Alliance Holdings GP (AHGP) 10-Q 2017 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.:  0-51952

ALLIANCE HOLDINGS GP, L.P.

(Exact name of registrant as specified in its charter)

Delaware	03-0573898
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

1717 South Boulder Avenue,  Suite 400, Tulsa, Oklahoma 74119

(Address of principal executive offices and zip code)

(918) 295-1415

(Registrant’s telephone number, including area code)

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. [X] Yes   [   ] No

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). [ X ] Yes   [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer,""accelerated filer,""smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [   ]	Accelerated Filer [ X  ]	Non-Accelerated Filer [   ]	Smaller Reporting Company [   ]
		(Do not check if smaller reporting company)
Emerging Growth Company [   ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [   ] Yes   [X] No

As of November 6, 2017,  59,863,000 common units are outstanding.

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
		Page
ITEM 1.	Financial Statements (Unaudited)
	ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES
	Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	1
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	4
	Notes to Condensed Consolidated Financial Statements	5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	41
ITEM 4.	Controls and Procedures	42
	Forward Looking Statements	44
PART II
OTHER INFORMATION
ITEM 1.	Legal Proceedings	46
ITEM 1A.	Risk Factors	46
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
ITEM 3.	Defaults Upon Senior Securities	46
ITEM 4.	Mine Safety Disclosures	46
ITEM 5.	Other Information	46
ITEM 6.	Exhibits	47

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PART I

FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

	September 30,		December 31,
	2017		2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	22,571	$	44,525
Trade receivables		129,031		152,032
Other receivables		709		279
Due from affiliates		27		37
Inventories, net		87,667		61,051
Advance royalties, net		1,207		1,207
Prepaid expenses and other assets		10,488		22,128
Total current assets		251,700		281,259
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost		2,938,362		2,920,988
Less accumulated depreciation, depletion and amortization		(1,436,470)		(1,335,145)
Total property, plant and equipment, net		1,501,892		1,585,843
OTHER ASSETS:
Advance royalties, net		40,578		29,372
Equity investments in affiliates		144,349		138,817
Cost investments		102,800		—
Goodwill		136,399		136,399
Other long-term assets		33,041		25,997
Total other assets		457,167		330,585
TOTAL ASSETS	$	2,210,759	$	2,197,687
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable	$	74,289	$	64,460
Due to affiliates		759		906
Accrued taxes other than income taxes		20,578		18,288
Accrued payroll and related expenses		41,124		41,576
Accrued interest		13,083		316
Workers' compensation and pneumoconiosis benefits		9,732		9,897
Current capital lease obligations		28,220		27,196
Other current liabilities		16,697		14,778
Current maturities, long-term debt, net		100,000		149,874
Total current liabilities		304,482		327,291
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities, net		385,449		399,446
Pneumoconiosis benefits		64,197		62,822
Accrued pension benefit		39,497		42,070
Workers' compensation		52,477		40,400
Asset retirement obligations		125,146		125,266
Long-term capital lease obligations		64,358		85,540
Other liabilities		16,248		17,203
Total long-term liabilities		747,372		772,747
Total liabilities		1,051,854		1,100,038
PARTNERS’ CAPITAL:
Alliance Holdings GP, L.P. ("AHGP") Partners' Capital:
Limited Partners – Common Unitholders 59,863,000 units outstanding		623,614		598,077
Accumulated other comprehensive loss		(25,270)		(16,550)
Total AHGP Partners' Capital		598,344		581,527
Noncontrolling interests		560,561		516,122
Total Partners’ Capital		1,158,905		1,097,649
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	2,210,759	$	2,197,687

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except unit and per unit data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
SALES AND OPERATING REVENUES:
Coal sales	$	435,162	$	533,817	$	1,256,168	$	1,357,578
Transportation revenues		8,009		7,692		24,933		19,732
Other sales and operating revenues		9,916		10,457		31,610		26,422
Total revenues		453,087		551,966		1,312,711		1,403,732
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization)		295,385		326,891		796,845		842,417
Transportation expenses		8,009		7,692		24,933		19,732
Outside coal purchases		—		1,514		—		1,514
General and administrative		15,389		18,987		47,160		55,175
Depreciation, depletion and amortization		69,962		101,432		194,109		245,736
Total operating expenses		388,745		456,516		1,063,047		1,164,574
INCOME FROM OPERATIONS		64,342		95,450		249,664		239,158
Interest expense (net of interest capitalized for the three and nine months ended September 30, 2017 and 2016 of $107, $47, $354 and $320, respectively)		(10,773)		(8,001)		(28,904)		(23,386)
Interest income		6		3		87		11
Equity in income of affiliates		3,798		1,105		10,414		1,041
Cost investment income		2,800		—		2,800		—
Debt extinguishment loss		—		—		(8,148)		—
Other income		774		293		2,461		545
INCOME BEFORE INCOME TAXES		60,947		88,850		228,374		217,369
INCOME TAX EXPENSE (BENEFIT)		4		6		(3)		4
NET INCOME		60,943		88,844		228,377		217,365
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(21,821)		(40,337)		(91,661)		(92,643)
NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. ("NET INCOME OF AHGP")	$	39,122	$	48,507	$	136,716	$	124,722
BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT	$	0.65	$	0.81	$	2.28	$	2.08
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT	$	0.73	$	0.55	$	1.83	$	2.06
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED		59,863,000		59,863,000		59,863,000		59,863,000

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
NET INCOME	$	60,943	$	88,844	$	228,377	$	217,365
OTHER COMPREHENSIVE INCOME (LOSS):
Defined benefit pension plan:
Amortization of prior service cost (1)		46		—		140		—
Amortization of net actuarial loss (1)		774		787		2,319		2,365
Total defined benefit pension plan adjustments		820		787		2,459		2,365
Pneumoconiosis benefits:
Amortization of net actuarial gain  (1)		(479)		(660)		(1,613)		(1,982)
Total pneumoconiosis benefits adjustments		(479)		(660)		(1,613)		(1,982)
OTHER COMPREHENSIVE INCOME		341		127		846		383
COMPREHENSIVE INCOME		61,284		88,971		229,223		217,748
Less: Comprehensive income attributable to noncontrolling interests		(21,957)		(40,410)		(92,039)		(92,827)
COMPREHENSIVE INCOME ATTRIBUTABLE TO AHGP	$	39,327	$	48,561	$	137,184	$	124,921

(1) Amortization of prior service cost and net actuarial gain or loss is included in the computation of net periodic benefit cost (see Notes 10 and 12 for additional details).

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES:	$	454,818	$	491,960
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures		(105,455)		(70,267)
Increase (decrease) in accounts payable and accrued liabilities		4,182		(7,965)
Proceeds from sale of property, plant and equipment		1,488		756
Contributions to equity investments in affiliates		(16,487)		(65,367)
Purchase of cost investment		(100,000)		—
Distributions received from investments in excess of cumulative earnings		10,880		2,167
Payment for acquisition of business		—		(1,011)
Payment for acquisition of customer contracts		—		(23,000)
Net cash used in investing activities		(205,392)		(164,687)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under securitization facility		100,000		44,600
Payments under securitization facility		(100,000)		(27,700)
Payments on term loan		(50,000)		(106,250)
Borrowings under revolving credit facilities		165,000		140,000
Payments under revolving credit facilities		(420,000)		(215,000)
Borrowings under long-term debt		400,000		—
Payment on long-term debt		(145,000)		—
Proceeds on capital lease transactions		—		33,881
Payments on capital lease obligations		(20,186)		(17,769)
Payment of debt issuance costs		(16,221)		—
Payment for debt extinguishment		(8,148)		—
Contributions to consolidated company from affiliate noncontrolling interest		251		2,557
Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan		(2,988)		(1,336)
Contribution by limited partner - affiliate		800		—
Distributions paid by consolidated partnership to noncontrolling interests		(62,143)		(69,680)
Distributions paid to Partners		(109,548)		(123,318)
Other		(3,197)		(60)
Net cash used in financing activities		(271,380)		(340,075)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(21,954)		(12,802)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		44,525		38,678
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	22,571	$	25,876
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	13,679	$	20,194
Cash paid for income taxes	$	10	$	7
NON-CASH INVESTING AND FINANCING ACTIVITY:
Accounts payable for purchase of property, plant and equipment	$	12,414	$	4,669
Assets acquired by capital lease	$	—	$	37,089
Market value of ARLP common units issued under ARLP's Long-Term Incentive and Directors Deferred Compensation Plans before tax withholding requirements	$	8,149	$	3,642

See notes to condensed consolidated financial statements.

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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.           ORGANIZATION AND PRESENTATION

Significant Relationships Referenced in Notes to Condensed Consolidated Financial Statements

· References to "we," "us," "our" or "AHGP" mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

· References to "AHGP Partnership" mean the business and operations of Alliance Holdings GP, L.P., the parent company, as well as its consolidated subsidiaries, including MGP II, LLC ("MGP II"), Alliance Resource Management GP, LLC and Alliance Resource Partners, L.P. and its consolidated subsidiaries. 

· References to "AGP" mean Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., also referred to as our general partner.

· References to "ARLP Partnership" mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

· References to "ARLP" mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

· References to "MGP" mean Alliance Resource Management GP, LLC, ARLP's sole general partner and, prior to the Exchange Transactions discussed below, its managing general partner.

· References to "SGP" mean Alliance Resource GP, LLC, ARLP's special general partner prior to the Exchange Transaction discussed below.

· References to "Intermediate Partnership" mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

· References to "Alliance Resource Properties" mean Alliance Resource Properties, LLC, the land-holding company for the mining operations of Alliance Resource Operating Partners, L.P.

· References to "Alliance Coal" mean Alliance Coal, LLC, the holding company for the mining operations of Alliance Resource Operating Partners, L.P.

Organization and Formation

We are a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol "AHGP."  We own indirectly 100% of the members' interest in MGP, ARLP's sole general partner.  The ARLP Partnership is a diversified producer and marketer of coal to major United States ("U.S.") utilities and industrial users.  ARLP conducts substantially all of its business through its wholly-owned subsidiary, the Intermediate Partnership.  Through our ownership of MGP, we own the 1.0001% managing general partner interest in the Intermediate Partnership.    ARLP and the Intermediate Partnership were formed in May 1999, to acquire upon completion of ARLP's initial public offering on August 19, 1999, certain coal production and marketing assets of Alliance Resource Holdings, Inc. ("ARH"), a Delaware corporation.  ARH is owned by Joseph W. Craft III, the Chairman, President and Chief Executive Officer of AGP as well as the President and Chief Executive Officer and a Director of MGP, and Kathleen S. Craft.  SGP, a Delaware limited liability company, is owned by ARH. SGP owns 20,641,168 common units of AHGP, 7,181 common units of ARLP and prior to the Exchange Transaction discussed below, owned a 0.01% special general partner interest in both ARLP and the Intermediate Partnership. 

We are owned 100% by limited partners.  Our general partner, AGP, has a non-economic interest in us and is owned by Mr. Craft.

Exchange Transaction

On July 28, 2017, our wholly-owned subsidiary, MGP contributed to ARLP all of its incentive distribution rights ("IDRs") and its managing general partner interest in ARLP in exchange for 56,100,000 ARLP common units and a non-economic general partner interest in ARLP.  In conjunction with this transaction and on the same economic basis as MGP, SGP also contributed to ARLP its 0.01% general partner interests in both ARLP and the Intermediate Partnership in

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exchange for 7,181 ARLP common units (collectively the "Exchange Transaction").  In connection with the Exchange Transaction, ARLP amended its partnership agreement to reflect, among other things, cancellation of the IDRs and the economic general partner interest in ARLP and issuance of a non-economic general partner interest to MGP.  MGP is the sole general partner of ARLP following the Exchange Transaction, and no control, management or governance changes otherwise occurred.  We now own directly and indirectly 87,188,338 ARLP common units and a non-economic general partner interest in ARLP.  We continue to own, through MGP, a 1.0001% managing general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal.

The Exchange Transaction constituted an exchange of equity interests between entities under common control and not a transfer of a business.  As there was no change in control of either us or ARLP, the exchange reflects the impact on controlling and noncontrolling interest at carrying value on a prospective basis from the date of the Exchange Transaction.

Simultaneously with the Exchange Transaction discussed above, MGP became a wholly-owned subsidiary of MGP II, which is 100% owned directly and indirectly by us and was created in connection with the Exchange Transaction.  MGP II holds the 56,100,000 ARLP common units discussed above. 

Basis of Presentation

The accompanying condensed consolidated financial statements include our accounts and operations and those of MGP, MGP II, ARLP (a variable interest entity of which AHGP is the primary beneficiary), ARLP's consolidated Intermediate Partnership and the Intermediate Partnership's operating subsidiaries and present the financial position as of September 30, 2017 and December 31, 2016, the results of operations and comprehensive income for the three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016.  ARLP and its consolidated subsidiaries represent virtually all the net assets and operations of AHGP.  All intercompany transactions and accounts have been eliminated.  See Note 8 – Variable Interest Entities for information regarding our consolidation of ARLP.

The earnings of the ARLP Partnership allocated to its limited partners' interests not owned by us are reflected as a noncontrolling interest in our condensed consolidated statements of income and balance sheet.  Our consolidated financial statements do not differ materially from those of the ARLP Partnership.  The differences between our financial statements and those of the ARLP Partnership are primarily attributable to (a) amounts reported as noncontrolling interests and (b) additional general and administrative costs and taxes attributable to us.  The additional general and administrative costs principally consist of costs incurred by us as a result of being a publicly traded partnership, amounts billed by, and reimbursed to, Alliance Coal under an administrative services agreement and amounts billed by, and reimbursed to, AGP under our partnership agreement. Net income attributable to Alliance Holdings GP, L.P. from within our accompanying condensed consolidated financial statements will be described as "Net Income of AHGP."

These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the results for the periods presented.  Results presented for prior periods have been recast to reflect an immaterial reclassification of depreciation, depletion, and amortization capitalized into coal inventory as an adjustment to Depreciation, depletion, and amortization rather than Operating expenses (excluding depreciation, depletion and amortization).  This reclassification did not impact Total operating expenses, Income from operations, Net income, Net income of AHGP or Basic and diluted net income of AHGP per limited partner unit.  Results for interim periods are not necessarily indicative of results to be expected for the full year ending December 31, 2017.

These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all of the information normally included with financial statements prepared in accordance with generally accepted accounting principles ("GAAP") of the U.S.  These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016.

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Use of Estimates

The preparation of AHGP Partnership's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in our condensed consolidated financial statements.  Actual results could differ from those estimates.

Investments

The ARLP Partnership's investments and ownership interests in which it does not have a controlling financial interest are accounted for either under the cost method of accounting if the ARLP Partnership does not have the ability to exercise significant influence over the entity, or under the equity method of accounting if the ARLP Partnership has the ability to exercise significant influence over the entity. 

Historical cost is used to account for investments accounted for under the cost method and distributions received on those investments are recorded as income unless those distributions are considered a return on investment in which case the historical cost is reduced.  The ARLP Partnership's cost method investment includes Kodiak Gas Services, LLC ("Kodiak").  See Note 9 – Investments for further discussion of this cost method investment.

Investments accounted for under the equity method are initially recorded at cost, and the difference between the basis of the ARLP Partnership's investment and the underlying equity in the net assets of the joint venture at the investment date, if any, is amortized over the lives of the related assets that gave rise to the difference.  In the event the ARLP Partnership's ownership entitles it to a disproportionate sharing of income or loss, the ARLP Partnership's equity in income or losses of affiliates is allocated based on the hypothetical liquidation at book value ("HLBV") method of accounting.

Under the HLBV method, equity in income or losses of affiliates is allocated based on the difference between the ARLP Partnership's claim on the net assets of the equity method investee at the end and beginning of the period, with consideration of certain eliminating entries regarding differences of accounting for various related-party transactions, after taking into account contributions and distributions, if any.  The ARLP Partnership's share of the net assets of the equity method investee is calculated as the amount it would receive if the equity method investee were to liquidate all of its assets at net book value and distribute the resulting cash to creditors, other investors and the ARLP Partnership according to the respective priorities.  None of our current equity investments use the HLBV method. Our last use of this method was in 2015 which will be discussed in our upcoming Form 10-K.

The ARLP Partnership's equity method investments include AllDale Minerals, LP ("AllDale I"), and AllDale Minerals II, LP ("AllDale II") (collectively "AllDale Minerals"), both held by the ARLP Partnership's subsidiary Cavalier Minerals JV, LLC ("Cavalier Minerals").  The ARLP Partnership also has an equity method investment in AllDale Minerals III, LP ("AllDale III") which is not held through Cavalier Minerals but rather held directly by the ARLP Partnership.  See Note 9 – Investments for further discussion of these equity method investments. 

The ARLP Partnership reviews its investments and ownership interests accounted for under both the equity method of accounting and the cost method of accounting for impairment whenever events or changes in circumstances indicate a loss in the value of the investment may be other-than-temporary.

2.           NEW ACCOUNTING STANDARDS

New Accounting Standards Issued and Adopted

In January 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04").  The ASU simplifies the subsequent measurement of goodwill by eliminating the need for an entity to determine the implied fair value of goodwill to calculate an impairment charge.  Under the new guidance an entity compares the fair value of the reporting unit containing the goodwill to its carrying value and records any excess carrying value as an impairment charge.  This new standard is applied prospectively and is effective for annual and interim periods beginning

7

after December 15, 2019; however, early adoption is permitted.  We have early adopted this new standard and will apply the guidance to any future goodwill impairment assessments.

In March 2016, the FASB issued ASU 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09").  ASU 2016-09 simplifies the accounting for several aspects of share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, flexibility in the accounting for forfeitures and classification on the statement of cash flows.  ASU 2016-09 was effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted.  The adoption of ASU 2016-09 did not have a material impact on our condensed consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory ("ASU 2015-11").  ASU 2015-11 simplifies the subsequent measurement of inventory.  It replaces the current lower of cost or market test with the lower of cost or net realizable value test.  Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  The new standard was applied prospectively and was effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods, with early adoption permitted.  The adoption of ASU 2015-11 did not have a material impact on our condensed consolidated financial statements.

New Accounting Standards Issued and Not Yet Adopted

In March 2017, the FASB issued ASU 2017-07, Compensation–Retirement Benefits (Topic 715) ("ASU 2017-07").  ASU 2017-07 requires that an employer disaggregate the service cost component from the other components of net benefit cost.  It also provides explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for capitalization.  The new guidance will be applied retroactively to all periods presented.  ASU 2017-07 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods.  We do not anticipate ASU 2017-07 will have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13").  ASU 2016-13 changes the impairment model for most financial assets and certain other instruments to require the use of a new forward-looking "expected loss" model that generally will result in earlier recognition of allowances for losses.  The new standard will require disclosure of significantly more information related to these items.  ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for the fiscal year beginning after December 15, 2018, including interim periods.  We are currently evaluating the effect of adopting ASU 2016-13, but do not anticipate it will have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02").  ASU 2016-02 increases transparency and comparability among organizations by requiring lessees to record right-to-use assets and corresponding lease liabilities on the balance sheet and disclosing key information about lease arrangements.  The new guidance will classify leases as either finance or operating (similar to current standard's "capital" or "operating" classification), with classification affecting the pattern of income recognition in the statement of income.  ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.  We have developed an assessment team and are currently evaluating the effect of adopting ASU 2016-02.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09").  ASU 2014-09 is a new revenue recognition standard that provides a five-step analysis of transactions to determine when and how revenue is recognized.  The core principle of the new standard is as follows:

An entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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ASU 2014-09 was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.  In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date ("ASU 2015-14"), which deferred the effective date by one year while providing the option to early adopt the standard on the original effective date. 

The ARLP Partnership developed an assessment team to determine the effect of adopting ASU 2014-09.  As part of the assessment process, the ARLP Partnership applied the five-step analysis outlined in the new standard to certain contracts representative of the majority of its coal sales contracts and determined that its pattern of recognition appears consistent between both the new and existing standards. The ARLP Partnership also reviewed the expanded disclosure requirements under the new standard and determined the additional information to be disclosed.  In addition the ARLP Partnership reviewed its business processes, systems and internal controls over financial reporting to support the new recognition and disclosure requirements under the new standard.  Based on the results of the ARLP Partnership's assessment team, the ARLP Partnership has started its implementation of the new standard.  The ARLP Partnership continues to report its implementation progress for the new standard to its management and MGP's audit committee. 

The ARLP Partnership continues to monitor closely (a) activities of the FASB and various non-authoritative groups with respect to implementation issues that may impact its determinations, (b) existing contracts for consistency with current implementation determinations derived from it assessment process and (c) its revenue recognition policy, where applicable, for required modifications.

We do not expect that the adoption of the new standard will have a material impact on our financial statements, but will require expanded disclosures including presenting, by type and by segment, revenues for all periods presented and expected revenues by year for performance obligations that are unsatisfied or partially unsatisfied as of the date of presentation.  The new standard allows for two methods of adoption: a full retrospective adoption method and a modified retrospective method.   We have elected to use the modified retrospective method of adoption which allows a cumulative effect adjustment to equity as of the date of adoption.  As we do not anticipate a change in the recognition pattern of our revenues, we do not expect to have a cumulative effect adjustment when we adopt the new standard.

3.           CONTINGENCIES

We are not engaged in any material litigation.  The ARLP Partnership is involved in various lawsuits, claims and regulatory proceedings incidental to its business.  The ARLP Partnership records accruals for potential losses related to these matters when, in management's opinion, such losses are probable and reasonably estimable.  Based on known facts and circumstances, the ARLP Partnership believes the ultimate outcome of these outstanding lawsuits, claims and regulatory proceedings will not have a material adverse effect on its financial condition, results of operations or liquidity.  However, if the results of these matters were different from management's current opinion and in amounts greater than the ARLP Partnership's accruals, then they could have a material adverse effect.

4.           INVENTORIES

Inventories consist of the following:

	September 30,		December 31,
	2017		2016
	(in thousands)
Coal	$	51,657	$	29,242
Supplies (net of reserve for obsolescence of $5,015 and $4,940, respectively)		36,010		31,809
Total inventories, net	$	87,667	$	61,051

.

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5.           FAIR VALUE MEASUREMENTS

The following table summarizes our fair value measurements within the hierarchy:

	September 30, 2017						December 31, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(in thousands)
Measured on a recurring basis:
Contingent consideration	$	—	$	—	$	9,700	$	—	$	—	$	9,700
Additional disclosures:
Long-term debt		—		536,296		—		—		559,509		—
Total	$	—	$	536,296	$	9,700	$	—	$	559,509	$	9,700

The carrying amounts for cash equivalents, accounts receivable, accounts payable, accrued and other liabilities, due from affiliates and due to affiliates approximate fair value due to the short maturity of those instruments.

The estimated fair value of the ARLP Partnership's long-term debt, including current maturities, is based on interest rates that the ARLP Partnership believes are currently available to it in active markets for issuance of debt with similar terms and remaining maturities (See Note 6 – Long-Term Debt).  The fair value of debt, which is based upon these interest rates, is classified as a Level 2 measurement under the fair value hierarchy.

The estimated fair value of the ARLP Partnership's contingent consideration arrangement is based on a probability-weighted discounted cash flow model.  The assumptions in the model include a risk-adjusted discount rate, forward coal sales price curves, cost of debt and probabilities of meeting certain contractual threshold coal sales prices.  The fair value measurement is based on significant inputs not observable in active markets and thus represents a Level 3 fair value measurement under the fair value hierarchy.

6.           LONG-TERM DEBT

Long-term debt consists of the following:

					Unamortized Discount and
	Principal				Debt Issuance Costs
	September 30,		December 31,		September 30,		December 31,
	2017		2016		2017		2016
	(inthousands)
ARLP Revolving Credit facility	$	—	$	255,000	$	(7,615)	$	(453)
ARLP Senior notes		400,000		—		(6,936)		—
ARLP Series B senior notes		—		145,000		—		(101)
ARLP Term loan		—		50,000		—		(126)
ARLP Securitization facility		100,000		100,000		—		—
		500,000		550,000		(14,551)		(680)
Less current maturities		(100,000)		(150,000)		—		126
Total long-term debt	$	400,000	$	400,000	$	(14,551)	$	(554)

On January 27, 2017, the Intermediate Partnership entered into a Fourth Amended and Restated Credit Agreement (the "ARLP Credit Agreement") with various financial institutions for a revolving credit facility and term loan (the "ARLP Credit Facility").  The ARLP Credit Facility replaced the $250 million term loan ("ARLP Replaced Term Loan") and $700 million revolving credit facility ("ARLP Replaced Revolving Credit Facility") extended to the Intermediate Partnership on May 23, 2012 (the "ARLP Replaced Credit Agreement") by various banks and other lenders that would have expired on May 23, 2017.

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The ARLP Credit Agreement provided for a $776.5 million revolving credit facility, reducing to $494.75 million on May 23, 2017, including a sublimit of $125 million for the issuance of letters of credit and a sublimit of $15.0 million for swingline borrowings (the "ARLP Revolving Credit Facility"), and for a term loan with a remaining principal balance of $50.0 million (the "ARLP Term Loan").  The outstanding revolver balance and term loan balance under the ARLP Replaced Credit Agreement were considered advanced under the ARLP Credit Facility on January 27, 2017.   On April 3, 2017, the ARLP Partnership entered into an amendment to the ARLP Credit Agreement (the "Amendment") to (a) extend the termination date of the ARLP Revolving Credit Facility as to $461.25 million of commitments to May 23, 2021, (b) eliminate the Cavalier Condition and the ARLP Senior Notes Condition (both as defined in the ARLP Credit Agreement) and (c) effectuate certain other changes.  In connection with the Amendment, the ARLP Partnership increased the commitments under the ARLP Revolving Credit Facility from $479.75 million to $494.75 million, effective May 23, 2017 (of which $33.5 million expire on May 23, 2019).  The ARLP Partnership incurred debt issuance costs in 2017 of $8.9 million in connection with the ARLP Credit Agreement.  These debt issuance costs are deferred and are being amortized as a component of interest expense over the term of the ARLP Credit Facility.

The ARLP Credit Agreement is guaranteed by all of the material direct and indirect subsidiaries of the Intermediate Partnership, and is secured by substantially all of the Intermediate Partnership’s assets.  The $50.0 million principal balance of the ARLP Term Loan was paid in full in May 2017.

Borrowings under the ARLP Credit Facility bear interest, at the option of the Intermediate Partnership, at either (i) the Base Rate at the greater of three benchmarks or (ii) a Eurodollar Rate, plus margins for (i) or (ii), as applicable, that fluctuate depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the ARLP Credit Agreement).  The ARLP Partnership elected a Eurodollar Rate, which, with applicable margin, was 3.59% as of September 30, 2017.  At September 30, 2017, the ARLP Partnership had $8.1 million of letters of credit outstanding with $486.7 million available for borrowing under the ARLP Revolving Credit Facility. The ARLP Partnership currently incurs  an annual commitment fee of 0.35% on the undrawn portion of the ARLP Revolving Credit Facility.  The ARLP Partnership utilizes the ARLP Revolving Credit Facility, as appropriate, for working capital requirements, capital expenditures and investments in affiliates, scheduled debt payments and distribution payments. 

The ARLP Credit Agreement contains various restrictions affecting the Intermediate Partnership and its subsidiaries including, among other things, incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates, in each case subject to various exceptions, and the payment of cash distributions by the Intermediate Partnership if such payment would result in a certain fixed charge coverage ratio (as defined in the ARLP Credit  Agreement).  The Amendment lowered this fixed charge ratio from less than 1.25 to 1.0 to 1.15 to 1.0 for each rolling four-quarter period and further limited the Intermediate Partnership’s ability to incur certain unsecured debt. The Amendment raised the debt to cash flow ratio from 2.25 to 1.0 to 2.50 to 1.0 and also removed the requirement for the Intermediate Partnership to remain in control of a certain amount of mineable coal reserves relative to its annual production.  The ARLP Credit  Agreement requires the Intermediate Partnership maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0 and (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters.  The debt to cash flow ratio and cash flow to interest expense ratio were 0.84 to 1.0 and 19.2 to 1.0, respectively, for the trailing twelve months ended September 30, 2017.  The ARLP Partnership  was compliant with the covenants of the ARLP Credit Agreement as of September 30, 2017.

On January 27, 2017, the Intermediate Partnership also amended the 2008 Note Purchase Agreement dated June 26, 2008, for $145.0 million of ARLP Series B Senior Notes which bore interest at 6.72% and were due to mature on June 26, 2018 with interest payable semi-annually (the "ARLP Series B Senior Notes").  The amendment provided for certain modifications to the terms and provisions of the Note Purchase Agreement, including granting liens on substantially all of the Intermediate Partnership's assets to secure its obligations under the Note Purchase Agreement on an equal basis with the obligations under the ARLP Credit Agreement.  The amendment also modified certain covenants to align them with the applicable covenants in the ARLP Credit Agreement.  As discussed below, the ARLP Partnership repaid the ARLP Series B Senior Notes in May 2017.

On April 24, 2017, the Intermediate Partnership and Alliance Resource Finance Corporation (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership ("Alliance Finance"), issued an aggregate principal amount of $400.0 million of senior unsecured notes due 2025 ("ARLP Senior Notes") in a private placement to qualified institutional

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buyers.  The ARLP Senior Notes have a term of eight years maturing on May 1, 2025 (the "Term") and accrue interest at an annual rate of 7.5%.  Interest is payable semi-annually in arrears on each May 1 and November 1, commencing on November 1, 2017.  The indenture governing the ARLP Senior Notes contains customary terms, events of default and covenants relating to, among other things, the incurrence of debt, the payment of distributions or similar restricted payments, undertaking transactions with affiliates and limitations on asset sales.  At any time prior to May 1, 2020, the issuers of the ARLP Senior Notes may redeem up to 35% of the aggregate principal amount of the ARLP Senior Notes with the net cash proceeds of one or more equity offerings at a redemption price equal to 107.5% of the principal amount redeemed, plus accrued and unpaid interest, if any, to the redemption date.  The issuers of the ARLP Senior Notes may also redeem all or a part of the notes at any time on or after May 1, 2020, at redemption prices set forth in the indenture governing the ARLP Senior Notes.  At any time prior to May 1, 2020, the issuers of the ARLP Senior Notes may redeem the ARLP Senior Notes at a redemption price equal to the principal amount of the ARLP Senior Notes plus a "make-whole" premium, plus accrued and unpaid interest, if any, to the redemption date.  The net proceeds from issuance of the ARLP Senior Notes and cash on hand were used to repay the ARLP Revolving Credit Facility, ARLP Term Loan and ARLP Series B Senior Notes (including a make-whole payment of $8.1 million).  The ARLP Partnership incurred discount and debt issuance costs of $7.3 million in connection with issuance of the ARLP Senior Notes.  These costs are deferred and are currently being amortized as a component of interest expense over the Term.

On December 5, 2014, certain direct and indirect wholly-owned subsidiaries of the Intermediate Partnership entered into a $100.0 million accounts receivable securitization facility ("ARLP Securitization Facility").  Under the ARLP Securitization Facility, certain subsidiaries sell trade receivables on an ongoing basis to the Intermediate Partnership, which then sells the trade receivables to AROP Funding, LLC ("AROP Funding"), a wholly-owned bankruptcy-remote special purpose subsidiary of the Intermediate Partnership, which in turn borrows on a revolving basis up to $100.0 million secured by the trade receivables.  After the sale, Alliance Coal, as servicer of the assets, collects the receivables on behalf of AROP Funding.  The ARLP Securitization Facility bears interest based on a Eurodollar Rate.  It was renewed in December 2016 and matures in December 2017. At September 30, 2017, the ARLP Partnership had $100.0 million outstanding under the Securitization Facility. 

On October 6, 2015, Cavalier Minerals (see Note 8 – Variable Interest Entities) entered into a credit agreement (the "Cavalier Credit Agreement") with Mineral Lending, LLC ("Mineral Lending") for a $100.0 million line of credit (the "Cavalier Credit Facility").  Mineral Lending is an entity owned by (a) Alliance Resource Holdings II, Inc. ("ARH II," the parent of ARH), (b) an entity owned by an officer of ARH who is also a director of ARH II ("ARH Officer") and (c) foundations established by the President and Chief Executive Officer of MGP and Kathleen S. Craft.  There is no commitment fee under the facility.  Borrowings under the Cavalier Credit Facility bear interest at a one month LIBOR rate plus 6% with interest payable quarterly.  Repayment of the principal balance will begin following the first fiscal quarter after the earlier of the date on which the aggregate amount borrowed exceeds $90.0 million or December 31, 2017, in quarterly payments of an amount equal to the greater of $1.3 million initially, escalated to $2.5 million after two years, or fifty percent of Cavalier Minerals' excess cash flow. The Cavalier Credit Facility matures September 30, 2024, at which time all amounts then outstanding are required to be repaid.  To secure payment of the facility, Cavalier Minerals pledged all of its partnership interests, owned or later acquired, in AllDale Minerals.  Cavalier Minerals may prepay the Cavalier Credit Facility at any time in whole or in part subject to terms and conditions described in the Cavalier Credit Agreement.  As of September  30, 2017, Cavalier Minerals had not drawn on the Cavalier Credit Facility.  Alliance Minerals, LLC ("Alliance Minerals") has the right to require Cavalier Minerals to draw the full amount available under the Cavalier Credit Facility and distribute the proceeds to the members of Cavalier Minerals, including Alliance Minerals.

7.           NONCONTROLLING INTERESTS

Our noncontrolling ownership interest in consolidated subsidiaries is presented in the condensed consolidated balance sheet within partners' capital as a separate component from the limited partners' equity. In addition, consolidated net income includes earnings attributable to both the limited partners' and the noncontrolling interests.

The noncontrolling interests balance is comprised of non-affiliate and affiliate ownership interests in the net assets of the ARLP Partnership that we consolidate (See Note 1 – Organization and Presentation) and an affiliate ownership interest in Cavalier Minerals (See Note 8 – Variable Interest Entities).

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

	September 30,		December 31,
	2017		2016
	(in thousands)
Noncontrolling interests reflected in Partners' Capital:
Affiliate (SGP)	$	(303,818)	$	(303,818)
Non-Affiliates (ARLP's non-affiliate limited partners)		871,432		836,380
Affiliate (Cavalier Minerals) (See Note 8 - Variable Interest Entities)		5,371		5,550
Accumulated other comprehensive loss attributable to noncontrolling interests		(12,424)		(21,990)
Total noncontrolling interests	$	560,561	$	516,122

The noncontrolling interest designated as Affiliate (SGP) represents SGP's limited partner interest in ARLP and, prior to the Exchange Transaction, SGP's 0.01% general partner interest in ARLP and 0.01% general partner interest in the Intermediate Partnership (See Note 1 – Organization and Presentation).

The noncontrolling interest designated as Non-Affiliates represents the limited partners' interest in ARLP controlled through the common unit ownership, excluding the 87,188,338 common units of ARLP held directly and indirectly by us (See Note 1 – Organization and Presentation).  The total obligation associated with ARLP's Long-Term Incentive Plan ("ARLP LTIP"), MGP Amended and Restated Deferred Compensation Plan for Directors ("MGP Deferred Compensation Plan") and the Supplemental Executive Retirement Plan ("SERP") are also included in the Non-Affiliates component of noncontrolling interest (See Note 11 – Compensation Plans).

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Net income attributable to noncontrolling interest:
Affiliate (SGP)	$	3	$	14	$	23	$	32
Non-Affiliates (ARLP's non-affiliate limited partners)		21,663		40,279		91,213		92,571
Affiliates (Cavalier Minerals)		155		44		425		40
	$	21,821	$	40,337	$	91,661	$	92,643

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

	Nine Months Ended
	September 30,
	2017		2016
	(in thousands)
Distributions paid to noncontrolling interests:
Affiliate (SGP) (1)	$	23	$	38
Non-Affiliates (ARLP's non-affiliate limited partners) (1)		62,120		69,642
	$	62,143	$	69,680

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

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The Affiliate (SGP) component of noncontrolling interests represents SGP's cumulative investment basis in the net assets of the ARLP Partnership.  SGP's investment basis as of September 30, 2017 and December 31, 2016 reflects various transactions associated with the ARLP Partnership's formation and initial public offering in 1999, the cumulative amount of nominal ARLP Partnership income allocations and distributions to SGP, nominal contributions by SGP to ARLP and the Intermediate Partnership to maintain its previous general partner interests in the ARLP Partnership and nominal net income allocations related to SGP's new limited partner interests obtained in the recent Exchange Transaction (See Note 1 – Organization and Presentation).

The following tables present the change in Partners' Capital for the nine months ended September 30, 2017 and 2016:

	Alliance Holdings GP, L.P.
			Accumulated Other
	Limited Partners'		Comprehensive		Noncontrolling		Total Partners'
	Capital		Income (Loss)		Interest		Capital
	(in thousands)
Balance at January 1, 2017	$	598,077	$	(16,550)	$	516,122	$	1,097,649
Net income		136,716		—		91,661		228,377
Other comprehensive income		—		468		378		846
Other comprehensive income reclassification resulting from the Exchange Transaction		—		(9,188)		9,188		—
Settlement of directors deferred compensation		(26)		—		—		(26)
Vesting of ARLP Long-Term Incentive Plan		—		—		(2,988)		(2,988)
Exchange Transaction fees		(2,342)		—		—		(2,342)
Common unit-based compensation		(63)		—		8,947		8,884
Distributions on ARLP common unit-based compensation		—		—		(2,392)		(2,392)
Contributions to consolidated company from affiliate noncontrolling interest		—		—		251		251
Distributions paid by consolidated company		—		—		(855)		(855)
Contributions by limited partner - affiliate		800		—		—		800
Distributions to AHGP Partners		(109,548)		—		—		(109,548)
Distributions paid by consolidated partnership to noncontrolling interest		—		—		(59,751)		(59,751)
Balance at September 30, 2017	$	623,614	$	(25,270)	$	560,561	$	1,158,905

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	Alliance Holdings GP, L.P.
			Accumulated Other
	Limited Partners'		Comprehensive		Noncontrolling		Total Partners'
	Capital		Income (Loss)		Interest		Capital
	(in thousands)
Balance at January 1, 2016	$	567,259	$	(14,875)	$	441,748	$	994,132
Net income		124,722		—		92,643		217,365
Other comprehensive income		—		199		184		383
Settlement of directors deferred compensation		(164)		—		(335)		(499)
Vesting of ARLP Long-Term Incentive Plan		—		—		(1,001)		(1,001)
Common unit-based compensation		237		—		9,802		10,039
Distributions on ARLP common unit-based compensation		—		—		(2,673)		(2,673)
Contributions to consolidated company from affiliate noncontrolling interest		—		—		2,557		2,557
Distributions paid by consolidated company		—		—		(60)		(60)
Distributions to AHGP Partners		(123,318)		—		—		(123,318)
Distributions paid by consolidated partnership to noncontrolling interest		—		—		(67,007)		(67,007)
Balance at September 30, 2016	$	568,736	$	(14,676)	$	475,858	$	1,029,918

.

8.           VARIABLE INTEREST ENTITIES

Cavalier Minerals

On November 10, 2014, the ARLP Partnership's subsidiary, Alliance Minerals, and Bluegrass Minerals Management, LLC ("Bluegrass Minerals") entered into a limited liability company agreement (the "Cavalier Agreement") to create Cavalier Minerals, which was formed to indirectly acquire oil and gas mineral interests, initially through its 71.7% noncontrolling ownership interest in AllDale I and subsequently through its 72.8% noncontrolling ownership interest in AllDale II.  Bluegrass Minerals is owned and controlled by the ARH Officer discussed in Note 6 – Long-Term Debt and is Cavalier Minerals' managing member.  Alliance Minerals and Bluegrass Minerals initially committed funding of $48.0 million and $2.0 million, respectively, to Cavalier Minerals, and Cavalier Minerals committed funding of $49.0 million to AllDale I.  On October 6, 2015, Alliance Minerals and Bluegrass Minerals committed to fund an additional $96.0 million and $4.0 million, respectively, to Cavalier Minerals, and Cavalier Minerals committed to fund $100.0 million to AllDale II.  Contributions in 2017 sufficiently completed funding to Cavalier Minerals for these commitments.  Cavalier Minerals is not expected to call on further funding of these commitments from Alliance Minerals and Bluegrass Minerals.

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Contributions made from Alliance Minerals and Bluegrass Minerals to Cavalier Minerals for each period presented are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Alliance Minerals
Beginning cumulative commitment fulfilled	$	143,112	$	95,597	$	137,077	$	63,498
Capital contributions - Cash		—		30,184		6,035		61,360
Capital contributions - Net AllDale Minerals' distributions received by Cavalier Minerals (1)		—		385		—		1,308
Ending cumulative commitment fulfilled		143,112		126,166		143,112		126,166
Remaining commitment		888		17,834		888		17,834
Total committed	$	144,000	$	144,000	$	144,000	$	144,000
Bluegrass Minerals
Beginning cumulative commitment fulfilled	$	5,963	$	3,983	$	5,712	$	2,646
Capital contributions - Cash		—		1,258		251		2,557
Capital contributions - Net AllDale Minerals' distributions received by Cavalier Minerals (1)		—		16		—		54
Ending cumulative commitment fulfilled		5,963		5,257		5,963		5,257
Remaining commitment		37		743		37		743
Total committed	$	6,000	$	6,000	$	6,000	$	6,000

(1) Represents distributions received from AllDale Minerals net of distributions reinvested and payments to Bluegrass Minerals for administration expense.

In accordance with the Cavalier Agreement, Bluegrass Minerals is entitled to receive an incentive distribution from Cavalier Minerals equal to 25% of all distributions (including in liquidation) after all members have recovered their investment.  The incentive distributions are reduced by certain distributions received by Bluegrass Minerals or its owner from AllDale Minerals Management, LLC ("AllDale Minerals Management"), the managing member of AllDale Minerals.  Distributions paid to Alliance Minerals and Bluegrass Minerals from Cavalier Minerals for each period presented are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Alliance Minerals	$	12,430	$	1,444	$	20,514	$	1,444
Bluegrass Minerals		518		60		855		60

Alliance Minerals' ownership interest in Cavalier Minerals at September 30, 2017 was 96%.  The remainder of the equity ownership is held by Bluegrass Minerals.  The ARLP Partnership has consolidated Cavalier Minerals' financial results as it concluded that Cavalier Minerals is a variable interest entity ("VIE") and the ARLP Partnership is the primary beneficiary because neither Bluegrass Minerals nor Alliance Minerals individually has both the power and the benefits related to Cavalier Minerals and the ARLP Partnership is most closely aligned with Cavalier Minerals through its substantial equity ownership.  Bluegrass Minerals' equity ownership of Cavalier Minerals is accounted for as noncontrolling ownership interest in our condensed consolidated balance sheets.  In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling interest in our condensed consolidated statements of income.

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WKY CoalPlay

On November 17, 2014, SGP Land, LLC ("SGP Land"), a wholly-owned subsidiary of SGP, and two limited liability companies ("Craft Companies") owned by irrevocable trusts established by the President and Chief Executive Officer of MGP entered into a limited liability company agreement to form WKY CoalPlay, LLC ("WKY CoalPlay").  WKY CoalPlay was formed, in part, to purchase and lease coal reserves.  WKY CoalPlay is managed by the ARH Officer discussed in Note 6 – Long-Term Debt, who is also an employee of SGP Land and trustee of the irrevocable trusts owning the Craft Companies.  In December 2014 and February 2015, the ARLP Partnership entered into various coal reserve leases with WKY CoalPlay.  During the nine months ended September 30, 2017, the ARLP Partnership paid $10.8 million of advanced royalties to WKY CoalPlay.  As of September 30, 2017, the ARLP Partnership had $30.0 million of advanced royalties outstanding under the leases, which is reflected in the Advance royalties, net line items in our condensed consolidated balance sheets.

The ARLP Partnership has concluded that WKY CoalPlay is a VIE because of its ability to exercise options to acquire reserves under lease with WKY CoalPlay, which is not within the control of the equity holders and, if it occurs, could potentially limit the expected residual return to the owners of WKY CoalPlay.  The ARLP Partnership does not have any economic or governance rights related to WKY CoalPlay and the ARLP Partnership's options that provide it with a variable interest in WKY CoalPlay's reserve assets do not give it any rights that constitute power to direct the primary activities that most significantly impact WKY CoalPlay's economic performance.  SGP Land has the sole ability to replace the manager of WKY CoalPlay at its discretion and therefore has power to direct the activities of WKY CoalPlay.  Consequently, the ARLP Partnership concluded that SGP Land is the primary beneficiary of WKY CoalPlay.

The ARLP Partnership

ARLP is a publicly-traded master limited partnership (NASDAQ ticker "ARLP") created in 1999 to acquire certain coal production and marketing assets of ARH.  As of September 30, 2017, AHGP held directly and indirectly 66.7% of the limited partnership interests in ARLP in addition to a non-economic general partner interest in the ARLP Partnership through its 100% ownership of MGP.  The limited partners do not have substantive kick-out rights to remove the general partner nor do they have substantive participating rights in the activities of ARLP, therefore we determined that ARLP is a variable interest entity.  To determine the primary beneficiary of ARLP, we considered that AHGP through its 100% ownership of MGP has the sole ability to direct the activities of ARLP and with its ownership of 66.7% limited partner interest, has economic benefit that is significant to ARLP.  As a result we determined that AHGP has both the power and benefits with respect to ARLP and is therefore the primary beneficiary and consolidates ARLP.

The Partnership Agreement (the "Agreement") of ARLP requires MGP to distribute on a quarterly basis 100% of ARLP’s available cash to ARLP's partners. Available cash is determined as defined in the Agreement and represents all cash with the exception of cash reserves (i) for the proper conduct of the business including reserves for future capital expenditures and for anticipated credit needs of the ARLP Partnership, (ii) to comply with debt obligations or (iii) to provide funds for certain subsequent distributions.  MGP is required under the terms of the Agreement to meet the distribution requirements as discussed above.  As discussed in Note 6 – Long-Term Debt, the Intermediate Partnership's debt covenants place additional restrictions on distributions from ARLP by limiting cash available for distribution based on various debt covenants pertaining to the most recent preceding quarter.  MGP cannot hold cash reserves to provide for subsequent distributions if that would prevent ARLP from making its minimum quarterly distributions or any cumulative distributions in arrears.  MGP does not have the ability to amend the Agreement without the consent of a majority of the limited partners.

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9.            INVESTMENTS

AllDale Minerals

In November 2014, Cavalier Minerals (see Note 8 – Variable Interest Entities), was created to indirectly purchase, through its equity investments in AllDale Minerals, oil and gas mineral interests in various geographic locations within producing basins in the continental U.S.  In February 2017, Alliance Minerals, which is included in our Other and Corporate category (see Note 13 – Segment Information), committed to directly (rather than through Cavalier Minerals) invest $30.0 million in AllDale III which was created for similar investment purposes.  The ARLP Partnership accounts for its ownership interest in the income or loss of AllDale Minerals and AllDale III (collectively, the "AllDale Partnerships") as equity method investments.  The ARLP Partnership records equity income or loss based on the AllDale Partnerships' individual distribution structures.  The changes in the ARLP Partnership's  aggregate equity method investment in the AllDale Partnerships for each of the periods presented were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Beginning balance	$	149,592	$	96,670	$	138,817	$	64,509
Contributions		3,900		32,181		16,487		65,367
Equity in income of affiliates		3,798		1,105		10,414		1,041
Distributions received		(12,941)		(1,905)		(21,369)		(2,866)
Ending balance	$	144,349	$	128,051	$	144,349	$	128,051

Kodiak

On July 19, 2017, Alliance Minerals purchased $100 million of Series A-1 Preferred Interests from Kodiak, a privately-held gas compression company providing large-scale, high-utilization compression assets to customers operating primarily in the Permian Basin.  This structured investment provides the ARLP Partnership with a quarterly cash or payment-in-kind return.  The ARLP Partnership's ownership interests in Kodiak are senior to all other Kodiak equity interests and subordinate only to Kodiak's senior secured debt facility.    The ARLP Partnership accounts for its ownership interests in Kodiak as a cost method investment.  It is not practicable to estimate the fair value of the ARLP Partnership's investment in Kodiak because of the lack of a quoted market price for its ownership interests.  The changes in the ARLP Partnership's investment in Kodiak for the three months ended September 30, 2017 were as follows:

	Three Months Ended
	September 30,
	2017
	(in thousands)
Beginning balance	$	—
Contributions		100,000
Payment-in-kind distributions received		2,800
Ending balance	$	102,800

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10.         WORKERS' COMPENSATION AND PNEUMOCONIOSIS

The changes in the workers' compensation liability, including current and long-term liability balances, for each of the periods presented were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Beginning balance	$	59,981	$	56,403	$	48,131	$	54,558
Accruals increase		1,999		2,480		16,673		7,904
Payments		(2,357)		(2,238)		(7,799)		(8,226)
Interest accretion		421		492		1,261		1,476
Valuation loss (1)		—		—		1,778		1,425
Ending balance	$	60,044	$	57,137	$	60,044	$	57,137

(1) The liability for the estimated present value of current workers′ compensation benefits is based on the ARLP Partnership's actuarial estimates.  The ARLP Partnership's actuarial calculations are based on a blend of actuarial projection methods and numerous assumptions including claim development patterns, mortality, medical costs and interest rates.  The ARLP Partnership conducted a mid-year review of its actuarial assumptions which resulted in a valuation loss in 2017 primarily attributable to a decrease in the discount rate used to calculate the estimated present value of future obligations from 3.52% at December 31, 2016 to 3.38% at June 30, 2017 and unfavorable changes in claims development.  The ARLP Partnership's mid-year 2016 actuarial review resulted in a valuation loss primarily attributable to a decrease in the discount rate used to calculate the estimated present value of future obligations from 3.63% at December 31, 2015 to 2.89% at June 30, 2016, partially offset by favorable changes in claims development.

Certain of the ARLP Partnership's mine operating entities are liable under state statutes and the Federal Coal Mine Health and Safety Act of 1969, as amended, to pay pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents.  Components of the net periodic benefit cost for each of the periods presented are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Service cost	$	580	$	644	$	1,682	$	1,936
Interest cost		649		627		1,906		1,880
Amortization of net actuarial gain (1)		(479)		(660)		(1,613)		(1,982)
Net periodic benefit cost	$	750	$	611	$	1,975	$	1,834

(1) Amortization of net actuarial gain is included in the Operatingexpenses(excludingdepreciation, depletion and amortization) line item within our condensed consolidated statements of income.

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11.         COMPENSATION PLANS

ARLP Long-Term Incentive Plan

The ARLP Partnership has the ARLP LTIP for certain employees and officers of MGP and its affiliates who perform services for the ARLP Partnership.  The ARLP LTIP awards are grants of non-vested "phantom" or notional units, also referred to as "restricted units", which upon satisfaction of time and performance based vesting requirements, entitle the ARLP LTIP participant to receive ARLP common units.  Annual grant levels and vesting provisions for designated participants are recommended by the President and Chief Executive Officer of MGP, subject to review and approval of the MGP Compensation Committee.  Vesting of all grants outstanding are subject to the satisfaction of certain financial tests, which management currently believes are probable.  Grants issued to ARLP LTIP participants are expected to cliff

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vest on January 1st of the third year following issuance of the grants.  The ARLP Partnership expects to settle the non-vested ARLP LTIP grants by delivery of ARLP common units, except for the portion of the grants that will satisfy tax withholding obligations of ARLP LTIP participants.  As provided under the distribution equivalent rights provisions of the ARLP LTIP and the terms of the ARLP LTIP awards, all non-vested grants include contingent rights to receive quarterly distributions in cash or, in the case of the 2016 and 2017 grants, at the discretion of the MGP Compensation Committee, cash or in lieu of cash, phantom units credited to a bookkeeping account with value, equal to the cash distributions we make to unitholders during the vesting period.

A summary of non-vested ARLP LTIP grants as of and for the nine months ended September 30, 2017 is as follows:

	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)
Non-vested grants at January 1, 2017	1,604,748	$	23.19	$	36,027
Granted	475,310		23.17
Vested (1)	(350,516)		40.73
Forfeited	(35,516)		20.01
Non-vested grants at September 30, 2017	1,694,026		19.62		32,779

(1) During the nine months ended September 30, 2017, the ARLP Partnership issued 222,011 unrestricted common units to the ARLP LTIP participants.  The remaining vested units were settled in cash to satisfy tax withholding obligations of the ARLP LTIP participants.

ARLP LTIP expense was $2.8 million and $3.1 million for the three months ended September 30, 2017 and 2016, respectively, and $8.2 million and $9.0 million for the nine months ended September 30, 2017 and 2016, respectively.  The total obligation associated with the ARLP LTIP as of September 30, 2017 was $18.9 million and is included in Noncontrolling interests line item in our condensed consolidated balance sheets.  As of September 30, 2017, there was $14.3 million in total unrecognized compensation expense related to the non-vested ARLP LTIP grants that are expected to vest.  That expense is expected to be recognized over a weighted-average period of 1.4 years.

After consideration of the January 1, 2017 vesting and subsequent issuance of 222,011 common units, approximately 2.5 million units remain available under the ARLP LTIP for issuance in the future, assuming all grants issued in 2017, 2016 and 2015 and currently outstanding are settled with ARLP common units, without reduction for tax withholding, and no future forfeitures occur.

AHGP Long-Term Incentive Plan

We have also adopted a Long-Term Incentive Plan (the "AHGP LTIP") for employees, directors and consultants of our general partner and its affiliates, including the ARLP Partnership.  Grants under the AHGP LTIP are to be made in AHGP restricted units, which are "phantom" units that entitle the grantee to receive either a common unit or equivalent amount of cash upon the vesting of the phantom unit.  The aggregate number of common units reserved for issuance under the AHGP LTIP is 5,215,000.  There have been no grants under the AHGP LTIP as of September 30, 2017.

SERP and Directors Deferred Compensation Plans

The ARLP Partnership has a SERP to provide deferred compensation benefits for certain officers and key employees.  All allocations made to participants under the SERP are made in the form of "phantom" ARLP units and SERP distributions will be settled in the form of ARLP common units. The SERP is administered by the MGP Compensation Committee. 

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Our directors participate in the AGP Amended and Restated Deferred Compensation Plan for Directors ("AGP Deferred Compensation Plan"), and the directors of MGP participate in the MGP Deferred Compensation Plan (collectively, the "Deferred Compensation Plans").  Pursuant to the Deferred Compensation Plans, for amounts deferred either automatically or at the election of the director, a notional account is established and credited with notional common units of ARLP or AHGP, as appropriate, which are described in the Deferred Compensation Plans as "phantom" units.  Distributions from the Deferred Compensation Plans will be settled in the form of ARLP or AHGP common units, as applicable.  

For both the SERP and Deferred Compensation Plans, when quarterly cash distributions are made with respect to ARLP or AHGP common units, an amount equal to such quarterly distribution is credited to each participant's notional account as additional phantom units.  All grants of phantom units under the SERP and Deferred Compensation Plans vest immediately.

A summary of SERP and MGP Deferred Compensation Plan activity as of and for the nine months ended September  30, 2017  is as follows:

	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)
Phantom units outstanding as of January 1, 2017	494,018	$	29.77	$	11,091
Granted	40,359		21.22
Phantom units outstanding as of September 30, 2017	534,377		29.13		10,340

Total SERP and MGP Deferred Compensation Plan expense was $0.3  million for each of the three months ended September  30, 2017  and 2016, and $1.0 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively.  As of September 30, 2017, the total obligation associated with the SERP and MGP Deferred Compensation Plan was $15.6 million and is included in Noncontrolling interests line item in our condensed consolidated balance sheet.

A summary of the AGP Deferred Compensation Plan activity as of and for the nine months ended September 30, 2017 is as follows:

	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)
Phantom units outstanding as of January 1, 2017	26,112	$	36.67	$	734
Granted	1,520		27.91
Issued	(4,357)		39.18
Phantom units outstanding as of September 30, 2017	23,275		35.63		647

Total AGP Deferred Compensation Plan expense was $16,075  and $52,775 for the three months ended September 30, 2017 and 2016, respectively, and $41,943 and $164,203 for the nine months ended September 30, 2017 and 2016, respectively.  The total obligation associated with the AGP Deferred Compensation Plan as of September 30, 2017 was $0.8 million and is included in Limited partners – Common Unitholders line item in our condensed consolidated balance sheets.

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12.         COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

Eligible employees at certain of the ARLP Partnership's mining operations participate in a defined benefit plan (the "Pension Plan") sponsored by the ARLP Partnership.  The Pension Plan is currently closed to new applicants and effective January 31, 2017, participants in the Pension Plan are no longer receiving benefit accruals for service.  The amendment did not affect pension benefits accrued prior to January 31, 2017.  The benefit formula for the Pension Plan is a fixed dollar unit based on years of service.  Components of the net periodic benefit cost for each of the periods presented are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Service cost	$	—	$	524	$	—	$	1,720
Interest cost		1,138		1,118		3,408		3,381
Expected return on plan assets		(1,240)		(1,363)		(3,743)		(3,937)
Amortization of prior service cost (1)		46		—		140		—
Amortization of net loss (1)		774		787		2,319		2,365
Net periodic benefit cost	$	718	$	1,066	$	2,124	$	3,529

(1) Amortization of prior service cost and net actuarial loss is included in the Operating expenses (excluding depreciation, depletion and amortization) line item within our condensed consolidated statements of income.

During the nine months ended September 30, 2017, the ARLP Partnership made contribution payments of $1.1 million to the Pension Plan for the 2016 plan year and $1.2 million for the 2017 plan year.  On October 16, 2017, the ARLP Partnership made a contribution payment of $0.6 million for the 2017 plan year.

13.         SEGMENT INFORMATION

The ARLP Partnership operates in the eastern U.S. as a producer and marketer of coal to major utilities and industrial users.  We aggregate multiple operating segments into two reportable segments, Illinois Basin and Appalachia, and we have an "all other" category referred to as Other and Corporate.  Our reportable segments correspond to major coal producing regions in the eastern U.S.  Similar economic characteristics for our operating segments within each of these two reportable segments generally include coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.   

The Illinois Basin reportable segment is comprised of multiple operating segments, including currently operating mining complexes (a) Webster County Coal, LLC's Dotiki mining complex, (b) Gibson County Coal, LLC's mining complex, which includes the Gibson North (currently idled) and Gibson South mines, (c) Warrior Coal, LLC's mining complex, (d) River View Coal, LLC's mining complex and (e) Hamilton County Coal, LLC's mining complex.  The Gibson North mine has been idled since the fourth quarter of 2015 in response to market conditions.

The Illinois Basin reportable segment also includes White County Coal, LLC's Pattiki mining complex ("Pattiki"), Hopkins County Coal, LLC's mining complex, which includes the Elk Creek mine, the Pleasant View surface mineable reserves and the Fies underground project, Sebree Mining, LLC's mining complex, which includes the Onton mine, Steamport, LLC and certain reserves, CR Services, LLC, CR Machine Shop, LLC, certain properties and equipment of Alliance Resource Properties, ARP Sebree, LLC, ARP Sebree South, LLC and UC Coal, LLC and its subsidiaries, UC Mining, LLC and UC Processing, LLC (collectively "UC Coal").  The Pattiki mine ceased production in December 2016.  The Elk Creek mine depleted its reserves in March 2016 and ceased production on April 1, 2016.  The Onton mine has been idled since the fourth quarter of 2015 in response to market conditions.  UC Coal equipment assets acquired in 2015 continue to be deployed as needed at various Illinois Basin operating mines.

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The Appalachia reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge, LLC mining complex and the MC Mining, LLC mining complex.  The Mettiki mining complex includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant. 

Other and Corporate includes the ARLP Partnership and AHGP's marketing and administrative expenses, Alliance Service, Inc. ("ASI") and its subsidiary, Matrix Design Group, LLC and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD ("Matrix Design"), Alliance Design Group, LLC ("Alliance Design") (collectively, the Matrix Design entities and Alliance Design are referred to as the "Matrix Group"), ASI's ownership of aircraft, the Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") dock activities, Alliance Coal's coal brokerage activity, Mid-America Carbonates, LLC ("MAC"), certain of Alliance Resource Properties' land and mineral interest activities, Pontiki Coal, LLC's throughput receivables and prior workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), Alliance Minerals, and its affiliate, Cavalier Minerals (Note 8 – Variable Interest Entities), both of which hold equity investments in various AllDale Partnerships (Note 9 – Investments), AROP Funding and the ARLP Partnership's new subsidiary formed March 30, 2017, Alliance Finance (both discussed in Note 6 – Long-Term Debt).  On July 19, 2017, Alliance Minerals purchased $100 million of Series A-1 Preferred Interests from Kodiak  (Note 9 – Investments).

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Reportable segment results as of and for the three and nine months ended September 30, 2017 and 2016 are presented below.

	Illinois				Other and		Elimination
	Basin		Appalachia		Corporate		(1)		Consolidated
	(in thousands)
Three Months Ended September 30, 2017
Revenues - Outside	$	266,931	$	152,865	$	33,291	$	—	$	453,087
Revenues - Intercompany		18,446		1,390		3,977		(23,813)		—
Total revenues (2)		285,377		154,255		37,268		(23,813)		453,087
Segment Adjusted EBITDA Expense (3)		192,465		97,316		26,421		(21,591)		294,611
Segment Adjusted EBITDA (4)		86,377		55,465		17,445		(2,222)		157,065
Capital expenditures		26,328		11,126		484		—		37,938
Three Months Ended September 30, 2016
Revenues - Outside	$	360,221	$	154,852	$	36,893	$	—	$	551,966
Revenues - Intercompany		18,267		—		4,826		(23,093)		—
Total revenues (2)		378,488		154,852		41,719		(23,093)		551,966
Segment Adjusted EBITDA Expense (3)		227,526		94,201		26,664		(20,279)		328,112
Segment Adjusted EBITDA (4)		145,424		58,497		16,160		(2,814)		217,267
Capital expenditures		10,893		10,306		466		—		21,665
Nine Months Ended September 30, 2017
Revenues - Outside	$	763,765	$	458,815	$	90,131	$	—	$	1,312,711
Revenues - Intercompany		46,740		1,390		11,985		(60,115)		—
Total revenues (2)		810,505		460,205		102,116		(60,115)		1,312,711
Segment Adjusted EBITDA Expense (3)		504,201		276,252		67,382		(53,451)		794,384
Segment Adjusted EBITDA (4)		285,928		179,396		47,948		(6,664)		506,608
Total assets		1,406,831		468,580		458,421		(123,073)		2,210,759
Capital expenditures		66,444		37,167		1,844		—		105,455
Nine Months Ended September 30, 2016
Revenues - Outside	$	921,796	$	407,406	$	74,530	$	—	$	1,403,732
Revenues - Intercompany		40,448		3,806		13,723		(57,977)		—
Total revenues (2)		962,244		411,212		88,253		(57,977)		1,403,732
Segment Adjusted EBITDA Expense (3)		567,214		261,933		63,575		(49,336)		843,386
Segment Adjusted EBITDA (4)		381,042		143,699		25,555		(8,641)		541,655
Total assets		1,541,513		480,920		374,810		(148,438)		2,248,805
Capital expenditures		41,264		27,317		1,686		—		70,267

(1) The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group and MAC to the ARLP Partnership's mining operations, coal sales and purchases between operations within different segments, sales of receivables to AROP Funding and insurance premiums paid to Wildcat Insurance.

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(2) Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, MAC revenues, Wildcat Insurance revenues and brokerage coal sales.

(3) Segment Adjusted EBITDA Expense includes operating expenses, coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to the ARLP Partnership's customers and consequently it does not realize any gain or loss on transportation revenues. We review Segment Adjusted EBITDA Expense per ton for cost trends.  Results presented for Segment Adjusted EBITDA Expense for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to Depreciation, depletion and amortization rather than Operating expenses (excluding depreciation, depletion and amortization).

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to Operating expenses (excluding depreciation, depletion and amortization):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Segment Adjusted EBITDA Expense	$	294,611	$	328,112	$	794,384	$	843,386
Outside coal purchases		—		(1,514)		—		(1,514)
Other income		774		293		2,461		545
Operating expenses (excluding depreciation, depletion and amortization)	$	295,385	$	326,891	$	796,845	$	842,417

(4) Segment Adjusted EBITDA is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and debt extinguishment loss.  Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to the ARLP Partnership's revenues and operating expenses, which are primarily controlled by our segments.  Results presented for Segment Adjusted EBITDA for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to Depreciation, depletion and amortization rather than Operating expenses (excluding depreciation, depletion and amortization).  Consolidated Segment Adjusted EBITDA is reconciled to net income as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Consolidated Segment Adjusted EBITDA	$	157,065	$	217,267	$	506,608	$	541,655
General and administrative		(15,389)		(18,987)		(47,160)		(55,175)
Depreciation, depletion and amortization		(69,962)		(101,432)		(194,109)		(245,736)
Interest expense, net		(10,767)		(7,998)		(28,817)		(23,375)
Debt extinguishment loss		—		—		(8,148)		—
Income tax (expense) benefit		(4)		(6)		3		(4)
Net income	$	60,943	$	88,844	$	228,377	$	217,365

.

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14.         SUBSEQUENT EVENTS

On October 27, 2017, we declared a quarterly distribution for the quarter ended September 30, 2017,  of $0.735 per unit on all common units outstanding, totaling approximately $44.0 million, payable on November 17, 2017 to all unitholders of record as of November 9, 2017.

On October 27, 2017, the ARLP Partnership declared a quarterly distribution for the quarter ended September 30, 2017, of $0.505 per unit, on all common units outstanding, totaling approximately $66.7 million, including distributions of $0.7  million to MGP with respect to its general partner interest in the Intermediate Partnership, payable on November 14, 2017 to all unitholders of record as of November 7, 2017.    

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Significant relationships referenced in this management's discussion and analysis of financial condition and results of operations include the following:

· References to "we," "us," "our" or "AHGP" mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

· References to "AHGP Partnership" mean the business and operations of Alliance Holdings GP, L.P., the parent company, as well as its consolidated subsidiaries, including MGP II, LLC ("MGP II"), Alliance Resource Management GP, LLC and Alliance Resource Partners, L.P. and its consolidated subsidiaries.

· References to "AGP" mean Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., also referred to as our general partner.

· References to "ARLP Partnership" mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

· References to "ARLP" mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

· References to "MGP" mean Alliance Resource Management GP, LLC, ARLP's sole general partner.

· References to "SGP" mean Alliance Resource GP, LLC, ARLP's special general partner prior to the Exchange Transaction discussed below.

· References to "Intermediate Partnership" mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

· References to "Alliance Resource Properties" mean Alliance Resource Properties, LLC, the land-holding company for the mining operations of Alliance Resource Operating Partners, L.P.

· References to "Alliance Coal" mean Alliance Coal, LLC, the holding company for the mining operations of Alliance Resource Operating Partners, L.P.

Summary

Our cash flows currently consist primarily of distributions from ARLP for our ARLP partnership interests.  We reflect our ownership interest in the ARLP Partnership on a consolidated basis, which means that our financial results are combined with the ARLP Partnership's financial results and the results of our other subsidiaries.  The earnings of the ARLP Partnership allocated to its limited partners' interest not owned by us and allocated to SGP's general partner interests in the ARLP Partnership prior to the Exchange Transaction discussed below are reflected as a noncontrolling interest in our condensed consolidated statement of income and balance sheet.  In addition to the ARLP Partnership, our results of operations include the results of operations of MGP II and MGP, our indirect wholly-owned subsidiaries.

The AHGP Partnership's results of operations principally reflect the results of operations of the ARLP Partnership adjusted for noncontrolling partners' interest in the ARLP Partnership's net income.  Accordingly, the discussion of our financial position and results of operations in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" reflects the operating activities and results of operations of the ARLP Partnership.

The ARLP Partnership is a diversified producer and marketer of coal primarily to major United States ("U.S.") utilities and industrial users. The ARLP Partnership began mining operations in 1971 and, since then, has grown through acquisitions and internal development to become the second largest coal producer in the eastern U.S.  As is customary in the coal industry, the ARLP Partnership has entered into long-term coal supply agreements with many of its customers.  The ARLP Partnership operates eight underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia, as well as a coal loading terminal on the Ohio River at Mt. Vernon, Indiana.  The ARLP Partnership also generates income from other sources including investments in oil and gas royalty interests and midstream services.

We have two reportable segments: Illinois Basin and Appalachia, and an "all other" category referred to as Other and Corporate.  Our reportable segments correspond to major coal producing regions in the eastern U.S.  Factors similarly affecting financial performance of our operating segments within each of these two reportable segments generally include coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

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· Illinois Basin reportable segment is comprised of multiple operating segments, including currently operating mining complexes (a) Webster County Coal, LLC's Dotiki mining complex ("Dotiki");  (b) Gibson County Coal, LLC's mining complex, which includes the Gibson North (currently idled) and Gibson South mines; (c) Warrior Coal, LLC's mining complex ("Warrior");  (d) River View Coal, LLC's mining complex ("River View") and (e) Hamilton County Coal, LLC's mining complex ("Hamilton").  The Gibson North mine has been idled since the fourth quarter of 2015 in response to market conditions.

The Illinois Basin reportable segment also includes White County Coal, LLC's Pattiki mining complex ("Pattiki"); Hopkins County Coal, LLC's mining complex, which includes the Elk Creek mine ("Elk Creek"), the Pleasant View surface mineable reserves and the Fies underground project; Sebree Mining, LLC's mining complex, which includes the Onton mine, Steamport, LLC and certain reserves; CR Services, LLC; CR Machine Shop, LLC; certain properties and equipment of Alliance Resource Properties; ARP Sebree, LLC; ARP Sebree South, LLC and UC Coal, LLC and its subsidiaries, UC Mining, LLC and UC Processing, LLC (collectively "UC Coal").  The Pattiki mine ceased production in December 2016.  The Elk Creek mine depleted its reserves in March 2016 and ceased production on April 1, 2016.  The Onton mine has been idled since the fourth quarter of 2015 in response to market conditions.  UC Coal equipment assets acquired in 2015 continue to be deployed as needed at various Illinois Basin operating mines.

· Appalachia reportable segment is comprised of multiple operating segments, including the Mettiki mining complex ("Mettiki"); the Tunnel Ridge, LLC mining complex ("Tunnel Ridge"); and the MC Mining, LLC mining complex ("MC Mining").  Mettiki includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant.

· Other and Corporate includes marketing and administrative expenses; Alliance Service, Inc. ("ASI") and its subsidiary, Matrix Design Group, LLC ("Matrix Design") and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD; Alliance Design Group, LLC; ASI's ownership of aircraft; the Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") dock activities; Alliance Coal's coal brokerage activity; Mid-America Carbonates, LLC's manufacturing and sales (primarily to the ARLP Partnership's mines) of rock dust; certain of Alliance Resource Properties' land and mineral interest activities; Pontiki Coal, LLC's throughput receivables and legacy workers' compensation and pneumoconiosis liabilities; Wildcat Insurance, LLC; Alliance Minerals, LLC ("Alliance Minerals"), which holds direct equity investments in AllDale Minerals III, LP ("AllDale III"), and its affiliate, Cavalier Minerals JV, LLC ("Cavalier Minerals"), which holds equity investments in AllDale Minerals, LP and AllDale Minerals II, LP (collectively with AllDale III, the "AllDale Partnerships"), AROP Funding, LLC ("AROP Funding") and the ARLP Partnership's new subsidiary formed March 30, 2017, Alliance Resource Finance Corporation ("Alliance Finance"). On July 19, 2017, Alliance Minerals purchased $100 million of Series A Preferred Interests from Kodiak Gas Services, LLC ("Kodiak").  Please read "Item 1. Financial Statements (Unaudited) – Note 6. Long-term Debt", "– Note 7. Variable Interest Entities" and "– Note 8. Investments" of this Quarterly Report on Form 10-Q for more information on AROP Funding, Alliance Finance, Alliance Minerals, Cavalier Minerals, the AllDale Partnerships and Kodiak.

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

We reported net income attributable to  AHGP of $39.1 million for the three months ended September 30, 2017 ("2017 Quarter") compared to $48.5 million for the three months ended September 30, 2016 ("2016 Quarter"). The decrease of $9.4 million was principally due to lower revenues resulting from reduced coal sales volumes and prices.   Lower revenues were offset in part by reduced operating expenses and depreciation, depletion and amortization, increased income from the ARLP Partnership's investments in oil and gas mineral interests and compression services and by increased quarterly cash distributions received from ARLP which in turn, increased net income allocations to us from the ARLP Partnership by $5.2 million.   Operating expenses decreased compared to the 2016 Quarter primarily as a result of decreased coal sales volumes in the 2017 Quarter and the continuing benefits of the ARLP Partnership's initiatives to shift production to lower-cost operations, partially offset by the impact of adverse geological conditions encountered at the Hamilton mine in the 2017 Quarter.  Results presented for the 2016 Quarter have been recast to reflect a reclassification

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of depreciation and depletion capitalized into coal inventory as an adjustment to depreciation, depletion and amortization rather than operating expenses. 

Regarding our increase in net income resulting from higher ARLP quarterly distributions, the increased distributions from ARLP resulted from (a) ARLP’s 15.4% higher quarterly unit distribution rate and (b) the increased number of ARLP common units we hold resulting from the Exchange Transaction discussed below.  Higher distributions to us from ARLP, increases our income allocation from the ARLP Partnership because the net income is first allocated to us based on quarterly distribution amounts and then the remaining undistributed net income or losses are allocated to us based on our percentage of ARLP’s outstanding common units.  Our percentage of ARLP’s total common units outstanding increased as a result of the Exchange Transaction.  The combination of the increase in quarterly distributions declared by ARLP and the common units we received in the Exchange Transaction resulted in a larger distribution to us versus if the Exchange Transaction had not occurred.    

On July 28, 2017, our wholly-owned subsidiary, MGP contributed to ARLP all of its incentive distribution rights ("IDR") and its general partner interest in ARLP in exchange for 56,100,000 ARLP common units and a non-economic general partner interest in ARLP.  In conjunction with this transaction and on the same economic basis as MGP, SGP also contributed to ARLP its 0.01% general partner interests in both ARLP and the Intermediate Partnership in exchange for 7,181 ARLP common units (collectively the "Exchange Transaction").  In connection with the Exchange Transaction, ARLP amended its partnership agreement to reflect, among other things, cancellation of the IDRs and the economic general partner interests in ARLP and issuance of a non-economic general partner interest to MGP.  We own directly and indirectly 87,188,338 ARLP common units and a non-economic general partner interest in ARLP.  We continue to own, through MGP, a 1.0001% managing general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal.  Please read "Item 1. Financial Statements (Unaudited) – Note 1. Organization and Presentation" of this Quarterly Report on Form 10-Q for more information on the Exchange Transaction.

	Three Months Ended September 30,
	2017		2016		2017		2016
	(in thousands)				(per ton sold)
Tons sold		9,645		10,757		N/A		N/A
Tons produced		8,521		8,512		N/A		N/A
Coal sales	$	435,162	$	533,817	$	45.12	$	49.63
Operating expenses and outside coal purchases	$	295,385	$	328,405	$	30.63	$	30.53

Coal sales.  Coal sales decreased $98.6 million or 18.5% to $435.2 million for the 2017 Quarter from $533.8 million for the 2016 Quarter.  The decrease was attributable to a volume variance of $55.2 million resulting from reduced tons sold and a price variance of $43.4 million due to lower average coal sales prices.  Reduced tons sold reflect significantly higher sales from coal inventory in the 2016 Quarter due to sizable contract deferrals by our customers in the first half of 2016 and the absence of sales at the Pattiki mine (which was closed in the fourth quarter of 2016) during the 2017 Quarter.  Average coal sales prices decreased $4.51 per ton sold in the 2017 Quarter to $45.12 compared to $49.63 per ton sold in the 2016 Quarter, primarily as a result of the expiration of higher-priced legacy contracts, offset in part by higher price realizations at the Mettiki mine from its participation in the metallurgical coal markets and improved prices at the MC Mining mine in the 2017 Quarter. Total production in the 2017 Quarter was comparable to the 2016 Quarter.

Operating expenses and outside coal purchases.  Operating expenses and outside coal purchases decreased 10.1% to $295.4 million for the 2017 Quarter from $328.4 million for the 2016 Quarter primarily as a result of decreased coal sales volumes in the 2017 Quarter.  On a per ton basis, operating expenses and outside coal purchases increased slightly to $30.63 per ton sold from $30.53 per ton sold in the 2016 Quarter, due primarily to the previously discussed adverse geological conditions encountered at the Hamilton mine in the 2017 Quarter, partially offset by the ARLP Partnership's initiatives to shift production to lower-cost operations.  The most significant operating expense variances by category are discussed below:

· Material and supplies expenses per ton produced increased 7.3% to $10.64 per ton in the 2017 Quarter from $9.92 per ton in the 2016 Quarter.  The increase of $0.72 per ton produced resulted primarily from increases of $0.36

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per ton for contract labor used in the mining process, $0.29 per ton for roof support and $0.13 per ton for certain ventilation expenses, partially offset by a decrease of $0.09 per ton in longwall subsidence expense; and

· Maintenance expenses per ton produced increased 13.9% to $3.61 per ton in the 2017 Quarter from $3.17 per ton in the 2016 Quarter.  The increase of $0.44 per ton produced was primarily due to increased maintenance expenses at several mines in both reportable segments.

Operating expenses and outside coal purchases per ton increases discussed above were partially offset by the following decreases:

· Labor and benefit expenses per ton produced, excluding workers' compensation, decreased 6.7% to $10.08 per ton in the 2017 Quarter from $10.80 per ton in the 2016 Quarter.  This decrease of $0.72 per ton was primarily attributable to lower health care benefit expenses; and

· Production taxes and royalty expenses incurred as a percentage of coal sales prices and volumes decreased $0.15 per produced ton sold in the 2017 Quarter compared to the 2016 Quarter primarily as a result of lower excise taxes per ton resulting from a favorable state production mix, increased export sales and lower average coal sales prices as discussed above. 

General and administrative.  General and administrative expenses for the 2017 Quarter decreased to $15.4 million compared to $19.0 million in the 2016 Quarter.  The decrease of $3.6 million was primarily due to lower incentive compensation expenses.

 Depreciation, depletion and amortization.  Depreciation, depletion and amortization expense decreased to $70.0 million in the 2017 Quarter from $101.4 million in the 2016 Quarter.  The decrease of $31.4 million resulted primarily from the closure of the Pattiki mine in the fourth quarter of 2016 and reduced sales volumes at other Illinois Basin mines.

Interest expense.    Interest expense, net of capitalized interest, increased to $10.8 million in the 2017 Quarter from $8.0 million in the 2016 Quarter primarily due to interest incurred under the $400 million senior unsecured notes due 2025 (the "ARLP Senior Notes") issued by ARLP in April 2017 offset in part by reduced borrowings under the ARLP revolving credit facility and the payment of the ARLP Term Loan and ARLP Series B Senior Notes.  Interest payable under the ARLP Senior Notes, ARLP revolving credit facility, ARLP Term Loan and ARLP Series B Senior Notes is discussed below under "–Debt Obligations."

Equity in income of affiliates.  Equity in income of affiliates increased $2.7 million in the 2017 Quarter compared to the 2016 Quarter due to increased income from the ARLP Partnership's investments in the AllDale Partnerships.

Cost investment income.    Distributions of additional preferred interests received from the ARLP Partnership's new Kodiak investment contributed $2.8 million of cost investment income to the 2017 Quarter.  Please read "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q for more information on Kodiak.

Net income attributable to noncontrolling interests.  The net income attributable to noncontrolling interest was $21.8 and $40.3 million for the 2017 and 2016 Quarters, respectively.  The difference of $18.5 million is due to the decrease in the consolidated net income of the ARLP Partnership resulting from the changes in revenues and expenses described above and an increased percentage allocation of the ARLP Partnership's net income to AHGP due to increased cash distributions from ARLP as a result of the Exchange Transaction discussed above.

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Segment Adjusted EBITDA.  Our 2017 Quarter Segment Adjusted EBITDA decreased $60.2 million, or 27.7%, to $157.1 million from the 2016 Quarter Segment Adjusted EBITDA of $217.3 million.  Segment Adjusted EBITDA, tons sold, coal sales, other sales and operating revenues and Segment Adjusted EBITDA Expense by segment are:

	Three Months Ended
	September 30,
	2017		2016		Increase (Decrease)
	(in thousands)
Segment Adjusted EBITDA
Illinois Basin	$	86,377	$	145,424	$	(59,047)	(40.6)	%
Appalachia		55,465		58,497		(3,032)	(5.2)	%
Other and Corporate		17,445		16,160		1,285	8.0	%
Elimination		(2,222)		(2,814)		592	21.0	%
Total Segment Adjusted EBITDA (1)	$	157,065	$	217,267	$	(60,202)	(27.7)	%
Tons sold
Illinois Basin		6,872		7,853		(981)	(12.5)	%
Appalachia		2,773		2,855		(82)	(2.9)	%
Other and Corporate		527		593		(66)	(11.1)	%
Elimination		(527)		(544)		17	3.1	%
Total tons sold		9,645		10,757		(1,112)	(10.3)	%
Coal sales
Illinois Basin	$	278,739	$	372,879	$	(94,140)	(25.2)	%
Appalachia		151,882		151,952		(70)	(0.0)	%
Other and Corporate		24,378		27,252		(2,874)	(10.5)	%
Elimination		(19,837)		(18,266)		(1,571)	(8.6)	%
Total coal sales	$	435,162	$	533,817	$	(98,655)	(18.5)	%
Other sales and operating revenues
Illinois Basin	$	104	$	71	$	33	46.5	%
Appalachia		899		745		154	20.7	%
Other and Corporate		12,888		14,467		(1,579)	(10.9)	%
Elimination		(3,975)		(4,826)		851	17.6	%
Total other sales and operating revenues	$	9,916	$	10,457	$	(541)	(5.2)	%
Segment Adjusted EBITDA Expense
Illinois Basin	$	192,465	$	227,526	$	(35,061)	(15.4)	%
Appalachia		97,316		94,201		3,115	3.3	%
Other and Corporate		26,421		26,664		(243)	(0.9)	%
Elimination		(21,591)		(20,279)		(1,312)	(6.5)	%
Total Segment Adjusted EBITDA Expense (1)	$	294,611	$	328,112	$	(33,501)	(10.2)	%

(1) For a definition of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to comparable generally accepted accounting principles ("GAAP") financial measures, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA" to GAAP "net income" and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses."  Results presented for Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense for the three months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to depreciation, depletion and amortization rather than operating expenses.

Illinois Basin – Segment Adjusted EBITDA decreased 40.6% to $86.4 million in the 2017 Quarter from $145.4 million in the 2016 Quarter.  The decrease of $59.0 million was primarily attributable to lower coal sales, which decreased

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25.2% to $278.7 million in the 2017 Quarter from $372.9 million in the 2016 Quarter.  The decrease of $94.2 million in coal sales primarily reflects lower average coal sales prices of $40.56 in the 2017 Quarter compared to $47.48 in the 2016 Quarter, resulting from the expiration and/or renegotiation of certain higher-priced legacy contracts and reduced sales volumes in the 2017 Quarter.  Tons sold decreased 12.5% compared to the 2016 Quarter, primarily due to the closure of the Pattiki mine in the fourth quarter of 2016 and reduced sales volumes from the Dotiki and River View mines, partially offset by increased volumes at the Hamilton mine.  Although total production for the 2017 Quarter was comparable to the 2016 Quarter, the 2016 Quarter included significantly higher sales from coal inventory resulting in the unfavorable comparison of sales volumes between the two quarters.  Segment Adjusted EBITDA Expense decreased 15.4% to $192.5 million in the 2017 Quarter from $227.5 million in the 2016 Quarter due to reduced sales volumes.  Segment Adjusted EBITDA Expense per ton decreased $0.96 per ton sold to $28.01 from $28.97 per ton sold in the 2016 Quarter, primarily due to lower selling expenses and health care benefit expenses as well as the ARLP Partnership's initiatives to shift production to lower-cost operations, partially offset by reduced recoveries across the region and adverse geological conditions encountered at the Hamilton mine in the 2017 Quarter.

Appalachia – Segment Adjusted EBITDA decreased 5.2% to $55.5 million for the 2017 Quarter from $58.5 million in the 2016 Quarter.  The decrease of $3.0 million was primarily attributable to reduced sales volumes and increased operating expenses, offset in part by increased coal sales prices.  Coal sales in the 2017 Quarter were comparable to the 2016 Quarter as a decrease of 2.9% in tons sold, primarily due to reduced sales volumes at the Mettiki mine, was substantially offset by higher coal sales prices, which increased 2.9% to $54.77 per ton sold compared to $53.22 per ton sold in the 2016 Quarter.  The increase in coal sales prices primarily reflects higher price realizations at the Mettiki mine from its participation in the metallurgical coal markets and improved prices at the MC Mining mine in the 2017 Quarter.  Segment Adjusted EBITDA Expense increased 3.3% to $97.3 million in the 2017 Quarter from $94.2 million in 2016 Quarter and Segment Adjusted EBITDA Expense per ton increased $2.09 per ton sold to $35.09 compared to $33.00 per ton sold in the 2016 Quarter, primarily due to higher selling expenses at the MC Mining and Mettiki mines and lower recoveries across the region, partially offset by lower health care benefit expenses at the MC Mining and Tunnel Ridge mines.

Other and Corporate – Segment Adjusted EBITDA increased by $1.2 million to $17.4 million in the 2017 Quarter compared to $16.2 million in the 2016 Quarter.  The increase was primarily attributable to higher equity income from the AllDale Partnerships and cost investment income from Kodiak in the 2017 Quarter, partially offset by reduced intercompany coal brokerage sales.

Nine  Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

We reported net income attributable to AHGP of $136.7 million for the nine months ended September 30, 2017 ("2017 Period") compared to $124.7 million for the nine months ended September 30, 2016 ("2016 Period").  The increase of $12.0 million was due to increased coal sales volumes, which rose to 27.7 million tons sold in the 2017 Period compared to 26.2 million tons sold in the 2016 Period, lower depreciation, depletion and amortization, lower operating expenses,  higher equity in income of affiliates from the ARLP Partnership's investments in oil and gas mineral interests and increased quarterly cash distributions received from ARLP which in turn, increased net income allocations to us from the ARLP Partnership by $10.3 million, offset in part by lower coal sales price realizations and a debt extinguishment loss of $8.1 million related to the early repayment of the ARLP Series B Senior Notes in May 2017.  Total revenues decreased to $1.3 billion in the 2017 Period compared to $1.4 billion in the 2016 Period as lower coal sales prices more than offset increased sales volumes and other sales and operating revenues.  Even though sales and production volumes increased for the 2017 Period, operating expenses were lower compared to the 2016 Period, reflecting the continuing benefits of the ARLP Partnership's recent initiatives to shift production to its lower-cost operations and lower health care benefit expenses.  The favorable production cost mix and lower selling expenses in the 2017 Period significantly lowered operating expenses per ton sold compared to the 2016 Period.  Results presented for the 2016 Period have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as an adjustment to depreciation, depletion and amortization rather than operating expenses.    

Regarding our increase in net income resulting from higher ARLP quarterly distributions, the increased distributions from ARLP resulted from (a) ARLP’s higher quarterly unit distribution rate for the 2017 Period and (b) our increased number of ARLP common units held resulting from the Exchange Transaction.  Higher distributions to us from

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ARLP, increases our income allocation from the ARLP Partnership because the net income is first allocated to us based on quarterly distribution amounts and then, the remaining undistributed net income or losses are allocated to us based on our percentage of ARLP’s outstanding common units.  Our percentage of ARLP’s common units outstanding increased as a result of the Exchange Transaction.  The combination of the increase in quarterly distributions declared by ARLP and the common units we received in the Exchange Transaction resulted in a larger distribution to us versus if the Exchange Transaction had not occurred.    

	Nine Months Ended September 30,
	2017		2016		2017		2016
	(in thousands)				(per ton sold)
Tons sold		27,721		26,177		N/A		N/A
Tons produced		28,211		25,759		N/A		N/A
Coal sales	$	1,256,168	$	1,357,578	$	45.31	$	51.86
Operating expenses and outside coal purchases	$	796,845	$	843,931	$	28.75	$	32.24

Coal sales.  Coal sales decreased $101.4 million or 7.5% to $1.3 billion for the 2017 Period from $1.4 billion for the 2016 Period.  The decrease was attributable to lower average coal sales prices, which reduced coal sales by $181.5 million, partially offset by the benefit of increased tons sold, which contributed $80.1 million in additional coal sales.  Average coal sales prices decreased $6.55 per ton sold in the 2017 Period to $45.31 compared to $51.86 per ton sold in the 2016 Period, primarily due to the expiration of higher-priced legacy contracts, partially offset by higher price realizations at the Mettiki mine from its participation in the metallurgical coal markets in the 2017 Period.  Sales and production volumes rose to 27.7 million tons sold and 28.2 million tons produced in the 2017 Period compared to 26.2 million tons sold and 25.8 million tons produced in the 2016 Period, primarily due to strong performances at the Gibson South, River View, Hamilton and Tunnel Ridge mines.

Operating expenses and outside coal purchases.  Operating expenses and outside coal purchases decreased 5.6% to $796.8 million for the 2017 Period from $843.9 million for the 2016 Period primarily as a result of the previously discussed favorable production cost mix.  On a per ton basis, operating expenses and outside coal purchases decreased 10.8% to $28.75 per ton sold from $32.24 per ton sold in the 2016 Period, due primarily to increased sales and production volumes and the continuing benefits from previously discussed initiatives to shift production to the ARLP Partnership's lower-cost operations.  The most significant operating expense variances by category are discussed below:

· Labor and benefit expenses per ton produced, excluding workers' compensation, decreased 16.5% to $9.26 per ton in the 2017 Period from $11.09 per ton in the 2016 Period.  This decrease of $1.83 per ton was primarily attributable to lower labor and benefit costs per ton due to fewer employees resulting in part from the increased mix of lower-cost production as well as lower health care benefit expenses;

· Workers' compensation expenses per ton produced decreased to $0.49 per ton in the 2017 Period from $0.63 per ton in the 2016 Period.  The decrease of $0.14 per ton produced was due to fewer employees resulting in part from the increased mix of lower-cost production, partially offset by a decrease in the discount rate used to calculate the estimated present value of future obligations and unfavorable changes in claims development;

· Material and supplies expenses per ton produced decreased 1.0% to $9.66 per ton in the 2017 Period from $9.76 per ton in the 2016 Period.  The decrease of $0.10 per ton produced resulted primarily from the increased mix of lower-cost production and related decreases of $0.18 per ton for power and fuel used in the mining process and $0.07 per ton for general mining materials and supplies, partially offset by an increase of $0.23 per ton for contract labor used in the mining process; and

· Production taxes and royalty expenses decreased $0.75 per produced ton sold in the 2017 Period compared to the 2016 Period primarily as a result of lower excise taxes per ton resulting from a favorable state production mix, and lower average coal sales prices. 

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Operating expenses and outside coal purchases per ton decreases discussed above were partially offset by the following increase:

· Maintenance expenses per ton produced increased 6.3% to $3.35 per ton in the 2017 Period from $3.15 per ton in the 2016 Period.  The increase of $0.20 per ton produced was primarily due to increased maintenance expenses at several mines in both reportable segments.

Other sales and operating revenues.  Other sales and operating revenues were principally comprised of Mt. Vernon transloading revenues, Matrix Design sales and other outside services from affiliates.  Other sales and operating revenues increased to $31.6 million in the 2017 Period from $26.4 million in the 2016 Period.  The increase of $5.2 million was primarily due to increased mining technology product sales by Matrix Design and increased transloading revenues from Mt. Vernon, partially offset in comparison to the 2016 Period by proceeds of coal supply contract buy-outs received in the 2016 Period.

General and administrative.  General and administrative expenses for the 2017 Period decreased to $47.2 million compared to $55.2 million in the 2016 Period.  The decrease of $8.0 million was primarily due to lower incentive compensation expenses.

 Depreciation, depletion and amortization.  Depreciation, depletion and amortization expense decreased to $194.1 million for the 2017 Period compared to $245.7 million for the 2016 Period primarily as a result of the depletion of reserves at the Elk Creek mine in the first quarter of 2016, closure of the Pattiki mine in the fourth quarter of 2016, volume reductions at the Dotiki mine, the use of surplus equipment from the ARLP Partnership's idled mines at the Warrior and River View mines and ongoing capital reduction initiatives at all of the ARLP Partnership's operations.

Interest expense. Interest expense, net of capitalized interest, increased to $28.9 million in the 2017 Period from $23.4 million in the 2016 Period primarily due to interest incurred under the ARLP Senior Notes issued in April 2017, offset in part by reduced borrowings under the ARLP revolving credit facility and the payment of the ARLP Term Loan and ARLP Series B Senior Notes.  Interest payable under the ARLP Senior Notes, ARLP revolving credit facility, ARLP Term Loan and ARLP Series B Senior Notes is discussed below under "–Debt Obligations."

Equity in income of affiliates.  Equity in income of affiliates increased $9.4 million in the 2017 Period compared to the 2016 Period due to increased income from the ARLP Partnership's investments in the AllDale Partnerships.

Cost investment income.  Distributions of additional preferred interests received from the ARLP Partnership's new Kodiak investment contributed $2.8 million of cost investment income to the 2017 Period.  Please read "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q for more information on Kodiak.

Debt extinguishment loss.  The ARLP Partnership recognized a debt extinguishment loss of $8.1 million in the 2017 Period to reflect a make-whole payment incurred to repay the ARLP Series B Senior Notes in May 2017.

Transportation revenues and expenses.  Transportation revenues and expenses were $24.9 million and $19.7 million for the 2017 and 2016 Periods, respectively.  The increase of $5.2 million was primarily attributable to increased tonnage for which the ARLP Partnership arranges third-party transportation at certain mines and an increase in average third-party transportation rates in the 2017 Period.  The cost of third-party transportation services are passed through to the ARLP Partnership's customers.

Net income attributable to noncontrolling interests.  The net income attributable to noncontrolling interest was $91.7 million and $92.6 million for the 2017 and 2016 Periods, respectively.  The difference of $0.9 million is due to an increased percentage allocation of the ARLP Partnership's net income to AHGP due to increased cash distributions to AHGP as a result of the Exchange Transaction discussed above, partially offset by the increase in the consolidated net income of the ARLP Partnership resulting from the changes in revenues and expenses described above.

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Segment Adjusted EBITDA.  Our 2017 Period Segment Adjusted EBITDA decreased $35.1 million, or 6.5%, to $506.6 million from the 2016 Period Segment Adjusted EBITDA of $541.7 million.  Segment Adjusted EBITDA, tons sold, coal sales, other sales and operating revenues and Segment Adjusted EBITDA Expense by segment are:

	Nine Months Ended
	September 30,
	2017		2016		Increase (Decrease)
	(in thousands)
Segment Adjusted EBITDA
Illinois Basin	$	285,928	$	381,042	$	(95,114)	(25.0)	%
Appalachia		179,396		143,699		35,697	24.8	%
Other and Corporate		47,948		25,555		22,393	87.6	%
Elimination		(6,664)		(8,641)		1,977	22.9	%
Total Segment Adjusted EBITDA (1)	$	506,608	$	541,655	$	(35,047)	(6.5)	%
Tons sold
Illinois Basin		19,635		18,892		743	3.9	%
Appalachia		8,071		7,236		835	11.5	%
Other and Corporate		1,350		1,248		102	8.2	%
Elimination		(1,335)		(1,199)		(136)	(11.3)	%
Total tons sold		27,721		26,177		1,544	5.9	%
Coal sales
Illinois Basin	$	789,081	$	940,843	$	(151,762)	(16.1)	%
Appalachia		453,267		402,914		50,353	12.5	%
Other and Corporate		61,951		58,074		3,877	6.7	%
Elimination		(48,131)		(44,253)		(3,878)	(8.8)	%
Total coal sales	$	1,256,168	$	1,357,578	$	(101,410)	(7.5)	%
Other sales and operating revenues
Illinois Basin	$	1,048	$	7,413	$	(6,365)	(85.9)	%
Appalachia		2,381		2,717		(336)	(12.4)	%
Other and Corporate		40,164		30,015		10,149	33.8	%
Elimination		(11,983)		(13,723)		1,740	12.7	%
Total other sales and operating revenues	$	31,610	$	26,422	$	5,188	19.6	%
Segment Adjusted EBITDA Expense
Illinois Basin	$	504,201	$	567,214	$	(63,013)	(11.1)	%
Appalachia		276,252		261,933		14,319	5.5	%
Other and Corporate		67,382		63,575		3,807	6.0	%
Elimination		(53,451)		(49,336)		(4,115)	(8.3)	%
Total Segment Adjusted EBITDA Expense (1)	$	794,384	$	843,386	$	(49,002)	(5.8)	%

(1) For a definition of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to comparable GAAP financial measures, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA" to GAAP "net income" and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses." Results presented for Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense for the nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to depreciation, depletion and amortization rather than operating expenses.

Illinois Basin – Segment Adjusted EBITDA decreased 25.0% to $285.9 million in the 2017 Period from $381.0 million in the 2016 Period.  The decrease of $95.1 million was primarily attributable to lower coal sales, which decreased 16.1%

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to $789.1 million in the 2017 Period from $940.8 million in the 2016 Period, partially offset by decreased expenses resulting from a favorable production mix.  The coal sales decrease of $151.7 million primarily reflects lower average coal sales prices of $40.19 in the 2017 Period compared to $49.80 in the 2016 Period, primarily resulting from the expiration of higher-priced legacy contracts.  Lower sales prices were partially offset by increased tons sold, which increased 3.9% to 19.6 million tons in the 2017 Period compared to 18.9 million tons in the 2016 Period.  Higher sales volumes resulted from strong performances at the Gibson South, River View and Hamilton mines, offset in part by the previously mentioned depletion of reserves at the Elk Creek mine in the 2016 first quarter, the closure of the Pattiki mine in the 2016 fourth quarter and reduced sales at the Dotiki mine.  Segment Adjusted EBITDA Expense decreased 11.1% to $504.2 million in the 2017 Period from $567.2 million in the 2016 Period and Segment Adjusted EBITDA Expense per ton decreased $4.34 per ton sold to $25.68 compared to $30.02 per ton sold in the 2016 Period, primarily due to a significant increase in low-cost longwall production from the Hamilton mine, increased production at the River View and Gibson South operations and a related reduced mix of sales volumes from the ARLP Partnership's higher cost mines, as well as reduced selling expenses, lower health care benefit expenses and certain cost decreases described above under "–Operating expenses and outside coal purchases."

Appalachia – Segment Adjusted EBITDA increased 24.8% to $179.4 million for the 2017 Period from $143.7 million in the 2016 Period.  The increase of $35.7 million was primarily attributable to increased tons sold, which rose 11.5% to 8.1 million tons sold in the 2017 Period compared to 7.2 million tons sold in the 2016 Period, and lower Segment Adjusted EBITDA Expense per ton.  Coal sales increased 12.5% to $453.3 million compared to $402.9 million in the 2016 Period.  The increase of $50.4 million primarily resulted from increased sales volumes across the region, including increased export sales from the Mettiki and MC Mining mines and higher average coal sales prices of $56.16 in the 2017 Period compared to $55.68 in the 2016 Period.  Higher price realizations in the 2017 Period were a result of sales from the Mettiki mine into the metallurgic coal export market and improved prices at the MC Mining mine.  Segment Adjusted EBITDA Expense increased 5.5% to $276.3 million in the 2017 Period from $261.9 million in the 2016 Period due to increased sales volumes.  However, Segment Adjusted EBITDA Expense per ton decreased $1.97 per ton sold to $34.23 compared to $36.20 per ton sold in the 2016 Period, as a result of increased production across the region, particularly at the Tunnel Ridge longwall operation resulting in part from increased longwall unit shifts and fewer longwall move days during the 2017 Period, and increased unit shifts at the MC Mining operations, as well as certain other cost decreases described above under "–Operating expenses and outside coal purchases."

Other and Corporate – Segment Adjusted EBITDA increased by $22.3 million to $47.9 million for the 2017 Period compared to $25.6 million in the 2016 Period.  The increase was primarily attributable to higher equity income from the AllDale Partnerships and increased mining technology product sales by Matrix Design.  In the 2017 Period, Segment Adjusted EBITDA Expense increased to $67.4 million for the 2017 Period compared to $63.6 million for the 2016 Period primarily as a result of increased brokerage activity and Matrix Design sales discussed above.

Elimination – Segment Adjusted EBITDA Expense eliminations increased in the 2017 Period to $53.5 million from $49.3 million in the 2016 Period and coal sales eliminations increased to $48.1 million from $44.3 million, reflecting increased intercompany coal sales brokerage activity.

Reconciliation of non-GAAP "Segment Adjusted EBITDA" to GAAP "net income" and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses"

Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and debt extinguishment loss.  Segment Adjusted EBITDA is a key component of consolidated EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others.  We believe that the presentation of EBITDA provides useful information to investors regarding our performance and results of operations because EBITDA, when used in conjunction with related GAAP financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.

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Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those stated in the previous explanation of EBITDA.  In addition, the exclusion of corporate general and administrative expenses from consolidated Segment Adjusted EBITDA allows management to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments.  Results presented for Segment Adjusted EBITDA for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to depreciation, depletion and amortization rather than operating expenses.

The following is a reconciliation of consolidated Segment Adjusted EBITDA to net income, the most comparable GAAP financial measure:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Consolidated Segment Adjusted EBITDA	$	157,065	$	217,267	$	506,608	$	541,655
General and administrative		(15,389)		(18,987)		(47,160)		(55,175)
Depreciation, depletion and amortization		(69,962)		(101,432)		(194,109)		(245,736)
Interest expense, net		(10,767)		(7,998)		(28,817)		(23,375)
Debt extinguishment loss		—		—		(8,148)		—
Income tax (expense) benefit		(4)		(6)		3		(4)
Net income	$	60,943	$	88,844	$	228,377	$	217,365

Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, coal purchases and other income.  Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any gain or loss on transportation revenues.  Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments.  Segment Adjusted EBITDA Expense is a key component of Segment Adjusted EBITDA in addition to coal sales and other sales and operating revenues.  The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses.  Results presented for Segment Adjusted EBITDA Expense for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to depreciation, depletion and amortization rather than operating expenses.

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to operating expense, the most comparable GAAP financial measure:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Segment Adjusted EBITDA Expense	$	294,611	$	328,112	$	794,384	$	843,386
Outside coal purchases		—		(1,514)		—		(1,514)
Other income		774		293		2,461		545
Operating expenses (excluding depreciation, depletion and amortization)	$	295,385	$	326,891	$	796,845	$	842,417

Liquidity and Capital Resources

Liquidity

Subsequent to the Exchange Transaction discussed above, our only cash generating assets are limited partnership interests in the ARLP Partnership and a managing general partnership interest in the Intermediate Partnership from which we receive quarterly distributions.  We rely on distributions from the ARLP Partnership to fund our cash requirements. 

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Prior to the Exchange Transaction our cash generating assets included incentive distribution rights and a 0.99% general partnership interest, both in ARLP.  Please read "Item 1. Financial Statements (Unaudited) – Note 1. Organization and Presentation" of this Quarterly Report on Form 10-Q for more information on the Exchange Transaction.

The ARLP Partnership has historically satisfied its working capital requirements and funded its capital expenditures, investments and debt service obligations with cash generated from operations, cash provided by the issuance of debt or equity, borrowings under credit and securitization facilities and sale-leaseback transactions.  The ARLP Partnership believes that existing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet its working capital requirements, capital expenditures and additional investments, debt payments, commitments and distribution payments.  Nevertheless, the ARLP Partnership's ability to satisfy its working capital requirements, to fund planned capital expenditures and investments, to service its debt obligations or to pay distributions will depend upon its future operating performance and access to and cost of financing sources, which will be affected by prevailing economic conditions generally and in the coal industry specifically, as well as other financial and business factors, some of which are beyond the ARLP Partnership's control.  Based on the ARLP Partnership's recent operating results, current cash position, current unitholder distributions, anticipated future cash flows and sources of financing that the ARLP Partnership expects to have available, it does not anticipate any constraints to its liquidity at this time.  However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected.  Please read "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016.

Cash Flows

Cash provided by operating activities was $454.8 million for the 2017 Period compared to $492.0 million for the 2016 Period.  The decrease in cash provided by operating activities was primarily due to a decrease in net income adjusted for non-cash items, an increase in coal inventories in the 2017 Period compared to a decrease in coal inventories in the 2016 Period and a smaller decrease in prepaid expenses and other assets in the 2017 Period.  These decreases were offset in part by increased distributions received from the AllDale Partnerships and favorable working capital changes related to trade receivables, accounts payable, accrued interest and other long-term liabilities in the 2017 Period compared to the 2016 Period.

Net cash used in investing activities was $205.4 million for the 2017 Period compared to $164.7 million for the 2016 Period.  The increase in cash used in investing activities was primarily attributable to the funding of the ARLP Partnership's new cost investment in Kodiak in the 2017 Period and increased capital expenditures for mine infrastructure and equipment at various mines in the 2017 Period compared to the 2016 Period.  Decreased purchases of equity investments in affiliates, the lack of customer contract buy-outs in the 2017 Period and favorable changes in accounts payable related to property, plant and equipment purchases partially offset increases in use of cash in investing activities previously discussed.  Please read "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q for more information on Kodiak.

Net cash used in financing activities was $271.4 million for the 2017 Period compared to $340.1 million for the 2016 Period.  The decrease in cash used in financing activities was primarily attributable to proceeds received from the issuance of senior notes, decreased payments under the Term Loan and a decrease in distributions paid to partners in the 2017 Period compared to the 2016 Period.  Repayment of the ARLP Series B Senior Notes, increased overall net payments on the ARLP Partnership's securitization and revolving credit facilities, payment of debt issuance and extinguishment costs and no proceeds received from sales-leaseback transactions in the 2017 Period partially offset decreases in net cash used in financing activities previously discussed.

Capital Expenditures

Capital expenditures increased to $105.5 million in the 2017 Period from $70.3 million in the 2016 Period.  See our discussion of "Cash Flows" above concerning the increase in capital expenditures.

The ARLP Partnership's anticipated total capital expenditures for the year ending December 31, 2017 are estimated in a range of $145.0 million to $165.0 million, which includes expenditures for maintenance capital at various

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mines.  In addition to these capital expenditures, the ARLP Partnership anticipates funding in 2017 investments of approximately $120.0 million to $130.0 million related to its commitment to acquire oil and gas mineral interests and including the ARLP Partnership's $100 million investment in Kodiak as discussed in "Item 1. Financial Statements (Unaudited) – Note 9. Investments" of this Quarterly Report on Form 10-Q.  Management anticipates funding remaining 2017 capital requirements with cash and cash equivalents ($18.4 million as of September 30, 2017), cash flows from operations, borrowings under revolving credit and securitization facilities and cash provided from the issuance of debt or equity.  The ARLP Partnership will continue to have significant capital requirements over the long-term, which may require it to incur debt or seek additional equity capital.  The availability and cost of additional capital will depend upon prevailing market conditions, the market price of the ARLP Partnership's common units and several other factors over which it has limited control, as well as its financial condition and results of operations.

Debt Obligations

ARLP Credit Agreement. On January 27, 2017, the Intermediate Partnership entered into a Fourth Amended and Restated Credit Agreement (the "ARLP Credit Agreement") with various financial institutions for a revolving credit facility and term loan (the "ARLP Credit Facility").  The ARLP Credit Facility replaced the $250 million term loan ("ARLP Replaced Term Loan") and $700 million revolving credit facility ("ARLP Replaced Revolving Credit Facility") extended to the Intermediate Partnership on May 23, 2012 (the "ARLP Replaced Credit Agreement") by various banks and other lenders that would have expired on May 23, 2017.

The ARLP Credit Agreement provided for a $776.5 million revolving credit facility, reducing to $494.75 million on May 23, 2017, including a sublimit of $125 million for the issuance of letters of credit and a sublimit of $15.0 million for swingline borrowings (the "ARLP Revolving Credit Facility"), and for a term loan with a remaining principal balance of $50.0 million (the "ARLP Term Loan").  The outstanding revolver balance and term loan balance under the ARLP Replaced Credit Agreement was considered advanced under the ARLP Credit Facility on January 27, 2017.  On April 3, 2017, the ARLP Partnership entered into an amendment to the ARLP Credit Agreement (the "Amendment") to (a) extend the termination date of the ARLP Revolving Credit Facility as to $461.25 million of commitments to May 23, 2021, (b) eliminate the Cavalier Condition and the ARLP Senior Notes Condition (both as defined in the ARLP Credit Agreement) and (c) effectuate certain other changes.  In connection with the Amendment, the ARLP Partnership increased the commitments under the ARLP Revolving Credit Facility from $479.75 million to $494.75 million, effective May 23, 2017 (of which $33.5 million expire on May 23, 2019).  The ARLP Partnership incurred debt issuance costs in 2017 of $8.9 million in connection with the ARLP Credit Agreement.  These debt issuance costs are deferred and are being amortized as a component of interest expense over the term of the ARLP Credit Facility.

The ARLP Credit Agreement is guaranteed by all of the material direct and indirect subsidiaries of the Intermediate Partnership, and is secured by substantially all of the Intermediate Partnership’s assets.  The ARLP Term Loan principal balance of $50.0 million was paid in full in May 2017.

Borrowings under the ARLP Credit Facility bear interest, at the option of the Intermediate Partnership, at either (i) the Base Rate at the greater of three benchmarks or (ii) a Eurodollar Rate, plus margins for (i) or (ii), as applicable, that fluctuate depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the ARLP Credit Agreement).  The ARLP Partnership elected a Eurodollar Rate, which, with applicable margin, was 3.59% as of September 30, 2017.  At September 30, 2017, the ARLP Partnership had $8.1 million of letters of credit outstanding with $486.7 million available for borrowing under the ARLP Revolving Credit Facility. The ARLP Partnership currently incurs  an annual commitment fee of 0.35% on the undrawn portion of the ARLP Revolving Credit Facility.  The ARLP Partnership utilizes the ARLP Revolving Credit Facility, as appropriate, for working capital requirements, capital expenditures and investments in affiliates, scheduled debt payments and distribution payments.

The ARLP Credit Agreement contains various restrictions affecting the Intermediate Partnership and its subsidiaries including, among other things, incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates, in each case subject to various exceptions, and the payment of cash distributions by the Intermediate Partnership if such payment would result in a certain fixed charge coverage ratio (as defined in the ARLP Credit Agreements).  The Amendment lowered this fixed charge ratio from less than 1.25 to 1.0 to 1.15 to 1.0 for each rolling four-quarter period and further limited the Intermediate Partnership’s ability to incur certain

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unsecured debt. The Amendment raised the debt to cash flow ratio from 2.25 to 1.0 to 2.50 to 1.0 and also removed the requirement for the Intermediate Partnership to remain in control of a certain amount of mineable coal reserves relative to its annual production.  The ARLP Credit Agreements require the Intermediate Partnership maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0 and (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters.  The debt to cash flow ratio and cash flow to interest expense ratio were 0.84 to 1.0 and 19.2 to 1.0, respectively, for the trailing twelve months ended September 30, 2017.  The ARLP Partnership was compliant with the covenants of the ARLP Credit Agreement as of September 30, 2017.

ARLP Series B Senior Notes.    On January 27, 2017, the Intermediate Partnership also amended the 2008 Note Purchase Agreement dated June 26, 2008, for $145.0 million of Series B Senior Notes which bore interest at 6.72% and were due to mature on June 26, 2018 with interest payable semi-annually.  The amendment provided for certain modifications to the terms and provisions of the ARLP Note Purchase Agreement, including granting liens on substantially all of the Intermediate Partnership's assets to secure its obligations under the ARLP Note Purchase Agreement on an equal basis with the obligations under the ARLP Credit Agreement.  The amendment also modified certain covenants to align them with the applicable covenants in the ARLP Credit Agreement.  As discussed below, the ARLP Partnership repaid the ARLP Series B Senior Notes in May 2017.

ARLP Senior Notes. On April 24, 2017, the Intermediate Partnership and Alliance Resource Finance Corporation (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership ("Alliance Finance"), issued an aggregate principal amount of $400.0 million of the ARLP Senior Notes in a private placement to qualified institutional buyers.  The ARLP Senior Notes have a term of eight years maturing on May 1, 2025 (the "Term") and accrue interest at an annual rate of 7.5%.  Interest is payable semi-annually in arrears on each May 1 and November 1, commencing on November 1, 2017.  The indenture governing the ARLP Senior Notes contains customary terms, events of default and covenants relating to, among other things, the incurrence of debt, the payment of distributions or similar restricted payments, undertaking transactions with affiliates and limitations on asset sales.  At any time prior to May 1, 2020, the issuers of the ARLP Senior Notes may redeem up to 35% of the aggregate principal amount of the ARLP Senior Notes with the net cash proceeds of one or more equity offerings at a redemption price equal to 107.5% of the principal amount redeemed, plus accrued and unpaid interest, if any, to the redemption date.  The issuers of the ARLP Senior Notes may also redeem all or a part of the notes at any time on or after May 1, 2020, at redemption prices set forth in the indenture governing the ARLP Senior Notes.  At any time prior to May 1, 2020, the issuers of the ARLP Senior Notes may redeem the ARLP Senior Notes at a redemption price equal to the principal amount of the ARLP Senior Notes plus a "make-whole" premium, plus accrued and unpaid interest, if any, to the redemption date.  The net proceeds from issuance of the ARLP Senior Notes and cash on hand were used to repay the ARLP Revolving Credit Facility, ARLP Term Loan and ARLP Series B Senior Notes (including a make-whole payment of $8.1 million).  The ARLP Partnership incurred discount and debt issuance costs of $7.3 million in connection with issuance of the ARLP Senior Notes.  These costs are deferred and are currently being amortized as a component of interest expense over the Term.

ARLP Accounts Receivable Securitization. On December 5, 2014, certain direct and indirect wholly-owned subsidiaries of the Intermediate Partnership entered into a $100.0 million accounts receivable securitization facility ("ARLP Securitization Facility").  Under the ARLP Securitization Facility, certain subsidiaries sell trade receivables on an ongoing basis to the Intermediate Partnership, which then sells the trade receivables to AROP Funding, LLC ("AROP Funding"), a wholly-owned bankruptcy-remote special purpose subsidiary of the Intermediate Partnership, which in turn borrows on a revolving basis up to $100.0 million secured by the trade receivables.  After the sale, Alliance Coal, as servicer of the assets, collects the receivables on behalf of AROP Funding.  The ARLP Securitization Facility bears interest based on a Eurodollar Rate.  It was renewed in December 2016 and matures in December 2017. At September 30, 2017, the ARLP Partnership had $100.0 million outstanding under the Securitization Facility.

Cavalier Credit Agreement.  On October 6, 2015, Cavalier Minerals entered into a credit agreement (the "Cavalier Credit Agreement") with Mineral Lending, LLC ("Mineral Lending") for a $100.0 million line of credit (the "Cavalier Credit Facility").  There is no commitment fee under the facility.  Borrowings under the Cavalier Credit Facility bear interest at a one month LIBOR rate plus 6% with interest payable quarterly.  Repayment of the principal balance will begin following the first fiscal quarter after the earlier of the date on which the aggregate amount borrowed exceeds $90.0 million or December 31, 2017, in quarterly payments of an amount equal to the greater of $1.3 million initially, escalated to $2.5 million after two years, or fifty percent of Cavalier Minerals' excess cash flow. The Cavalier Credit Facility matures

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September 30, 2024, at which time all amounts then outstanding are required to be repaid.  To secure payment of the facility, Cavalier Minerals pledged all of its partnership interests, owned or later acquired, in AllDale Minerals, LP and AllDale Minerals II, LP.  Cavalier Minerals may prepay the Cavalier Credit Facility at any time in whole or in part subject to terms and conditions described in the Cavalier Credit Agreement.  As of September 30, 2017, Cavalier Minerals had not drawn on the Cavalier Credit Facility.  Alliance Minerals has the right to require Cavalier Minerals to draw the full amount available under the Cavalier Credit Facility and distribute the proceeds to the members of Cavalier Minerals, including Alliance Minerals.

Other.  In addition to the letters of credit available under the ARLP Credit Facility discussed above, the ARLP Partnership also has agreements with one bank to provide additional letters of credit of $5.0 million to maintain surety bonds to secure its obligations for workers' compensation benefits.  At September 30, 2017, the ARLP Partnership had $5.0 million in letters of credit outstanding under the agreement.

Related-Party Transactions

The ARLP Partnership has continuing related-party transactions with us, SGP and our respective affiliates including MGP II. These related-party transactions relate principally to the provision of administrative services to us and Alliance Resource Holdings II, Inc. and our respective affiliates, mineral leases with SGP and its affiliates, and agreements relating to the use of aircraft.  For more information regarding MGP II, please read Item 1. Financial Statements (Unaudited) – Note 1. Organization and Presentation" of this Quarterly Report on Form 10-Q.  The ARLP Partnership has also had transactions with (a) WKY CoalPlay, LLC ("WKY CoalPlay") regarding three mineral leases,  (b) Kodiak to support its compression services and (c) Bluegrass Minerals Management, LLC ("Bluegrass Minerals") and, through Alliance Minerals and Cavalier Minerals, the AllDale Partnerships to support the acquisition of oil and gas mineral interests.  For more information regarding WKY CoalPlay, Kodiak, the AllDale Partnerships and Bluegrass Minerals, please read "Item 1. Financial Statements (Unaudited) – Note 8. Variable Interest Entities" and "– Note 9. Investments" of this Quarterly Report on Form 10-Q.  Please read our Annual Report on Form 10-K for the year ended December 31, 2016, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Related-Party Transactions" for additional information concerning related-party transactions.

New Accounting Standards

See "Item 1. Financial Statements (Unaudited) – Note 2. New Accounting Standards" of this Quarterly Report on Form 10-Q for a discussion of new accounting standards.

Other Information

White Oak IRS Notice

The previously communicated IRS audit of White Oak Resources LLC for the tax year ended December 31, 2011 is ongoing.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our ownership interests, results of operations and cash flows principally reflect those of the ARLP Partnership.   As such, our discussions of market risk reflect those risks as they apply to the ARLP Partnership.

Commodity Price Risk

The ARLP Partnership has significant long-term coal supply agreements.  Most of the long-term coal supply agreements are subject to price adjustment provisions, which periodically permit an increase or decrease in the contract price typically to reflect changes in specified indices or changes in production costs resulting from regulatory changes, or both.

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The ARLP Partnership has exposure to price risk for supplies that are used directly or indirectly in the normal course of coal production such as steel, electricity and other supplies. The ARLP Partnership manages its risk for these items through strategic sourcing contracts for normal quantities required by its operations.  The ARLP Partnership does not utilize any commodity price-hedges or other derivatives related to these risks.

Credit Risk

Most of the ARLP Partnership's sales tonnage is consumed by electric utilities.  Therefore, the ARLP Partnership's credit risk is primarily with domestic electric power generators.  The ARLP Partnership's policy is to independently evaluate each customer’s creditworthiness prior to entering into transactions and to constantly monitor outstanding accounts receivable against established credit limits. When deemed appropriate by the ARLP Partnership's credit management department, it will take steps to reduce its credit exposure to customers that do not meet its credit standards or whose credit has deteriorated. These steps may include obtaining letters of credit or cash collateral, requiring prepayment for shipments or establishing customer trust accounts held for the ARLP Partnership's benefit in the event of a failure to pay.

Exchange Rate Risk

Almost all of the ARLP Partnership's transactions are denominated in U.S. Dollars, and as a result, it does not have material exposure to currency exchange-rate risks.

Interest Rate Risk

Borrowings under the ARLP Credit Agreement,  ARLP Securitization Facility and Cavalier Credit Agreement are at variable rates and, as a result, the ARLP Partnership has interest rate exposure.  Historically, the ARLP Partnership's earnings have not been materially affected by changes in interest rates.  The ARLP Partnership does not utilize any interest rate derivative instruments related to its outstanding debt.  The ARLP Partnership had $100.0 million in borrowings under the ARLP Securitization Facility at September 30, 2017.  A one percentage point increase in the interest rates related to the ARLP Securitization Facility would result in an annualized increase in interest expense of $1.0 million, based on borrowing levels at September 30, 2017.  With respect to the ARLP Partnership's fixed-rate borrowings, a one percentage point increase in interest rates would result in a decrease of approximately $27.6 million in the estimated fair value of these borrowings.

As of September 30, 2017, the estimated fair value of the ARLP Partnership's long-term debt was approximately $536.3 million.  The fair values of long-term debt are estimated using discounted cash flow analyses, based upon the ARLP Partnership's current incremental borrowing rates for similar types of borrowing arrangements as of September 30, 2017.  There were no other changes in our quantitative and qualitative disclosures about market risk as set forth in our Annual Report on Form 10-K for the year ended December 31, 2016. 

ITEM 4.CONTROLS AND PROCEDURES

We maintain controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file with the Securities and Exchange Commission ("SEC") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.  As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of September 30, 2017.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures are effective as of September 30, 2017.

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During the quarterly period ended September 30, 2017, there have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with this evaluation that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q may constitute "forward-looking statements."  These statements are based on our beliefs as well as assumptions made by, and information currently available to, us.  When used in this document, the words "anticipate," "believe," "continue," "estimate," "expect," "forecast," "may," "project," "will," and similar expressions identify forward-looking statements.  Without limiting the foregoing, all statements relating to our future outlook, anticipated capital expenditures, future cash flows and borrowings and sources of funding are forward-looking statements. These statements reflect our current views with respect to future events and are subject to numerous assumptions that we believe are reasonable, but are open to a wide range of uncertainties and business risks, and actual results may differ materially from those discussed in these statements.  Among the factors that could cause actual results to differ from those in the forward-looking statements are:

· changes in coal prices, which could affect the ARLP Partnership's operating results and cash flows;

· changes in competition in coal markets and the ARLP Partnership's ability to respond to such changes;

· legislation, regulations, and court decisions and interpretations thereof, including those relating to the environment and the release of greenhouse gases, mining, miner health and safety and health care;

· deregulation of the electric utility industry or the effects of any adverse change in the coal industry, electric utility industry, or general economic conditions;

· risks associated with the expansion of the ARLP Partnership's operations and properties;

· dependence on significant customer contracts, including renewing existing contracts upon expiration;

· adjustments made in price, volume or terms to existing coal supply agreements;

· changing global economic conditions or in industries in which the ARLP Partnership's customers operate;

· liquidity constraints, including those resulting from any future unavailability of financing;

· customer bankruptcies, cancellations or breaches to existing contracts, or other failures to perform;

· customer delays, failure to take coal under contracts or defaults in making payments;

· fluctuations in coal demand, prices and availability;

· continuation or worsening of depressed oil and gas prices adversely affecting the ARLP Partnership's investments in oil and gas mineral interests and midstream services;

· the ARLP Partnership's productivity levels and margins earned on its coal sales;

· the coal industry's share of electricity generation, including as a result of environmental concerns related to coal mining and combustion and the cost and perceived benefits of other sources of electricity, such as natural gas, nuclear energy and renewable fuels;

· changes in raw material costs;

· changes in the availability of skilled labor;

· the ARLP Partnership's ability to maintain satisfactory relations with its employees;

· increases in labor costs including costs of health insurance and taxes resulting from the Affordable Care Act, adverse changes in work rules, or cash payments or projections associated with post mine reclamation and workers' compensation claims;

· increases in transportation costs and risk of transportation delays or interruptions;

· operational interruptions due to geologic, permitting, labor, weather-related or other factors;

· risks associated with major mine-related accidents, such as mine fires, or interruptions;

· results of litigation, including claims not yet asserted;

· difficulty maintaining the ARLP Partnership's surety bonds for mine reclamation as well as workers' compensation and black lung benefits;

· difficulty in making accurate assumptions and projections regarding post-mine reclamation as well as pension, black lung benefits and other post-retirement benefit liabilities;

· uncertainties in estimating and replacing the ARLP Partnership's coal reserves;

· a loss or reduction of benefits from certain tax deductions and credits;

· difficulty obtaining commercial property insurance, and risks associated with the ARLP Partnership's participation (excluding any applicable deductible) in the commercial insurance property program;

· difficulty in making accurate assumptions and projections regarding future revenues and costs associated with equity investments in companies the ARLP Partnership does not control; and

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· other factors, including those discussed in "Item 1A. Risk Factors" and "Item 3. Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2016.

If one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those described in any forward-looking statement.  When considering forward-looking statements, you should also keep in mind the risk factors described in "Risk Factors" below.  These risk factors could also cause our actual results to differ materially from those contained in any forward-looking statement.  We disclaim any obligation to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

You should consider the information above when reading or considering any forward-looking statements contained in:

· this Quarterly Report on Form 10-Q;

· other reports filed by us with the SEC;

· our press releases;

· our website http://www.ahgp.com; and

· written or oral statements made by us or any of our officers or other authorized persons acting on our behalf.

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PART II

OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The information in Note 3. Contingencies to the Unaudited Condensed Consolidated Financial Statements included in "Part I. Item 1. Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q herein is hereby incorporated by reference.  See also "Item 3. Legal Proceedings" of our Annual Report on Form 10-K for the year ended December 31, 2016.

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A  "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016 which could materially affect our business, financial condition or future results.  The risks described in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q are not our only risks.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial based on current knowledge and factual circumstances, if such knowledge or facts change, also may materially adversely affect our business, financial condition and/or operating results in the future.  We do not believe there have been any material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Quarterly Report on Form 10-Q.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	SEC File No. and Film No.	Exhibit	Filing Date	Filed Herewith*
3.1	Amended and Restated Agreement of Limited Partnership of Alliance Holdings GP, L.P.	8-K	000-51952 06849300	3.1	05/17/2006
3.2	Amended and Restated Limited Liability Company Agreement of Alliance GP, LLC	8-K	000-51952 06849300	3.2	05/17/2006
3.3	Certificate of Limited Partnership of Alliance Holdings GP, L.P.	S-1	333-129883 051220816	3.1	11/22/2005
3.4	Certificate of Formation of Alliance GP, LLC	S-1	333-129883 051220816	3.3	11/22/2005
3.5(1)	Fourth Amended and Restated Agreement of Limited Partnership of Alliance Resource Partners, L.P.	8-K	000-26823 17990766	3.2	07/28/2017
3.6(1)	Amended and Restated Agreement of Limited Partnership of Alliance Resource Operating Partners, L.P.	10-K	000-26823 583595	3.2	03/29/2000
3.7(1)	Amended and Restated Certificate of Limited Partnership of Alliance Resource Partners, L.P.	8-K	000-26823 17990766	3.6	07/28/2017
3.8(1)	Certificate of Limited Partnership of Alliance Resource Operating Partners, L.P.	S-1/A	333-78845 99669102	3.8	07/23/1999
3.9(1)	Certificate of Formation of Alliance Resource Management GP, LLC	S-1/A	333-78845 99669102	3.7	07/23/1999
3.10(1)	Second Amended and Restated Operating Agreement of Alliance Resource Management GP, LLC	8-K	000-26823 17990766	3.3	07/28/2017
3.11(1)	Certificate of Formation of MGP II, LLC	8-K	000-26823 17990766	3.5	07/28/2017
3.12(1)	Amended and Restated Operating Agreement of MGP II, LLC	8-K	000-26823 17990766	3.4	07/28/2017
3.13	Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Alliance Holdings GP, L.P., dates as of October 25, 2007.	10-K	000-51952 08673302	3.14	03/07/2008
31.1	Certification of Joseph W. Craft, III, President and Chief Executive Officer of Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., dated November 6, 2017, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Brian L. Cantrell, Senior Vice President and Chief Financial Officer of Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., dated November 6, 2017, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	SEC File No. and Film No.	Exhibit	Filing Date	Filed Herewith*
32.1	Certification of Joseph W. Craft III, President and Chief Executive Officer of Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., dated November 6, 2017, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Brian L. Cantrell, Senior Vice President and Chief Financial Officer of Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P., dated November 6, 2017, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95.1	Federal Mine Safety and Health Act Information
101	Interactive Data File (Form 10-Q for the quarter ended September 30, 2017 filed in XBRL).

*     Or furnished, in the case of Exhibits 32.1 and 32.2.

(1) Denotes Alliance Resource Partners, L.P. filings.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in Tulsa, Oklahoma, on November 6, 2017.

ALLIANCE HOLDINGS GP, L.P.
By:	Alliance GP, LLC
	its general partner
	/s/ Joseph W. Craft, III
	Joseph W. Craft, III
	President, Chief Executive Officer
	and Director, duly authorized to sign
	on behalf of the registrant
	/s/ Brian L. Cantrell
	Brian L. Cantrell
	Senior Vice President and
	Chief Financial Officer

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