In the future, if we are not be able to meet the continued listing requirements of the NYSE, which require, among other things, that the average closing price of our common stock not fall below $1.00 over 30 consecutive trading days, we would fall below compliance standards and could risk having our common stock delisted if the Company is not able to regain compliance.
 

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A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock; and limiting our ability to issue additional securities or obtain additional financing in the future.
Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board of Directors and may be limited by our current financial condition, our holding company structure, the covenants in our debt instruments and applicable provisions of Delaware law.
On January 27, 2015, our Board of Directors suspended the quarterly dividend to stockholders and may, in its discretion discontinue the payment of dividends for the foreseeable future. If we were to decide in the future to pay dividends, our ability to do so will be dependent upon the ability of our subsidiaries to generate earnings and cash flows and distribute them to us so that we may fund our obligations and pay dividends to our stockholders. The ability of our subsidiaries to make distributions to us will be subject to our and their respective operating results, cash requirements and financial condition, the applicable laws of the State of Delaware (which may limit the amount of funds available for distribution), compliance with covenants and required financial ratios related to existing or future indebtedness and other agreements with third parties. Furthermore, our Credit Agreement contains a restriction on our ability to pay cash dividends in any fiscal quarter when our secured leverage ratio exceeds 4.50:1.00. If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our business, we may not be able to make the payment of dividends on our shares in the foreseeable future.
Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition and results of operations.
Terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the U.S. or its allies, as well as military or trade disruptions affecting our customers or the economy as a whole may materially adversely affect our operations or those of our customers. As a result, there could be delays or losses in transportation and deliveries of coal to our customers, decreased sales of our coal and extension of time for payment of accounts receivable from our customers. Strategic targets such as energy-related assets may be at greater risk of future terrorist attacks than other targets in the U.S. In addition, disruption or significant increases in energy prices could result in government-imposed price controls. Any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition or results of operations.
We are exposed to significant liability, reputational harm, loss of revenue, increased costs or other risks if we sustain cyber-attacks or other security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us, our customers or other third-parties.
We have implemented security protocols and systems with the intent of maintaining the physical security of our operations and protecting our and our counterparties' confidential information and information related to identifiable individuals against unauthorized access. Despite such efforts, we may be subject to security breaches, which could result in unauthorized access to our facilities or the information that we are trying to protect. Unauthorized physical access to one of our facilities or electronic access to our information systems could result in, among other things, unfavorable publicity, litigation by affected parties, damage to sources of competitive advantage, disruptions to our operations, loss of customers, financial obligations for damages related to the theft or misuse of such information and costs to remediate such security vulnerabilities, any of which could have a substantial impact on our results of operations, financial condition or cash flows.
Item 1B.    Unresolved Staff Comments
None

40


Item 2.    Properties
The administrative headquarters and production facilities of the Company and its subsidiaries as of December 31, 2014 are summarized as follows:
 
 
 
 
 
 
Land
Acreage
 
Building
Square
Footage
 
 
Business Unit /Location
 
 
 
Reportable Segment
 
Principal Operations
 
Leased
 
Owned
 
Leased
 
Owned
U.S. Operations
 
Alabama Operations:
 
 
 
 

 
 

 
 

 
 

 
 
Blue Creek Coal Sales
 
 
 
 

 
 

 
 

 
 

 
 
Mobile, AL
 
Administrative headquarters
 

 

 

 
1,471

 
 
Mobile, AL
 
Real estate
 

 
16

 

 

 
 
Blue Creek Energy, Inc.
 
 
 
 

 
 

 
 

 
 

 
 
Tuscaloosa County, AL
 
Coal mines and land holdings
 
21,343

 
717

 
11,711

 

 
 
Jim Walter Resources
 
 
 
 

 
 

 
 

 
 

 
 
Brookwood, AL
 
Administrative headquarters & mine support facilities
 

 

 

 
577,841

 
 
Various Counties in AL
 
Coal mines, land holdings and coal bed methane fields
 

 
30,386

 

 

 
 
Tuscaloosa County, AL
 
Coal mines, land holdings and coal bed methane fields
 
16,437

 

 

 

 
 
Walter Black Warrior Basin
 
 
 
 

 
 

 
 

 
 

 
 
Tuscaloosa County, AL
 
Administrative headquarters & mine support facilities
 
10

 
28

 

 
15,425

 
 
Tuscaloosa County, AL
 
Coal bed methane fields—developed
 
91,022

 

 

 

 
 
Walter Minerals
 
 
 
 

 
 

 
 

 
 

 
 
Tuscaloosa County, AL
 
Mine support facilities—barge load-out
 

 
118

 

 
896

 
 
Various Counties in AL
 
Real estate
 

 
31,937

 
400

 
24,997

 
 
Various Counties in AL
 
Real estate—mineral interest only
 

 
168,182

 

 

 
 
Tuscaloosa Resources
 
 
 
 

 
 

 
 

 
 

 
 
Tuscaloosa County, AL
 
Administrative headquarters & mine support facilities
 

 

 
664

 
7,196

 
 
Tuscaloosa County, AL
 
Real estate
 

 
696

 

 


41


 
 
 
 
 
 
Land
Acreage
 
Building
Square
Footage
 
 
Business Unit /Location
 
 
 
Reportable Segment
 
Principal Operations
 
Leased
 
Owned
 
Leased
 
Owned
 
 
Taft Coal Sales & Assoc.
 
 
 
 

 
 

 
 

 
 

 
 
Walker County, AL
 
Administrative headquarters & mine support facilities
 

 

 

 
11,075

 
 
Walker County, AL
 
Coal mines and land holdings
 
1,817

 
1,563

 

 

 
 
Blount County, AL
 
Coal mines and land holdings
 
801

 

 

 

 
 
Walter Coke
 
 
 
 

 
 

 
 

 
 

 
 
Birmingham, AL
 
Administrative headquarters
 

 

 

 
13,135

 
 
Birmingham, AL
 
Furnace & foundry coke battery
 

 
428

 

 
222,112

 
 
West Virginia Operations:
 
 
 
 

 
 

 
 

 
 

 
 
Atlantic Leaseco
 
 
 
 

 
 

 
 

 
 

 
 
Nicholas County, WV
 
Administrative headquarters
 

 

 
2,640

 

 
 
Nicholas County, WV
 
Coal mines and land holdings
 
17,588

 
2,090

 

 
50,083

 
 
Maple Coal
 
 
 
 

 
 

 
 

 
 

 
 
Fayette & Kanawha Counties, WV
 
Coal mines and land holdings
 
35,704

 
5

 

 
47,100

 
 
JW Walter, Inc.
 
 
 
 

 
 

 
 

 
 

 
 
Various Counties in WV
 
Coal mines and land holdings
 

 
6,250

 

 

Canadian and U.K. Operations
 
Canadian Operations:
 
 
 
 

 
 

 
 

 
 

 
 
Walter Canada
 
 
 
 

 
 

 
 

 
 

 
 
Northeast, B.C. 
 
Chetwynd and Tumbler Ridge headquarters
 

 

 
8,486

 

 
 
Wolverine's Perry Creek
 
 
 
 

 
 

 
 

 
 

 
 
Northeast, B.C. 
 
Coal mines and land holdings
 
35,801

 
24

 

 

 
 
Northeast, B.C. 
 
Administrative headquarters & mine support facilities
 

 

 

 
44,737

 
 
Brazion's Brule
 
 
 
 

 
 

 
 

 
 

 
 
Northeast, B.C. 
 
Coal mines and land holdings
 
28,434

 

 

 

 
 
Brazion's Willow Creek
 
 
 
 

 
 

 
 

 
 

 
 
Northeast, B.C. 
 
Coal mines and land holdings
 
49,992

 
263

 

 

 
 
Northeast, B.C. 
 
Administrative headquarters & mine support facilities
 

 

 

 
9,250

 
 
U.K. Operations:
 
 
 
 

 
 

 
 

 
 

 
 
Energybuild
 
 
 
 

 
 

 
 

 
 

 
 
South Wales, U.K
 
Administrative headquarters & mine support facilities
 

 

 
34,339

 
61,498

 
 
South Wales, U.K
 
Coal mines and land holdings
 
7,549

 

 

 

 
 
South Wales, U.K
 
Real estate
 
247

 

 

 

Other
 
Other:
 
 
 
 

 
 

 
 

 
 

 
 
Birmingham, AL
 
Executive headquarters & corporate support facilities
 

 

 
49,200

 

 
 
Calgary, A.B
 
Administrative headquarters
 

 

 
1,174

 

 
 
Vancouver, B.C
 
Administrative headquarters
 

 

 
5,036

 

As of December 31, 2014, we had estimated reserves totaling 392.7 million metric tons, of which 212.4 million tons, or 54%, are "assigned" recoverable reserves that are either currently being mined, are controlled and accessible from a currently active mine, or located at idled facilities where limited capital expenditures would be required to initiate operations when conditions warrant. The remaining 180.3 million tons are classified as "unassigned," representing coal at currently non-producing locations which we anticipate mining in the future, but would require additional development capital before operations could begin.

42


Our reserve estimates are predicated on engineering, economic and geological data assembled and analyzed by our internal engineers, geologists and finance associates, as well as third party consultants. Annually, we update our reserve estimates to reflect past coal production, new drilling information and other geological or mining data, and acquisitions or sales of coal properties.

43


The following table provides the location and coal reserves associated with each mine or potential mine as of December 31, 2014:
ESTIMATED RECOVERABLE COAL RESERVES
AS OF DECEMBER 31, 2014
(In Thousands of Metric Tons)
 
 
 
 
 
 
 
 
 
 
Recoverable Reserves(1)
 
Reserve
Control(4)
 
 
 
 
Status of
Operation(5)
 
 
 
Assigned/
Unassigned(3)
 
Location/Mine
 
Type(8)
 
Coal Bed
 
Reserves(1)
 
Proven(2)
 
Probable(2)
 
Owned
 
Leased
Alabama:
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Jim Walter Resources, Inc.
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

No. 4 (10)
 
U
 
Production
 
Mary Lee
 
Assigned
 
46,440

 
45,105

 
1,335

 

 
46,440

No. 7 (10)
 
U
 
Production
 
Mary Lee
 
Assigned
 
67,591

 
60,421

 
7,170

 
6,761

 
60,830

Blue Creek Energy, Inc.
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Blue Creek No. 1
 
U
 
Exploration
 
Mary Lee
 
Unassigned
 
74,882

 
71,789

 
3,093

 

 
74,882

Tuscaloosa Resources, Inc.
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Carter/Swann's Crossing
 
S
 
Idled
 
Brookwood
 
Assigned
 
2,804

 
2,804

 

 
2,804

 

Panther 3
 
S
 
Idled
 
Brookwood
 
Assigned
 
262

 
262

 

 
262

 

Taft Coal Sales & Associates
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Choctaw
 
S
 
Production
 
Pratt
 
Assigned
 
308

 
308

 

 

 
308

Gayosa South
 
S
 
Development
 
Pratt
 
Assigned
 
353

 
353

 

 

 
353

Robbins Road
 
S
 
Development
 
Pratt
 
Assigned
 
1,225

 
1,225

 

 

 
1,225

Walter Minerals, Inc.
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Beltona East
 
S
 
Development
 
Black Creek
 
Unassigned
 
1,013

 
1,013

 

 
1,013

 

Morris
 
S
 
Development
 
Mary Lee
 
Unassigned
 
4,125

 
4,125

 

 
2,145

 
1,980

Total Alabama
 
 
 
 
 
 
 
 
 
199,003

 
187,405

 
11,598

 
12,985

 
186,018

West Virginia:
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Atlantic Leasco
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Gauley Eagle (9)
 
U
 
Idled
 
Allegheny, Kanawha
 
Assigned
 
7,102

 
6,267

 
835

 

 
7,102

Gauley Eagle (9)
 
S
 
Idled
 
Allegheny, Kanawha
 
Assigned
 
6,619

 
5,908

 
711

 

 
6,619

Maple Coal Company
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Eagle
 
U
 
Production
 
Allegheny, Kanawha
 
Assigned
 
9,427

 
7,027

 
2,400

 

 
9,427

Peerless
 
U
 
Exploration
 
Allegheny, Kanawha
 
Unassigned
 
6,406

 
4,769

 
1,637

 

 
6,406

Powellton
 
U
 
Exploration
 
Allegheny, Kanawha
 
Unassigned
 
2,555

 
2,530

 
25

 

 
2,555

Maple
 
S
 
Production
 
Allegheny, Kanawha
 
Assigned
 
12,685

 
11,692

 
993

 

 
12,685

Total West Virginia
 
 
 
 
 
 
 
 
 
44,794

 
38,193

 
6,601

 

 
44,794

Northeast B.C., Canada:
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Walter Canada
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Wolverine's Perry Creek
 
S
 
Idled
 
Gates
 
Assigned
 
8,827

 
8,827

 

 

 
8,827

Wolverine's Mt. Spieker (EB)
 
S
 
Development
 
Gates
 
Unassigned
 
14,749

 
12,404

 
2,345

 

 
14,749

Wolverine's Hermann
 
S
 
Development
 
Gates
 
Unassigned
 
9,075

 
6,775

 
2,300

 

 
9,075

Brazion's Brule
 
S
 
Idled
 
Gething
 
Assigned
 
16,645

 
16,645

 

 

 
16,645

Brazion's Willow Creek
 
S
 
Idled
 
Gething
 
Assigned
 
16,645

 
15,365

 
1,280

 

 
16,645

Brazion's Willow South
 
S
 
Exploration
 
Gething
 
Unassigned
 
14,252

 
7,186

 
7,066

 

 
14,252

Brazion's Hudette
 
S
 
Exploration
 
Gething
 
Unassigned
 
24,658

 
24,193

 
465

 

 
24,658

Belcourt Saxon(6)
 
S
 
Exploration
 
Gates
 
Unassigned
 
28,523

 
28,273

 
250

 

 
28,523

Total Canada
 
 
 
 
 
 
 
 
 
133,374

 
119,668

 
13,706

 

 
133,374

South Wales, U.K.:
 
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

 
 

Energybuild's Aberpergwm
 
U
 
Development
 
9' & 18'(7)
 
Assigned
 
15,481

 
13,220

 
2,261

 

 
15,481

Total Walter Energy
 
 
 
 
 
 
 
 
 
392,652

 
358,486

 
34,166

 
12,985

 
379,667

_______________________________________________________________________________

(1)
Reserves are that part of a mineral deposit which can be economically and legally extracted or produced at the time of the reserve determination. Recoverable reserves represent the amount of proven and probable reserves that can actually be recovered taking into account all mining and preparation losses involved in producing a saleable product using existing methods under current law.

44


(2)
Reserves are further categorized as Proven (Measured) and Probable (Indicated) as defined by Securities and Exchange Commission Industry Guide 7 as follows: Proven (Measured) Reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites of inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. Probable (Indicated) Reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are father apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
(3)
"Assigned" reserves represent recoverable reserves that are either currently being mined, reserves that are controlled and accessible from a currently active mine, or reserves at idled facilities where limited capital expenditures would be required to initiate operations. "Unassigned" reserves represent coal at currently non-producing locations which would require significant additional capital spending before operations begin.
(4)
"Reserve Control" of recoverable reserves is either through direct ownership of the property or through third party leases. Third party leases generally provide for terms or renewals through the anticipated life of the associated mine.
(5)
The "Status of Operation" for each mine is classified as follows: Exploration—mines where exploration has been conducted sufficient to define recoverable reserves, but the mine is not yet in development or production stage; Development—we are engaged in the preparation of an established commercially minable deposit (reserves) for extraction but are not yet in production; Production—the mine is actively operating; Idled—previously active mines that have been idled until such time as reinitiating operations are considered feasible. If conditions warrant, the mines could be re-opened with less capital investment than would be required to develop a new mine.
(6)
The Belcourt Saxon properties are part of a joint venture partnership in which Walter Energy, Inc. has a 50% ownership interest. The reserves reported represent 50% of the total recoverable reserves held by the joint venture.
(7)
South Wales Coal Basin—Lower Coal Measures (Geological formation name)
(8)
Type of Mine: U = Underground; S = Surface
(9)
These operations are classified as assets and liabilities held for sale as of December 31, 2014. See Note 4 within the "Notes to Consolidated Financial Statements" included herein.
(10)
In January 2015, the Company entered into a lease agreement which increased the recoverable reserves for Alabama Mines No. 4 and 7 by 0.5 million and 13.4 million metric tons, respectively. The additional reserves are not included in the table above.
Note: Also see Glossary for definitions of technical terms

45


The following table provides a summary of the quality of our reserves as of December 31, 2014:
ESTIMATED RECOVERABLE COAL RESERVES (Continued)
AS OF DECEMBER 31, 2014
(In Thousands of Metric Tons)
 
 
 
 
 
 
Quality (Wet Basis)(3)
 
Average Coal
Seam Thickness
 
Date Mine:
Location/Mine
 
Reserves
 
Type(1)
 
% Ash
 
% Sulfur
 
BTU/lb.
 
(in Feet)
 
Acquired/
Opened
 
Ceased/Idled
Alabama:
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Jim Walter Resources, Inc.
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
No. 4
 
46,440

 
M
 
9.00

 
0.80

 
13,909

 
4.84

 
1976
 
N/A
No. 7
 
67,591

 
M
 
9.00

 
0.75

 
13,952

 
4.13

 
1978
 
N/A
Blue Creek Energy, Inc.
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Blue Creek No. 1
 
74,882

 
M
 
9.00

 
0.69

 
13,791

 
4.70

 
N/A
 
N/A
Tuscaloosa Resources, Inc.
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Carter/Swann's Crossing
 
2,804

 
M/T
 
11.75

 
1.25

 
12,489

 
9.93

 
May-11
 
Jul-13
Panther 3
 
262

 
T
 
8.93

 
4.21

 
13,636

 
1.99

 
Aug-07
 
2008
Taft Coal Sales & Associates
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Choctaw(2)
 
308

 
M/T
 
12.78

 
1.68

 
12,665

 
6.59

 
Sep-08
 
N/A
Gayosa South(2)
 
353

 
M/T
 
14.69

 
1.32

 
12,484

 
4.79

 
N/A
 
N/A
Robbins Road(2)
 
1,225

 
M/T
 
12.36

 
1.55

 
12,887

 
4.26

 
N/A
 
N/A
Walter Minerals, Inc.
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Beltona East
 
1,013

 
M/T
 
7.79

 
2.58

 
14,162

 
4.88

 
N/A
 
N/A
Morris
 
4,125

 
T
 
21.81

 
1.73

 
12,367

 
5.25

 
N/A
 
N/A
Total Alabama
 
199,003

 
 
 
 

 
 

 
 

 
 

 
 
 
 
West Virginia:
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Atlantic Leasco
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Gauley Eagle underground (4)
 
7,102

 
M/T
 
7.45

 
1.04

 
12,944

 
3.80

 
Apr-11
 
Apr-12
Gauley Eagle surface (4)
 
6,619

 
M/T
 
12.22

 
1.09

 
12,450

 
18.56

 
Apr-11
 
May-12
Maple Coal Company
 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 
Eagle underground
 
9,427

 
M
 
6.21

 
0.87

 
13,643

 
4.14

 
Apr-11
 
N/A
Peerless underground
 
6,406

 
T
 
5.13

 
2.08

 
13,333

 
3.59

 
Apr-11
 
N/A
Powellton underground
 
2,555

 
M
 
5.87

 
0.80

 
13,275

 
3.05

 
Apr-11
 
N/A
Maple surface
 
12,685

 
M/T
 
12.98

 
0.85

 
11,800

 
33.59

 
Apr-11
 
N/A
Total West Virginia
 
44,794