##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010

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
INCORPORATION OR ORGANIZATION) |  | (IRS EMPLOYER IDENTIFICATION NO.)

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)

Securities registered pursuant to Section 12(b) of the Act: Common Units representing limited partner interests



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange On Which
Registered
|Common Units        |  | The NASDAQ Stock Market LLC              

Securities registered pursuant to Section 12(g) of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   ̈  Yes    x   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.   ̈  Yes    x  No

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).     ̈  Yes     ̈  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.  x

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

Large Accelerated
Filer   ̈    Accelerated Filer  x    Non-Accelerated Filer   ̈    Smaller Reporting Company   ̈

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

The aggregate value of the common units held by non-affiliates of the registrant (treating all executive officers, all current and former
employees who comprise a group under Rule 13d-5(b) of the Securities Exchange Act of 1934 and directors of the registrant, for this purpose, as if they may be affiliates of the registrant) was approximately $432,955,959 as of June 30, 2010, the
last business day of the registrants most recently completed second fiscal quarter, based on the reported closing price of the common units as reported on the NASDAQ Stock Market, LLC on such date.

As of March 8, 2011, 59,863,000 common units were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None









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TABLE OF CONTENTS



|         |  |                                                                                                             |  |      |     | 
|-------- |  | ----------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|         |  |                                                                                                             |  | Page |    
|        
|PART I   | 
|         |  |                                                                                                            
|Item 1.  |  | Business                                                                                                    |  |      | 1   | 
|         |  |                                                                                                            
|Item 1A. |  | Risk Factors                                                                                                |  |      | 19  | 
|         |  |                                                                                                            
|Item 1B. |  | Unresolved Staff Comments                                                                                   |  |      | 38  | 
|         |  |                                                                                                            
|Item 2.  |  | Properties                                                                                                  |  |      | 39  | 
|         |  |                                                                                                            
|Item 3.  |  | Legal Proceedings                                                                                           |  |      | 41  | 
|         |  |                                                                                                            
|Item 4.  |  | Reserved                                                                                                    |  |      | 42  | 
|        
|PART II  | 
|         |  |                                                                                                            
|Item 5.  |  | Market for Registrants Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities |  |      | 43  | 
|         |  |                                                                                                            
|Item 6.  |  | Selected Financial Data                                                                                     |  |      | 44  | 
|         |  |                                                                                                            
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                       |  |      | 47  | 
|         |  |                                                                                                            
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                  |  |      | 75  | 
|         |  |                                                                                                            
|Item 8.  |  | Financial Statements and Supplementary Data                                                                 |  |      | 77  | 
|         |  |                                                                                                            
|Item 9.  |  | Changes in and Disagreements with Accountant on Accounting and Financial Disclosure                         |  |      | 111 | 
|         |  |                                                                                                            
|Item 9A. |  | Controls and Procedures                                                                                     |  |      | 111 | 
|         |  |                                                                                                            
|Item 9B. |  | Other Information                                                                                           |  |      | 114 | 
|        
|PART III | 
|         |  |                                                                                                            
|Item 10. |  | Directors, Executive Officers and Corporate Governance of the General Partner                               |  |      | 118 | 
|         |  |                                                                                                            
|Item 11. |  | Executive Compensation                                                                                      |  |      | 122 | 
|         |  |                                                                                                            
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters               |  |      | 133 | 
|         |  |                                                                                                            
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                   |  |      | 135 | 
|         |  |                                                                                                            
|Item 14. |  | Principal Accountant Fees and Services                                                                      |  |      | 137 | 
|        
|PART IV  | 
|         |  |                                                                                                            
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                  |  |      | 138 | 



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FORWARD-LOOKING STATEMENTS

Certain statements and information in this Annual Report on Form 10-K 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 competition in coal markets and the ARLP Partnerships ability to respond to such changes;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | changes in coal prices, which could affect the ARLP Partnerships operating results and cash flows;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | risks associated with the ARLP Partnerships expansion of its operations and properties;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the impact of recent health care legislation;
| | - |  | ---------------------------------------------



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



| |  |  | dependence on significant customer contracts, including renewing customer contracts upon expiration of existing contracts;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | adjustments made in price, volume or terms to existing coal supply agreements;
| | - |  | ------------------------------------------------------------------------------



| |  |  | fluctuations in coal demand, prices and availability due to labor and transportation costs and disruptions, equipment availability, governmental
regulations, including those related to carbon dioxide emissions, and other factors;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | legislation, regulatory and court decisions and interpretations thereof, including issues related to climate change and miner health and safety;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ARLP Partnerships productivity levels and margins it earns on coal sales;
| | - |  | ------------------------------------------------------------------------------



| |  |  | unexpected changes in raw material costs;
| | - |  | -----------------------------------------



| |  |  | unexpected changes in availability of skilled labor;
| | - |  | ----------------------------------------------------



| |  |  | the ARLP Partnerships ability to maintain satisfactory relations with its employees;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments or projections associated with post-mine
reclamation and workers compensation claims;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any unanticipated increases in transportation costs and risk of transportation delays or interruptions;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | greater than expected environmental regulation, costs and liabilities;
| | - |  | ----------------------------------------------------------------------



| |  |  | a variety of operational, geologic, permitting, labor and weather-related 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 pension, black lung benefits and other post-retirement benefit liabilities;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | coal market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 alternative sources of energy, such as natural gas, nuclear energy and renewable fuels;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | uncertainties in estimating and replacing the ARLP Partnerships coal reserves;
| | - |  | -------------------------------------------------------------------------------



| |  |  | a loss or reduction of benefits from certain tax 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; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other factors, including those discussed in Item 1A. Risk Factors and Item 3. Legal Proceedings.
| | - |  | ----------------------------------------------------------------------------------------------------

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 Item 1A.Risk Factors
below.



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The 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 any forward-looking statements contained:



| |  |  | in this Annual Report on Form 10-K;
| | - |  | -----------------------------------



| |  |  | other reports filed by us with the Securities and Exchange Commission (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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Significant Relationships Referenced in this Annual Report



| |  |  | 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, which includes 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, the managing general partner of Alliance Resource Partners, L.P.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | References to SGP mean Alliance Resource GP, LLC, the special general partner of Alliance Resource Partners, L.P.
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | References to Intermediate Partnership mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource
Partners, L.P.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | References to Alliance Coal mean Alliance Coal, LLC, the holding company for operations of Alliance Resource Operating Partners, L.P.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

PART I



|ITEM 1. | BUSINESS
|------- | --------

General

We are a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol AHGP. We own, directly
and indirectly, 100% of the members interest in MGP, the managing general partner of ARLP. We completed our initial public offering (IPO) in May 2006.

Currently, our only cash-generating assets are our ownership interests in ARLP, which consist of the following:



| |  |  | a 1.98% general partner interest in ARLP, which we hold through our 100% ownership interest in MGP;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | the incentive distribution rights (IDRs) in ARLP;
| | - |  | ---------------------------------------------------



| |  |  | 15,544,169 common units of ARLP, representing approximately 42.3% of the common units of ARLP as of December 31, 2009; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | a 0.001% managing interest in Alliance Coal, which we hold through our 100% ownership interest in MGP.
| | - |  | ------------------------------------------------------------------------------------------------------

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



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The following diagram depicts our organization and ownership as of December 31, 2010:

LOGO



|(1) | The Management Group comprises current and former members of management, who are the former indirect owners of MGP, and their affiliates.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------



|(2) | The units held by SGP and most of the units held by the Management Group are subject to a transfer restrictions agreement that, subject to a number of exceptions
(including certain transfers by Mr. Craft in which the other parties to the agreement are entitled or required to participate), prohibits the transfer of such units unless approved by a majority of the disinterested members of the board of
directors of AGP (Board of Directors) pursuant to certain procedures set forth in the agreement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our primary business objective is to increase our cash distributions to our unitholders by actively assisting ARLP in executing its
business strategy. ARLPs business strategy is to create sustainable, capital-efficient growth in available cash to maximize its distributions to its unitholders.

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 fourth largest coal producer in the eastern U.S. At December 31, 2010, the ARLP Partnership had approximately 697.4 million tons of coal reserves in
Illinois, Indiana, Kentucky, Maryland, Pennsylvania and West Virginia. In 2010, the ARLP Partnership produced 28.9 million tons of coal and sold



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30.3 million tons of coal, of which 8.0% was low-sulfur coal, 20.7% was medium-sulfur coal and 71.3% was high-sulfur coal. In 2010, the ARLP Partnership sold 91.5% of its total tons to
electric utilities, of which 93.5% was sold to utility plants with installed pollution control devices. These devices, also known as scrubbers, eliminate substantially all emissions of sulfur dioxide. The ARLP Partnership classifies low-sulfur coal
as coal with a sulfur content of less than 1%, medium-sulfur coal as coal with a sulfur content between 1% and 2%, and high-sulfur coal as coal with a sulfur content of greater than 2%.

The ARLP Partnership operates nine underground mining complexes in Illinois, Indiana, Kentucky, Maryland, and West Virginia. The ARLP
Partnership is constructing a new mining complex in West Virginia, and it also operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana. The ARLP Partnerships mining activities are conducted in three geographic regions
commonly referred to in the coal industry as the Illinois Basin, Central Appalachian and Northern Appalachian regions. The ARLP Partnership has grown historically, and expects to grow in the future, through expansion of its operations by adding and
developing mines and coal reserves in these regions.

Our internet address is http://www.ahgp.com, and we make
available free of charge on our website our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and Forms 3, 4 and 5 for our Section 16 filers (and amendments and exhibits, such as press releases, to
such filings) as soon as reasonably practicable after we electronically file with or furnish such material to the SEC. Information on our website or any other website is not incorporated by reference into this report and does not constitute a part
of this report.

We file or furnish annual, quarterly and current reports, proxy statements and other documents with the SEC
under the Securities Exchange Act of 1934, as amended (the Exchange Act). The public may read and copy any materials that we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers,
including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

Mining Operations

The ARLP Partnership produces a diverse range of steam
coals with varying sulfur and heat contents, which enables it to satisfy the broad range of specifications required by its customers. The following chart summarizes the ARLP Partnerships coal production by region for the last five years.



|                                                                   |  |                        |      |  |      |  |      |      |  |  |      |  |  |      |      |  |  |  |      | 
|------------------------------------------------------------------ |  | ---------------------- | ---- |  | ---- |  | ---- | ---- |  |  | ---- |  |  | ---- | ---- |  |  |  | ---- | 
|                                                                   |  | Year Ended December 31 |     
|Regions and Complexes                                              |  | 2010                   |      |  | 2009 |  |      | 2008 |  |  | 2007 |  |  | 2006 |     
|                                                                   |  | (tons in millions)     |     
|Illinois Basin:                                                    |  |                        |      |  |      |  |      |      |  |  |      |  |  |      |      |  |  |  |      | 
|Dotiki, Warrior, Pattiki, Hopkins, River View and Gibson complexes |  |                        | 23.7 |  |      |  | 20.7 |      |  |  | 20.3 |  |  |      | 17.9 |  |  |  | 16.9 | 
|Central Appalachian:                                               |  |                        |      |  |      |  |      |      |  |  |      |  |  |      |      |  |  |  |      | 
|Pontiki and MC Mining complexes                                    |  |                        | 2.3  |  |      |  | 2.6  |      |  |  | 3.2  |  |  |      | 3.2  |  |  |  | 3.5  | 
|Northern Appalachian:                                              |  |                        |      |  |      |  |      |      |  |  |      |  |  |      |      |  |  |  |      | 
|Mettiki and Tunnel Ridge complexes                                 |  |                        | 2.9  |  |      |  | 2.5  |      |  |  | 2.9  |  |  |      | 3.2  |  |  |  | 3.3  | 
|                                                                   |  |                        |      |  |      |  |      |      |  |  |      |  |  |      |      |  |  |  |      | 
|Total                                                              |  |                        | 28.9 |  |      |  | 25.8 |      |  |  | 26.4 |  |  |      | 24.3 |  |  |  | 23.7 | 
|                                                                   |  |                        |      |  |      |  |      |      |  |  |      |  |  |      |      |  |  |  |      | 



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The following map shows the location of the ARLP Partnerships mining complexes and
projects:

LOGO

Illinois Basin Operations

The ARLP Partnerships Illinois Basin mining operations are located in western Kentucky, southern Illinois and southern Indiana. As
of February 1, 2011, the ARLP Partnership had 2,487 employees and it operates six mining complexes in the Illinois Basin.

Dotiki Complex. The ARLP Partnerships subsidiary, Webster County Coal, LLC (Webster County Coal), operates
Dotiki, which is an underground mining complex located near the city of Providence in Webster County, Kentucky. The complex was opened in 1966, and was purchased by the ARLP Partnership in 1971. The Dotiki complex utilizes continuous mining units
employing room-and-pillar mining techniques to produce high-sulfur coal. Dotikis preparation plant has throughput capacity of 1,300 tons of raw coal an hour. Coal from the Dotiki complex is shipped via the CSX Transportation, Inc.
(CSX) and Paducah & Louisville Railway, Inc. (PAL) railroads and by truck on U.S. and state highways directly to customers or to various transloading facilities, including the Mt. Vernon Transfer Terminal, LLC
(Mt. Vernon) transloading facility, for sale to customers capable of receiving barge deliveries.

Warrior
Complex. The ARLP Partnerships subsidiary, Warrior Coal, LLC (Warrior), operates an underground mining complex located near the city of Madisonville in Hopkins County, Kentucky. The Warrior complex was opened in 1985 and
acquired by the ARLP Partnership in February 2003. Warrior utilizes continuous mining units employing room-and-pillar mining techniques to produce high-sulfur coal. Warriors preparation plant became operational in the first quarter of 2009 and
has throughput capacity of 1,200 tons of raw coal an hour. Warriors production can be shipped via the CSX and PAL railroads and by truck on U.S. and state highways directly to customers or to various transloading facilities, including the
Mt. Vernon transloading facility, for sale to customers capable of receiving barge deliveries.



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Pattiki Complex. The ARLP Partnerships subsidiary, White County Coal, LLC
(White County Coal), operates Pattiki, an underground mining complex located near the city of Carmi in White County, Illinois. The ARLP Partnership began construction of the complex in 1980 and has operated it since its inception. The
Pattiki complex utilizes continuous mining units employing room-and-pillar mining techniques to produce high-sulfur coal. The preparation plant has throughput capacity of 1,000 tons of raw coal an hour. Coal from the Pattiki complex is shipped via
the Evansville Western Railway, Inc. (EVW) railroad directly, or via connection with CSX, to customers or to various transloading facilities, including the Mt. Vernon transloading facility, for sale to customers capable of receiving
barge deliveries. A failure of the vertical hoist conveyor system temporarily halted production from the Pattiki mine for a period of approximately two months beginning May 13, 2010 and resulted in limited production from the mine until full
production was resumed on January 3, 2011.

Hopkins Complex.The Hopkins complex, which the ARLP Partnership
acquired in January 1998, is located near the city of Madisonville in Hopkins County, Kentucky. It is operated by the ARLP Partnerships subsidiary, Hopkins County Coal, LLC (Hopkins County Coal). During 2006, Hopkins County Coal
ceased production from its Newcoal surface mine, which is being reclaimed, and began operations at its Elk Creek underground mine using continuous mining units employing room-and-pillar mining techniques to produce high-sulfur coal. Coal produced
from the Elk Creek mine is processed and shipped through Hopkins County Coals preparation plant, which has throughput capacity of 1,200 tons of raw coal an hour. Elk Creeks production can be shipped via the CSX and PAL railroads and by
truck on U.S. and state highways directly to customers or to various transloading facilities, including the Mt. Vernon transloading facility, for sale to customers capable of receiving barge deliveries.

Gibson Complex. The ARLP Partnerships subsidiary, Gibson County Coal, LLC (Gibson County Coal), operates the
Gibson mine, an underground mining complex located near the city of Princeton in Gibson County, Indiana. The mine began production in November 2000 and utilizes continuous mining units employing room-and-pillar mining techniques to produce
medium-sulfur coal. The preparation plant has throughput capacity of 700 tons of raw coal an hour. Production from Gibson is either shipped by truck on U.S. and state highways or transported by rail on CSX and Norfolk Southern Railway Company
(NS) railroads directly to customers or to various transloading facilities, including the Mt. Vernon transloading facility, for sale to customers capable of receiving barge deliveries. We refer to the reserves mined at this location as
the Gibson North reserves. The ARLP Partnership also controls undeveloped reserves in Gibson County that are not contiguous to the reserves currently being mined, which we refer to as the Gibson South reserves. See
Gibson South Reserves discussed below.

River View Complex. In April 2006, the ARLP Partnership acquired
River View Coal, LLC (River View) from Alliance Resource Holdings, Inc. (ARH). River View currently controls, through coal leases or direct ownership, approximately 128.5 million tons of proven and probable high-sulfur
coal in the Kentucky No. 7, No. 9 and No. 11 coal seams underlying properties located primarily in Union County, Kentucky, as well as certain surface properties, facilities and permits. In July 2007, the ARLP Partnership began
construction of the mining complex, which is an underground mining complex utilizing continuous mining units employing room-and-pillar mining techniques. Production began in August 2009 and expanded to eight continuous mining units in 2010. River
Views preparation plant has throughput capacity of 1,800 tons of raw coal per hour. Coal produced from the River View mine is transported by overland belt to a barge loading facility on the Ohio River. Total capital expenditures required to
develop the River View mine to its current capacity were approximately $252.0 million, of which $52.5 million was incurred in 2010. These amounts exclude capitalized interest and capitalized mine development costs associated with incidental
production. (For more information about mine development costs, please read Mine Development Costs under Item 8. Financial Statements and Supplementary DataNote 2. Summary of Significant Accounting Policies.)

Gibson South Reserves. The ARLP Partnership has partially completed the permitting process for the Gibson South
reserves and continues to evaluate development of the project. (For more information on the permitting process and matters that could hinder or delay the process, please read Regulation and LawsMining Permits and
Approvals.) Although development of the project is market dependent, the ARLP Partnership currently expects production to begin in 2014. The ARLP Partnership expects the mine to be developed as an underground mining complex using
continuous mining units employing room-and-pillar techniques, and to have annual production capacity of approximately 3.0 million to 3.5 million tons. Definitive development commitment for Gibson South is dependent upon final approval by
the board of directors of MGP (the MGP Board of Directors).

Sebree Reserves.The ARLP Partnership
controls, through its subsidiaries, Alliance Resource Properties, LLC (Alliance Resource Properties) and ARP Sebree, LLC, undeveloped reserves in Webster County, Kentucky, which it refers to as the Sebree Reserves. The ARLP
Partnership is in the process of permitting the Sebree property for future development through its subsidiary Sebree Mining, LLC (Sebree).



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Central Appalachian Operations

The ARLP Partnerships Central Appalachian mining operations are located in eastern Kentucky. As of February 1, 2011, the ARLP
Partnership had 474 employees and it operates two mining complexes in Central Appalachia.

Pontiki Complex.The Pontiki
complex is located near the city of Inez in Martin County, Kentucky. The ARLP Partnership constructed the mine in 1977. Its subsidiary, Pontiki Coal, LLC (Pontiki), owns the mining complex and controls the reserves, and its subsidiary,
Excel Mining, LLC (Excel), conducts all mining operations. The underground operation utilizes continuous mining units employing room-and-pillar mining techniques to produce low-sulfur coal. The preparation plant has throughput capacity
of 900 tons of raw coal an hour. Coal produced in 2010 remained low sulfur, but does not meet the compliance requirements of Phase II of the Federal Clean Air Act (CAA) (see Regulation and LawsAir Emissions
below). Coal produced from the mine is shipped via the NS railroad directly to customers or to various transloading facilities on the Ohio River for sale to customers capable of receiving barge deliveries, or by truck via U.S. and state highways
directly to customers or to various docks on the Big Sandy River for shipment to customers capable of receiving barge deliveries. In 2009, the ARLP Partnership idled one of the Pontiki production units due to weak coal market conditions and that
unit remained idle throughout 2010.

MC Mining Complex.The MC Mining complex is located near the city of Pikeville in
Pike County, Kentucky. The ARLP Partnership acquired the mine in 1989. The ARLP Partnerships subsidiary, MC Mining, LLC (MC Mining), owns the mining complex and leases the reserves, and Excel conducts all mining operations. The
underground operation utilizes continuous mining units employing room-and-pillar mining techniques to produce low-sulfur coal. The preparation plant has throughput capacity of 1,000 tons of raw coal an hour. Substantially all of the coal produced at
MC Mining in 2010 met or exceeded the compliance requirements of Phase II of the CAA (see Regulation and LawsAir Emissions below). Coal produced from the mine is shipped via the CSX railroad directly to customers or to
various transloading facilities on the Ohio River for sale to customers capable of receiving barge deliveries, or by truck via U.S. and state highways directly to customers or to various docks on the Big Sandy River for shipment to customers capable
of receiving barge deliveries.

Northern Appalachian Operations

The ARLP Partnerships Northern Appalachian mining operations employed 391 employees, as of February 1, 2011, and are located in
Maryland and West Virginia. The ARLP Partnership operates one mining complex and has one mining complex under construction in Northern Appalachia. The ARLP Partnership also controls undeveloped reserves in West Virginia and Pennsylvania.

Mettiki (MD) Operation.The ARLP Partnerships subsidiary, Mettiki Coal, LLC (Mettiki (MD)), previously operated
an underground longwall mine located near the city of Oakland in Garrett County, Maryland. Underground longwall mining operations ceased at this mine in October 2006 upon the exhaustion of the economically mineable reserves, and the longwall mining
equipment was moved from the Mettiki (MD) operation to the operation of the ARLP Partnerships subsidiary, Mettiki Coal (WV), LLC (Mettiki (WV)) (discussed below). Medium-sulfur coal produced from two small-scale third-party mining
operations (a surface strip mine and an underground mine) on properties controlled by Mettiki (MD) and another subsidiary of the ARLP Partnership, Backbone Mountain, LLC, supplements the Mettiki (WV) production, providing blending optimization and
allowing the operation to take advantage of market opportunities as they arise. The surface strip mine was idled for part of 2009 due to weak coal market conditions, but operated throughout 2010.

The ARLP Partnerships Mettiki (MD) preparation plant has throughput capacity of 1,350 tons of raw coal an hour. A portion of the
Mettiki (WV) production is transported to this preparation plant for processing and then trucked to a blending facility at the Virginia Electric and Power Company (VEPCO) Mt. Storm Power Station. The preparation plant also is served by
the CSX railroad, providing the opportunity to ship into the domestic and export metallurgical coal markets.

Mettiki (WV)
Operation. In July 2005, Mettiki (WV) began continuous miner development of the Mountain View mine located in Tucker County, West Virginia. Upon completion of mining at the Mettiki (MD) longwall operation, the longwall mining equipment was moved
to the Mountain View mine and put into operation in November 2006. The Mountain View mine produces medium-sulfur coal which is transported by truck either to the Mettiki (MD) preparation plant (which is served by CSX) or to the coal blending
facility at the VEPCO Mt. Storm Power Station.



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Tunnel Ridge Complex.The ARLP Partnerships subsidiary, Tunnel Ridge, LLC
(Tunnel Ridge), controls, through a coal lease agreement with its special general partner, approximately 97.4 million tons of proven and probable high-sulfur coal in the Pittsburgh No. 8 coal seam in West Virginia and
Pennsylvania. In 2008, Tunnel Ridge began construction of the mining complex, which will be an underground, longwall mine, and development mining began in 2010. During 2010, Tunnel Ridge had incidental production of approximately 115,000 tons, which
the ARLP Partnership expects to increase to approximately 550,000 tons to 750,000 tons of incidental production in 2011 as development mining continues. The ARLP Partnership expects to begin longwall mining operations at Tunnel Ridge in the first
quarter of 2012, with annual production capacity of approximately 5.5 to 6.0 million tons. Capital expenditures required for development of Tunnel Ridge are estimated to be in the range of approximately $295 million to $305 million, of which
approximately $200.0 million has been incurred as of December 31, 2010. These amounts exclude capitalized interest and capitalized mine development costs associated with incidental production. (For more information about mine development costs,
please read Mine Development Costs under Item 8. Financial Statements and Supplementary DataNote 2. Summary of Significant Accounting Policies.)

Penn Ridge. The ARLP Partnerships subsidiary, Penn Ridge Coal, LLC (Penn Ridge), is party to a coal lease agreement effective December 31, 2005 with Allegheny Pittsburgh Coal
Company (Allegheny), pursuant to which Penn Ridge leases Alleghenys Buffalo coal reserve in Washington County, Pennsylvania, which is estimated to include approximately 56.7 million tons of proven and probable high-sulfur coal
in the Pittsburgh No. 8 seam. Penn Ridge has initiated the permitting process for the Buffalo coal reserves and continues to evaluate development. (For more information on the permitting process, and matters that could hinder or delay the
process, please read Regulation and LawsMining Permits and Approvals.) Development of the project is regulatory and market dependent, and its timing is open-ended pending obtaining all required regulatory approvals and
sufficient coal sales commitments to support the project. It is expected that these reserves will be developed as an underground mining complex using either continuous mining units employing room-and-pillar techniques, longwall mining, or both. The
ARLP Partnership expects the annual production capacity of the Penn Ridge mine to be approximately 2.5 to 3.0 million tons utilizing continuous mining units or up to 5.0 million tons with longwall mining. Definitive development commitment
for Penn Ridge is dependent upon final approval by the MGP Board of Directors.

Other Operations

Mt. Vernon Transfer Terminal, LLC

The ARLP Partnerships subsidiary, Mt. Vernon, leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana. Coal is delivered to Mt. Vernon by both rail and truck. The
terminal has a capacity of 8.0 million tons per year with existing ground storage of approximately 60,000 to 70,000 tons. During 2010, the terminal loaded approximately 2.5 million tons for customers of Pattiki, Gibson, Elk Creek, and for
third-parties.

Coal Brokerage

As markets allow, the ARLP Partnership buys coal from non-affiliated producers principally throughout the eastern U.S., which it then resells. The ARLP Partnership has a policy of matching its outside
coal purchases and sales to minimize market risks associated with buying and reselling coal. In 2010, the ARLP Partnership sold 54,699 tons classified as brokerage coal.

Matrix Group

The ARLP Partnerships subsidiaries, Matrix
Design Group, LLC (Matrix Design) and Alliance Design Group, LLC (Alliance Design) (collectively, Matrix Design and Alliance Design are referred to as the Matrix Group), provide a variety of mine products and
services for the ARLP Partnerships mining operations and to unrelated parties. The ARLP Partnership acquired this business in September 2006. Matrix Groups products and services include design and installation of underground mine hoists
for transporting employees and materials in and out of mines; design of systems for automating and controlling various aspects of industrial and mining environments; and design and sale of mine safety equipment, including its miner and equipment
tracking and proximity detection systems. In 2010, our financial results were not significantly impacted by Matrix Groups activities.



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Additional Services

The ARLP Partnership develops and markets additional services in order to establish itself as the supplier of choice for its customers.
Examples of the kind of services it has offered to date include ash and scrubber sludge removal, coal yard maintenance and arranging alternate transportation services. Revenues from these services in 2010 and historically have represented less than
one percent of the ARLP Partnerships total revenues. In addition, the ARLP Partnerships affiliate, Mid-America Carbonates, LLC (MAC), which is a joint venture in which White County Coal participates, manufactures and sells
rock dust to the ARLP Partnerships mining operations and to unrelated parties. In 2010, our financial results were not significantly impacted by MACs business. Please read Item 8. Financial Statements and Supplementary
DataNote 13. Mid-America Carbonates.

Reportable Segments

Please read Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations, and Segment
Information under Item 8. Financial Statements and Supplementary DataNote 22. Segment Information for information concerning our reportable segments.

Coal Marketing and Sales

As is customary in the coal industry, the ARLP
Partnership has entered into long-term coal supply agreements with many of its customers. These arrangements are mutually beneficial to the ARLP Partnership and its customers in that they provide greater predictability of sales volumes and sales
prices. In 2010, approximately 92.4% and 89.0% of the ARLP Partnerships sales tonnage and total coal sales, respectively, were sold under long-term contracts (contracts having a term of one year or greater) with committed term expirations
ranging from 2011 to 2016. As of January 28, 2011, the ARLP Partnerships nominal commitment under long-term contracts was approximately 31.1 million tons in 2011, 27.3 million tons in 2012, 24.1 million tons in 2013 and
19.0 million tons in 2014. The commitment of coal under contract is an approximate number because, in some instances, the contracts contain provisions that could cause the nominal commitment to increase or decrease by as much as 20%. The
contractual time commitments for customers to nominate future purchase volumes under these contracts are typically sufficient to allow the ARLP Partnership to balance its sales commitments with prospective production capacity. In addition, the
nominal commitment can otherwise change because of reopener provisions contained in certain of these long-term contracts.

The
provisions of long-term contracts are the results of both bidding procedures and extensive negotiations with each customer. As a result, the provisions of these contracts vary significantly in many respects, including, among others, price adjustment
features, price and contract reopener terms, permitted sources of supply, force majeure provisions, coal qualities and quantities. Virtually all of the ARLP Partnerships long-term contracts are subject to price adjustment provisions, which
permit an increase or decrease periodically in the contract price to reflect changes in specified price indices or items such as taxes, royalties or actual production costs. These provisions, however, may not assure that the contract price will
reflect every change in production or other costs. Failure of the parties to agree on a price pursuant to an adjustment or a reopener provision can, in some instances, lead to early termination of a contract. Some of the long-term contracts also
permit the contract to be reopened for renegotiation of terms and conditions other than pricing terms, and where a mutually acceptable agreement on terms and conditions cannot be concluded, either party may have the option to terminate the contract.
The long-term contracts typically stipulate procedures for transportation of coal, quality control, sampling and weighing. Most contain provisions requiring the ARLP Partnership to deliver coal within stated ranges for specific coal characteristics
such as heat, sulfur, ash, moisture, grindability, volatility and other qualities. Failure to meet these specifications can result in economic penalties, rejection or suspension of shipments or termination of the contracts. While most of the
contracts specify the approved seams and/or approved locations from which the coal is to be mined, some contracts allow the coal to be sourced from more than one mine or location. Although the volume to be delivered pursuant to a long-term contract
is stipulated, the buyers often have the option to vary the volume within specified limits.



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Reliance on Major Customers

The ARLP Partnerships two largest customers in 2010 were Tennessee Valley Authority and Louisville Gas and Electric Company. During 2010, the ARLP Partnership derived approximately 29.2% of its
total revenues from these two customers and at least 10.0% of its total revenues from each of the two. For more information about these customers, please read Item 8. Financial Statements and Supplementary DataNote 21. Concentration of
Credit Risk and Major Customers.

Competition

The coal industry is intensely competitive. The most important factors on which the ARLP Partnership competes are coal price, coal quality (including sulfur and heat content), transportation costs from
the mine to the customer and the reliability of supply. The ARLP Partnerships principal competitors include Alpha Natural Resources, Inc., Arch Coal, Inc., CONSOL Energy, Inc., International Coal Group, Inc., James River Coal Company, Massey
Energy Company, Murray Energy, Inc., Patriot Coal Corporation, Foresight Energy LLC and Peabody Energy Corp. Some of these coal producers are larger and have greater financial resources and larger reserve bases than the ARLP Partnership. The ARLP
Partnership also competes directly with a number of smaller producers in the Illinois Basin, Central Appalachian and Northern Appalachian regions. The prices the ARLP Partnership is able to obtain for its coal are primarily linked to coal
consumption patterns of domestic electricity generating utilities, which in turn are influenced by economic activity, government regulations, weather and technological developments. Additionally the ARLP Partnership exports a portion of its coal
into the international metallurgical coal market. The prices the ARLP Partnership obtains for its export coal are influenced by a variety of factors, such as global economic conditions, weather patterns and political instability, among others.
Further, coal competes with other fuels such as petroleum, natural gas, nuclear energy and renewable energy sources for electrical power generation. Over time, costs and other factors, such as safety and environmental considerations, may affect the
overall demand for coal as a fuel. For additional information, please see Item 1A. Risk Factors. As the price of domestic coal increases, the ARLP Partnership may also begin to compete with companies that produce coal from one or more
foreign countries.

Transportation

The ARLP Partnerships coal is transported to its customers by rail, truck and barge. Depending on the proximity of the customer to the mine and the transportation available for delivering coal to
that customer, transportation costs can range from 4.0% to 45.0% of the total delivered cost of a customers coal. As a consequence, the availability and cost of transportation constitute important factors in the marketability of coal. The ARLP
Partnership believes its mines are located in favorable geographic locations that minimize transportation costs for its customers, and in many cases it is able to accommodate multiple transportation options. Typically, the ARLP Partnerships
customers pay the transportation costs from the mining complex to the destination, which is the standard practice in the industry. Approximately 61.7% of the ARLP Partnerships 2010 sales volume was initially shipped from the mines by rail,
with 17.5% shipped from the mines by truck and 20.8% shipped from the mines by barge. In 2010, the largest volume transporter of the ARLP Partnerships coal shipments was CSX, which moved approximately 36.7% of the ARLP Partnerships
tonnage over its rail system. The practices of, and rates set by, the transportation company serving a particular mine or customer may affect, either adversely or favorably, the ARLP Partnerships marketing efforts with respect to coal produced
from the relevant mine.

Regulation and Laws

The coal mining industry is subject to extensive regulation by federal, state and local authorities on matters such as:



| |  |  | employee health and safety;
| | - |  | ---------------------------



| |  |  | mine permits and other licensing requirements;
| | - |  | ----------------------------------------------



| |  |  | air quality standards;
| | - |  | ----------------------



| |  |  | water quality standards;
| | - |  | ------------------------



| |  |  | storage of petroleum products and substances which are regarded as hazardous under applicable laws or which, if spilled, could reach waterways or
wetlands;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | plant and wildlife protection;
| | - |  | ------------------------------



| |  |  | reclamation and restoration of mining properties after mining is completed;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the discharge of materials into the environment;
| | - |  | ------------------------------------------------



| |  |  | storage and handling of explosives;
| | - |  | -----------------------------------



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| |  |  | wetlands protection;
| | - |  | --------------------



| |  |  | surface subsidence from underground mining; and
| | - |  | -----------------------------------------------



| |  |  | the effects, if any, that mining has on groundwater quality and availability.
| | - |  | -----------------------------------------------------------------------------

In addition, the utility industry is subject to extensive regulation regarding the environmental impact of its power generation
activities, which could affect demand for the ARLP Partnerships coal. It is possible that new legislation or regulations may be adopted, or that existing laws or regulations may be differently interpreted or more stringently enforced, any of
which could have a significant impact on the ARLP Partnerships mining operations or its customers ability to use coal. For more information, please see risk factors described in Item 1A. Risk Factors below.

The ARLP Partnership is committed to conducting mining operations in compliance with applicable federal, state and local laws and
regulations. However, because of the extensive and detailed nature of these regulatory requirements, it is extremely difficult for the ARLP Partnership and other underground coal mining companies in particular, as well as the coal industry in
general, to comply with all requirements at all times. None of the ARLP Partnerships violations to date has had a material impact on its operations or financial condition. While it is not possible to quantify all of the costs of compliance
with applicable federal and state laws and associated regulations, those costs have been and are expected to continue to be significant. Compliance with these laws and regulations has substantially increased the cost of coal mining for domestic coal
producers.

Capital expenditures for environmental matters have not been material in recent years. The ARLP Partnership has
accrued for the present value of the estimated cost of asset retirement obligations and mine closings, including the cost of treating mine water discharge, when necessary. The accruals for asset retirement obligations and mine closing costs are
based upon permit requirements and the costs and timing of asset retirement obligations and mine closing procedures. Although management believes it has made adequate provisions for all expected reclamation and other costs associated with mine
closures, future operating results would be adversely affected if the ARLP Partnership later determines these accruals to be insufficient.

Mining Permits and Approvals

Numerous governmental permits or
approvals are required for mining operations. Applications for permits require extensive engineering and data analysis and presentation, and must address a variety of environmental, health, and safety matters associated with a proposed mining
operation. These matters include the manner and sequencing of coal extraction, the storage, use and disposal of waste and other substances and other impacts on the environment, the construction of water containment areas, and reclamation of the area
after coal extraction. Meeting all requirements imposed by any of these authorities may be costly and time consuming, and may delay or prevent commencement or continuation of mining operations.

The permitting process for certain mining operations can extend over several years and can be subject to judicial challenge, including by
the public. Some required mining permits are becoming increasingly difficult to obtain in a timely manner, or at all. We cannot assure you that the ARLP Partnership will not experience difficulty or delays in obtaining mining permits in the future.

The ARLP Partnership is required to post bonds to secure performance under its permits. Under some circumstances, substantial
fines and penalties, including revocation of mining permits, may be imposed under the laws and regulations described above. Monetary sanctions and, in severe circumstances, criminal sanctions may be imposed for failure to comply with these laws and
regulations. Regulations also provide that a mining permit can be refused or revoked if the permit applicant or permittee owns or controls, directly or indirectly through other entities, mining operations that have outstanding environmental
violations. Although, like other coal companies, the ARLP Partnership has been cited for violations in the ordinary course of its business, it has never had a permit suspended or revoked because of any violation, and the penalties assessed for these
violations have not been material.

Mine Health and Safety Laws

Stringent safety and health standards have been imposed by federal legislation since 1969 when the Federal Coal Mine Health and Safety Act
of 1969 (CMHSA) was adopted. The Federal Mine Safety and Health Act of 1977 (FMSHA), and regulations adopted pursuant thereto, significantly expanded the enforcement of health and safety standards of the CMHSA, and imposed
extensive and detailed safety and health standards on numerous aspects of mining operations, including training of mine personnel, mining procedures, blasting, the equipment used in mining operations, and numerous other matters. The Mine Safety and
Health Administration (MSHA) monitors and



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rigorously enforces compliance with these federal laws and regulations. In addition, most of the states where the ARLP Partnership operates also have state programs for mine safety and health
regulation and enforcement. Federal and state safety and health regulations affecting the coal mining industry are perhaps the most comprehensive and rigorous system for protection of employee safety and have a significant effect on the ARLP
Partnerships operating costs. Although many of the requirements primarily impact underground mining, the ARLP Partnerships competitors in all of the areas in which it operates are subject to the same laws and regulations.

The FMSHA has been construed as authorizing MSHA to issue citations and orders pursuant to the legal doctrine of strict liability, or
liability without fault, and FMSHA requires imposition of a civil penalty for each cited violation. Negligence and gravity assessments, and other factors can result in the issuance of various types of orders, including orders requiring withdrawal
from the mine or the affected area, and some orders can also result in the imposition of civil penalties. The FMSHA also contains criminal liability provisions. For example, criminal liability may be imposed upon corporate operators who knowingly
and willfully authorize, order or carry out violations of the FMSHA, or its mandatory health and safety standards.

In 2006,
the Federal Mine Improvement and New Emergency Response Act of 2006 (MINER Act) was enacted. The MINER Act significantly amended the FMSHA, imposing more extensive and stringent compliance standards, increasing criminal penalties and
establishing a maximum civil penalty for non-compliance, and expanding the scope of federal oversight, inspection, and enforcement activities. Following the passage of the MINER Act, MSHA has issued new or more stringent rules and policies on a
variety of topics, including:



| |  |  | sealing off abandoned areas of underground coal mines;
| | - |  | ------------------------------------------------------



| |  |  | mine safety equipment, training and emergency reporting requirements;
| | - |  | ---------------------------------------------------------------------



| |  |  | substantially increased civil penalties for regulatory violations;
| | - |  | ------------------------------------------------------------------



| |  |  | training and availability of mine rescue teams;
| | - |  | -----------------------------------------------



| |  |  | underground refuge alternatives capable of sustaining trapped miners in the event of an emergency;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | flame-resistant conveyor belt, fire prevention and detection, and use of air from the belt entry; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | post-accident two-way communications and electronic tracking systems.
| | - |  | ---------------------------------------------------------------------

MSHA continues to interpret and implement various provisions of the MINER Act, along with introducing new proposed regulations and
standards. Among these new proposed regulations is MSHAs proposed rule titled Lowering Miners Exposure to Respirable Coal Mine Dust, Including Continuous Personal Dust Monitors. The rule, which is currently in the comment
phase, would require a 50% reduction in the allowable respirable coal mine dust exposure limits and require each operation to significantly increase the number of respirable coal mine dust samples taken. The rule would also increase oversight by
MSHA regarding coal mine dust and ventilation issues at each mine, including the approval process for ventilation plans at each mine. MSHA also introduced an Emergency Temporary Standard in 2010 that required the application and continued
maintenance of a significantly increased amount of rock dust throughout underground coal mines.

Subsequent to passage of the MINER Act, Illinois, Kentucky, Pennsylvania and West Virginia have enacted legislation
addressing issues such as mine safety and accident reporting, increased civil and criminal penalties, and increased inspections and oversight. Other states may pass similar legislation in the future. Additionally, in 2010, the 111thCongress introduced federal legislation seeking to impose extensive
additional safety and health requirements on coal mining. While the legislation was passed by the House of Representatives, the legislation was not voted on in the Senate and did not become law. On January 26, 2011, the same legislation was
reintroduced in the 112thCongress by Senators Jay
Rockefeller (D-W.Va.), Tom Harkin (D-Iowa), Patty Murray (D-Wash.) and Joe Manchin III (D-W.Va.).

Although the ARLP
Partnership is unable to quantify the full impact, implementing and complying with these new state and federal safety laws and regulations have had, and are expected to continue to have, an adverse impact on its results of operation and financial
position.

Black Lung Benefits Act

The Federal Black Lung Benefits Act (BLBA) requires businesses that conduct current mining operations to make payments of black lung benefits to coal miners with black lung disease and to some
survivors of a miner who dies from this disease. The BLBA levies a tax on production of $1.10 per ton for underground-mined coal and $0.55 per ton for surface-mined coal, but not to exceed 4.4% of the applicable sales price, in order to compensate
miners who are totally disabled due to black lung disease and some survivors of miners who died from this disease, and who were last employed as miners prior to 1970 or subsequently where no responsible coal mine operator has been identified for



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claims. In addition, BLBA provides that some claims for which coal operators had previously been responsible are or will become obligations of the government trust funded by the tax. The Revenue
Act of 1987 extended the termination date of this tax from January 1, 1996, to the earlier of January 1, 2014, or the date on which the government trust becomes solvent. For miners last employed as miners after 1969 and who are determined
to have contracted black lung, the ARLP Partnership self-insures the potential cost of compensating such miners using its actuary estimates of the cost of present and future claims. The ARLP Partnership is also liable under state statutes for black
lung claims. Congress and state legislatures regularly consider various items of black lung legislation, which, if enacted, could adversely affect the ARLP Partnerships business, results of operations and financial position.

Revised BLBA regulations took effect in January 2001, relaxing the stringent award criteria established under previous regulations and
thus potentially allowing more new federal claims to be awarded and allowing previously denied claimants to re-file under the revised criteria. These regulations may also increase black lung related medical costs by broadening the scope of
conditions for which medical costs are reimbursable, and increase legal costs by shifting more of the burden of proof to the employer.

The Patient Protection and Affordable Care Act (PPACA), signed into law on March 23, 2010, includes provisions, retroactive to 2005, which would (1) provide an automatic survivor
benefit paid upon the death of a miner with an awarded black lung claim, without requiring proof that the death was due to pneumoconiosis, or black lung, and (2) establish a rebuttable presumption with regard to pneumoconiosis among miners with
15 or more years of coal mine employment that are totally disabled by a respiratory condition. This legislation has had and is expected to have an adverse impact on our results of operation and financial position.

Workers Compensation

The ARLP Partnership provides income replacement and medical treatment for work-related traumatic injury claims as required by applicable state laws. Workers compensation laws also compensate
survivors or workers who suffer employment related deaths. Several states in which the ARLP Partnership operates consider changes in workers compensation laws from time to time. The ARLP Partnership generally self-insures this potential
expense using its actuary estimates of the cost of present and future claims. For more information concerning the ARLP Partnerships requirement to maintain bonds to secure its workers compensation obligations, see the discussion of
surety bonds below under Surface Mining Control and Reclamation Act.

Coal Industry Retiree Health
Benefits Act

The Federal Coal Industry Retiree Health Benefits Act (CIRHBA) was enacted to fund health
benefits for some United Mine Workers of America retirees. CIRHBA merged previously established union benefit plans into a single fund into which signatory operators and related persons are obligated to pay annual premiums
for beneficiaries. CIRHBA also created a second benefit fund for miners who retired between July 21, 1992 and September 30, 1994, and whose former employers are no longer in business. Because of the ARLP Partnerships union-free
status, it is not required to make payments to retired miners under CIRHBA, with the exception of limited payments made on behalf of predecessors of MC Mining. However, in connection with the sale of the coal assets acquired by ARH in 1996, MAPCO
Inc., now a wholly-owned subsidiary of The Williams Companies, Inc., agreed to retain, and be responsible for, all liabilities under CIRHBA.

Surface Mining Control and Reclamation Act

The Federal Surface
Mining Control and Reclamation Act of 1977 (SMCRA), establishes operational, reclamation and closure standards for all aspects of surface mining as well as many aspects of deep mining. Although the ARLP Partnership has minimal surface
mining activity and no mountaintop removal mining activity, SMCRA nevertheless requires that comprehensive environmental protection and reclamation standards be met during the course of and upon completion of its mining activities.

SMCRA and similar state statutes require, among other things, that mined property be restored in accordance with specified standards and
approved reclamation plans. SMCRA requires the ARLP Partnership to restore the surface to approximate the original contours as contemporaneously as practicable with the completion of surface mining operations. Federal law and some states impose on
mine operators the responsibility for replacing certain water supplies damaged by mining operations and repairing or compensating for damage to certain structures occurring on the surface as a result of mine subsidence, a consequence of longwall
mining and possibly other mining operations. The ARLP Partnership believes it is in compliance in all material respects with applicable regulations relating to reclamation.



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In addition, the Abandoned Mine Lands Program, which is part of SMCRA, imposes a tax on all
current mining operations, the proceeds of which are used to restore mines closed before 1977. The tax for surface-mined and underground-mined coal is $0.315 per ton and $0.135 per ton, respectively. The ARLP Partnership has accrued the estimated
costs of reclamation and mine closing, including the cost of treating mine water discharge when necessary. Please read Item 8. Financial Statements and Supplementary Data.Note 17. Asset Retirement Obligations. In addition, states
from time to time have increased and may continue to increase their fees and taxes to fund reclamation or orphaned mine sites and acid mine drainage (AMD) control on a statewide basis.

Under SMCRA, responsibility for unabated violations, unpaid civil penalties and unpaid reclamation fees of independent contract mine
operators and other third-parties can be imputed to other companies that are deemed, according to the regulations, to have owned or controlled the third-party violator. Sanctions against the owner or
controller are quite severe and can include being blocked from receiving new permits and having any permits that have been issued since the time of the violations revoked or, in the case of civil penalties and reclamation fees, since the
time those amounts became due. The ARLP Partnership is not aware of any currently pending or asserted claims against it relating to the ownership or control theories discussed above. However, the ARLP Partnership cannot
assure you that such claims will not be asserted in the future.

The Office of Surface Mining Reclamation (OSM)
published in November 2009, an Advance Notice of Proposed Rulemaking and announced its intent to revise the Stream Buffer Zone (SBZ) rule published in December 2008. The SBZ rule prohibits mining disturbances within 100 feet of streams
if there would be a negative effect on water quality. OSM intends to propose a series of Stream Protection Rules in 2011 and will finalize those rules in 2012. The ARLP Partnership is unable to predict the impact, if any, of these actions by the
OSM, although the actions potentially could result in additional delays and costs associated with obtaining permits, prohibitions or restrictions relating to mining activities near streams, and additional enforcement actions. In addition, Congress
has proposed, and may in the future propose, legislation to restrict the placement of mining material in streams. The requirements of the revised SBZ Rule or future legislation, if adopted, will likely be stricter than the prior SBZ Rule and may
adversely affect the ARLP Partnerships business and operations.

Bonding Requirements

Federal and state laws require bonds to secure the ARLP Partnerships obligations to reclaim lands used for mining, to pay federal
and state workers compensation, to pay certain black lung claims, and to satisfy other miscellaneous obligations. These bonds are typically renewable on a yearly basis. It has become increasingly difficult for the ARLP Partnership and for its
competitors to secure new surety bonds without the posting of partial collateral. In addition, surety bond costs have increased while the market terms of surety bonds have generally become less favorable to the ARLP Partnership. It is possible that
surety bond issuers may refuse to renew bonds or may demand additional collateral upon those renewals. The ARLP Partnerships failure to maintain, or inability to acquire, surety bonds that are required by state and federal laws would have a
material adverse effect on its ability to produce coal, which could affect its profitability and cash flow.

As of
December 31, 2010, the ARLP Partnership had approximately $68.4 million in surety bonds outstanding to secure the performance of its reclamation obligations.

Air Emissions

The CAA and similar state and local laws and
regulations regulate emissions into the air and affect coal mining operations. The CAA directly impacts the ARLP Partnership coal mining and processing operations by imposing permitting requirements and, in some cases, requirements to install
certain emissions control equipment, achieve certain emissions standards, or implement certain work practices on sources that emit various air pollutants. The CAA also indirectly affects coal mining operations by extensively regulating the air
emissions of coal-fired electric power generating plants and other coal-burning facilities. There have been a series of federal rulemakings focused on emissions from coal-fired electric generating facilities. Installation of additional emissions
control technology and any additional measures required under the laws, as well as regulations promulgated by the U.S. Environmental Protection Agency (EPA) will make it more costly to operate coal-fired power plants and could make coal
a less attractive fuel alternative in the planning and building of power plants in the future. A significant reduction in coals share of power generating capacity could have a material adverse effect on our business, financial condition and
results of operations.



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The EPAs Acid Rain Program, provided in Title IV of the CAA, regulates emissions of
sulfur dioxide from electric generating facilities. Sulfur dioxide is a by-product of coal combustion. Affected facilities purchase or are otherwise allocated sulfur dioxide emissions allowances, which must be surrendered annually in an amount equal
to a facilitys sulfur dioxide emissions in that year. Affected facilities may sell or trade excess allowances to other facilities that require additional allowances to offset their sulfur dioxide emissions. In addition to purchasing or trading
for additional sulfur dioxide allowances, affected power facilities can satisfy the requirements of the EPAs Acid Rain Program by switching to lower sulfur fuels, installing pollution control devices such as flue gas desulfurization systems,
or scrubbers, or by reducing electricity generating levels. In 2010, the ARLP Partnership sold 91.5% of its total tons to electric utilities, of which 93.5% was sold to utility plants with installed pollution control devices.

The EPA has promulgated rules, referred to as the Nitrogen Oxide SIP Call, that, among other things, require coal-fired power
plants in 21 eastern states and Washington D.C. to make substantial reductions in nitrogen oxide emissions in an effort to reduce the impacts of ozone transport between states. As a result of the program, many power plants have been or will be
required to install additional emission control measures, such as selective catalytic reduction devices. Installation of additional emission control measures will make it more costly to operate coal-fired power plants, potentially making coal a less
attractive fuel.

Additionally, in March 2005, the EPA issued the final Clean Air Interstate Rule (CAIR) which
would have permanently capped nitrogen oxide and sulfur dioxide emissions in 28 eastern states and Washington, D.C. Similarly, in March 2005, the EPA finalized the Clean Air Mercury Rule (CAMR), which established a two-part, nationwide
cap on mercury emissions from coal-fired power plants beginning in 2010. The CAIR and CAMR rules were both the subject of successful legal challenges, however, which have rendered the future of these rules uncertain. On February 8, 2008, the
D.C. Circuit Court of Appeals vacated the CAMR rule for further consideration by the EPA. The court established a deadline of November 2011 for the EPA to issue a final rule requiring Maximum Achievable Control Technology standards
(MACT) for power plants, which are likely to impose stricter limitations on mercury emissions from power plants than the vacated CAMR. The EPA has stated that it intends to propose air toxics standards for coal- and oil-fired electric
generating units by March 10, 2011. In addition, on July 11, 2008, the D.C. Circuit Court of Appeals vacated the CAIR, but on petition for rehearing, the court retracted its vacatur and remanded the rule to the EPA for further
consideration. This remand has the effect of leaving the rule in place while the EPA evaluates possible changes to the rule to correct the defects identified in the courts original opinion. Also, the EPA expects to issue a final
Transport Rule, which sets a pollution limit on nitrogen oxide and sulfur dioxide emissions in 31 states and the District of Columbia, in Spring 2011. Under the proposed Transport Rule, some coal-fired power plants might be required to
install additional pollution control equipment which could lead to decreased demand for low-sulfur coal. Also, on April 29, 2010, the EPA proposed new MACT for several classes of boilers and process heaters, including large coal-fired boilers
and process heaters, which would require significant reductions in the emission of particulate matter, carbon monoxide, hydrogen chloride, dioxins and mercury. Certain states have adopted or proposed mercury control regulations that are more
stringent than the federal requirements. The Obama Administration has also indicated a desire to negotiate an international treaty to reduce mercury pollution. More stringent regulation of mercury or other emissions by the EPA, state regulators,
Congress, or pursuant to an international treaty may decrease the future demand for coal, but the ARLP Partnership is unable to predict the magnitude of any such impact with any reasonable degree of certainty.

The EPA is required by the CAA to periodically re-evaluate the available health effects information to determine whether the national
ambient air quality standards (NAAQS) should be revised. Pursuant to this process, the EPA adopted more stringent NAAQS for fine particulate matter ozone, nitrogen oxide and sulfur dioxide. As a result, some states will be required to
amend their existing state implementation plans (SIPs) to attain and maintain compliance with the new air quality standards and other states will be required to develop new SIPs for areas that were previously in attainment
but do not attain the new standards. In addition, under the revised ozone NAAQS, significant additional emissions control expenditures may be required at coal-fired power plants. Attainment dates for the new standards range between 2013 and 2030,
depending on the severity of the non-attainment. In July 2009, the U.S. Court of Appeals for the District of Columbia vacated part of a rule implementing the ozone NAAQS and remanded certain other aspects of the rule to the EPA for further
consideration. Notwithstanding the decision, we expect that additional emissions control requirements may be imposed on new and expanded coal-fired power plants and industrial boilers in the years ahead. Because coal mining operations and coal-fired
electric generating facilities emit particulate matter and nitrogen oxides, which are precursors to ozone formation, the ARLP Partnerships mining operations and its customers could be affected when the new standards are implemented by the
applicable states.



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A regional haze program initiated by the EPA to protect and to improve visibility at and
around national parks, national wilderness areas and international parks may restrict the construction of new coal-fired power plants whose operation may impair visibility at and around federally protected areas and may require some existing
coal-fired power plants to install additional control measures designed to limit haze-causing emissions. These requirements could limit the demand for coal in some locations.

The Department of Justice, on behalf of the EPA, has filed lawsuits against a number of coal-fired electric generating facilities alleging violations of the new source review provisions of the CAA. The
EPA has alleged that certain modifications have been made to these facilities without first obtaining certain permits issued under the new source review program. Several of these lawsuits have settled, but others remain pending, and still more
lawsuits may be filed. Depending on the ultimate resolution of these cases, demand for coal could be affected.

Carbon
Dioxide Emissions

Combustion of fossil fuels, such as the coal the ARLP Partnership produces, results in the emission
of carbon dioxide, which is considered a greenhouse gas or GHG. Future regulation of greenhouse gas emissions in the U.S. could occur pursuant to future U.S. treaty commitments, new domestic legislation or regulation by the
EPA. President Obama has expressed support for a mandatory cap and trade program to restrict or regulate emissions of greenhouse gases and Congress has recently considered various proposals to reduce greenhouse gas emissions and it is possible
federal legislation could be adopted in the future. Many states and regions have adopted greenhouse gas initiatives and certain governmental bodies, including the State of California, have or are considering the imposition of fees or taxes based on
the emission of greenhouse gases by certain facilities, including coal-fired electric generating facilities. Depending on the particular regulatory program that may be enacted, at either the federal or state level, the demand for coal could be
negatively impacted which would have an adverse effect on the ARLP Partnerships operations.

Even in the absence of new
federal legislation, the EPA has begun to regulate greenhouse gas emissions pursuant to the CAA based on the U.S. Supreme Courts decision on April 2, 2007 in Massachusetts v. EPA that the EPA has authority to regulate greenhouse
gas emissions.

In 2009, the EPA issued a final rule declaring that greenhouse gas emissions, including carbon dioxide and
methane, endanger public health and welfare and that greenhouse gases emitted by motor vehicles contribute to that endangerment (Endangerment Finding). Several groups have filed petitions asking the EPA to reconsider the Endangerment
Finding. Further, several groups have filed petitions asking the United States Court of Appeals for the District of Columbia Circuit to review the legality of the EPAs Endangerment Finding.

In May 2010, the EPA issued its final tailoring rule for greenhouse gas emissions, a policy aimed at shielding small emission
sources from Clean Air Act permitting requirements. The EPAs rule phases in various greenhouse-gas-related permitting requirements beginning in January 2011. Until June 30, 2011, facilities that must already obtain New Source Review
permits for other pollutants will be required to include greenhouse gases in their permits if they increase their emissions of the gases by at least 75,000 tons of carbon dioxide equivalent per year. Beginning July 1, 2011, the EPA will extend
these requirements to new construction projects that emit at least 100,000 tons per year of greenhouse gases and existing facilities that increase their emissions by at least 75,000 tons per year. Sources that are smaller, those with
emissions of less than 50,000 tons of greenhouse gases per year, will not be regulated until at least April 30, 2016, and may in fact be permanently excluded from the permitting requirements. In December 2010, the EPA issued its plan to update
pollution standards for fossil fuel power plants and petroleum refineries. The EPA has stated that it intends to propose standards for power plants in July 2011 and for refineries in December 2011 and will issue final standards in May 2012 and
November 2012, respectively. Lawsuits challenging the tailoring rule have already been brought, and as a result of such challenges, the rule may be modified or vacated in whole or in part. On June 28, 2010, the EPA issued the Final Mandatory
Reporting of Greenhouse Gases Rule requiring all stationary sources that emit more than 25,000 tons of greenhouse gases per year to collect and report to the EPA data regarding such emissions. This rule affects many of the ARLP Partnerships
customers, as well as additional source categories, including all underground mines subject to quarterly methane sampling by MSHA. Underground mines subject to this rule, including the ARLP Partnerships, were required to begin monitoring
greenhouse gas emissions on January 1, 2011 and must begin reporting to the EPA on March 31, 2012.

There have been
an increasing number of protests of and challenges to the permitting of new coal-fired power plants by environmental organizations and state regulators for concerns related to greenhouse gas emissions. For instance, various state regulatory
authorities have rejected the construction of new coal-fueled power plants based on the uncertainty surrounding the potential costs associated with greenhouse gas emissions from these plants under future laws



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limiting the emissions of carbon dioxide. In addition, several permits issued to new coal-fueled power plants without limits on greenhouse gas emissions have been appealed to the EPAs
Environmental Appeals Board. In addition, over 30 states have currently adopted mandatory renewable portfolio standards, which require electric utilities to obtain a certain percentage of their electric generation portfolio from
renewable resources by a certain date. These standards range generally from 10% to 30%, over time periods that generally extend from the present until between 2020 and 2030. Other states may adopt similar requirements, and federal legislation is a
possibility in this area. To the extent these requirements affect the ARLP Partnerships current and prospective customers, they may reduce the demand for coal-fired power, and may affect long-term demand for its coal. Finally, a federal
appeals court has allowed a lawsuit pursuing federal common law claims to proceed against certain utilities on the basis that they may have created a public nuisance due to their emissions of carbon dioxide, while a second federal appeals court
dismissed a similar case on procedural grounds. In the former case, the U.S. Supreme Court has agreed to hear the appeal of the lower courts decision.

It is possible that future international, federal and state initiatives to control carbon dioxide emissions could result in increased costs associated with coal consumption, such as costs to install
additional controls to reduce carbon dioxide emissions or costs to purchase emissions reduction credits to comply with future emissions trading programs. Such increased costs for coal consumption could result in some customers switching to
alternative sources of fuel, or otherwise adversely affect the ARLP Partnerships operations and demand for its products, which could have a material adverse effect on its business, financial condition, and results of operations.

Water Discharge

The Federal Clean Water Act (CWA) and similar state and local laws and regulations affect coal mining operations by imposing restrictions on effluent discharge into waters and the discharge of
dredged or fill material into the waters of the U.S. Regular monitoring, as well as compliance with reporting requirements and performance standards, is a precondition for the issuance and renewal of permits governing the discharge of pollutants
into water. Section 404 of the CWA imposes permitting and mitigation requirements associated with the dredging and filling of wetlands and streams. The CWA and equivalent state legislation, where such equivalent state legislation exists, affect
coal mining operations that impact wetlands and streams. Although permitting requirements have been tightened in recent years, the ARLP Partnership believes it has obtained all necessary permits required under CWA Section 404 as it has
traditionally been interpreted by the responsible agencies. However, mitigation requirements under existing and possible future fill permits may vary considerably. For that reason, the setting of post-mine asset retirement obligation
accruals for such mitigation projects is difficult to ascertain with certainty and may increase in the future. Although more stringent permitting requirements may be imposed in the future, the ARLP Partnership is not able to accurately predict the
impact, if any, of such permitting requirements.

The U.S. Army Corps of Engineers (Corps of Engineers) maintains
two permitting programs under CWA Section 404 for the discharge of dredged or fill material: one for individual permits and a more streamlined program for general permits. The ARLP Partnerships coal mining
operations typically require such permits to authorize activities such as the creation of slurry ponds and stream impoundments. Although the CWA has long authorized the EPA to review Section 404 permits issued by the Corps of Engineers, the EPA
has only recently begun reviewing Section 404 permits issued by the Corps of Engineers for coal mining in Appalachia. Currently, significant uncertainty exists regarding the obtaining of permits under the CWA for coal mining operations in
Appalachia due to various initiatives launched by the EPA regarding these permits.

For instance, even though the State of
West Virginia has been delegated the authority to issue permits for coal mines in that state, the EPA is taking a more active role in its review of National Pollutant Discharge Elimination System (NPDES) permit applications for coal
mining operations in Appalachia. The EPA has stated that it plans to review all applications for NPDES permits. Indeed, interim final guidance issued by the EPA on April 1, 2010, encourages EPA Regions 3, 4 and 5 to (1) object to the
issuance of state program NPDES permits where the Region does not believe that the proposed permit satisfies the requirements of the CWA, and (2) exercise a greater degree of oversight with regard to state issued general Section 404
permits.

In addition, on April 1, 2010, the EPA issued a guidance document on water quality requirements for coal mines
in Appalachia. This guidance follows up on the June 11, 2009 Enhanced Coordination Process Memoranda for the issuance of Section 404 permits whereby the EPA undertook a new level of review of 404 permits than it had previously undertaken.
Ultimately, the EPA identified 79 coal-related applications for 404 permits that would need to go through that process. The EPAs actions in issuing the Enhanced Coordination Process Memoranda and the guidance are being challenged in a lawsuit
pending before the U.S. District Court for the District of Columbia in a case captioned National



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Mining Assoc. v. U.S. Environmental Protection Agency. In a ruling issued on January 18, 2011, the District Court held that these measures are legislative rules that were adopted in
violation of notice and comment requirements. The court would not grant the motion for a preliminary injunction to enjoin further use of these measures but also refused to dismiss the Complaint as the EPA had sought.

Not only is the EPA reviewing new permits before they are issued, the EPA on January 14, 2011 exercised its veto power
to withdraw or restrict the use of previously issued permits in connection with the Spruce No. 1 Surface Mine in West Virginia, which is one of the largest surface mining operations ever authorized in Appalachia. This action is the first time
that such power was exercised with regard to a previously permitted coal mining project.

These initiatives have extended the
time required to obtain some permits required for coal mining and have caused the costs of obtaining and complying with those permits to increase substantially. It is possible that some of the ARLP Partnerships projects may not be able to
obtain these permits or may experience delays in securing, utilizing or renewing permits because of the manner in which these rules are being interpreted and applied.

Total Maximum Daily Load (TMDL), regulations under the CWA, establish a process to calculate the maximum amount of a pollutant that a water body can receive and still meet state water quality
standards, and to allocate pollutant loads among the point and non-point pollutant sources discharging into that water body. This process applies to those waters that states have designated as impaired (i.e., as not meeting present water quality
standards). Industrial dischargers, including coal mines, will be required to meet new TMDL allocations for these stream segments. The adoption of new TMDL-related allocations for the ARLP Partnerships coal mines could require more costly
water treatment and could adversely affect its coal production.

Hazardous Substances and Wastes

The Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), otherwise known as the
Superfund law, and analogous state laws, impose liability, without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release of a hazardous
substance into the environment. These persons include the owner or operator of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Persons who are or were
responsible for the release of hazardous substances may be subject to joint and several liability under CERCLA for the costs of cleaning up the hazardous substances released into the environment and for damages to natural resources. Some products
used in coal mining operations generate waste containing hazardous substances. The ARLP Partnership is currently unaware of any material liability associated with the release or disposal of hazardous substances from its past or present mine sites.

The Federal Resource Conservation and Recovery Act (RCRA) and corresponding state laws regulating hazardous waste
affect coal mining operations by imposing requirements for the generation, transportation, treatment, storage, disposal, and cleanup of hazardous wastes. Many mining wastes are excluded from the regulatory definition of hazardous wastes, and coal
mining operations covered by SMCRA permits are by statute exempted from RCRA permitting. RCRA also allows the EPA to require corrective action at sites where there is a release of hazardous substances. In addition, each state has its own laws
regarding the proper management and disposal of waste material. While these laws impose ongoing compliance obligations, such costs are not believed to have a material impact on the ARLP Partnerships operations.

On June 21, 2010, the EPA released a proposed rule to regulate the disposal of certain coal combustion by-products
(CCB). The proposed rule sets forth two proposed very different approaches for regulating CCB under RCRA. The first option calls for regulation of CCB as a hazardous waste under Subtitle C, which creates a comprehensive program of
federally enforceable requirements for waste management and disposal. The second option utilizes Subtitle D, which gives the EPA authority to set performance standards for waste management facilities and would be enforced primarily through citizen
suits. The proposal leaves intact the Bevill exemption for beneficial uses of CCB. If CCB is not classified as hazardous waste, it is not anticipated that regulation of CCB will have any material effect on the amount of coal used by electricity
generators. However, if CCB were re-classified as hazardous waste, regulations would likely restrict ash disposal, provide specifications for storage facilities, require groundwater testing and impose restrictions on storage locations, which could
increase the ARLP Partnerships customers operating costs and potentially reduce their ability to purchase coal. In addition, contamination caused by the past disposal of CCB, including coal ash, may lead to material liability to the ARLP
Partnerships customers under RCRA or other federal or state laws and potentially reduce the demand for coal. Although it is not currently possible to predict how such regulations would impact the ARLP Partnerships operations or those of
its customers, the regulation of CCB as hazardous waste could result in increased disposal and compliance costs, which could result in decreased demand for its products.



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Other Environmental, Health And Safety Regulation

In addition to the laws and regulations described above, the ARLP Partnership is subject to regulations regarding underground and above
ground storage tanks in which it may store petroleum or other substances. Some monitoring equipment that it uses is subject to licensing under the Federal Atomic Energy Act. Water supply wells located on the ARLP Partnerships properties are
subject to federal, state, and local regulation. In addition, the ARLP Partnerships use of explosives is subject to the Federal Safe Explosives Act (SEA). The ARLP Partnership is also required to comply with the Safe Drinking Water
Act, the Toxic Substance Control Act, and the Emergency Planning and Community Right-to-Know Act. The costs of compliance with these regulations should not have a material adverse effect on the ARLP Partnerships business, financial condition
or results of operations.

Employees

To conduct its operations, the ARLP Partnership, as of February 1, 2011, employed 3,558 full-time employees, including 3,352 employees involved in active mining operations, 71 employees in other
operations, and 135 corporate employees. The ARLP Partnerships work force is entirely union-free. The ARLP Partnership believes that relations with its employees are generally good. We do not have any employees of our own.

Administrative Services

On April 1, 2010, effective January 1, 2010, we entered into an amended and restated administrative services agreement (the Administrative Services Agreement) with ARLP, MGP, the
Intermediate Partnership, our general partner AGP, and ARH II, the indirect parent of SGP. The Administrative Services Agreement superseded the administrative services agreement signed in connection with our initial public offering in 2006. Under
the Administrative Services Agreement, certain employees of ARLP, including some executive officers, provide administrative services to AHGP and ARH II and their respective affiliates. We reimburse the ARLP Partnership for services rendered for us
by those employees as provided under the Administrative Services Agreement. We paid the ARLP Partnership $0.3 million under this agreement for the year ended December 31, 2010. Please read Item 13Certain Relationships and Related
Transactions, and Director IndependenceAdministrative Services.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

Risks Inherent in an
Investment in Us

In the future, we may not have sufficient cash to pay distributions at our current quarterly distribution level or
to increase distributions.

Currently, the source of our earnings and cash flow consists solely of cash distributions
from ARLP. Therefore, the amount of distributions we are able to make to our unitholders may fluctuate based on the level of distributions ARLP makes to its partners. We cannot assure you that ARLP will continue to make quarterly distributions at
its current level or increase its quarterly distributions in the future. In addition, while we would expect to increase or decrease distributions to our unitholders if ARLP increases or decreases distributions to us, the timing and amount of such
increased or decreased distributions, if any, will not necessarily be comparable to the timing and amount of the increase or decrease in distributions made by ARLP to us.

Our ability to distribute cash received from ARLP to our unitholders could be limited by a number of factors, including:



| |  |  | interest expense and principal payments on indebtedness;
| | - |  | --------------------------------------------------------



| |  |  | restrictions on distributions contained in any current or future debt agreements;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | our general and administrative expenses;
| | - |  | ----------------------------------------



| |  |  | expenses of our subsidiaries other than ARLP, including tax liabilities of our corporate subsidiaries, if any;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | reserves necessary for us to make the necessary capital contributions to maintain our 1.98% general partner interest in ARLP as required by the
partnership agreement of ARLP upon the issuance of additional partnership securities by ARLP; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reserves our general partner believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

We cannot guarantee that in the future we will be able to pay distributions or that any distributions we do
make will be at or above our current quarterly distribution level. The actual amount of cash that is available for distribution to our unitholders will depend on numerous factors, many of which are beyond our control or the control of our general
partner.

ARLPs cash distributions are not guaranteed and may fluctuate with its performance and other
external factors.

The amount of cash that ARLP can distribute to holders of its common units or other partnership
securities, including us, each quarter principally depends on the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things:



| |  |  | the amount of coal the ARLP Partnership is able to produce from its properties;
| | - |  | -------------------------------------------------------------------------------



| |  |  | the price at which it is able to sell coal, which is affected by the supply of and demand for domestic and foreign coal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | the level of its operating costs;
| | - |  | ---------------------------------



| |  |  | weather conditions;
| | - |  | -------------------



| |  |  | the proximity to and capacity of transportation facilities;
| | - |  | -----------------------------------------------------------



| |  |  | domestic and foreign governmental regulations and taxes;
| | - |  | --------------------------------------------------------



| |  |  | the price and availability of alternative fuels;
| | - |  | ------------------------------------------------



| |  |  | the effect of worldwide energy consumption; and
| | - |  | -----------------------------------------------



| |  |  | prevailing economic conditions.
| | - |  | -------------------------------

In addition, the actual amount of cash that ARLP will have available for distribution will depend on other factors, including:



| |  |  | the level of its capital expenditures;
| | - |  | --------------------------------------



| |  |  | the cost of acquisitions, if any;
| | - |  | ---------------------------------



| |  |  | its debt service requirements and restrictions on distributions contained in its current or future debt agreements;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | fluctuations in its working capital needs;
| | - |  | ------------------------------------------



| |  |  | unavailability of financing resulting in unanticipated liquidity restraints;
| | - |  | ----------------------------------------------------------------------------



| |  |  | the ability of ARLP to borrow under its credit agreement to make distributions to its unitholders; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | the amount, if any, of cash reserves established by MGP, in its discretion, for the proper conduct of ARLPs business.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



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Because of these and other factors, ARLP may not have sufficient available cash to pay a
specific level of cash distributions to its unitholders. Furthermore, the amount of cash that ARLP has available for distribution depends primarily upon its cash flow, including cash flow from financial reserves and working capital borrowing, and is
not solely a function of profitability, which will be affected by non-cash items. As a result, ARLP may be able to make cash distributions during periods when it records net losses and may be unable to make cash distributions during periods when it
records net income. Please read Risks Related to Alliance Resource Partners Business for a discussion of further risks affecting ARLPs ability to generate distributable cash flow.

ARLPs managing general partner, with our consent, may limit or modify the incentive distributions we are entitled
to receive in order to facilitate ARLPs growth strategy. Our general partners board of directors can give this consent without a vote of our unitholders.

We own ARLPs managing general partner, which owns the IDRs in ARLP that entitle us to receive increasing percentages, up to a
maximum of 48%, of any cash distributed by ARLP, as certain target distribution levels are reached in excess of $0.275 per ARLP unit in any quarter. The IDRs currently participate at the maximum 48% target cash distribution level. A substantial
portion of the cash flow we receive from ARLP is provided by these IDRs. The MGP Board of Directors may reduce the distributions related to the IDRs payable to us with our consent, which we may provide without the approval of our unitholders.

A reduction in ARLPs distributions will disproportionately affect the amount of cash distributions to
which we are currently entitled.

MGPs ownership of the IDRs in ARLP entitles us to receive specified
percentages of total cash distributions made by ARLP with respect to any particular quarter only in the event that ARLP distributes more than $0.275 per unit for such quarter. As a result, the holders of ARLPs common units have a priority over
the holders of ARLPs IDRs to the extent of cash distributions by ARLP up to and including $0.275 per unit for any quarter.

MGPs ownership of the IDRs in ARLP entitle us to receive up to 48% of all cash distributed by ARLP. Because the IDRs currently participate at the maximum 48% target cash distribution level, future
growth in distributions we receive from ARLP will not result from an increase in the target cash distribution level associated with the IDRs.

Furthermore, a decrease in the amount of distributions by ARLP to less than $0.375 per common unit per quarter would reduce MGPs percentage of the incremental cash distributions above $0.3125 per
common unit per quarter from 48% to 23%. As a result, any such reduction in quarterly cash distributions from ARLP would disproportionately reduce the amount of all distributions that we receive from ARLP as compared to the impact on the holders of
ARLP common units only.

Restrictions in future financing agreements could limit our ability to make distributions to our unitholders,
borrow additional funds or capitalize on business opportunities.

Any future credit facility could include such
provisions and our ability to comply with them may be affected by events beyond our control, including prevailing economic, financial and industry conditions. Failure to comply with any such restrictions or covenants could have significant
consequences, such as causing a significant portion of the indebtedness under such a facility to become immediately due and payable or our lenders commitment to make further loans to us under such facility to terminate. We might not have, or
be able to obtain, sufficient funds to make such payments.

Our payment of principal and interest on any future indebtedness
will reduce our cash available for distribution on our units. In addition, any future levels of indebtedness may:



| |  |  | adversely affect our ability to obtain additional financing for future operations or capital needs;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | limit our ability to pursue acquisitions and other business opportunities; or
| | - |  | -----------------------------------------------------------------------------



| |  |  | make our results of operations more susceptible to adverse economic or operating conditions.
| | - |  | --------------------------------------------------------------------------------------------

For more information regarding our credit facility, please read Item 7. Managements Discussion and Analysis of Financial
Conditions and Results of OperationsDebt Obligations.



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Our unitholders do not elect our general partner or vote on our general
partners officers or directors. Certain current and former members of management and their affiliates currently own 79.41% of our units, a sufficient number of our common units to block any attempt to remove our general
partner.

Unlike the holders of common stock in a corporation, our unitholders have only limited voting rights on
matters affecting our business and, therefore, limited ability to influence managements decisions regarding our business. Our unitholders do not have the ability to elect our general partner or the officers or directors of our general partner.
The Board of Directors, including our independent directors, is chosen by the members of our general partner.

Furthermore, if
our unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Our general partner may not be removed except upon the vote of the holders of at least 2/3rds of our
outstanding units. Because certain current and former members of management and their affiliates currently own 79.41% of our outstanding common units, it is not currently possible for our general partner to be removed without their consent. As a
result, the price at which our units trade may be lower because of the absence or reduction of a takeover premium in the trading price.

We may issue an unlimited number of limited partner interests, on terms and conditions established by our general partner, without the consent of
our unitholders, which will dilute your ownership interest in us and may increase the risk that we will not have sufficient available cash to maintain or increase our per unit distribution level.

The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:



| |  |  | our unitholders proportionate ownership interest in us will decrease;
| | - |  | ----------------------------------------------------------------------



| |  |  | the amount of cash available for distribution on each unit may decrease;
| | - |  | ------------------------------------------------------------------------



| |  |  | the relative voting strength of each previously outstanding unit may be diminished;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | the ratio of taxable income to distributions may increase; and
| | - |  | --------------------------------------------------------------



| |  |  | the market price of our common units may decline.
| | - |  | -------------------------------------------------

The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public markets, including sales by our existing unitholders.

Certain current and former members of management and their affiliates currently own 79.41% of our units. Sales by any
of our existing unitholders of a substantial number of our common units in the public markets could have a material adverse effect on the price of our common units or could impair our ability to obtain capital through an offering of equity
securities. We do not know whether any such sales would be made in the public market or in private placements, nor do we know what impact such potential or actual sales would have on our unit price in the future.

Control of our general partner and the IDRs in ARLP may be transferred to a third-party without unitholder consent.

Our general partner may transfer its general partner interest in us to a third-party in a merger or in a sale of its equity securities
without the consent of our unitholders. Furthermore, there is no restriction in the partnership agreement on the ability of the owner of our general partner to sell or transfer all or part of its ownership interest in our general partner to a
third-party. The new owner or owners of our general partner would then be in a position to replace the directors and officers of our general partner and control the decisions made and actions taken by its Board of Directors and officers. In
addition, the owner of our general partner controls MGP, the owner of the IDRs in ARLP. Control of MGP can likewise be transferred to a third-party without unitholder consent.

Our ability to sell our partnership interests in ARLP may be limited by securities law restrictions and liquidity constraints.

Of the 15,544,169 common units of ARLP that we own, 6,422,531 common units are unregistered, restricted securities within the meaning of
Rule 144 under the Securities Act. Unless we exercise our registration rights with respect to these common units, we are limited to selling into the market in any three-month period an amount of ARLP common units that does not exceed the greater of
1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. We face contractual limitations on our ability to sell our general partner interest
and IDRs, and the market for such interests is illiquid.



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We depend on the leadership and involvement of Joseph W. Craft III and other key personnel for the
success of our and ARLPs business.

We depend on the leadership and involvement of Mr. Craft,
the Chairman, President and Chief Executive Officer of our general partner and a Director and President and Chief Executive Officer of ARLPs managing general partner. Mr. Craft has been integral to the success of ARLP and us, due in part
to his ability to identify and develop internal growth projects and accretive acquisitions, make strategic decisions and attract and retain key personnel. The loss of his leadership and involvement or the services of any members of our or
ARLPs senior management team could have a material adverse effect on our business, financial condition and results of operations and those of ARLP.

Several key personnel, including Messrs. Craft, Charles R. Wesley and Thomas M. Wynne, received substantial amounts of the proceeds from our IPO in May 2006. As a result of these cash payments, there is
an increased risk that key personnel will retire or resign in the future.

Your liability as a limited partner may not be limited, and
our unitholders may have to repay distributions or make additional contributions to us under certain circumstances.

As
a limited partner in a partnership organized under Delaware law, you could be held liable for our obligations to the same extent as a general partner if you participate in the control of our business. Our general partner generally has
unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to our general partner. Additionally, the limitations on the liability of holders of
limited partner interests for the obligations of a limited partnership have not been clearly established in many jurisdictions.

Under certain circumstances, our unitholders may have to repay amounts wrongfully distributed to them. Under Delaware law, neither we nor
ARLP may make a distribution to our unitholders if the distribution would cause our or ARLPs respective liabilities to exceed the fair value of our respective assets. Delaware law provides that for a period of three years from the date of the
impermissible distribution, partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the partnership for the distribution amount. Liabilities to partners on account of their
partnership interest and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.

An increase in interest rates may cause the market price of our common units to decline.

Like all equity investments, an investment in our common units is subject to certain risks. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would
otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in
demand for riskier investments generally, including yield-based equity investments such as publicly-traded limited partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment
opportunities may cause the trading price of our common units to decline.

If in the future we cease to manage and control ARLP, we may
be deemed to be an investment company under the Investment Company Act of 1940.

If we cease to manage and control ARLP
and are deemed to be an investment company under the Investment Company Act of 1940 because of our ownership of ARLP partnership interests, we would either have to register as an investment company under the Investment Company Act, obtain exemptive
relief from the SEC or modify our organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially limit our ability to engage in
transactions with affiliates, including the purchase and sale of certain securities or other property to or from our affiliates, restrict our ability to borrow funds or engage in other transactions involving leverage and require us to add additional
directors who are independent of us or our affiliates.

The price of our common units may be volatile, and the trading market for our
common units may not provide you with adequate liquidity.

The market price of our common units could be subject to
significant fluctuations. The following factors could affect our common unit price:



| |  |  | ARLPs operating and financial performance and prospects;
| | - |  | ---------------------------------------------------------



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| |  |  | quarterly variations in the rate of growth of our financial indicators, such as net income and revenues;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | changes in revenue or earnings estimates or publication of research reports by analysts;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the current economic downturn;
| | - |  | ------------------------------



| |  |  | the price of coal and expectations for the future of the coal industry;
| | - |  | -----------------------------------------------------------------------



| |  |  | speculation by the press or investment community;
| | - |  | -------------------------------------------------



| |  |  | sales of our common units by our unitholders;
| | - |  | ---------------------------------------------



| |  |  | actions by our existing unitholders prior to their disposition of our common units;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | announcements by ARLP or its competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, securities offerings or
capital commitments;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general market conditions; and
| | - |  | ------------------------------



| |  |  | domestic and international economic, legal and regulatory factors related to ARLPs performance.
| | - |  | ------------------------------------------------------------------------------------------------

The equity markets in general are subject to volatility that may be unrelated to the operating performance of particular companies. These
broad market fluctuations may adversely affect the trading price of our common units. In addition, potential investors may be deterred from investing in our common units for various reasons, including the very limited number of publicly-traded
entities whose assets consist almost exclusively of partnership interests in a publicly-traded partnership. The lack of liquidity may also contribute to significant fluctuations in the market price of our common units and limit the number of
investors who are able to buy our common units.

Our common units and ARLPs common units may not trade in simple
relation or proportion to one another. Instead, the trading prices may diverge because, among other things:



| |  |  | ARLPs cash distributions to its common unitholders have a priority over distributions on its IDRs;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | we participate in the IDRs in ARLP, while ARLPs common unitholders do not; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | we may enter into other businesses separate and apart from ARLP or any of its affiliates.
| | - |  | -----------------------------------------------------------------------------------------

Our partnership agreement restricts the rights of unitholders owning 20% or more of our units.

Our unitholders voting rights are restricted by the provision in our partnership agreement generally providing that any units held
by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the Board of Directors, cannot be voted on any
matter. In addition, our partnership agreement contains provisions limiting the ability of our unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting our unitholders ability to
influence the manner or direction of our management. As a result, the price at which our common units will trade may be lower because of the absence or reduction of a takeover premium in the trading price.

ARLP may issue additional units, which may increase the risk that ARLP will not have sufficient available cash to maintain or increase its per unit
distribution level.

ARLP has wide latitude to issue additional units on terms and conditions established by MGP,
including units that rank senior to the ARLP common units and the IDRs as to quarterly cash distributions. The payment of distributions on those additional units may increase the risk that ARLP may not have sufficient cash available to maintain or
increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. To the extent these units are senior to the common units or the IDRs, there is an increased risk that we will not
receive the same level or increased distributions on the common units and IDRs. Neither the common units nor the IDRs are entitled to any arrearages from prior quarters.

Risks Related to Conflicts of Interest

Conflicts of interest exist and may
arise in the future among us, ARLP and our respective general partners and affiliates. Future conflicts of interest may arise among us and the entities affiliated with any general partner interests we acquire or among ARLP and such entities. For a
further discussion of conflicts of interest that may arise, please read Item 13. Certain Relationships and Related Party Transactions, and Director Independence.



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Although we control ARLP through our ownership of ARLPs managing
general partner, ARLPs managing general partner owes fiduciary duties to ARLP and ARLPs unitholders, which may conflict with our interests.

Conflicts of interest exist and may arise in the future as a result of the relationships between us and our affiliates, including
ARLPs managing general partner, on the one hand, and ARLP and its limited partners, on the other hand. The directors and officers of ARLPs managing general partner have fiduciary duties to manage ARLP in a manner beneficial to us, its
owner. At the same time, ARLPs managing general partner has a fiduciary duty to manage ARLP in a manner beneficial to ARLP and its limited partners. The MGP Board of Directors will resolve any such conflict and has broad latitude to consider
the interests of all parties to the conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders.

For example, conflicts of interest may arise in the following situations:



| |  |  | the allocation of shared overhead expenses to ARLP and us;
| | - |  | ----------------------------------------------------------



| |  |  | the interpretation and enforcement of contractual obligations between us and our affiliates, on the one hand, and ARLP, on the other hand;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the determination and timing of the amount of cash to be distributed to ARLPs partners and the amount of cash to be reserved for the future
conduct of ARLPs business;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the decision as to whether ARLP should make acquisitions, and on what terms;
| | - |  | ----------------------------------------------------------------------------



| |  |  | the determination of whether ARLP should use cash on hand, borrow or issue equity to raise cash to finance acquisition or expansion capital projects,
repay indebtedness, meet working capital needs, pay distributions to ARLPs partners or otherwise; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any decision we make in the future to engage in business activities independent of, or in competition with, ARLP.
| | - |  | -----------------------------------------------------------------------------------------------------------------

The fiduciary duties of our general partners officers and directors may conflict with those of
ARLPs general partners officers and directors.

Our general
partners officers and directors have fiduciary duties to manage our business in a manner beneficial to us and our partners. However, all of our general partners executive officers also serve as executive officers of MGP. In addition, our
general partners non-independent director and one of our independent directors also serve as directors of MGP. As a result, these executive officers and directors have fiduciary duties to manage the business of ARLP in a manner beneficial to
ARLP and its partners. Consequently, these directors and officers may encounter situations in which their fiduciary obligations to ARLP, on one hand, and us, on the other hand, are in conflict. The resolution of these conflicts may not always be in
our best interest or that of our unitholders.

If we are presented with certain business opportunities, ARLP will have the first right
to pursue such opportunities.

Pursuant to an agreement among ARLP, SGP, MGP, ARH, ARH II, our general partner and us,
among others, (referred to as the omnibus agreement), we have agreed to certain business opportunity arrangements to address potential conflicts that may arise between us and ARLP. If a business opportunity in respect of any coal mining, marketing
and transportation assets is presented to us, our general partner, ARLP or its general partners, then ARLP will have the first right to acquire such assets. The omnibus agreement provides, among other things, that ARLP will be presumed to desire to
acquire the assets until such time as it advises us that it has abandoned the pursuit of such business opportunity, and we may not pursue the acquisition of such assets prior to that time.

ARLP and affiliates of our general partner are not limited in their ability to compete with us, which could cause conflicts of interest and limit our ability to acquire additional assets or
businesses which in turn could adversely affect our results of operations and cash available for distribution to our unitholders.

Neither our partnership agreement nor the omnibus agreement prohibits ARLP or affiliates of our general partner from owning assets or engaging in businesses that compete directly or indirectly with us or
one another. In addition, ARLP and its affiliates or affiliates of our general partner, may acquire, construct or dispose of additional assets related to the mining, marketing and transportation of coal or other assets in the future, without any
obligation to offer us the opportunity to purchase or construct any of those assets. As a result, competition among these entities could adversely impact ARLPs or our results of operations and cash available for distribution.



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Potential conflicts of interest may arise among our general partner, its affiliates and us. Our
general partner and its affiliates have limited fiduciary duties to us and our unitholders, which may permit them to favor their own interests to the detriment of us and our unitholders.

Conflicts of interest may arise among our general partner and its affiliates, on the one hand, and us and our unitholders, on the other
hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following:



| |  |  | Our general partner is allowed to take into account the interests of parties other than us, including ARLP and its affiliates and any other businesses
acquired in the future, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our general partner has limited its liability and reduced its fiduciary duties under the terms of our partnership agreement, while also restricting the
remedies available to our unitholders for actions that, without these limitations, might constitute breaches of fiduciary duties. As a result of purchasing our units, unitholders consent to various actions and conflicts of interest that might
otherwise constitute a breach of fiduciary or other duties under applicable state law.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our general partner determines the amount and timing of our investment transactions, borrowings, issuances of additional partnership securities and
reserves, each of which can affect the amount of cash that is available for distribution to our unitholders.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our general partner determines which costs incurred by it and its affiliates are reimbursable by us.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered, or from entering
into additional contractual arrangements with any of these entities on our behalf, so long as the terms of any such payments or additional contractual arrangements are fair and reasonable to us.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our general partner controls the enforcement of obligations owed to us by it and its affiliates.
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
| | - |  | -----------------------------------------------------------------------------------------------------------------

The president and chief executive officer of both our general partner and ARLPs managing general partner effectively
controls us and ARLP through his control of our general partner and ARLPs managing general partner.

Mr. Craft, the president and chief executive officer of both our general partner and ARLPs managing general partner, controls ARLPs managing general partner, indirectly owns SGP and owns
or controls 43.24% of ARLPs common units. Mr. Craft also currently holds, directly or indirectly or may be deemed to be the beneficial owner of, 79.41% of our common units. These interests give Mr. Craft substantial control over our
and ARLPs business and operations and the ability to control the outcome of many matters that require unitholder approval. Mr. Craft is not restricted from disposing of all or a part of his equity interests in our general partner, in
ARLPs managing general partner or in ARLPs special general partner.

Our partnership agreement limits our general
partners fiduciary duties to us and our unitholders and restricts the remedies available to our unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

Our partnership agreement contains provisions that reduce the standards to which our general partner would otherwise be
held by state fiduciary duty law. For example, our partnership agreement:



| |  |  | permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This
entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner. Examples include
the exercise of its limited call right, its voting rights with respect to the units it owns, its registration rights and its determination whether or not to consent to any merger or consolidation of our partnership or amendment to our partnership
agreement;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long
as it acted in good faith, meaning it believed the decisions were in the best interests of our partnership;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the audit and conflicts committee of the Board
of Directors and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third-parties or be fair and reasonable to us and that, in determining
whether a transaction or resolution is fair and reasonable, our general partner may consider the totality of the relationships among the parties involved, including other transactions that may be particularly advantageous or beneficial
to us;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | provides that in resolving conflicts of interest, it will be presumed that in making its decision our general partner acted in good faith, and in any
proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for
any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct or,
in the case of a criminal matter, acted with knowledge that such persons conduct was criminal.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
becoming a limited partner of our partnership, a common unitholder is bound by the provisions in the partnership agreement, including the provisions discussed above.

Our general partner has a limited call right that may require you to sell your units at an undesirable time or price.

If at any time our general partner and its affiliates own more than 85% of our outstanding units, our general partner will have the right, but not the obligation, which it may assign to any of its
affiliates or to us, to acquire all, but not less than all, of the units held by unaffiliated persons at a price not less than their then-current market price. As a result, you may be required to sell your units at an undesirable time or price and
may not receive any return on your investment. You may also incur a tax liability upon a sale of your units.

Risks Related to ARLPs
Business

Because our cash flow consists exclusively of distributions from ARLP, risks to the ARLP Partnerships
business are also risks to us. We have set forth below many of the risks to ARLPs business or results of operations, the occurrence of which could negatively impact the ARLP Partnerships financial performance and decrease the amount of
cash it is able to distribute to us, thereby decreasing the amount of cash we have available for distribution to our unitholders.

Global economic conditions or economic conditions in any of the industries in which the ARLP Partnership customers operate as well as sustained
uncertainty in financial markets may have material adverse impacts on its business and financial condition that it currently cannot predict.

During the latter half of 2007 as well as throughout much of 2008 and 2009, financial markets in the U.S., Europe and Asia experienced a period of volatility and declines in security prices, diminished
liquidity and credit availability, inability to access capital markets, the bankruptcy, failure, collapse or sale of various financial institutions and an unprecedented level of intervention from the U.S. federal government and other governments.
While national and global economies have more recently exhibited signs of improvement, the re-emergence of weakness in the U.S. or global economies, in any of the industries the ARLP Partnership serves or in the financial markets, could materially
adversely affect its business and financial condition. For example:



| |  |  | the demand for electricity in the U.S. may not fully recover or may decline if economic conditions deteriorate, which may negatively impact the
revenues, margins and profitability of the ARLP Partnerships business;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any inability of the ARLP Partnerships customers to raise capital could adversely affect its ability to honor its obligations to us; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ARLP Partnerships future ability to access the capital markets may be restricted as a result of future economic conditions which could materially
impact the ARLP Partnerships ability to grow its business, including development of its coal reserves.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A
substantial or extended decline in coal prices could negatively impact the ARLP Partnerships results of operations.

The ARLP Partnerships results of operations are primarily dependent upon the prices it receives for its coal, as well as its ability to improve productivity and control costs. The prices the ARLP
Partnership receives for its production depends upon factors beyond the ARLP Partnerships control, including:



| |  |  | the supply of and demand for domestic and foreign coal;
| | - |  | -------------------------------------------------------



| |  |  | weather conditions;
| | - |  | -------------------



| |  |  | the proximity to and capacity of transportation facilities;
| | - |  | -----------------------------------------------------------



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| |  |  | domestic and foreign governmental regulations and taxes;
| | - |  | --------------------------------------------------------



| |  |  | the price and availability of alternative fuels;
| | - |  | ------------------------------------------------



| |  |  | the effect of worldwide energy consumption; and
| | - |  | -----------------------------------------------



| |  |  | prevailing economic conditions.
| | - |  | -------------------------------

Any adverse change in these factors could result in weaker demand and lower prices for the ARLP Partnerships products. A substantial or extended decline in coal prices could materially and adversely
affect the ARLP Partnership by decreasing its revenues in the event that it is not otherwise protected pursuant to the specific terms of its coal supply agreements.

Competition within the coal industry may adversely affect the ARLP Partnerships ability to sell coal, and excess production capacity in the industry could put downward pressure on coal prices.

The ARLP Partnership competes with other large coal producers and many small coal producers in various regions of the
U.S. for domestic coal sales. The industry has undergone significant consolidation over the last decade. This consolidation has led to several competitors having significantly larger financial and operating resources than the ARLP Partnership. In
addition, the ARLP Partnership competes to some extent with western surface coal mining operations that have a much lower per ton cost of production and produce low-sulfur coal. Over the last 20 years, growth in production from western coal mines
has substantially exceeded growth in production from the east. Declining prices from an oversupply of coal in the market could reduce the ARLP Partnerships revenues and cash available for distribution.

Any change in consumption patterns by utilities away from the use of coal could affect the ARLP Partnerships ability to sell the coal it
produces.

The domestic electric utility industry accounts for approximately 90% of domestic coal consumption. The
amount of coal consumed by the domestic electric utility industry is affected primarily by the overall demand for electricity, environmental and other governmental regulations, and the price and availability of competing fuels for power plants such
as nuclear, natural gas and fuel oil as well as alternative sources of energy. For example, the relatively low price of natural gas in 2010 resulted, in some instances, in utilities increasing natural gas consumption while decreasing coal
consumption. Future environmental regulation of greenhouse gas emissions could accelerate the use by utilities of fuels other than coal. In addition, state and federal mandates for increased use of electricity derived from renewable energy sources
could affect demand for the ARLP Partnerships coal. A number of states have enacted mandates that require electricity suppliers to rely on renewable energy sources in generating a certain percentage of power. Such mandates, combined with other
incentives to use renewable energy sources, such as tax credits, could make alternative fuel sources more competitive with coal. A decrease in coal consumption by the domestic electric utility industry could adversely affect the price of coal, which
could negatively impact the ARLP Partnerships results of operations and reduce its cash available for distribution.

The stability
and profitability of the ARLP Partnerships operations could be adversely affected if its customers do not honor existing contracts or do not extend existing or enter into new long-term contracts for coal.

A substantial decrease in the amount of coal sold by the ARLP Partnership pursuant to long-term contracts would reduce the certainty of
the price and amounts of coal sold and subject the ARLP Partnerships revenue stream to increased volatility. If that were to happen, changes in spot market coal prices would have a greater impact on the ARLP Partnerships results, and any
decreases in the spot market price for coal could adversely affect its profitability and cash flow. In 2010, the ARLP Partnership sold approximately 92.4% of its sales tonnage under contracts having a term greater than one year, which it refers to
as long-term contracts. Long-term sales contracts have historically provided a relatively secure market for the amount of production committed under the terms of the contracts. From time to time industry conditions may make it more difficult for the
ARLP Partnership to enter into long-term contracts with its electric utility customers, and if supply exceeds demand in the coal industry, electric utilities may become less willing to lock in price or quantity commitments for an extended period of
time. Accordingly, the ARLP Partnership may not be able to continue to obtain long-term sales contracts with reliable customers as existing contracts expire.

Some of the ARLP Partnerships long-term coal sales contracts contain provisions allowing for the renegotiation of prices and, in some instances, the termination of the contract or the
suspension of purchases by customers.

Some of the ARLP Partnerships long-term contracts contain provisions that
allow for the purchase price to be renegotiated at periodic intervals. These price reopener provisions may automatically set a new price based on the



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prevailing market price or, in some instances, require the parties to the contract to agree on a new price. Any adjustment or renegotiation leading to a significantly lower contract price could
adversely affect the ARLP Partnerships operating profit margins. Accordingly, long-term contracts may provide only limited protection during adverse market conditions. In some circumstances, failure of the parties to agree on a price under a
reopener provision can also lead to early termination of a contract.

Several of the ARLP Partnerships long-term
contracts also contain provisions that allow the customer to suspend or terminate performance under the contract upon the occurrence or continuation of certain events that are beyond the customers reasonable control. Such events may include
labor disputes, mechanical malfunctions and changes in government regulations, including changes in environmental regulations rendering use of the ARLP Partnerships coal inconsistent with the customers environmental compliance
strategies. In the event of early termination of any of the ARLP Partnerships long-term contracts, if the ARLP Partnership is unable to enter into new contracts on similar terms, its business, financial condition and results of operations
could be adversely affected.

Extensive environmental laws and regulations affect coal consumers, and have corresponding effects on the
demand for the ARLP Partnerships coal as a fuel source.

Federal, state and local laws and regulations
extensively regulate the amount of sulfur dioxide, particulate matter, nitrogen oxides, mercury and other compounds emitted into the air from coal-fired electric power plants, which are the ultimate consumers of much of the ARLP Partnerships
coal. These laws and regulations can require significant emission control expenditures for many coal-fired power plants, and various new and proposed laws and regulations may require further emission reductions and associated emission control
expenditures. A substantial portion of the ARLP Partnerships coal has a high-sulfur content, which may result in increased sulfur dioxide emissions when combusted. Accordingly, these laws and regulations may affect demand and prices for the
ARLP Partnerships low- and high-sulfur coal. There is also continuing pressure on state and federal regulators to impose limits on carbon dioxide emissions from electric power plants, particularly coal-fired power plants. In addition, the EPA
has proposed a rule that could result in regulation of CCB as a hazardous waste. As a result of these current and proposed laws, regulations and regulatory initiatives, electricity generators may elect to switch to other fuels that generate less of
these emissions or by-products, further reducing demand for the ARLP Partnerships coal. Please read Item 1. BusinessRegulation and LawsAir Emissions, Carbon Dioxide Emissions and
Hazardous Substances and Wastes.

Increased regulation of greenhouse gas emissions could result in increased
operating costs and reduced demand for coal as a fuel source, which could reduce demand for the ARLP Partnerships products, decrease its revenues and reduce its profitability.

Combustion of fossil fuels, such as the coal we produce, results in the emission of carbon dioxide into the atmosphere. On
December 15, 2009, the EPA published its findings that emissions of carbon dioxide and other greenhouse gases present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing
to warming of the earths atmosphere and other climatic changes, and the EPA has begun to regulate greenhouse gas emissions pursuant to the CAA. In addition, it is possible federal legislation could be adopted in the future to restrict
greenhouse gas emissions, as President Obama has expressed support for a mandatory cap and trade program to restrict or regulate emissions of greenhouse gases and Congress has recently considered various proposals to reduce greenhouse gas emissions.
Many states and regions have adopted greenhouse gas initiatives. Also, there have been an increasing number of protests of, and challenges to, the permitting of new coal-fired power plants by environmental organizations and state regulators for
concerns related to greenhouse gas emissions. Please read Item 1. BusinessRegulation and LawsAir Emissions and Carbon Dioxide Emissions.

Future international, federal and state initiatives to control carbon dioxide emissions could result in increased costs associated with
coal consumption, such as costs to install additional controls to reduce carbon dioxide emissions or costs to purchase emissions reduction credits to comply with future emissions trading programs. Such increased costs for coal consumption could
result in reduced demand for coal and some customers switching to alternative sources of fuel, which could have a material adverse effect on the ARLP Partnerships business, financial condition, and results of operations. In addition, the
increased difficulty or inability of the ARLP Partnerships customers to obtain permits for construction of new or expansion of existing coal-fired power plants could adversely affect demand for its coal and have an adverse effect on its
business and results of operation.



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Plaintiffs in recent federal court litigation have attempted to pursue tort claims based on the
alleged effects of climate change.

In 2004, eight states and New York City sued five electric utility companies in
Connecticut v. American Electric Power Co., Civ. No. 04 CV 05669 (S.D.N.Y.). These defendants were chosen as allegedly the five largest carbon dioxide emitters in the U.S., through their fossil-fuel-fired electric power plants. Invoking
the federal and state common law of public nuisance, plaintiffs sought an injunction requiring defendants to abate their contribution to the nuisance of climate change by capping carbon dioxide emissions and then reducing them. Plaintiffs sued both
on their own behalf to protect state-owned property and on behalf of their citizens and residents to protect public health and well-being. On September 21, 2009, on appeal of the trial courts dismissal of the case, the Second Circuit
issued a ruling holding that the district court erred in dismissing the complaints on political question grounds, that all of the plaintiffs have standing and that plaintiffs validly stated claims under the federal common law on nuisance. In
December 2010, the U.S. Supreme Court granted the petition for certiorari filed by the defendants and therefore could determine in this case whether companies accused of emitting greenhouse gases can be held liable under public nuisance laws.

Proliferation of successful climate change litigation could adversely impact demand for the ARLP Partnerships coal and
ultimately have a material adverse effect on its business, financial condition and results of operations.

The ARLP Partnership depends
on a few customers for a significant portion of its revenues, and the loss of one or more significant customers could affect its ability to maintain the sales volume and price of the coal it produces.

During 2010, the ARLP Partnership derived approximately 29.2% of its total revenues from two customers and at least 10.0% of its 2010
total revenues from each of the two. If the ARLP Partnership were to lose either of these customers without finding replacement customers willing to purchase an equivalent amount of coal on similar terms, or if these customers were to decrease the
amounts of coal purchased or the terms, including pricing terms, on which they buy coal from the ARLP Partnership, it could have a material adverse effect on the ARLP Partnerships business, financial condition and results of operations.

Litigation resulting from disputes with the ARLP Partnerships customers may result in substantial costs, liabilities and loss of
revenues.

From time to time the ARLP Partnership has disputes with its customers over the provisions of long-term coal
supply contracts relating to, among other things, coal pricing, quality, quantity and the existence of specified conditions beyond the ARLP Partnership or its customers control that suspend performance obligations under the particular contract.
Disputes may occur in the future and the ARLP Partnership may not be able to resolve those disputes in a satisfactory manner, which could have a material adverse effect on the ARLP Partnerships business, financial condition and results of
operations.

The ARLP Partnerships ability to collect payments from its customers could be impaired if their creditworthiness
declines or if they fail to honor their contracts with the ARLP Partnership.

The ARLP Partnerships ability to
receive payment for coal sold and delivered depends on the continued creditworthiness of its customers. If the creditworthiness of its customers declines significantly, its business could be adversely affected. In addition, if a customer refuses to
accept shipments of the ARLP Partnerships coal for which they have an existing contractual obligation, the ARLP Partnerships revenues will decrease and it may have to reduce production at its mines until its customers contractual
obligations are honored.

The ARLP Partnerships profitability may decline due to unanticipated mine operating conditions and other
events that are not within its control and that may not be fully covered under its insurance policies.

The ARLP
Partnerships mining operations are influenced by changing conditions or events that can affect production levels and costs at particular mines for varying lengths of time and, as a result, can diminish its profitability.

These conditions and events include, among others:



| |  |  | fires;
| | - |  | ------



| |  |  | mining and processing equipment failures and unexpected maintenance problems;
| | - |  | -----------------------------------------------------------------------------



| |  |  | unavailability of required equipment;
| | - |  | -------------------------------------



| |  |  | prices for fuel, steel, explosives and other supplies;
| | - |  | ------------------------------------------------------



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| |  |  | fines and penalties incurred as a result of alleged violations of environmental and safety laws and regulations;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | variations in thickness of the layer, or seam, of coal;
| | - |  | -------------------------------------------------------



| |  |  | amounts of overburden, partings, rock and other natural materials;
| | - |  | ------------------------------------------------------------------



| |  |  | weather conditions, such as heavy rains, flooding, ice and other storms;
| | - |  | ------------------------------------------------------------------------



| |  |  | accidental mine water discharges and other geological conditions;
| | - |  | -----------------------------------------------------------------



| |  |  | employee injuries or fatalities;
| | - |  | --------------------------------



| |  |  | labor-related interruptions;
| | - |  | ----------------------------



| |  |  | increased reclamation costs;
| | - |  | ----------------------------



| |  |  | inability to acquire, maintain or renew mining rights or permits in a timely manner, if at all; and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | fluctuations in transportation costs and the availability or reliability of transportation.
| | - |  | -------------------------------------------------------------------------------------------

These conditions have had, and can be expected in the future to have, a significant impact on the ARLP Partnerships operating
results. Prolonged disruption of production at any of the ARLP Partnerships mines would result in a decrease in its revenues and profitability, which could materially adversely impact its quarterly or annual results.

During September 2010, the ARLP Partnership completed its annual property and casualty insurance renewal with various insurance coverages
effective as of October 1, 2010. The aggregate maximum limit in the commercial property program is $75.0 million per occurrence, excluding a $1.5 million deductible for property damage, a 60-day waiting period for business interruption and a
$10 million overall aggregate deductible. The ARLP Partnership can make no assurances that it will not experience significant insurance claims in the future that could have a material adverse effect on its business, financial condition, results of
operations and ability to purchase property insurance in the future.

A shortage of skilled labor may make it difficult for the ARLP
Partnership to maintain labor productivity and competitive costs and could adversely affect the ARLP Partnerships profitability.

Efficient coal mining using modern techniques and equipment requires skilled laborers, preferably with at least one year of experience and proficiency in multiple mining tasks. In recent years, a shortage
of experienced coal miners has caused the ARLP Partnership to include some inexperienced staff in the operation of certain mining units, which decreases its productivity and increases its costs. This shortage of experienced coal miners is the result
of a significant percentage of experienced coal miners reaching retirement age, combined with the difficulty of retaining existing workers in and attracting new workers to the coal industry. Thus, this shortage of skilled labor could continue over
an extended period. If the shortage of experienced labor continues or worsens, it could have an adverse impact on labor productivity and costs and its ability to expand production in the event there is an increase in the demand for its coal, which
could adversely affect its profitability.

Although none of the ARLP Partnerships employees are members of unions, its work force
may not remain union-free in the future.

None of the ARLP Partnerships employees is represented under collective
bargaining agreements. However, all of its work force may not remain union-free in the future, and proposed legislation such as the Employee Free Choice Act, could, if enacted, make staying union-free more difficult. If some or all of the ARLP
Partnerships currently union-free operations were to become unionized, it could adversely affect its productivity and increase the risk of work stoppages at its mining complexes. In addition, even if the ARLP Partnership remains union-free,
its operations may still be adversely affected by work stoppages at unionized companies, particularly if union workers were to orchestrate boycotts against the ARLP Partnerships operations.

The ARLP Partnerships mining operations are subject to extensive and costly laws and regulations, and such current and future laws and
regulations could increase current operating costs or limit the ARLP Partnerships ability to produce coal.

The
ARLP Partnership is subject to numerous and comprehensive federal, state and local laws and regulations affecting the coal mining industry, including laws and regulations pertaining to employee health and safety, permitting and licensing
requirements, air quality standards, water pollution, plant and wildlife protection, reclamation and restoration of mining properties after mining is completed, the discharge or release of materials into the environment, surface subsidence from
underground mining and the effects that mining has on groundwater quality and availability. Certain of these laws and regulations may impose joint and several strict liability without regard to fault or legality of the original conduct. Failure to
comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial liabilities, and the issuance of injunctions limiting or prohibiting the



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performance of operations. Complying with these laws and regulations may be costly and time consuming and may delay commencement or continuation of exploration or production operations. The
possibility exists that new laws or regulations may be adopted, or that judicial interpretations or more stringent enforcement of existing laws and regulations may occur, that could materially affect the ARLP Partnerships mining operations,
cash flow, and profitability, either through direct impacts on the ARLP Partnerships existing mining operations, or indirect impacts that discourage or limit the ARLP Partnerships customers use of coal. Please read Item 1.
BusinessRegulations and Laws

Congress and several state legislatures (including those in Illinois, Kentucky, West
Virginia and Pennsylvania) have passed new laws addressing mine safety practices and imposing stringent new mine safety and accident reporting requirements and increased civil and criminal penalties for violations of mine safety laws. Implementing
and complying with these new laws and regulations has increased and will continue to increase the ARLP Partnerships operational expense and to have an adverse effect on the ARLP Partnerships results of operation and financial position.
For more information, please read Item 1. BusinessRegulation and LawsMine Health and Safety Laws.

The
ARLP Partnership may be unable to obtain and renew permits necessary for its operations, which could reduce its production, cash flow and profitability.

Mining companies must obtain numerous governmental permits or approvals that impose strict conditions and obligations relating to various environmental and safety matters in connection with coal mining.
The permitting rules are complex and can change over time. Regulatory authorities exercise considerable discretion in the timing and scope of permit issuance. The public has the right to comment on permit applications and otherwise participate in
the permitting process, including through court intervention. Accordingly, permits required to conduct the ARLP Partnerships operations may not be issued, maintained or renewed, or may not be issued or renewed in a timely fashion, or may
involve requirements that restrict the ARLP Partnerships ability to economically conduct its mining operations. Limitations on the ARLP Partnerships ability to conduct its mining operations due to the inability to obtain or renew
necessary permits or similar approvals could reduce the ARLP Partnerships production, cash flow and profitability. Please read Item 1. BusinessRegulations and LawsMining Permits and Approvals.

The EPA has recently begun reviewing permits required for the discharge of overburden from mining operations under Section 404 of
the CWA. Various initiatives by the EPA regarding these permits have increased the time required to obtain and the costs of complying with such permits. In addition, the EPA recently exercised its veto power to withdraw or restrict the
use of previously issued permits in connection with one of the largest surface mining operations in Central Appalachia. As a result of these developments, the ARLP Partnership may be unable to obtain or experience delays in securing, utilizing or
renewing Section 404 permits required for its operations, which could have an adverse effect on its results of operation and financial position. Please read Item 1. BusinessRegulations and LawsWater Discharge.

Fluctuations in transportation costs and the availability or reliability of transportation could reduce revenues by causing the ARLP
Partnership to reduce its production or by impairing its ability to supply coal to its customers.

Transportation costs
represent a significant portion of the total cost of coal for the ARLP Partnerships customers and, as a result, the cost of transportation is a critical factor in a customers purchasing decision. Increases in transportation costs could
make coal a less competitive source of energy or could make the ARLP Partnerships coal production less competitive than coal produced from other sources. Disruption of transportation services due to weather-related problems, flooding, drought,
accidents, mechanical difficulties, strikes, lockouts, bottlenecks or other events could temporarily impair the ARLP Partnerships ability to supply coal to its customers. The ARLP Partnerships transportation providers may face
difficulties in the future that may impair its ability to supply coal to its customers, resulting in decreased revenues. If there are disruptions of the transportation services provided by the ARLP Partnerships primary rail or barge carriers
that transport its coal and the ARLP Partnership is unable to find alternative transportation providers to ship its coal, our business could be adversely affected.

Conversely, significant decreases in transportation costs could result in increased competition from coal producers in other parts of the country. For instance, difficulty in coordinating the many eastern
coal loading facilities, the large number of small shipments, the steeper average grades of the terrain and a more unionized workforce are all issues that combine to make coal shipments originating in the eastern U.S. inherently more expensive on a
per-mile basis than coal shipments originating in the western U.S. Historically, high coal transportation rates from the western coal producing areas into certain eastern markets limited the use of western coal in those markets. Lower rail rates
from the western coal producing areas to markets served by eastern U.S. coal producers have created major competitive challenges for eastern coal producers. In the event of lower transportation costs, the increased competition could have a material
adverse effect on the ARLP Partnerships business, financial condition and results of operations.



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In recent years, the states of Kentucky and West Virginia have increased enforcement of
weight limits on coal trucks on their public roads. It is possible that all states in which the ARLP Partnerships coal is transported by truck may modify their laws to limit truck weight limits. Such legislation and enforcement efforts could
result in shipment delays and increased costs. An increase in transportation costs could have an adverse effect on the ARLP Partnerships ability to increase or to maintain production and could adversely affect revenues.

The ARLP Partnership may not be able to successfully grow through future acquisitions.

Since ARLPs formation and the acquisition of its predecessor in August 1999, the ARLP Partnership has expanded its operations by
adding and developing mines and coal reserves in existing, adjacent and neighboring properties. The ARLP Partnership continually seeks to expand its operations and coal reserves. The ARLP Partnerships future growth could be limited if it is
unable to continue to make acquisitions, or if it is unable to successfully integrate the companies, businesses or properties it acquires. The ARLP Partnership may not be successful in consummating any acquisitions and the consequences of
undertaking these acquisitions are unknown. Moreover, any acquisition could be dilutive to earnings and distributions to unitholders and any additional debt incurred to finance an acquisition could affect the ARLP Partnerships ability to make
distributions to unitholders. The ARLP Partnerships ability to make acquisitions in the future could be limited by restrictions under its existing or future debt agreements, competition from other coal companies for attractive properties or
the lack of suitable acquisition candidates.

Mine expansions and acquisitions involve a number of risks, any of which could cause the
ARLP Partnership not to realize the anticipated benefits.

If the ARLP Partnership is unable to successfully integrate
the companies, businesses or properties it acquires, its profitability may decline and it could experience a material adverse effect on its business, financial condition, or results of operations. Expansion and acquisition transactions involve
various inherent risks, including:



| |  |  | uncertainties in assessing the value, strengths, and potential profitability of, and identifying the extent of all weaknesses, risks, contingent and
other liabilities (including environmental or mine safety liabilities) of, expansion and acquisition opportunities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability to achieve identified operating and financial synergies anticipated to result from an expansion or an acquisition;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | problems that could arise from the integration of the new operations; and
| | - |  | -------------------------------------------------------------------------



| |  |  | unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the ARLP Partnerships rationale
for pursuing the expansion or acquisition opportunity.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any one or more of these factors could cause the
ARLP Partnership not to realize the benefits anticipated to result from an expansion or acquisition. Any expansion or acquisition opportunities the ARLP Partnership pursues could materially affect its liquidity and capital resources and may require
it to incur indebtedness, seek equity capital or both. In addition, future expansions or acquisitions could result in the ARLP Partnership assuming more long-term liabilities relative to the value of the acquired assets than it has assumed in its
previous expansions and/or acquisitions.

Completion of growth projects and future expansion could require significant amounts of
financing which may not be available to the ARLP Partnership on acceptable terms, or at all.

The ARLP Partnership
plans to fund capital expenditures for its current growth projects with existing cash balances, future cash flow from operations, borrowings under its revolving credit facility and cash provided from the issuance of debt or equity. The ARLP
Partnerships funding plans may, however, be negatively impacted by numerous factors, including higher than anticipated capital expenditures or lower than expected cash flow from operations. In addition, the ARLP Partnership may be unable to
refinance its current revolving credit facility when it expires or obtain adequate funding prior to expiry because its lending counterparties may be unwilling or unable to meet their funding obligations. Furthermore, additional growth projects and
expansion opportunities may develop in the future which could also require significant amounts of financing. Consequently, completion of growth projects and future expansion could require significant amounts of financing which may not be available
to the ARLP Partnership on acceptable terms or in the proportions that it expects, or at all.



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Despite recent improvements, financial markets remain volatile and persistent weaknesses
continue to plague global economies. These conditions continue to negatively impact the debt and equity capital markets and could adversely impact the ARLP Partnerships credit ratings or its ability to remain in compliance with the financial
covenants under its current debt agreements, which in turn could have a material adverse effect on its financial condition, results of operations and cash flows. If the ARLP Partnership is unable to finance its growth and future expansions as
expected, it could be required to seek alternative financing, the terms of which may not be attractive to it, or to revise or cancel its plans.

The unavailability of an adequate supply of coal reserves that can be mined at competitive costs could cause the ARLP Partnerships
profitability to decline.

The ARLP Partnerships profitability depends substantially on its ability to mine coal
reserves that have the geological characteristics that enable them to be mined at competitive costs and to meet the quality needed by the ARLP Partnerships customers. Because the ARLP Partnership depletes its reserves as it mines coal, its
future success and growth depend, in part, upon its ability to acquire additional coal reserves that are economically recoverable. Replacement reserves may not be available when required or, if available, may not be mineable at costs comparable to
those of the depleting mines. The ARLP Partnership may not be able to accurately assess the geological characteristics of any reserves that it acquires, which may adversely affect its profitability and financial condition. Exhaustion of reserves at
particular mines also may have an adverse effect on the ARLP Partnerships operating results that is disproportionate to the percentage of overall production represented by such mines. The ARLP Partnerships ability to obtain other
reserves in the future could be limited by restrictions under its existing or future debt agreements, competition from other coal companies for attractive properties, the lack of suitable acquisition candidates or the inability to acquire coal
properties on commercially reasonable terms.

The estimates of the ARLP Partnerships coal reserves may prove inaccurate and could
result in decreased profitability.

The estimates of the ARLP Partnerships coal reserves may vary substantially
from actual amounts of coal it is able to economically recover. The reserve data set forth in Item 2. Properties represent the ARLP Partnerships engineering estimates. All of the reserves presented in this Annual Report on Form
10-K constitute proven and probable reserves. There are numerous uncertainties inherent in estimating quantities of reserves, including many factors beyond the ARLP Partnerships control. Estimates of coal reserves necessarily depend upon a
number of variables and assumptions, any one of which may vary considerably from actual results. These factors and assumptions relate to:



| |  |  | geological and mining conditions, which may not be fully identified by available exploration data and/or differ from the ARLP Partnerships
experiences in areas where it currently mines;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the percentage of coal in the ground ultimately recoverable;
| | - |  | ------------------------------------------------------------



| |  |  | historical production from the area compared with production from other producing areas;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the assumed effects of regulation and taxes by governmental agencies; and
| | - |  | -------------------------------------------------------------------------



| |  |  | assumptions concerning future coal prices, operating costs, capital expenditures, severance and excise taxes and development and reclamation costs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

For these reasons, estimates of the recoverable quantities of coal attributable to any particular group of
properties, classifications of reserves based on risk of recovery and estimates of future net cash flows expected from these properties as prepared by different engineers, or by the same engineers at different times, may vary substantially. Actual
production, revenue and expenditures with respect to the ARLP Partnerships reserves will likely vary from estimates, and these variations may be material. Any inaccuracy in the estimates of the ARLP Partnerships reserves could result in
higher than expected costs and decreased profitability.

Mining in certain areas in which the ARLP Partnership operates is more
difficult and involves more regulatory constraints than mining in other areas of the U.S., which could affect the mining operations and cost structures of these areas.

The geological characteristics of some of the ARLP Partnerships coal reserves, such as depth of overburden and coal seam thickness, make them difficult and costly to mine. As mines become depleted,
replacement reserves may not be available when required or, if available, may not be mineable at costs comparable to those characteristic of the depleting mines. In addition, permitting, licensing and other environmental and regulatory requirements
associated with certain of the ARLP Partnerships mining operations are more costly and time-consuming to satisfy. These factors could materially adversely affect the mining operations and cost structures of, and the ARLP Partnerships
customers ability to use coal produced by, the ARLP Partnerships mines.



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Some of the ARLP Partnerships operating subsidiaries lease a portion of the surface properties
upon which their mining facilities are located.

The ARLP Partnerships operating subsidiaries do not, in all
instances, own all of the surface properties upon which their mining facilities have been constructed. Certain of the operating companies have constructed and now operate all or some portion of their facilities on properties owned by unrelated
third-parties with whom the subsidiary has entered into a long-term lease. The ARLP Partnership has no reason to believe that there exists any risk of loss of these leasehold rights given the terms and provisions of the subject leases and the nature
and identity of the third-party lessors; however, in the unlikely event of any loss of these leasehold rights, operations could be disrupted or otherwise adversely impacted as a result of increased costs associated with retaining the necessary land
use.

Unexpected increases in raw material costs could significantly impair the ARLP Partnerships operating profitability.

The ARLP Partnerships coal mining operations are affected by commodity prices. The ARLP Partnership uses
significant amounts of steel, petroleum products and other raw materials in various pieces of mining equipment, supplies and materials, including the roof bolts required by the room and pillar method of mining. Steel prices and the prices of scrap
steel, natural gas and coking coal consumed in the production of iron and steel fluctuate significantly and may change unexpectedly. There may be acts of nature or terrorist attacks or threats that could also impact the future costs of raw
materials. Future volatility in the price of steel, petroleum products or other raw materials will impact the ARLP Partnerships operational expenses and could result in significant fluctuations to its profitability.

The ARLP Partnerships indebtedness may limit its ability to borrow additional funds, make distributions to unitholders or capitalize on
business opportunities.

The ARLP Partnership has long-term indebtedness, consisting of its outstanding senior
unsecured notes, revolving credit facility and its term loan agreement. At December 31, 2010, the ARLP Partnerships total long-term indebtedness outstanding was $704.0 million. The ARLP Partnerships leverage may:



| |  |  | adversely affect its ability to finance future operations and capital needs;
| | - |  | ----------------------------------------------------------------------------



| |  |  | limit its ability to pursue acquisitions and other business opportunities;
| | - |  | --------------------------------------------------------------------------



| |  |  | make its results of operations more susceptible to adverse economic or operating conditions; and
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | make it more difficult to self-insure for the ARLP Partnerships workers compensation obligations.
| | - |  | ---------------------------------------------------------------------------------------------------

In addition, the ARLP Partnership has unused borrowing capacity under its revolving credit facility. Future borrowings, under credit
facilities or otherwise, could result in a significant increase in the ARLP Partnerships leverage.

The ARLP
Partnerships payments of principal and interest on any indebtedness will reduce the cash available for distribution on its units. The ARLP Partnership will be prohibited from making cash distributions:



| |  |  | during an event of default under any of its indebtedness; or
| | - |  | ------------------------------------------------------------



| |  |  | if either before or after such distribution, it fails to meet a coverage test based on the ratio of its consolidated debt to its consolidated cash
flow.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

Various limitations in the ARLP Partnerships debt agreements may reduce its ability to incur
additional indebtedness, to engage in some transactions and to capitalize on business opportunities. Any subsequent refinancing of the ARLP Partnerships current indebtedness or any new indebtedness could have similar or greater restrictions.

Federal and state laws require bonds to secure the ARLP Partnerships obligations related to statutory reclamation requirements
and workerscompensation and black lung benefits. The ARLP Partnerships inability to acquire or failure to maintain surety bonds that are required by state and federal law would have a material adverse effect on it.

Federal and state laws require the ARLP Partnership to place and maintain bonds to secure its obligations to repair
and return property to its approximate original state after it has been mined (often referred to as reclaim or reclamation), to pay federal and state workers compensation and pneumoconiosis, or black lung, benefits and
to satisfy other miscellaneous obligations. These bonds provide assurance that the ARLP Partnership will perform its statutorily required obligations and are referred to as surety bonds. These bonds are typically renewable on a yearly
basis. The



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failure to maintain or the inability to acquire sufficient surety bonds, as required by state and federal laws, could subject the ARLP Partnership to fines and penalties and result in the loss of
its mining permits. Such failure could result from a variety of factors, including:



| |  |  | lack of availability, higher expense or unreasonable terms of new surety bonds;
| | - |  | -------------------------------------------------------------------------------



| |  |  | the ability of current and future surety bond issuers to increase required collateral, or limitations on availability of collateral for surety bond
issuers due to the terms of the ARLP Partnerships credit agreements; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the exercise by third-party surety bond holders of their rights to refuse to renew the surety.
| | - |  | ----------------------------------------------------------------------------------------------

The ARLP Partnership has outstanding surety bonds with third-parties for reclamation expenses, federal and state workers
compensation obligations and other miscellaneous obligations. The ARLP Partnership may have difficulty maintaining its surety bonds for mine reclamation as well as workers compensation and black lung benefits. The ARLP Partnerships
inability to acquire or failure to maintain these bonds would have a material adverse effect on it.

The ARLP Partnership and its
subsidiaries are subject to various legal proceedings, which may have a material effect on its business.

The ARLP
Partnership is party to a number of legal proceedings incident to its normal business activities. There is the potential that an individual matter or the aggregation of multiple matters could have an adverse effect on the ARLP Partnerships
cash flows, results of operations or financial position. Please see Item 8. Financial Statements and Supplementary DataNote 20. Commitments and Contingencies for further discussion.

Tax Risks to Our Common Unitholders

If we or ARLP were to become subject to entity-level taxation for federal or state tax purposes, our cash available for distribution to you would be
substantially reduced.

The anticipated after-tax benefit of an investment in our units depends largely on AHGP being
treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service (IRS) on this matter. The value of our investment in ARLP depends largely on ARLP
being treated as a partnership for federal income tax purposes.

Despite the fact that we and ARLP are limited partnerships
under Delaware law, it is possible in certain circumstances for a publicly-traded partnership such as ARLPs or ours to be treated as a corporation for federal income tax purposes. Although we do not believe, based upon ARLPs current
operations, that we or ARLP would be so treated, a change in ARLPs business or our business could cause us or ARLP to be treated as a corporation for federal income tax purposes or otherwise subject us or ARLP to taxation as an
entity.

In addition, current law may change, causing us or ARLP to be treated as a corporation for federal income tax purposes
or otherwise subjecting us or ARLP to entity-level taxation. At the federal level, legislation has recently been considered that would have eliminated partnership tax treatment for certain publicly-traded partnerships. Although such legislation
would not have appeared to apply to us or ARLP as considered, it could be reintroduced in a manner that does apply to us or ARLP. We are unable to predict whether any of these changes or other proposals will be reintroduced or will ultimately be
enacted. At the state level, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise or other forms of
taxation. If we or ARLP were subject to federal income tax as a corporation or any state were to impose a tax upon us or ARLP as an entity, the cash available for distribution to you would be reduced and the value of our common units or ARLP common
units could be negatively impacted.

ARLPs partnership agreement provides that if a law is enacted or existing law is
modified or interpreted in a manner that subjects ARLP to taxation as a corporation or otherwise subjects ARLP to entity-level taxation for federal, state or local income tax purposes, the minimum quarterly distribution amount and the target
distribution amounts may be adjusted to reflect the impact of that law on ARLP. Likewise, our cash distributions to you will be reduced if we or ARLP is subjected to any form of such entity-level taxation.



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If the IRS were to contest the federal income tax positions we take, it may adversely impact the
market for our common units or ARLP common units, and the costs of any such contest would reduce cash available for distribution to ARLP and our unitholders.

We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes. The IRS may adopt positions that differ from the positions that we or ARLP take,
even positions taken with the advice of counsel. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we or ARLP take. A court may not agree with some or all of the positions we or ARLP take.
Any contest with the IRS may materially and adversely impact the market for our common units or ARLPs common units and the prices at which they trade. In addition, the costs of any contest with the IRS will be borne by ARLP and therefore
indirectly by us, as a unitholder and as the owner of the general partner of ARLP. Moreover, the costs of any contest between us and the IRS will result in a reduction in cash available for distribution to our unitholders and thus will be borne
indirectly by our unitholders.

Even if you do not receive any cash distributions from us, you will be required to pay taxes on your
share of our taxable income.

You will be required to pay federal income taxes and, in some cases, state and local
income taxes, on your share of our taxable income, whether or not you receive cash distributions from us. You may not receive cash distributions from us equal to your share of our taxable income or even equal to the actual tax liability that result
from your share of our taxable income.

Tax gain or loss on the disposition of our units could be different than expected.

If you sell your units, you will recognize gain or loss equal to the difference between the amount realized and your
tax basis in those units. Because distributions in excess of your allocable share of our net taxable income decrease your tax basis in your units, the amount, if any, of such prior excess distributions with respect to the units you sell will, in
effect, become taxable income to you if you sell such units at a price greater than your tax basis therein, even if the price you receive is less than your original cost. Furthermore, a substantial portion of the amount realized, whether or not
representing gain, may be taxed as ordinary income to you due to potential recapture items, including depreciation and depletion recapture. In addition, because the amount realized includes a unitholders share of our non-recourse liabilities,
if you sell your units, you may incur a tax liability in excess of the amount of cash you receive from the sale.

Tax-exempt entities
and non-U.S. persons owning our units face unique tax issues that may result in adverse tax consequences to them.

Investment in our units by tax-exempt entities, such as individual retirement accounts (known as IRAs) and non-U.S. persons,
raises issues unique to them. For example, virtually all of our income allocated to organizations exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.
Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file U.S. federal income tax returns and pay tax on their share of our taxable income. If
you are a tax exempt entity or a non-U.S. person, you should consult your tax advisor before investing in our common units.

We treat
each purchaser of our units as having the same tax benefits without regard to the units purchased. The IRS may challenge this treatment, which could adversely affect the value of our units.

Because we cannot match transferors and transferees of units, we adopt depreciation and amortization positions that may not conform to all
aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to you. It also could affect the timing of these tax benefits or the amount of gain from your sale of
units and could have a negative impact on the value of our units or result in audit adjustments to your tax returns.

We prorate our
items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS
may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.



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We prorate our items of income, gain, loss and deduction between transferors and transferees
of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The use of this proration method may not be permitted under existing Treasury
Regulations. Recently, however, the U.S. Treasury Department issued proposed Treasury Regulations that provide a safe harbor pursuant to which a publicly-traded partnership may use a similar monthly simplifying convention to allocate tax items among
transferor and transferee unitholders. Nonetheless, the proposed regulations do not specifically authorize the use of the proration method we have adopted. If the IRS were to challenge our proration method or new Treasury Regulations were issued, we
may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

A unitholder whose units
are loaned to a short seller to cover a short sale of units may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan
and may recognize gain or loss from the disposition.

Because a unitholder whose units are loaned to a short
seller to cover a short sale of units may be considered as having disposed of the loaned units, he may no longer be treated for tax purposes as a partner with respect to those units during the period of the loan to the short seller and the
unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those units may not be reportable by the unitholder and any cash
distributions received by the unitholder as to those units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to modify
any applicable brokerage account agreements to prohibit their brokers from borrowing their units.

ARLP has adopted certain valuation
methodologies that may result in a shift of income, gain, loss and deduction between the general partner and the unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units.

When we or ARLP issue additional units or engage in certain other transactions, ARLP determines the fair market value of its assets and
allocates any unrealized gain or loss attributable to its assets to the capital accounts of ARLPs unitholders and us. ARLPs methodology may be viewed as understating the value of ARLPs assets. In that case, there may be a shift of
income, gain, loss and deduction between certain ARLP unitholders and us, which may be unfavorable to such ARLP unitholders. Moreover, under ARLPs valuation methods, subsequent purchasers of our common units may have a greater portion of their
Internal Revenue Code Section 743(b) adjustment allocated to ARLPs intangible assets and a lesser portion allocated to ARLPs tangible assets. The IRS may challenge ARLPs valuation methods, or our or ARLPs allocation of
the Section 743(b) adjustment attributable to ARLPs tangible and intangible assets, and allocations of income, gain, loss and deduction between us and certain of ARLPs unitholders.

A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to
our unitholders. It also could affect the amount of gain from our unitholders sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders tax returns without
the benefit of additional deductions.

Certain federal income tax deductions currently available with respect to coal mining and
production may be eliminated as a result of future legislation.

The Obama administration has indicated a desire to
eliminate certain key U.S. federal income tax provisions currently applicable to coal companies, including the percentage depletion allowance with respect to coal properties. No legislation with that effect has been proposed and elimination of those
provisions would not impact the ARLP Partnerships financial statements or results of operations. However, elimination of the provisions could result in unfavorable tax consequences for its unitholders and, as a result, could negatively impact
its unit price.

The sale or exchange of 50% or more of our capital and profits interests within a twelve-month period will result in
the termination of our partnership for federal income tax purposes.

We will be considered to have technically
terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of determining whether the 50% threshold has been
met, multiple sales of the same interest will be counted only once. Our termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns for one fiscal year and
could result in a deferral of depreciation deductions



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allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a calendar year, the closing of our taxable year may also result in more than twelve
months of our taxable income or loss being includable in his taxable income for the year of termination. A termination does not affect our classification as a partnership for federal income tax purposes, but it would result in our being treated as a
new partnership for tax purposes. If we were treated as a new partnership, we would be required to make new tax elections and could be subject to penalties if we were unable to determine that a termination occurred. The IRS has recently announced a
relief procedure whereby the IRS may allow a publicly-traded partnership that has technically terminated to provide only a single Schedule K-1 to unitholders for the tax years in which the termination occurs.

You will likely be subject to state and local taxes and income tax return filing requirements in jurisdictions where you do not live as a result of
investing in our units.

In addition to federal income taxes, you will likely be subject to other taxes, such as state
and local income taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property. You will likely be required to file state and local income tax
returns and pay state and local income taxes in some or all of these various jurisdictions. Further, you may be subject to penalties for failure to comply with those requirements. We may own property or conduct business in other states in the
future. It is your responsibility to file all federal, state and local tax returns.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



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|ITEM 2. | PROPERTIES
|------- | ----------

Coal Reserves

The ARLP Partnership must obtain permits from applicable regulatory authorities before beginning to mine particular
reserves. For more information on this permitting process, and matters that could hinder or delay the process, please read Item 1. BusinessRegulation and LawsMining Permits and Approvals.

The ARLP Partnerships reported coal reserves are those it believes can be economically and legally extracted or produced at the
time of the filing of its Annual Report on Form 10-K. In determining whether its reserves meet this economical and legal standard, the ARLP Partnership takes into account, among other things, its potential ability or inability to obtain a mining
permit, the possible necessity of revising a mining plan, changes in estimated future costs, changes in future cash flows caused by changes in mining permits, variations in quantity and quality of coal, and varying levels of demand and their effects
on selling prices.

At December 31, 2010, the ARLP Partnership had approximately 697.4 million tons of coal
reserves. All of the estimates of reserves which are presented in this Annual Report on Form 10-K are of proven and probable reserves (as defined below) and adhere to the standards described in U. S. Geological Survey (USGS) Circular 831
and USGS Bulletin 1450-B. For information on the locations of the ARLP Partnerships mines, please read Mining Operations under Item 1. Business.

The following table sets forth reserve information, at December 31, 2010, about the ARLP Partnerships mining operations:



|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|------------------------------- |  | --------- | ----------- |  | ----------------------------- |  | ------ | ---------------------------- |  |  | ------------------ | - |  | --------------- | ---- | - | ----- |  | ----- | -------- |  |  | ---------- | - |  | ----- | ----- | - | ------ |  | ----- | - |  |  | ---- | - |  |  | ----- | -
|                                |  |           |             |  |                               |  |        | Proven and Probable Reserves |  |  |                    |   |  |                 |     
|                                |  |           |             |  |                               |  |        | Pounds S02 per MMBTU         |  |  | Reserve Assignment |   |  | Reserve Control |     
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   | 
|Operations                      |  | Mine Type |             |  | Heat Content(BTUs per 
pound) |  |        | <1.2                         |  |  | 1.2-2.5            |   |  | >2.5            |      |   | Total |  |       | Assigned |  |  | Unassigned |   |  | Owned |       |   | Leased | 
|                                |  |           |             |  |                               |  |        | (tons in millions)           |  |  |                    |   |  |                 |      |   |       |  |       |          | 
|Illinois Basin Operations       |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Dotiki (KY)                     |  |           | Underground |  |                               |  | 12,200 |                              |  |  |                   |   |  |                 |     |   |       |  | 55.5  |          |  |  | 55.5       |   |  |       | 55.5  |   |        |  |      |   |  |  | 21.2 |   |  |  | 34.3  |  
|Warrior (KY)                    |  |           | Underground |  |                               |  | 12,600 |                              |  |  |                   |   |  |                 |     |   |       |  | 113.9 |          |  |  | 113.9      |   |  |       | 65.2  |   |        |  | 48.7  |   |  |  | 24.9 |   |  |  | 89.0  |  
|Hopkins (KY)                    |  |           | Underground |  |                               |  | 12,200 |                              |  |  |                   |   |  |                 |     |   |       |  | 38.1  |          |  |  | 38.1       |   |  |       | 23.0  |   |        |  | 15.1  |   |  |  | 8.1  |   |  |  | 30.0  |  
|                                |  |           | / Surface   |  |                               |  | 11,500 |                              |  |  |                   |   |  |                 |     |   |       |  | 7.8   |          |  |  | 7.8        |   |  |       | 7.8   |   |        |  |      |   |  |  | 7.8  |   |  |  |      |  
|River View (KY)                 |  |           | Underground |  |                               |  | 11,600 |                              |  |  |                   |   |  |                 |     |   |       |  | 128.5 |          |  |  | 128.5      |   |  |       | 128.5 |   |        |  |      |   |  |  | 12.6 |   |  |  | 115.9 |  
|Sebree (KY)                     |  |           | Underground |  |                               |  | 11,400 |                              |  |  |                   |   |  |                 |     |   |       |  | 23.9  |          |  |  | 23.9       |   |  |       |      |   |        |  | 23.9  |   |  |  |     |   |  |  | 23.9  |  
|Pattiki (IL)                    |  |           | Underground |  |                               |  | 11,500 |                              |  |  |                   |   |  |                 |     |   |       |  | 60.4  |          |  |  | 60.4       |   |  |       | 60.4  |   |        |  |      |   |  |  | 0.1  |   |  |  | 60.3  |  
|Gibson (North) (IN)             |  |           | Underground |  |                               |  | 11,600 |                              |  |  |                   |   |  |                 | 19.1 |   |       |  | 3.0   |          |  |  | 22.1       |   |  |       | 22.1  |   |        |  |      |   |  |  | 0.4  |   |  |  | 21.7  |  
|Gibson (South) (IN)             |  |           | Underground |  |                               |  | 11,500 |                              |  |  |                   |   |  |                 | 12.4 |   |       |  | 36.0  |          |  |  | 48.4       |   |  |       |      |   |        |  | 48.4  |   |  |  | 16.3 |   |  |  | 32.1  |  
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Region Total                    |  |           |             |  |                               |  |        |                              |  |  |                   |   |  |                 | 31.5 |   |       |  | 467.1 |          |  |  | 498.6      |   |  |       | 362.5 |   |        |  | 136.1 |   |  |  | 91.4 |   |  |  | 407.2 |  
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Central Appalachian Operations  |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Pontiki (KY)                    |  |           | Underground |  |                               |  | 13,000 |                              |  |  |                   |   |  |                 | 8.1  |   |       |  |      |          |  |  | 8.1        |   |  |       | 8.1   |   |        |  |      |   |  |  |     |   |  |  | 8.1   |  
|MC Mining (KY)                  |  |           | Underground |  |                               |  | 12,600 |                              |  |  | 14.6               |   |  |                 | 0.5  |   |       |  | 1.5   |          |  |  | 16.6       |   |  |       | 16.6  |   |        |  |      |   |  |  | 4.2  |   |  |  | 12.4  |  
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Region Total                    |  |           |             |  |                               |  |        |                              |  |  | 14.6               |   |  |                 | 8.6  |   |       |  | 1.5   |          |  |  | 24.7       |   |  |       | 24.7  |   |        |  |      |   |  |  | 4.2  |   |  |  | 20.5  |  
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Northern Appalachian Operations |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Mettiki (MD)                    |  |           | Underground |  |                               |  | 13,200 |                              |  |  |                   |   |  |                 | 2.1  |   |       |  | 5.9   |          |  |  | 8.0        |   |  |       | 8.0   |   |        |  |      |   |  |  |     |   |  |  | 8.0   |  
|Mountain View (WV)              |  |           | Underground |  |                               |  | 13,200 |                              |  |  |                   |   |  |                 | 5.1  |   |       |  | 6.9   |          |  |  | 12.0       |   |  |       | 12.0  |   |        |  |      |   |  |  |     |   |  |  | 12.0  |  
|Tunnel Ridge (PA/WV)            |  |           | Underground |  |                               |  | 12,600 |                              |  |  |                   |   |  |                 |     |   |       |  | 97.4  |          |  |  | 97.4       |   |  |       | 97.4  |   |        |  |      |   |  |  |     |   |  |  | 97.4  |  
|Penn Ridge (PA)                 |  |           | Underground |  |                               |  | 12,500 |                              |  |  |                   |   |  |                 |     |   |       |  | 56.7  |          |  |  | 56.7       |   |  |       | 56.7  |   |        |  |      |   |  |  |     |   |  |  | 56.7  |  
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Region Total                    |  |           |             |  |                               |  |        |                              |  |  |                   |   |  |                 | 7.2  |   |       |  | 166.9 |          |  |  | 174.1      |   |  |       | 174.1 |   |        |  |      |   |  |  |     |   |  |  | 174.1 |  
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|Total                           |  |           |             |  |                               |  |        |                              |  |  | 14.6               |   |  |                 | 47.3 |   |       |  | 635.5 |          |  |  | 697.4      |   |  |       | 561.3 |   |        |  | 136.1 |   |  |  | 95.6 |   |  |  | 601.8 |  
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  
|% of Total                      |  |           |             |  |                               |  |        |                              |  |  | 2.1                | % |  |                 | 6.8  | % |       |  | 91.1  | %        |  |  | 100.0      | % |  |       | 80.5  | % |        |  | 19.5  | % |  |  | 13.7 | % |  |  | 86.3  | %
|                                |  |           |             |  |                               |  |        |                              |  |  |                    |   |  |                 |      |   |       |  |       |          |  |  |            |   |  |       |       |   |        |  |       |   |  |  |      |   |  |  |       |  

The ARLP Partnerships reserve estimates are prepared from geological data
assembled and analyzed by its staff of geologists and engineers. This data is obtained through the ARLP Partnerships extensive, ongoing exploration drilling and in-mine channel sampling programs. The ARLP Partnerships drill spacing
criteria adhere to standards as defined by the USGS. The maximum acceptable distance from seam data points varies with the geologic nature of the coal seam being studied, but generally the standard for (a) proven reserves is that points of
observation are no greater than 1/2mile apart and
are projected to extend as a 1/4mile wide belt
around each point of measurement and (b) probable reserves is that points of observation are between
1/2and 1 1/2miles apart and are projected to extend as a 1/2mile wide belt that lies 1/4mile from the points of measurement.



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Reserve estimates will change from time to time to reflect mining activities, additional
analysis, new engineering and geological data, acquisition or divestment of reserve holdings, modification of mining plans or mining methods, and other factors. Weir International Mining Consultants performed an audit of the ARLP Partnerships
reserves and calculation methods in August 2010.

Reserves represent that part of a mineral deposit that
can be economically and legally extracted or produced, and reflect estimated losses involved in producing a saleable product. All of the ARLP Partnerships reserves are steam coal, except for reserves at Mettiki that can be delivered to the
steam or metallurgical markets. The 14.6 million tons of reserves listed as <1.2 pounds of SO2per million British thermal units (MMBTU) are compliance coal under Phase II of CAA.

Assigned reserves are those reserves that have been designated for mining by a specific operation. Unassigned reserves are those reserves that have not yet been designated for mining by a specific
operation. British thermal units (BTU) values are reported on an as shipped, fully washed, basis. Shipments that are either fully or partially raw will have a lower BTU value.

The ARLP Partnership controls certain leases for coal deposits that are near, but not contiguous to, its primary reserve bases. The tons
controlled by these leases are classified as non-reserve coal deposits and are not included in the ARLP Partnerships reported reserves. These non-reserve coal deposits are as follows: Dotiki6.3 million tons, Pattiki4.8 million
tons, Hopkins County Coal3.1 million tons, River View19.6 million tons, Sebree1.2 million tons, Gibson (North)2.5 million tons, Gibson (South)5.6 million tons, Warrior12.1 million tons, Mettiki2.9 million
tons; Tunnel Ridge3.4 million tons, Penn Ridge3.4 million tons, Pontiki8.6 million tons, and 64.3 million tons of coal located near the River View complex, for total non-reserve coal deposits of 137.8 million tons.

The ARLP Partnership leases most of its reserves and generally has the right to maintain leases in force until the exhaustion
of the mineable and merchantable coal located within the leased premises or a larger coal reserve area. These leases provide for royalties to be paid to the lessor at a fixed amount per ton or as a percentage of the sales price. Many leases require
payment of minimum royalties, payable either at the time of the execution of the lease or in periodic installments, even if no mining activities have begun. These minimum royalties are normally credited against the production royalties owed to a
lessor once coal production has commenced.



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Mining Operations

The following table sets forth production and other data about the ARLP Partnerships mining operations:



|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|------------------------------- |  | -------- | ------------- |  | ------------- |  | ---- | -------------- |  | --------- | ---- |  |  |  | ---- |  |  | ---------------------- |  | ------
|Operations                      |  | Location |               |  | Tons Produced |  |      | Transportation |  | Equipment
|                                |  | 2010     |               |  | 2009          |  |      | 2008           |  |           |     
|                                |  |          |               |  | (in millions) |  |      |                |  |          
|Illinois Basin Operations       |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Dotiki                          |  |          | Kentucky      |  |               |  | 3.9  |                |  |           | 4.2  |  |  |  | 4.7  |  |  | CSX, PAL, truck, barge |  | CM    
|Warrior                         |  |          | Kentucky      |  |               |  | 5.8  |                |  |           | 6.2  |  |  |  | 5.1  |  |  | CSX, PAL, truck, barge |  | CM    
|Hopkins                         |  |          | Kentucky      |  |               |  | 3.3  |                |  |           | 4.0  |  |  |  | 4.0  |  |  | CSX, PAL, truck, barge |  | CM, DL
|River View                      |  |          | Kentucky      |  |               |  | 5.9  |                |  |           | 0.5  |  |  |  |     |  |  | Barge                  |  | CM    
|Pattiki                         |  |          | Illinois      |  |               |  | 1.7  |                |  |           | 2.5  |  |  |  | 2.7  |  |  | CSX, EVW, barge        |  | CM    
|Gibson (North)                  |  |          | Indiana       |  |               |  | 3.1  |                |  |           | 3.3  |  |  |  | 3.8  |  |  | CSX, NS, truck, barge  |  | CM    
|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Region Total                    |  |          |               |  |               |  | 23.7 |                |  |           | 20.7 |  |  |  | 20.3 |  |  |                        |  |       
|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Central Appalachian Operations  |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Pontiki                         |  |          | Kentucky      |  |               |  | 0.9  |                |  |           | 1.1  |  |  |  | 1.5  |  |  | NS, truck, barge       |  | CM    
|MC Mining                       |  |          | Kentucky      |  |               |  | 1.4  |                |  |           | 1.5  |  |  |  | 1.7  |  |  | CSX, truck, barge      |  | CM    
|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Region Total                    |  |          |               |  |               |  | 2.3  |                |  |           | 2.6  |  |  |  | 3.2  |  |  |                        |  |       
|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Northern Appalachian Operations |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Mettiki                         |  |          | Maryland      |  |               |  | 0.4  |                |  |           | 0.3  |  |  |  | 0.4  |  |  | Truck, CSX             |  | CM, CS
|Mountain View                   |  |          | West Virginia |  |               |  | 2.4  |                |  |           | 2.2  |  |  |  | 2.5  |  |  | Truck, CSX             |  | LW, CM
|Tunnel Ridge                    |  |          | West Virginia |  |               |  | 0.1  |                |  |           |     |  |  |  |     |  |  | Barge                  |  | LW, CM
|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|Region Total                    |  |          |               |  |               |  | 2.9  |                |  |           | 2.5  |  |  |  | 2.9  |  |  |                        |  |       
|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       
|TOTAL                           |  |          |               |  |               |  | 28.9 |                |  |           | 25.8 |  |  |  | 26.4 |  |  |                        |  |       
|                                |  |          |               |  |               |  |      |                |  |           |      |  |  |  |      |  |  |                        |  |       

|    |  |  |   |  |  |                                                             
|--- |  |  | - |  |  | ------------------------------------------------------------
|CSX |  |  | - |  |  | CSX Railroad                                                
|NS  |  |  | - |  |  | Norfolk Southern Railroad                                   
|PAL |  |  | - |  |  | Paducah & Louisville Railroad                               
|CM  |  |  | - |  |  | Continuous Miner                                            
|LW  |  |  | - |  |  | Longwall                                                    
|EVW |  |  | - |  |  | Evansville Western Railroad                                 
|DL  |  |  | - |  |  | Dragline with Stripping Shovel, Front End Loaders and Dozers
|CS  |  |  | - |  |  | Contour Strip                                               



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are
not engaged in any material litigation. The ARLP Partnership is not engaged in any litigation that it believes is material to its operations, including without limitation, any litigation relating to its long-term coal supply contracts or under the
various environmental protection statutes to which it is subject. However, the ARLP Partnership is subject to various types of litigation in the ordinary course of its business, and we cannot assure you that disputes or litigation will not arise or
that the ARLP Partnership will be able to resolve any such future disputes or litigation in a satisfactory manner. The information under General Litigation and Other in Item 8. Financial Statements and Supplementary
Data.Note 20. Commitments and Contingencies is incorporated herein by this reference.

On November 2, 2006
George W. Rector et al. (the Plaintiffs) filed a complaint in the Circuit Court of the Second Judicial Circuit of Illinois, in White County, Illinois, against the ARLP Partnerships subsidiaries White County Coal, LLC, Alliance
Properties, LLC and Alliance Coal, LLC (collectively the Alliance Defendants) asserting claims for breach of contract, breach of fiduciary duty and unjust enrichment. The Plaintiffs claims are based on their assertion that, as a
result of assignments in 1977, 1978 and 1979 from the Plaintiffs or their predecessors to the Alliance Defendants predecessors, MAPCO Coal, Inc. and MAPCO Land & Development Corporation (collectively MAPCO), of
certain coal leases, they are entitled to receive royalty payments on all coal mined previously or in the future from the property once affected by those leases as well as from other property in the area. The subject assignments were made in
accordance with an agreement between Plaintiffs and MAPCO pursuant to which Plaintiffs reserved the right to receive an overriding royalty on coal mined under the assigned leases. Several years after MAPCO terminated a number of the assigned leases,
the Alliance Defendants entered into new leases of some of the property previously covered by the assigned leases, and subsequently began mining in the area. The ARLP Partnership believes that Plaintiffs overriding royalty interest did not
extend to any renewal of the subject leases or to any new lease covering the same property.



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A bench trial of the case was concluded in November 2009. During November 2010, the court
entered judgment for the Plaintiffs and awarded damages of $3.8 million comprising royalty payments through August 31, 2009 with prejudgment interest, plus royalties for the period of September 1, 2009 through the date of judgment (which
total approximately $0.5 million, including prejudgment interest), and ordered the Alliance Defendants to pay royalties on coal mined in the future from property covered by the assigned leases. The Alliance Defendants have appealed the judgment to
the Illinois Fifth District Appellate Court. The Plaintiffs cross-appealed claiming the court should have awarded them the present value of future royalties. Both appeals are pending. The ARLP Partnership continues to believe the
Plaintiffs claims are without merit. The ARLP Partnership also believes that an adverse decision in this litigation, if any, would not have a material adverse effect on its business, financial position or results of operations.

On April 24, 2006, the ARLP Partnership was served with a complaint from Mr. Ned Comer, et al. (the Plaintiffs)
alleging that approximately 40 oil and coal companies, including the ARLP Partnership, (the Defendants) is liable to the Plaintiffs for tortuously causing damage to Plaintiffs property in Mississippi. The Plaintiffs allege that the
Defendants greenhouse gas emissions caused global warming and resulted in the increase in the destructive capacity of Hurricane Katrina. On August 30, 2007, the trial court dismissed the Plaintiffs complaint. On September 17,
2007, Plaintiffs filed a notice of appeal of that dismissal to the U.S. Court of Appeals for the Fifth Circuit. On October 16, 2009, the Fifth Circuit overturned the trial courts dismissal of the Plaintiffs private nuisance,
trespass and negligence claims, finding Article III constitutional standing and no political question. The Fifth Circuit remanded these claims to the trial court for further proceedings. By order filed February 26, 2010, the Fifth Circuit
granted the Defendants petition for rehearing en banc and, on May 28, 2010, dismissed the appeal. The Plaintiffs petitioned the U.S. Supreme Court to issue a Writ of Mandamus ordering the Fifth Circuit to reinstate the appeal, which
the Supreme Court denied on January 10, 2011, effectively ending the litigation. As a result, this complaint will not have an adverse effect on the ARLP Partnerships business, financial position or results of operations. If, however, tort
claims brought in other cases against corporate defendants for liability arising from greenhouse gas emissions are successful, demand for the ARLP Partnerships coal could be adversely impacted.



|ITEM 4. | RESERVED
|------- | --------



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

The common units representing limited partners interests are listed on the NASDAQ Global Select Market under the symbol
AHGP. The common units began trading on May 10, 2006. On March 2, 2011, the closing market price for the common units was $54.77 per unit and there were 59,863,000 common units outstanding. There were approximately 7,237 record
holders and beneficial owners (held in street name) of common units at December 31, 2010.

The following table sets forth
the range of high and low sales prices per common unit and the amount of cash distributions declared and paid with respect to the units, for the two most recent fiscal years:



|                 |  |      |       |  |     |   |       |                        |  |                                 
|---------------- |  | ---- | ----- |  | --- | - | ----- | ---------------------- |  | --------------------------------
|                 |  | High |       |  | Low |   |       | Distributions Per Unit
|1st Quarter 2009 |  | $    | 18.88 |  |     | $ | 13.05 |                        |  | $0.415 (paid May 20, 2009)      
|2nd Quarter 2009 |  | $    | 23.74 |  |     | $ | 15.54 |                        |  | $0.4275 (paid August 19, 2009)  
|3rd Quarter 2009 |  | $    | 22.44 |  |     | $ | 18.12 |                        |  | $0.440 (paid November 19, 2009) 
|4th Quarter 2009 |  | $    | 29.09 |  |     | $ | 19.50 |                        |  | $0.4525 (paid February 19, 2010)
|1st Quarter 2010 |  | $    | 34.89 |  |     | $ | 26.54 |                        |  | $0.465 (paid May 20, 2010)      
|2nd Quarter 2010 |  | $    | 36.00 |  |     | $ | 26.14 |                        |  | $0.4825 (paid August 19, 2010)  
|3rd Quarter 2010 |  | $    | 44.29 |  |     | $ | 33.13 |                        |  | $0.500 (paid November 19, 2010) 
|4th Quarter 2010 |  | $    | 49.50 |  |     | $ | 39.12 |                        |  | $0.5275 (paid February 18, 2011)

We will
distribute 100% of our available cash (including any held by MGP) within 50 days after the end of each quarter to unitholders of record. Available cash is generally defined as all cash and cash equivalents on hand at the end of each quarter less
reserves established by the AGP in its reasonable discretion for future cash requirements. These reserves are retained to provide for the conduct of our business, the payment of debt principal and interest and to provide funds for future
distributions.

Equity Compensation Plans

The information relating to our equity compensation plans required by Item 5 is incorporated by reference to such information as set forth in Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Unitholder Matters contained herein.



43



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|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

On May 15, 2006, we completed our IPO of 12,500,000 common units representing limited partner interests in us at a price of $25.00
per unit. Concurrent with the closing of the IPO, Alliance Management Holdings, LLC (AMH) and AMH II, LLC (AMH II) (which were the previous owners of MGP), AHGP and SGP entered into a Contribution Agreement
(Contribution Agreement) pursuant to which 100% of the members interest in MGP, ARLPs IDRs, 15,550,628 of ARLPs common units and a 0.001% managing interest in Alliance Coal were contributed to us.

The transfer of assets from prior years described above was between entities under common control. In accordance with Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations, the transfer of assets was accounted for at historical cost, in a manner similar to a pooling of interests.

Since we own MGP, our historical financial statements reflect the consolidated results of the ARLP Partnership. The amount of
earnings of the ARLP Partnership allocated to its limited partners interests, not owned by us, is reflected as a noncontrolling interest in our consolidated income statement 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, (b) additional general
and administrative costs and taxes attributable to us, and (c) debt and interest expense attributable to borrowings under our credit facility. The additional general and administrative costs principally consist of costs incurred by us as a
result of being a publicly-traded partnership, amounts paid to Alliance Coal under an Administrative Services Agreement in addition to amounts paid to AGP under our partnership agreement.

Our historical financial data below were derived from the AHGP Partnerships audited consolidated financial statements as of and for
the years ended December 31, 2010, 2009, 2008, 2007 and 2006.



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|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|----------------------------------------------------------------------- | ---- | ----------------------- | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - | ---- | - | ---------- | - |  | - | ---------- | -
|(in millions, except per unit and per ton data)                         |      | Year Ended December 31, |           
|                                                                        | 2010 |                         |            | 2009 |  |   | 2008       |   |  | 2007 |            |   | 2006 |  
|                                                                        |      |                         |            |      | 
|Statements of Income                                                    |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Sales and operating revenues:                                           |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Coal sales                                                              |      | $                       | 1,551.5    |      |  | $ | 1,163.9    |   |  | $    | 1,093.1    |   |      | $ | 960.3      |   |  | $ | 895.8      |  
|Transportation revenues                                                 |      |                         | 33.6       |      |  |   | 45.7       |   |  |      | 44.7       |   |      |   | 37.7       |   |  |   | 39.9       |  
|Other sales and operating revenues                                      |      |                         | 24.6       |      |  |   | 21.0       |   |  |      | 18.3       |   |      |   | 35.0       |   |  |   | 31.5       |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Total revenues                                                          |      |                         | 1,609.7    |      |  |   | 1,230.6    |   |  |      | 1,156.1    |   |      |   | 1,033.0    |   |  |   | 967.2      |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Expenses:                                                               |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Operating expenses (excluding depreciation, depletion and amortization) |      |                         | 1,009.9    |      |  |   | 797.6      |   |  |      | 801.9      |   |      |   | 685.1      |   |  |   | 627.8      |  
|Transportation expenses                                                 |      |                         | 33.6       |      |  |   | 45.7       |   |  |      | 44.7       |   |      |   | 37.7       |   |  |   | 39.9       |  
|Outside coal purchases                                                  |      |                         | 17.1       |      |  |   | 7.5        |   |  |      | 23.8       |   |      |   | 22.0       |   |  |   | 19.2       |  
|General and administrative                                              |      |                         | 54.2       |      |  |   | 42.9       |   |  |      | 38.9       |   |      |   | 36.7       |   |  |   | 32.1       |  
|Depreciation, depletion and amortization                                |      |                         | 146.9      |      |  |   | 117.5      |   |  |      | 105.3      |   |      |   | 85.3       |   |  |   | 66.5       |  
|Gain from sale of coal reserves                                         |      |                         |           |      |  |   |           |   |  |      | (5.2       | ) |      |   |           |   |  |   |           |  
|Net gain from insurance settlement and other (1)                        |      |                         |           |      |  |   |           |   |  |      | (2.8       | ) |      |   | (11.5      | ) |  |   |           |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Total operating expenses                                                |      |                         | 1,261.7    |      |  |   | 1,011.2    |   |  |      | 1,006.6    |   |      |   | 855.3      |   |  |   | 785.5      |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Income from operations                                                  |      |                         | 348.0      |      |  |   | 219.4      |   |  |      | 149.5      |   |      |   | 177.7      |   |  |   | 181.7      |  
|Interest expense (net of interest capitalized)                          |      |                         | (30.1      | )    |  |   | (30.8      | ) |  |      | (22.1      | ) |      |   | (11.6      | ) |  |   | (12.2      | )
|Interest income                                                         |      |                         | 0.2        |      |  |   | 1.1        |   |  |      | 3.7        |   |      |   | 1.7        |   |  |   | 3.0        |  
|Other income                                                            |      |                         | 0.9        |      |  |   | 1.2        |   |  |      | 0.9        |   |      |   | 1.4        |   |  |   | 0.9        |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Income before income taxes and cumulative effect of accounting change   |      |                         | 319.0      |      |  |   | 190.9      |   |  |      | 132.0      |   |      |   | 169.2      |   |  |   | 173.4      |  
|Income tax expense (benefit)                                            |      |                         | 1.7        |      |  |   | 0.7        |   |  |      | (0.5       | ) |      |   | 1.7        |   |  |   | 3.0        |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Income before cumulative effect of accounting change                    |      |                         | 317.3      |      |  |   | 190.2      |   |  |      | 132.5      |   |      |   | 167.5      |   |  |   | 170.4      |  
|Cumulative effect of accounting change (2)                              |      |                         |           |      |  |   |           |   |  |      |           |   |      |   |           |   |  |   | 0.1        |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Net income                                                              |      |                         | 317.3      |      |  |   | 190.2      |   |  |      | 132.5      |   |      |   | 167.5      |   |  |   | 170.5      |  
|Income attributable to noncontrolling interests                         |      |                         | (143.0     | )    |  |   | (76.0      | ) |  |      | (51.3      | ) |      |   | (79.6      | ) |  |   | (84.8      | )
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Net income attributable to Alliance Holdings GP, L.P. (AHGP)          |      | $                       | 174.3      |      |  | $ | 114.2      |   |  | $    | 81.2       |   |      | $ | 87.9       |   |  | $ | 85.7       |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Basic and diluted net income of AHGP per limited partner unit           |      | $                       | 2.91       |      |  | $ | 1.91       |   |  | $    | 1.36       |   |      | $ | 1.47       |   |  | $ | 1.55       |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Distributions paid per limited partner unit                             |      | $                       | 1.90       |      |  | $ | 1.685      |   |  | $    | 1.3175     |   |      | $ | 1.03       |   |  | $ | 0.33785    |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Weighted average number of units outstanding-basic and diluted          |      |                         | 59,863,000 |      |  |   | 59,863,000 |   |  |      | 59,863,000 |   |      |   | 59,863,000 |   |  |   | 55,445,192 |  
|                                                                        |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Balance Sheet Data:                                                     |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Working capital                                                         |      | $                       | 350.8      |      |  | $ | 56.9       |   |  | $    | 240.8      |   |      | $ | 26.0       |   |  | $ | 37.2       |  
|Total assets                                                            |      |                         | 1,504.1    |      |  |   | 1,054.3    |   |  |      | 1,032.6    |   |      |   | 702.5      |   |  |   | 635.5      |  
|Long-term obligations (3)                                               |      |                         | 704.2      |      |  |   | 422.5      |   |  |      | 440.8      |   |      |   | 137.1      |   |  |   | 127.5      |  
|Total liabilities (4)                                                   |      |                         | 1,046.9    |      |  |   | 731.6      |   |  |      | 741.5      |   |      |   | 384.6      |   |  |   | 386.3      |  
|Partners capital (4)                                                   |      |                         | 457.2      |      |  |   | 322.7      |   |  |      | 291.2      |   |      |   | 317.8      |   |  |   | 249.2      |  
|Other Operating Data:                                                   |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Tons sold                                                               |      |                         | 30.3       |      |  |   | 25.0       |   |  |      | 27.2       |   |      |   | 24.7       |   |  |   | 24.4       |  
|Tons produced                                                           |      |                         | 28.9       |      |  |   | 25.8       |   |  |      | 26.4       |   |      |   | 24.3       |   |  |   | 23.7       |  
|Revenues per ton sold (5)                                               |      | $                       | 52.02      |      |  | $ | 47.40      |   |  | $    | 40.86      |   |      | $ | 40.30      |   |  | $ | 38.00      |  
|Cost per ton sold (6)                                                   |      | $                       | 35.68      |      |  | $ | 33.92      |   |  | $    | 31.78      |   |      | $ | 30.11      |   |  | $ | 27.83      |  
|Other Financial Data:                                                   |      |                         |            |      |  |   |            |   |  |      |            |   |      |   |            |   |  |   |            |  
|Net cash provided by operating activities                               |      | $                       | 517.0      |      |  | $ | 280.8      |   |  | $    | 259.3      |   |      | $ | 241.6      |   |  | $ | 249.2      |  
|Net cash used in investing activities                                   |      |                         | (295.0     | )    |  |   | (320.1     | ) |  |      | (184.1     | ) |      |   | (178.7     | ) |  |   | (137.7     | )
|Net cash provided by (used in) financing activities                     |      |                         | 96.1       |      |  |   | (183.7     | ) |  |      | 169.7      |   |      |   | (98.2      | ) |  |   | (106.6     | )
|EBITDA (7)                                                              |      |                         | 495.8      |      |  |   | 338.2      |   |  |      | 255.7      |   |      |   | 264.4      |   |  |   | 249.2      |  
|Maintenance capital expenditures (8)                                    |      |                         | 90.5       |      |  |   | 96.1       |   |  |      | 77.7       |   |      |   | 76.3       |   |  |   | 67.8       |  



|(1) | Represents the net gain from the final settlement in 2007 with the ARLP Partnerships insurance underwriters for claims relating to a fire at the Dotiki mine and a
fire at MC Mining (MC Mining Fire Incident) and a realized gain in 2008 of $2.8 million on settlement of the ARLP Partnerships claim against the third-party that provided security services at the time of the MC Mining Fire
Incident.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Represents the cumulative effect of the accounting change attributable to the adoption of FASB ASC 718, Compensation-Stock Compensation, on January 1, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



45



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|(3) | Long-term obligations include long-term portions of debt and capital lease obligations.
|--- | ---------------------------------------------------------------------------------------



|(4) | On January 1, 2009, we adopted FASB ASC 810-10-65 and 810-10-45-16, which amended accounting and reporting standards for noncontrolling ownership interests in
subsidiaries. As a result of the adoption of the FASB ASC 810-10-65 and 810-10-45-16 amendments, noncontrolling ownership interest in consolidated subsidiaries is now presented in the consolidated balance sheet within partners capital as a
separate component from the parents equity. Consolidated net income now includes earnings attributable to both the parent and the noncontrolling interests.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Revenues per ton sold are based on the total of coal sales and other sales and operating revenues divided by tons sold.
|--- | -----------------------------------------------------------------------------------------------------------------------



|(6) | Cost per ton sold is based on the total of operating expenses, outside coal purchases and general and administrative expenses divided by tons sold.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | EBITDA is a non-Generally Accepted Accounting Principles (GAAP) financial measure and is defined as net income (prior to the allocation of noncontrolling
interest) before income taxes, cumulative effect of accounting change, interest expense, interest income and depreciation, depletion and amortization. EBITDA is used as a supplemental financial measure by our management and by external users of our
financial statements such as investors, commercial banks, research analysts and others, to assess:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the financial performance of the ARLP Partnerships assets without regard to financing methods, capital structure or historical cost basis;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of the ARLP Partnerships assets to generate cash sufficient to pay interest costs and support its indebtedness;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | the ARLP Partnerships operating performance and return on investment compared to those of other companies in the coal energy sector, without
regard to financing or capital structures; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

EBITDA should not be considered as an alternative to net income, income from operations, cash flows from operating
activities or any other measure of financial performance presented in accordance with GAAP. EBITDA is not intended to represent cash flow and does not represent the measure of cash available for distribution. Our method of computing EBITDA may not
be the same method used to compute similar measures reported by other companies, or EBITDA may be computed differently by us in different contexts (i.e. public reporting versus computation under financing agreements).



46



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##### Table of Contents

The following table presents a reconciliation of (a) GAAP Cash Flows Provided by
Operating Activities to a non-GAAP EBITDA and (b) non-GAAP EBITDA to GAAP net income (in thousands):



|                                                                   |  |                         |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|------------------------------------------------------------------ |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                   |  | Year Ended December 31, |         
|                                                                   |  | 2010                    |          |   | 2009 |   |          | 2008 |  |   | 2007     |   |  | 2006 |        
|Cash flows provided by operating activities                        |  | $                       | 517,025  |   |      | $ | 280,802  |      |  | $ | 259,311  |   |  | $    | 241,552 |   |  | $ | 249,239 |  
|Non-cash compensation expense                                      |  |                         | (4,051   | ) |      |   | (3,582   | )    |  |   | (3,931   | ) |  |      | (3,925  | ) |  |   | (4,112  | )
|Asset retirement obligations                                       |  |                         | (2,579   | ) |      |   | (2,678   | )    |  |   | (2,827   | ) |  |      | (2,419  | ) |  |   | (2,101  | )
|Coal inventory adjustment to market                                |  |                         | (498     | ) |      |   | (3,030   | )    |  |   | (452     | ) |  |      | (21     | ) |  |   | (319    | )
|Net gain (loss) on foreign currency exchange                       |  |                         | (274     | ) |      |   | 653      |      |  |   |         |   |  |      |        |   |  |   |        |  
|Net gain (loss) on sale of property, plant and equipment           |  |                         | (234     | ) |      |   | (136     | )    |  |   | 911      |   |  |      | 3,189   |   |  |   | 1,188   |  
|Gain on sale of coal reserves                                      |  |                         |         |   |      |   |         |      |  |   | 5,159    |   |  |      |        |   |  |   |        |  
|Gain from insurance recoveries for property damage                 |  |                         |         |   |      |   |         |      |  |   |         |   |  |      | 2,357   |   |  |   |        |  
|Gain from insurance settlement proceeds received in a prior period |  |                         |         |   |      |   |         |      |  |   |         |   |  |      | 5,088   |   |  |   |        |  
|Loss on retirement of vertical hoist conveyor system               |  |                         | (1,204   | ) |      |   |         |      |  |   |         |   |  |      |        |   |  |   |        |  
|Other                                                              |  |                         | (1,448   | ) |      |   | (537     | )    |  |   | (366     | ) |  |      | (811    | ) |  |   | (1,119  | )
|Net effect of working capital changes                              |  |                         | (42,555  | ) |      |   | 36,208   |      |  |   | (19,971  | ) |  |      | 7,789   |   |  |   | (5,802  | )
|Interest expense, net                                              |  |                         | 29,858   |   |      |   | 29,781   |      |  |   | 18,369   |   |  |      | 9,928   |   |  |   | 9,185   |  
|Income tax expense (benefit)                                       |  |                         | 1,742    |   |      |   | 709      |      |  |   | (480     | ) |  |      | 1,670   |   |  |   | 3,013   |  
|                                                                   |  |                         |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|EBITDA                                                             |  |                         | 495,782  |   |      |   | 338,190  |      |  |   | 255,723  |   |  |      | 264,397 |   |  |   | 249,172 |  
|Depreciation, depletion and amortization                           |  |                         | (146,881 | ) |      |   | (117,524 | )    |  |   | (105,278 | ) |  |      | (85,310 | ) |  |   | (66,497 | )
|Interest expense, net                                              |  |                         | (29,858  | ) |      |   | (29,781  | )    |  |   | (18,369  | ) |  |      | (9,928  | ) |  |   | (9,185  | )
|Income tax (expense) benefit                                       |  |                         | (1,742   | ) |      |   | (709     | )    |  |   | 480      |   |  |      | (1,670  | ) |  |   | (3,013  | )
|Cumulative effect of accounting change                             |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |        |   |  |   | 112     |  
|                                                                   |  |                         |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Net income                                                         |  | $                       | 317,301  |   |      | $ | 190,176  |      |  | $ | 132,556  |   |  | $    | 167,489 |   |  | $ | 170,589 |  
|                                                                   |  |                         |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  



|(8) | The ARLP Partnerships maintenance capital expenditures, as defined under the terms of its partnership agreement, are those capital expenditures required to
maintain, over the long-term, the operating capacity of its capital assets.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

General

The following discussion of our financial condition and results of
operations should be read in conjunction with the historical financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. For more detailed information regarding the basis of presentation for the following financial
information, please see Item 8. Financial Statements and Supplementary Data.Note 1. Organization and Presentation and Note 2. Summary of Significant Accounting Policies.

Executive Overview

The AHGP Partnership

We have no operating activities apart from those conducted by the ARLP Partnership, and our cash flows currently consist primarily of
distributions from ARLP for our ARLP partnership interests, including the IDRs that we own. 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 interests not owned by us and allocated to SGPs general partner interest in ARLP are
reflected as a noncontrolling interest in our consolidated income statement and balance sheet. Accordingly, the noncontrolling partners interest in the ARLP Partnership is reflected as reduction of consolidated net income in our results of
operations. In addition to the ARLP Partnership, our historical consolidated results of operations include the results of operations of MGP, our wholly-owned subsidiary.

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.



47



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##### Table of Contents

Our primary business objective is to increase our cash distributions to our unitholders by
actively assisting ARLP in executing its business strategy. ARLPs business strategy is to create sustainable, capital-efficient growth in available cash to maximize its distribution to its unitholders by:



| |  |  | expanding its operations by adding and developing mines and coal reserves in existing, adjacent or neighboring properties;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | extending the lives of its current mining operations through acquisition and development of coal reserves using its existing infrastructure;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continuing to make productivity improvements to remain a low-cost producer in each region in which it operates;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | strengthening its position with existing and future customers by offering a broad range of coal qualities, transportation alternatives and customized
services; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | developing strategic relationships to take advantage of opportunities within the coal industry and MLP sector.
| | - |  | --------------------------------------------------------------------------------------------------------------

The ARLP Partnership

The ARLP Partnership is a diversified producer and marketer of coal primarily to major U.S. utilities and industrial users. In 2010, its total coal production was 28.9 million tons and total coal
sales were 30.3 million tons. The coal it produced in 2010 was approximately 8.0% low-sulfur coal, 20.7% medium-sulfur coal and 71.3% high-sulfur coal. The ARLP Partnership classifies low-sulfur coal as coal with a sulfur content of less than
1%, medium-sulfur coal as coal with a sulfur content between 1% and 2%, and high-sulfur coal as coal with a sulfur content of greater than 2%.

The ARLP Partnership operates nine underground mining complexes, and at December 31, 2010, had approximately 697.4 million tons of proven and probable coal reserves in Illinois, Indiana,
Kentucky, Maryland, Pennsylvania and West Virginia. The ARLP Partnership believes it controls adequate reserves to implement its currently contemplated mining plans. The ARLP Partnership is constructing a new mining complex in West Virginia, and it
also operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana. Please see Item 1. BusinessMining Operations for further discussion of the ARLP Partnership mines.

As discussed in more detail in Item 1A. Risk Factors, the ARLP Partnerships results of operations could be impacted by
prices for fuel, steel, explosives and other supplies, unforeseen geologic conditions or mining and processing equipment failures and unexpected maintenance problems, and by the availability or reliability of transportation for coal shipments. The
ARLP Partnerships results of operations also could be impacted by its ability to obtain and renew permits necessary for its operations, secure or acquire coal reserves, or find replacement buyers for coal under contracts with comparable terms
to existing contracts. Moreover, the regulatory environment has grown increasingly more stringent in recent years. As outlined in Item 1. BusinessRegulation and Laws a variety of measures taken by regulatory agencies in the U.S.
and abroad in response to the perceived threat from climate change attributed to greenhouse gas emissions could substantially increase compliance costs for the ARLP Partnership and its customers and reduce demand for coal, which could materially and
adversely impact the ARLP Partnerships results of operations. For additional information regarding some of the risks and uncertainties that affect the ARLP Partnerships business and the industry in which it operates, see Item 1A.
Risk Factors.

The ARLP Partnerships principal expenses related to the production of coal are labor and benefits,
equipment, materials and supplies, maintenance, royalties and excise taxes. Unlike many of the ARLP Partnerships competitors in the eastern U.S., it employs a totally union-free workforce. Many of the benefits of the ARLP Partnerships
union-free workforce are related to higher productivity and are not necessarily reflected in direct costs. In addition, while the ARLP Partnership does not pay its customers transportation costs, they may be substantial and are often the
determining factor in a coal consumers contracting decision. The ARLP Partnerships mining operations are located near many of the major eastern utility generating plants and on major coal hauling railroads in the eastern U.S. The ARLP
Partnerships River View mine, Tunnel Ridge development project and Mt. Vernon transloading facility are located on the Ohio River, and as indicated in Item 2. Properties, most of the ARLP Partnerships operations have
access to barge facilities.

We have four reportable segments: the Illinois Basin, Central Appalachia, Northern Appalachia and
Other and Corporate. The first three segments correspond to the three major coal producing regions in the eastern U.S. Coal quality, coal seam height, mining and transportation methods and regulatory issues are similar within each of these three
segments.



| |  |  | Illinois Basin segment is comprised of Webster County Coals Dotiki mining complex, Gibson County Coals Gibson North mining complex,
Hopkins County Coals Elk Creek mining complex, White County Coals Pattiki
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | mining complex, Warriors mining complex, River Views mining complex, which initiated operations in 2009, the Sebree property, the Gibson South property and certain properties of
Alliance Resource Properties and its wholly-owned subsidiary, ARP Sebree, LLC. The ARLP Partnership is in the process of permitting the Gibson South property and the Sebree property for future mine development. For more information on the permitting
process, and matters that could hinder or delay the process, please read Item 1. BusinessRegulation and LawsMining Permits and Approvals.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Central Appalachian segment is comprised of Pontikis and MC Minings mining complexes.
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Northern Appalachiansegment is comprised of Mettiki (MD)s mining complex, Mettiki (WV)s Mountain View mining complex, two small
third-party mining operations, a mining complex currently under construction at Tunnel Ridge and the Penn Ridge property. In May 2010, incidental production began from mine development activities at Tunnel Ridge, however, longwall production is not
anticipated until early 2012. The ARLP Partnership is in the process of permitting the Penn Ridge property for future mine development. For more information on the permitting process, and matters that could hinder or delay the process, please read
Item 1. BusinessRegulation and LawsMining Permits and Approvals.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other and Corporate segment includes ARLP Partnership and AHGP marketing and administrative expenses, the Matrix Group, the Mt. Vernon dock
activities, coal brokerage activity, the ARLP Partnerships equity investment in MAC and certain properties of Alliance Resource Properties.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

How the ARLP Partnership Evaluates its Performance

The ARLP
Partnerships management uses a variety of financial and operational measurements to analyze its performance. Primary measurements include the following: (1) salable tons produced per unit shift; (2) coal sales price per ton;
(3) Segment Adjusted EBITDA Expense per ton; (4) EBITDA; and (5) Segment Adjusted EBITDA

Saleable Tons
Produced Per Unit Shift. The ARLP Partnership reviews saleable tons produced per unit shift as part of its operational analysis to measure the productivity of its operating segments which is significantly influenced by mining conditions and the
efficiency of its preparation plants. A discussion of mining conditions and preparation plant costs are found below under Analysis of Historical Results of Operations and therefore provides implicit analysis of saleable tons
produced per unit shift.

Coal Sales Price per Ton. The ARLP Partnership defines coal sales price per ton as total coal
sales divided by tons sold. The ARLP Partnership reviews coal sales price per ton to evaluate marketing efforts and for market demand and trend analysis.

Segment Adjusted EBITDA Expense per Ton. The ARLP Partnership defines Segment Adjusted EBITDA Expense per ton as the sum of operating expenses, outside coal purchases and other income divided by
total tons sold. The ARLP Partnership reviews segment adjusted EBITDA expense per ton for cost trends.

EBITDA. The
ARLP Partnership defines EBITDA (a non-GAAP financial measure) as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, and depreciation, depletion and amortization. EBITDA is used as a
supplemental financial measure by the ARLP Partnerships management and by external users of its financial statements such as investors, commercial banks, research analysts and others, to assess:



| |  |  | the financial performance of its assets without regard to financing methods, capital structure or historical cost basis;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of its assets to generate cash sufficient to pay interest costs and support its indebtedness;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | its operating performance and return on investment compared to those of other companies in the coal energy sector, without regard to financing or
capital structures; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

Segment Adjusted EBITDA. The ARLP Partnership defines Segment Adjusted EBITDA (a non-GAAP financial
measure) as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization and corporate general and administrative expenses. Management therefore is able 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.



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##### Table of Contents

Sources of the ARLP Partnerships Revenues

In 2010, approximately 91.5% of the ARLP Partnerships sales tonnage was consumed by electric utilities, with the
balance shipped to third-party resellers, industrial consumers and cogeneration plants. In 2010, approximately 92.4% of the ARLP Partnerships sales tonnage, including approximately 94.5% of its medium- and high-sulfur coal sales tonnage, was
sold under long-term contracts. The balance of the ARLP Partnerships sales was made in the spot market. The ARLP Partnerships long-term contracts contribute to its stability and profitability by providing greater predictability of sales
volumes and sales prices. In 2010, approximately 91.8% of the ARLP Partnerships medium- and high-sulfur coal was sold to utility plants with installed pollution control devices. These devices, also known as scrubbers, eliminate substantially
all emissions of sulfur dioxide.

Health Care Reform

On March 23, 2010, President Obama signed into law the PPACA. Additionally, on March 30, 2010, President Obama signed into law a reconciliation measure, the Health Care and Education
Reconciliation Act of 2010. Implementation of the PPACA and the Health Care and Education Reconciliation Act (collectively, the Health Care Act) will result in comprehensive changes to health care in the U.S. Implementation of this
legislation is planned to occur in phases, with standard plan changes taking effect beginning in 2010, but to a greater extent with the 2011 benefit plan year and extending through 2018.

The Health Care Act has both short-term and long-term implications on benefit plan eligibility, coverage requirements, and benefit
standards and limitations. In the short term, the ARLP Partnerships health care costs are expected to increase due to raising the maximum age and easing of eligibility limitations for covered dependents. The Health Care Act also prevents the
group health plan from limiting benefit payments for participants who meet or exceed annual or lifetime dollar limits per covered individual. The ARLP Partnership does not currently expect raising the maximum age and easing of eligibility
limitations for covered dependents to significantly increase its annual health care costs beginning in 2011. In addition, the ARLP Partnership currently expects removing the lifetime maximum could have an additional impact on it that the ARLP
Partnership is unable to reasonably estimate at this time. While historically few participants have reached the plan lifetime maximum limit of $1 million, future federal and state mandates are expected to impact large claims costs and make this a
potentially greater risk in the future. In the long term, the ARLP Partnership plans health care costs are expected to increase for various reasons due to the Health Care Act, including the potential impact of an excise tax on high
cost plans (beginning in 2018), among other standard requirements. The ARLP Partnership has chosen not to grandfather its health care plan as allowed under the Health Care Act. This decision allows the ARLP Partnership to make
benefit modifications that encourage participants to use high value, lower cost medical care options such as on-site medical services, generic preferred medications, and urgent care centers instead of emergency rooms.

The ARLP Partnership anticipates that certain government agencies will provide additional regulations or interpretations concerning the
application of the Health Care Act and reporting required thereunder. Until these regulations or interpretations are published, the ARLP Partnership is unable to reasonably estimate the further impact of such federal mandate requirements on its
future health care costs.

The Health Care Act also amended previous legislation related to coal workers pneumoconiosis,
or black lung, providing automatic extension of awarded lifetime benefits to surviving spouses and providing changes to the legal criteria used to assess and award claims. The impact of these changes to the ARLP Partnerships current population
of beneficiaries and claimants resulted in an estimated $8.3 million increase to the ARLP Partnerships black lung obligation at December 31, 2010. This increase to the ARLP Partnerships obligation excludes the impact of potential
re-filing of closed claims and potential filing rates for employees who terminated more than seven years ago as the ARLP Partnership does not have sufficient information to determine what, if any, claims will be filed until regulations are issued.

The ARLP Partnership will continue to evaluate the potential impact of the legislation on its self-insured long term
disability plan, black lung liabilities, results of operations and internal controls as governmental agencies issue interpretations regarding the meaning and scope of the Health Care Act. However, the ARLP Partnership believes it is likely that its
costs will increase as a result of these provisions, which may have an adverse impact on its results of operations and cash flows.



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##### Table of Contents

The DoddFrank Act

On July 21, 2010, President Obama signed into law the DoddFrank Wall Street Reform and Consumer Protection Act
(DoddFrank Act). The DoddFrank Act gives regulators new resolution authority, creates a new council to monitor and address systemic risk, changes the mandate of the Federal Reserve, imposes significant new regulations on
banking organizations, makes significant changes to the rules that affect the process of financing business enterprises and creates a new governmental authority, the Bureau of Consumer Financial Protection, to regulate retail financial products and
services, among many other provisions.

The additional regulations imposed by the DoddFrank Act on financial
institutions may result in increased costs associated with future borrowings and decreased availability of credit. However, we are presently unable to determine the significance of any potential increase in our borrowing costs or potential liquidity
constraints, if any. The DoddFrank Act also requires public mining companies to report certain safety information regarding citations, penalties and pending legal actions in each periodic report filed with the SEC and to file current reports
on Form 8-K for certain safety matters. We are continuing to evaluate the effect of the DoddFrank Act on the Partnerships operations.

Analysis of Historical Results of Operations

2010 Compared with 2009

We reported net income of $317.3 million in 2010, an increase of 66.8% compared to net income of $190.2 million in 2009.
This increase of $127.1 million was principally due to increased tons sold and improved contract pricing resulting in an average coal sales price of $51.21 per ton sold, as compared to $46.60 per ton sold in 2009. The ARLP Partnership sold
30.3 million tons and produced 28.9 million tons in 2010 compared to 25.0 million tons sold and 25.8 million tons produced in 2009. This increase in tons sold and produced primarily reflects increased production from the ARLP
Partnerships River View mine and resulted in higher operating expenses during 2010, particularly impacting materials and supplies expenses, sales-related expenses and labor and labor-related expenses. Expenses were further impacted by
increased depreciation, depletion and amortization.



|                                              |      |                |           |      |                |   |           |  |  |      |       |  |  |   |       | 
|--------------------------------------------- | ---- | -------------- | --------- | ---- | -------------- | - | --------- |  |  | ---- | ----- |  |  | - | ----- | 
|                                              |      | December 31,   |           |      | December 31,   |  
|                                              | 2010 |                |           | 2009 |                |   | 2010      |  |  | 2009 |      
|                                              |      | (in thousands) |           |      | (per ton sold) |  
|Tons sold                                     |      |                | 30,295    |      |                |   | 24,975    |  |  |      | N/A   |  |  |   | N/A   | 
|Tons produced                                 |      |                | 28,860    |      |                |   | 25,838    |  |  |      | N/A   |  |  |   | N/A   | 
|Coal sales                                    |      | $              | 1,551,539 |      |                | $ | 1,163,871 |  |  | $    | 51.21 |  |  | $ | 46.60 | 
|Operating expenses and outside coal purchases |      | $              | 1,027,013 |      |                | $ | 805,051   |  |  | $    | 33.90 |  |  | $ | 32.23 | 

Coal sales.
Coal sales increased 33.3% to $1.6 billion in 2010 from $1.2 billion in 2009. The increase of $387.6 million reflected the benefit of increased tons sold (contributing $247.9 million in coal sales) and higher average coal sales prices (contributing
$139.7 million in additional coal sales). Average coal sales price increased $4.61 per ton sold in 2010 to $51.21 per ton compared to $46.60 per ton in 2009, primarily as a result of improved contract pricing across all regions.

Operating expenses. Operating expenses increased 26.6% to $1.0 billion in 2010 from $797.5 million in 2009 primarily due to record
coal sales and production volumes. Increased River View production and Tunnel Ridge development combined to increase certain operating expenses $109.0 million during 2010 compared to 2009 and are generally included in the variances discussed further
below. In addition to the impact of record volumes, operating expenses were impacted by various other factors, the most significant of which are discussed below:



| |  |  | Labor and benefit expenses per ton produced, excluding workers compensation, decreased 1.0% to $10.97 per ton in 2010 from $11.08 per ton in
2009. The decrease of $0.11 per ton was primarily attributable to lower labor cost per ton resulting from production at the ARLP Partnerships River View mine, a decrease in the cost of training new employees in the Illinois Basin and lower
pension plan expense, partially offset by increased mine development labor at the ARLP Partnerships Tunnel Ridge mine, heightened regulatory oversight, particularly at the Central Appalachian mines, and production disruptions at the Dotiki,
Gibson and Pattiki mines during 2010;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Workers compensation expenses per ton produced decreased to $0.72 per ton in 2010 from $0.96 per ton in 2009. The decrease of $0.24 per ton
primarily reflected favorable reserve adjustments in the fourth quarter of 2010 related to the ARLP Partnerships annual actuary analysis for claims related to prior years, partially offset by a non-cash charge that resulted from a decrease in
the discount rate from 5.27% at the end of 2009 to 4.70% at the end of 2010;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Material and supplies expenses per ton produced increased 9.7% to $10.55 per ton in 2010 from $9.62 per ton in 2009. The increase of $0.93 per ton
resulted from increased costs for certain products and services, primarily roof support (increase of $0.22 per ton), outside services expenses (increase of $0.19 per ton), power and fuel used in the mining process (increase of $0.17 per ton),
contract labor used in the mining process (increase of $0.12 per ton) and rock dust (increase of $0.09 per ton) in addition to the negative cost impact of heightened regulatory oversight;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintenance expenses per ton produced decreased 1.1% to $3.63 per ton in 2010 from $3.67 per ton in 2009. The decrease of $0.04 per ton resulted
primarily from the benefit of newer equipment and increased production at the ARLP Partnerships River View mining complex, partially offset by higher maintenance at the ARLP Partnerships Mettiki mine reflecting increased longwall and
continuous mining run days and higher maintenance costs associated with the ARLP Partnerships mine development project at Tunnel Ridge;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mine administration expenses increased $14.9 million in 2010 compared to 2009, primarily due to increased legal expenses and related contingency
accruals, higher third-party product sales by Matrix Design and increased regulatory costs;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Contract mining expenses increased $5.6 million in 2010 compared to 2009. The increase primarily reflects the restart of a third-party mining operation
in the Northern Appalachian region during February 2010 that was previously idled in May 2009 and increased production from other existing contract mining operations in Northern Appalachia, both in response to increased demand in the export coal
market;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Production taxes and royalties (which were incurred as a percentage of coal sales or based on coal volumes) increased $0.48 per produced ton sold in
2010 compared to 2009, primarily as a result of increased average coal sales prices across all regions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating expenses increased due to a reduction in coal inventory of 1.0 million tons in 2010 reflecting higher coal sales, in comparison to 2009
during which coal inventory increased 1.1 million tons; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating expenses in 2010 included $1.2 million for the retirement of certain assets resulting from the failure of the vertical hoist conveyor system
at the ARLP Partnerships Pattiki mine. For more information, please read Part II. Item 8. Financial StatementsNote 4. Pattiki Vertical Hoist Conveyor System Failure of this Annual Report on Form 10-K.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other sales and operating revenues. Other sales and operating revenues are principally
comprised of Mt. Vernon transloading revenues, products and services provided by MAC (in 2009 only), Matrix Design and other outside services. Other sales and operating revenues increased 17.2% to $24.6 million in 2010 from $21.0 million in 2009.
The increase of $3.6 million was primarily attributable to increased Matrix Design product sales, partially offset by lower transloading revenues and decreased rock dust revenues reflecting the deconsolidation of MAC. For more information about MAC,
please read Part II. Item 8. Financial StatementsNote 13. Mid-America Carbonates of this Annual Report on Form 10-K.

Outside coal purchases. Outside coal purchases increased to $17.1 million in 2010 from $7.5 million in 2009. The increase of $9.6 million was primarily attributable to an increase in outside coal
purchases related to the Northern Appalachian region in response to improved demand in the export coal markets and increased coal brokerage activity partially offset by decreased outside coal purchases in the Central Appalachian region due to the
lack of attractive sales opportunities in the coal spot markets that were available in the first quarter of 2009.

General
and administrative. General and administrative expenses in 2010 increased to $54.2 million compared to $42.9 million in 2009. The increase of $11.3 million was primarily attributable to increased incentive compensation expense and retirement
plan expense.



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Depreciation, depletion and amortization. Depreciation, depletion and amortization
increased to $146.9 million in 2010 compared to $117.5 million in 2009. The increase of $29.4 million was primarily attributable to additional depreciation expense associated with the ARLP Partnerships River View mine in addition to continuing
capital expenditures related to infrastructure improvements and efficiency projects.

Interest expense. Interest
expense, net of capitalized interest, decreased to $30.1 million in 2010 from $30.8 million in 2009. The decrease of $0.7 million was principally attributable to reduced interest expense resulting from annual principal repayments made during August
2010 and 2009 of $18.0 million on the ARLP Partnerships original senior notes issued in 1999, partially offset by increased interest expense for borrowings under the ARLP Partnerships revolving credit facility during 2010, each of which
is discussed in more detail below under Debt Obligations.

Interest income.Interest income decreased
to $0.2 million in 2010 from $1.1 million in 2009. The decrease of $0.9 million resulted from reduced interest income earned on short-term investments, which were substantially liquidated throughout 2009.

Transportation revenues and expenses. Transportation revenues and expenses each decreased to $33.6 million in 2010 from $45.7
million in 2009. The decrease of $12.1 million was primarily attributable to reduced tonnage in 2010 for which the ARLP Partnership arranged the transportation compared to 2009. The cost of transportation services are passed through to its
customers. Consequently, the ARLP Partnership does not realize any gain or loss on transportation revenues.

Income tax
expense. Income tax expense increased to $1.7 million in 2010 from $0.7 million in 2009. The increase of $1.0 million was primarily due to higher net income in 2010 from the ARLP Partnerships Matrix Design operation.

Net income attributable to 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 and a third-party ownership interest in MAC (MAC in 2009 only). The noncontrolling interest designated as affiliate represents SGPs 0.01% general
partner interest in ARLP and 0.01% general partner interest in the Intermediate Partnership. The noncontrolling interest designated as non-affiliates represents the limited partners interest in ARLP controlled through the common unit
ownership, excluding the 15,544,169 common units of ARLP held by us. The noncontrolling interest designated as MAC in 2009 represents a 50% third-party interest in MAC. The net income attributable to noncontrolling interest was $143.0 million and
$76.0 million in 2010 and 2009, respectively.The increase in net income attributable to noncontrolling interest is due to an increase in the consolidated net income of the ARLP Partnership due to the changes in revenues and expenses
described above. For more information about MAC, please read Item 8. Financial StatementsNote 13. Mid-America Carbonates of this Annual Report on Form 10-K.



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Segment Information.Our 2010 Segment Adjusted EBITDA increased 44.3% to $550.0
million from 2009 Segment Adjusted EBITDA of $381.1 million. Segment Adjusted EBITDA, tons sold, coal sales, other sales and operating revenues and Segment Adjusted EBITDA Expense by segment are as follows (in thousands):



|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|----------------------------------------- |  | ----------------------- | --------- | - | ------------------- | - | --------- | - |  | - | ------- | - |  |  | ----- | --
|                                          |  | Year Ended December 31, |           |   | Increase (Decrease) |  
|                                          |  | 2010                    |           |   | 2009                |   |          
|Segment Adjusted EBITDA                   |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 460,592   |   |                     | $ | 315,542   |   |  | $ | 145,050 |   |  |  | 46.0  | % 
|Central Appalachia                        |  |                         | 36,714    |   |                     |   | 41,149    |   |  |   | (4,435  | ) |  |  | (10.8 | )%
|Northern Appalachia                       |  |                         | 46,702    |   |                     |   | 15,552    |   |  |   | 31,150  |   |  |  | (1    | ) 
|Other and Corporate                       |  |                         | 5,989     |   |                     |   | 9,192     |   |  |   | (3,203  | ) |  |  | (34.8 | )%
|Elimination                               |  |                         |          |   |                     |   | (370      | ) |  |   | 370     |   |  |  | (1    | ) 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total Segment Adjusted EBITDA (2)         |  | $                       | 549,997   |   |                     | $ | 381,065   |   |  | $ | 168,932 |   |  |  | 44.3  | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Tons sold                                 |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  |                         | 24,763    |   |                     |   | 19,660    |   |  |   | 5,103   |   |  |  | 26.0  | % 
|Central Appalachia                        |  |                         | 2,221     |   |                     |   | 2,641     |   |  |   | (420    | ) |  |  | (15.9 | )%
|Northern Appalachia                       |  |                         | 3,256     |   |                     |   | 2,660     |   |  |   | 596     |   |  |  | 22.4  | % 
|Other and Corporate                       |  |                         | 55        |   |                     |   | 14        |   |  |   | 41      |   |  |  | (1    | ) 
|Elimination                               |  |                         |          |   |                     |   |          |   |  |   |        |   |  |  |      |   
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total tons sold                           |  |                         | 30,295    |   |                     |   | 24,975    |   |  |   | 5,320   |   |  |  | 21.3  | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Coal sales                                |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 1,176,275 |   |                     | $ | 846,940   |   |  | $ | 329,335 |   |  |  | 38.9  | % 
|Central Appalachia                        |  |                         | 164,834   |   |                     |   | 179,369   |   |  |   | (14,535 | ) |  |  | (8.1  | )%
|Northern Appalachia                       |  |                         | 207,057   |   |                     |   | 136,412   |   |  |   | 70,645  |   |  |  | 51.8  | % 
|Other and Corporate                       |  |                         | 3,373     |   |                     |   | 1,150     |   |  |   | 2,223   |   |  |  | (1    | ) 
|Elimination                               |  |                         |          |   |                     |   |          |   |  |   |        |   |  |  |      |   
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total coal sales                          |  | $                       | 1,551,539 |   |                     | $ | 1,163,871 |   |  | $ | 387,668 |   |  |  | 33.3  | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Other sales and operating revenues        |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 1,357     |   |                     | $ | 1,151     |   |  | $ | 206     |   |  |  | 17.9  | % 
|Central Appalachia                        |  |                         | 199       |   |                     |   | 191       |   |  |   | 8       |   |  |  | 4.2   | % 
|Northern Appalachia                       |  |                         | 3,520     |   |                     |   | 3,316     |   |  |   | 204     |   |  |  | 6.2   | % 
|Other and Corporate                       |  |                         | 41,359    |   |                     |   | 38,832    |   |  |   | 2,527   |   |  |  | 6.5   | % 
|Elimination                               |  |                         | (21,815   | ) |                     |   | (22,492   | ) |  |   | 677     |   |  |  | 3.0   | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total other sales and operating revenues  |  | $                       | 24,620    |   |                     | $ | 20,998    |   |  | $ | 3,622   |   |  |  | 17.2  | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Segment Adjusted EBITDA Expense           |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 717,040   |   |                     | $ | 532,549   |   |  | $ | 184,491 |   |  |  | 34.6  | % 
|Central Appalachia                        |  |                         | 128,318   |   |                     |   | 138,412   |   |  |   | (10,094 | ) |  |  | (7.3  | )%
|Northern Appalachia                       |  |                         | 163,876   |   |                     |   | 124,176   |   |  |   | 39,700  |   |  |  | 32.0  | % 
|Other and Corporate                       |  |                         | 38,743    |   |                     |   | 30,789    |   |  |   | 7,954   |   |  |  | 25.8  | % 
|Elimination                               |  |                         | (21,815   | ) |                     |   | (22,122   | ) |  |   | 307     |   |  |  | 1.4   | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total Segment Adjusted EBITDA Expense (3) |  | $                       | 1,026,162 |   |                     | $ | 803,804   |   |  | $ | 222,358 |   |  |  | 27.7  | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   



|(1) | Percentage increase or decrease was greater than or equal to 100%.
|--- | ------------------------------------------------------------------



|(2) | Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as EBITDA, excluding general and administrative expense. EBITDA is defined as net income (prior to the
allocation of noncontrolling interest) before net interest expense, income taxes, and depreciation, depletion and amortization. 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, to assess:
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the financial performance of the ARLP Partnerships assets without regard to financing methods, capital structure or historical cost basis;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the ability of the ARLP Partnerships assets to generate cash sufficient to pay interest costs and support its indebtedness;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | the ARLP Partnerships operating performance and return on investment compared to those of other companies in the coal energy sector, without
regard to financing or capital structures; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those
stated in the above explanation of EBITDA. In addition, the exclusion of corporate general and administrative expenses, which are discussed above under Analysis of Historical Results of Operations, from 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.

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



|                                         |  |                         |          |   |      |   |          |  
|---------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                         |  | Year Ended December 31, |         
|                                         |  | 2010                    |          |   | 2009 |  
|Segment Adjusted EBITDA                  |  | $                       | 549,997  |   |      | $ | 381,065  |  
|General and administrative               |  |                         | (54,215  | ) |      |   | (42,875  | )
|Depreciation, depletion and amortization |  |                         | (146,881 | ) |      |   | (117,524 | )
|Interest expense, net                    |  |                         | (29,858  | ) |      |   | (29,781  | )
|Income tax expense                       |  |                         | (1,742   | ) |      |   | (709     | )
|                                         |  |                         |          |   |      |   |          |  
|Net income                               |  | $                       | 317,301  |   |      | $ | 190,176  |  
|                                         |  |                         |          |   |      |   |          |  



|(3) | Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, outside 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. Segment Adjusted EBITDA Expense is used as a supplemental financial measure by
the ARLP Partnerships management to assess the operating performance of the segments. In the ARLP Partnerships evaluation of EBITDA, which is discussed above under How We Evaluate Our Performance, Segment
Adjusted EBITDA Expense is a key component of 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 of the ARLP
Partnership to focus solely on the evaluation of segment operating performance as it primarily relates to operating expenses. Outside coal purchases are included in Segment Adjusted EBITDA Expense because tons sold and coal sales include sales from
outside coal purchases.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|                                                                       |  |                         |           |   |      |   |         |  
|---------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | ------- | -
|                                                                       |  | Year Ended December 31, |          
|                                                                       |  | 2010                    |           |   | 2009 |  
|Segment Adjusted EBITDA Expense                                        |  | $                       | 1,026,162 |   |      | $ | 803,804 |  
|Outside coal purchases                                                 |  |                         | (17,078   | ) |      |   | (7,524  | )
|Other income                                                           |  |                         | 851       |   |      |   | 1,247   |  
|                                                                       |  |                         |           |   |      |   |         |  
|Operating expense (excluding depreciation, depletion and amortization) |  | $                       | 1,009,935 |   |      | $ | 797,527 |  
|                                                                       |  |                         |           |   |      |   |         |  

Illinois Basin  Segment Adjusted EBITDA increased 46.0% to $460.6 million in 2010 from $315.5 million
in 2009. The increase of $145.1 million was primarily attributable to increased tons sold, which increased 26.0% to 24.8 million tons sold in 2010, as well as improved contract pricing resulting in a higher average coal sales price of $47.50
per ton during 2010 compared to $43.08 per ton in 2009. Coal sales increased 38.9% to $1.2 billion in 2010 compared to $846.9 million in 2009. The increase of $329.3 million primarily reflects increased sales from the ARLP Partnerships River
View mine (which commenced operations in August of 2009 and continued to expand production during 2010), increased sales from coal inventories in the region and the negative impact of weather disruptions in 2009 at the ARLP Partnerships
Dotiki, Warrior and Elk Creek mines, partially offset by production disruptions at its Dotiki, Gibson and Pattiki mines during 2010. Total Segment Adjusted EBITDA Expense in 2010 increased 34.6% to $717.0 million from $532.5 million in 2009 and
increased $1.87 per ton sold to $28.96 from $27.09 per ton sold, primarily as a result of certain cost increases described above under consolidated operating expenses as well as a $1.2 million loss on the retirement of certain assets related to the
failure of the vertical hoist conveyor system at the ARLP Partnerships Pattiki mine, the aforementioned production disruptions at the ARLP Partnerships Dotiki, Gibson and Pattiki mines and increased sales from coal inventories in the
region. For more information on the Pattiki mine, please read Part II. Item 8. Financial StatementsNote 4. Pattiki Vertical Hoist Conveyor System Failure of this Annual Report on Form 10-K.

Central Appalachia  Segment Adjusted EBITDA decreased $4.4 million, or 10.8%, to $36.7 million in 2010, compared to $41.1 million
in 2009. The decrease was primarily the result of lower sales volumes due to the impact of heightened regulatory oversight, reduced coal demand in the spot market during 2010, lower clean coal recovery due to mining conditions and the continued
impact of idling one mining unit at Pontiki beginning in July 2009, partially offset by improved contract pricing in 2010 that resulted in an increase in the average coal sales price of $6.28 per ton to $74.19 per ton in 2010, as compared to $67.91
per ton in 2009. Segment Adjusted EBITDA Expense per ton sold during 2010 increased to $57.76 compared to $52.41 per ton sold, an increase of $5.35 per ton sold, reflecting certain cost increases described above under consolidated operating
expenses, as well as the impact of lower coal sales volumes and decreased coal production in response to lower spot market demand and lower productivity due to Pontikis transition from the depleted Pond Creek coal seam into the thinner Van
Lear coal seam beginning in 2009. Although Segment Adjusted EBITDA Expense per ton sold increased, Segment Adjusted EBITDA Expense for 2010 decreased 7.3% to $128.3 million from $138.4 million in 2009 primarily as a result of lower coal sales offset
in part by higher expenses per ton as described above.

Northern Appalachia  Segment Adjusted EBITDA increased to $46.7
million in 2010, compared to $15.6 million in 2009. The increase of $31.1 million was primarily attributable to a higher average sales price of $63.60 per ton sold in 2010 compared to $51.28 per ton sold in 2009, and a 22.4% increase in tons sold to
3.3 million tons in 2010, both resulting from improved demand in the export coal markets, as well as the benefit of increased production days and additional contract miner production. Segment Adjusted EBITDA Expense for 2010 increased 32.0% to
$163.9 million from $124.2 million in 2009 and increased $3.66 on a per ton sold basis to $50.34 from $46.68 per ton sold, primarily as a result of higher coal sales volumes, higher costs associated with producing metallurgical quality coal, lower
coal recoveries due to adverse geologic conditions, as well as other cost increases described above under consolidated operating expenses, including non-capitalized costs incurred related to the ARLP Partnerships Tunnel Ridge mine development
project.

Other and Corporate  Segment Adjusted EBITDA decreased to $6.0 million in 2010 from $9.2 million in 2009. The
decrease of $3.2 million was primarily attributable to the impact of the deconsolidation of MAC effective January 1, 2010, lower EBITDA associated with Matrix Group safety equipment sales to the ARLP Partnerships other subsidiaries (which
are eliminated upon consolidation), a loss in 2010 compared to a gain in 2009 associated with United Kingdom (UK) currency previously held for equipment purchases from a UK supplier and lower Mt. Vernon outside transloading revenues and
affiliate administrative service revenues, partially offset by higher EBITDA resulting from increased third-party safety equipment sales and services revenue at Matrix Design. Other sales and operating revenues



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increased 6.5% to $41.4 million for 2010 compared to $38.8 million for 2009. The increase of $2.6 million was primarily attributable to increased services revenue and sales of mine safety
equipment by the Matrix Group. Segment Adjusted EBITDA Expense increased 25.8% to $38.7 million for 2010, primarily due to increased expenses associated with higher services revenue and safety equipment sales by the Matrix Group, higher coal
brokerage expenses associated with increased brokerage coal sales offset in part by the impact of the deconsolidation of MAC mentioned above. For more information about MAC, please read Part II. Item 8. Financial Statements 
Note 13. Mid-America Carbonates of this Annual Report on Form 10-K.

2009 Compared with 2008

We reported net income of $190.2 million in 2009, an increase of 43.5% compared to net income of $132.6 million in 2008. The increase of
$57.6 million was principally due to improved contract pricing resulting in an average coal sales price of $46.60 per ton sold, compared to $40.23 per ton sold in 2008, partially offset by lower sales volumes and higher operating expense per ton
sold in 2009. The ARLP Partnership had tons sold of 25.0 million and tons produced of 25.8 million in 2009 compared to 27.2 million tons sold and 26.4 million tons produced in 2008. Unplanned customer outages, contractual
deferrals and weak spot market demand combined to reduce coal sales and production volumes in 2009 compared to 2008. In addition, the 2008 operating results included significant non-recurring gains of $9.9 million related to the sale of non-core
coal reserves and the settlement of claims. Decreased operating expenses in the aggregate primarily reflected lower coal production and sales volumes, as well as reduced materials and supplies expenses, contract mining costs and other factors
described below. The significant factors related to increased operating expense per ton are also included in our analysis below.



|                                              |      |                |           |      |                |   |           |  |  |      |       |  |  |   |       | 
|--------------------------------------------- | ---- | -------------- | --------- | ---- | -------------- | - | --------- |  |  | ---- | ----- |  |  | - | ----- | 
|                                              |      | December 31,   |           |      | December 31,   |  
|                                              | 2009 |                |           | 2008 |                |   | 2009      |  |  | 2008 |      
|                                              |      | (in thousands) |           |      | (per ton sold) |  
|Tons sold                                     |      |                | 24,975    |      |                |   | 27,170    |  |  |      | N/A   |  |  |   | N/A   | 
|Tons produced                                 |      |                | 25,838    |      |                |   | 26,429    |  |  |      | N/A   |  |  |   | N/A   | 
|Coal sales                                    |      | $              | 1,163,871 |      |                | $ | 1,093,059 |  |  | $    | 46.60 |  |  | $ | 40.23 | 
|Operating expenses and outside coal purchases |      | $              | 805,051   |      |                | $ | 825,630   |  |  | $    | 32.23 |  |  | $ | 30.39 | 

Coal sales.
Coal sales increased 6.5% to $1.2 billion in 2009 from $1.1 billion in 2008. The increase of $0.1 billion reflected the benefit of higher average coal sales prices (contributing an increase of $0.2 billion) partially offset by lower sales volume
(reducing coal sales by $0.1 billion). Average coal sales prices increased $6.37 per ton sold in 2009 to $46.60 per ton compared to 2008, primarily as a result of improved contract pricing on long-term sales contracts, particularly in the Illinois
Basin and Central Appalachian segments described below.

Operating expenses. Operating expenses in the aggregate
decreased 0.5% to $797.5 million in 2009 from $801.9 million in 2008 primarily as a result of decreased tons produced and sold, in addition to various other factors, the most significant of which are discussed below. In addition, factors related to
increased operating expense per ton are also included in our analysis below:



| |  |  | Labor and benefit expenses per ton produced, excluding workers compensation, increased 16.5% to $11.08 per ton in 2009 from $9.51 per ton in
2008. The increase of $1.57 per ton represents pay rate increases and higher benefit expenses, particularly increased health care costs and retirement expenses, and the impact of increased headcount as the ARLP Partnership continues to hire and
train new employees for the River View and Tunnel Ridge mine development projects;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Workers compensation expenses per ton produced increased 23.1% to $0.96 per ton in 2009 from $0.78 per ton in 2008. The increase of $0.18 per ton
primarily reflected a non-cash charge that resulted from a decrease in the discount rate from 6.11% at the end of 2008 to 5.27% at the end of 2009, which increased the accrued liabilities for the present value of estimated future claim payments;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Material and supplies expenses per ton produced decreased 2.2% to $9.62 per ton in 2009 from $9.84 per ton in 2008. This decrease of $0.22 per ton
resulted from decreased costs for certain products and services, primarily roof support (decrease of $0.25 per ton), outside expenses including dozer repair and trucking (decrease of $0.12 per ton) and fuel used in the mining process (decrease of
$0.10 per ton). These decreases were offset in part by increased costs in bits and cutter bars (increase of $0.05 per ton), higher power costs (increase of $0.12
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | per ton), preparation plant costs (increase of $0.09 per ton) reflecting reduced clean coal recovery and additional supplies associated with disruptions related to an ice storm during the 2009
first quarter in the Illinois Basin region, among other factors;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintenance expenses per ton produced increased 10.9% to $3.67 per ton in 2009 from $3.31 per ton in 2008. The increase of $0.36 per ton resulted from
higher repair costs related to continuous miners, belt conveyor equipment and other equipment categories;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mine administration expenses decreased $4.2 million in 2009 compared to 2008, primarily as a result of lower accruals related to estimated regulatory
settlements;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Contract mining expenses decreased $5.3 million in 2009 compared to 2008. The decrease reflects a curtailment of third-party mining operations in the
ARLP Partnerships Northern Appalachian segment in response to weak demand in export and spot coal markets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Production taxes and royalties (which were incurred as a percentage of coal sales or based on coal volumes) increased $0.48 per produced ton sold in
2009 compared to 2008, primarily as a result of increased average coal sales prices;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating expenses incurred in 2009 relating to the ARLP Partnerships River View and Tunnel Ridge mine development projects increased $18.7
million over 2008. These expenses are generally included in the variances discussed above; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 2008 operating expenses benefited from a $1.9 million gain on settlement of claims relating to the vertical hoist conveyor incident at the ARLP
Partnerships Pattiki mine.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other sales and operating revenues. Other sales and operating
revenues are principally comprised of Mt. Vernon transloading revenues, products and services provided by MAC, Matrix Design, and other outside services. Other sales and operating revenues increased 14.6% to $21.0 million in 2009 from $18.3 million
in 2008. The increase of $2.7 million was primarily attributable to increased revenues from Matrix Design product sales and Mt. Vernon transloading revenues partially offset by decreases in ash disposal revenues and MAC product sales.

Outside coal purchases. Outside coal purchases decreased to $7.5 million in 2009 from $23.8 million in 2008. The decrease of $16.3
million was primarily attributable to a decrease in outside coal purchases in our Central and Northern Appalachian regions in response to a weak demand in export and spot coal markets.

General and administrative. General and administrative expenses in 2009 increased to $42.9 million compared to $38.9 million in
2008. The increase of $4.0 million was primarily attributable to higher unit-based incentive compensation expense and increased salary and benefit costs primarily related to higher staffing levels.

Depreciation, depletion and amortization. Depreciation, depletion and amortization increased to $117.5 million in 2009 compared to
$105.3 million in 2008. The increase of $12.2 million was primarily attributable to additional depreciation expense associated with continuing capital expenditures related to infrastructure improvements, efficiency projects and expansion of
production capacity.

Interest expense. Interest expense, net of capitalized interest, increased to $30.8 million in
2009 from $22.1 million in 2008. The increase of $8.7 million was principally attributable to the increased interest expense resulting from the $350 million private placement completed in June 2008, partially offset by reduced interest expense
resulting from annual principal repayments made during August 2009 and 2008 of $18.0 million on the ARLP Partnerships senior notes issued in 1999. The 2008 financing activities are discussed in more detail below under Debt
Obligations.

Interest income.Interest income decreased to $1.1 million in 2009 from $3.8 million in 2008. The
decrease of $2.7 million resulted from reduced interest income earned on short-term investments purchased with funds received from the 2008 financing activities, which were substantially liquidated to principally fund increased capital expenditures
during 2009.

Transportation revenues and expenses. Transportation revenues and expenses increased 2.0% to $45.7
million in 2009 from $44.8 million in 2008. The increase of $0.9 million was primarily attributable to an increase in coal sales volumes for which we arranged transportation in 2009 compared to 2008, partially offset by a decrease in average



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transportation rates of $0.35 per ton in 2009 compared to 2008, primarily due to lower fuel costs. The costs of transportation services are a pass-through to the ARLP Partnerships
customers; consequently, the ARLP Partnership does not realize any gain or loss on transportation revenues.

Income tax
expense (benefit). Income tax expense increased to $0.7 million in 2009 from an income tax benefit of $0.5 million in 2008. The income tax expense in 2009 and benefit in 2008 were primarily due to operations of Matrix Design.

Net income attributable to 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 and a third-party ownership interest in MAC. The noncontrolling interest designated as affiliate represents SGPs 0.01% general partner interest in ARLP
and 0.01% general partner interest in the Intermediate Partnership. The noncontrolling interest designated as non-affiliates represents the limited partners interest in ARLP controlled through the common unit ownership, excluding the
15,544,169 common units of ARLP held by us. The noncontrolling interest designated as MAC represents a 50% third-party interest in MAC. The net income attributable to noncontrolling interest was $76.0 million and $51.3 million in 2009 and 2008,
respectively.The increase in net income attributable to noncontrolling interest is due to an increase in the consolidated net income of the ARLP Partnership due to the changes in revenues and expenses described above. For more information,
please read Item 8. Financial StatementsNote 12. Noncontrolling Interests of this Annual Report on Form 10-K.



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Segment Information.Our 2009 Segment Adjusted EBITDA increased 29.4% to $381.1
million from 2008 Segment Adjusted EBITDA of $294.6 million. Segment Adjusted EBITDA, tons sold, coal sales, other sales and operating revenues and Segment Adjusted EBITDA Expense by segment are as follows (in thousands):



|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|----------------------------------------- |  | ----------------------- | --------- | - | ------------------- | - | --------- | - |  | - | ------- | - |  |  | ----- | --
|                                          |  | Year Ended December 31, |           |   | Increase (Decrease) |  
|                                          |  | 2009                    |           |   | 2008                |   |          
|Segment Adjusted EBITDA                   |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 315,542   |   |                     | $ | 194,410   |   |  | $ | 121,132 |   |  |  | 62.3  | % 
|Central Appalachia                        |  |                         | 41,149    |   |                     |   | 52,812    |   |  |   | (11,663 | ) |  |  | (22.1 | )%
|Northern Appalachia                       |  |                         | 15,552    |   |                     |   | 39,480    |   |  |   | (23,928 | ) |  |  | (60.6 | )%
|Other and Corporate                       |  |                         | 9,192     |   |                     |   | 7,856     |   |  |   | 1,336   |   |  |  | 17.0  | % 
|Elimination                               |  |                         | (370      | ) |                     |   | 22        |   |  |   | (392    | ) |  |  | (1    | ) 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total Segment Adjusted EBITDA (2)         |  | $                       | 381,065   |   |                     | $ | 294,580   |   |  | $ | 86,485  |   |  |  | 29.4  | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Tons sold                                 |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  |                         | 19,660    |   |                     |   | 20,496    |   |  |   | (836    | ) |  |  | (4.1  | )%
|Central Appalachia                        |  |                         | 2,641     |   |                     |   | 3,428     |   |  |   | (787    | ) |  |  | (23.0 | )%
|Northern Appalachia                       |  |                         | 2,660     |   |                     |   | 3,246     |   |  |   | (586    | ) |  |  | (18.1 | )%
|Other and Corporate                       |  |                         | 14        |   |                     |   |          |   |  |   | 14      |   |  |  | (1    | ) 
|Elimination                               |  |                         |          |   |                     |   |          |   |  |   |        |   |  |  |      |   
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total tons sold                           |  |                         | 24,975    |   |                     |   | 27,170    |   |  |   | (2,195  | ) |  |  | (8.1  | )%
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Coal sales                                |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 846,940   |   |                     | $ | 715,862   |   |  | $ | 131,078 |   |  |  | 18.3  | % 
|Central Appalachia                        |  |                         | 179,369   |   |                     |   | 207,339   |   |  |   | (27,970 | ) |  |  | (13.5 | )%
|Northern Appalachia                       |  |                         | 136,412   |   |                     |   | 169,858   |   |  |   | (33,446 | ) |  |  | (19.7 | )%
|Other and Corporate                       |  |                         | 1,150     |   |                     |   |          |   |  |   | 1,150   |   |  |  | (1    | ) 
|Elimination                               |  |                         |          |   |                     |   |          |   |  |   |        |   |  |  |      |   
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total coal sales                          |  | $                       | 1,163,871 |   |                     | $ | 1,093,059 |   |  | $ | 70,812  |   |  |  | 6.5   | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Other sales and operating revenues        |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 1,151     |   |                     | $ | 1,123     |   |  | $ | 28      |   |  |  | 2.5   | % 
|Central Appalachia                        |  |                         | 191       |   |                     |   | 258       |   |  |   | (67     | ) |  |  | (26.0 | )%
|Northern Appalachia                       |  |                         | 3,316     |   |                     |   | 4,422     |   |  |   | (1,106  | ) |  |  | (25.0 | )%
|Other and Corporate                       |  |                         | 38,832    |   |                     |   | 23,138    |   |  |   | 15,694  |   |  |  | 67.8  | % 
|Elimination                               |  |                         | (22,492   | ) |                     |   | (10,614   | ) |  |   | (11,878 | ) |  |  | (1    | ) 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total other sales and operating revenues  |  | $                       | 20,998    |   |                     | $ | 18,327    |   |  | $ | 2,671   |   |  |  | 14.6  | % 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Segment Adjusted EBITDA Expense           |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Illinois Basin                            |  | $                       | 532,549   |   |                     | $ | 522,575   |   |  | $ | 9,974   |   |  |  | 1.9   | % 
|Central Appalachia                        |  |                         | 138,412   |   |                     |   | 157,575   |   |  |   | (19,163 | ) |  |  | (12.2 | )%
|Northern Appalachia                       |  |                         | 124,176   |   |                     |   | 134,800   |   |  |   | (10,624 | ) |  |  | (7.9  | )%
|Other and Corporate                       |  |                         | 30,789    |   |                     |   | 20,441    |   |  |   | 10,348  |   |  |  | 50.6  | % 
|Elimination                               |  |                         | (22,122   | ) |                     |   | (10,636   | ) |  |   | (11,486 | ) |  |  | (1    | ) 
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   
|Total Segment Adjusted EBITDA Expense (3) |  | $                       | 803,804   |   |                     | $ | 824,755   |   |  | $ | (20,951 | ) |  |  | (2.5  | )%
|                                          |  |                         |           |   |                     |   |           |   |  |   |         |   |  |  |       |   



|(1) | Percentage increase or decrease was greater than or equal to 100%.
|--- | ------------------------------------------------------------------



|(2) | Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as EBITDA, excluding general and administrative expense. EBITDA is defined as net income (prior to the
allocation of noncontrolling interest) before net interest expense, income taxes, and depreciation, depletion and amortization. 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, to assess:
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the financial performance of the ARLP Partnerships assets without regard to financing methods, capital structure or historical cost basis;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the ability of the ARLP Partnerships assets to generate cash sufficient to pay interest costs and support its indebtedness;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | the ARLP Partnerships operating performance and return on investment compared to those of other companies in the coal energy sector, without
regard to financing or capital structures; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those
stated in the above explanation of EBITDA. In addition, the exclusion of corporate general and administrative expenses, which are discussed above under Analysis of Historical Results of Operations, from 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.

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



|                                         |  |                         |          |   |      |   |          |  
|---------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                         |  | Year Ended December 31, |         
|                                         |  | 2009                    |          |   | 2008 |  
|Segment Adjusted EBITDA                  |  | $                       | 381,065  |   |      | $ | 294,580  |  
|General and administrative               |  |                         | (42,875  | ) |      |   | (38,857  | )
|Depreciation, depletion and amortization |  |                         | (117,524 | ) |      |   | (105,278 | )
|Interest expense, net                    |  |                         | (29,781  | ) |      |   | (18,369  | )
|Income tax (expense) benefit             |  |                         | (709     | ) |      |   | 480      |  
|                                         |  |                         |          |   |      |   |          |  
|Net income                               |  | $                       | 190,176  |   |      | $ | 132,556  |  
|                                         |  |                         |          |   |      |   |          |  



|(3) | Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, outside 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. Segment Adjusted EBITDA Expense is used as a supplemental financial measure by
the ARLP Partnerships management to assess the operating performance of the segments. In the ARLP Partnerships evaluation of EBITDA, which is discussed above under How We Evaluate Our Performance, Segment
Adjusted EBITDA Expense is a key component of 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 operating expenses. Outside coal purchases are included in Segment Adjusted EBITDA Expense because tons sold and coal sales include sales from outside coal
purchases.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|                                                                       |  |                         |         |   |      |   |         |  
|---------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                                                                       |  | Year Ended December 31, |        
|                                                                       |  | 2009                    |         |   | 2008 |  
|Segment Adjusted EBITDA Expense                                        |  | $                       | 803,804 |   |      | $ | 824,755 |  
|Outside coal purchases                                                 |  |                         | (7,524  | ) |      |   | (23,776 | )
|Other income                                                           |  |                         | 1,247   |   |      |   | 875     |  
|                                                                       |  |                         |         |   |      |   |         |  
|Operating expense (excluding depreciation, depletion and amortization) |  | $                       | 797,527 |   |      | $ | 801,854 |  
|                                                                       |  |                         |         |   |      |   |         |  

Illinois BasinSegment Adjusted EBITDA in 2009 increased 62.3% to $315.5 million from 2008 Segment
Adjusted EBITDA of $194.4 million. The increase of $121.1 million was primarily attributable to improved contract pricing resulting in a higher average coal sales price of $43.08 per ton in 2009 compared to $34.93 per ton in 2008. The benefit of
higher average coal sales pricing was partially offset by reduced tons sold due to first quarter 2009 weather disruptions in western Kentucky, particularly at the Dotiki, Warrior and Elk Creek mines, as well as unplanned customer outages and
weakness in the spot market during 2009. Total Segment Adjusted EBITDA Expense in 2009 increased 1.9% to $532.5 million from $522.6 million in 2008. The increase in 2009 Segment Adjusted EBITDA Expense compared to 2008 was primarily the result of
cost increases described above under consolidated operating expenses, the impact of weather disruptions in 2009, in addition to the $1.9 million gain on settlement of claims relating to the Pattiki vertical hoist conveyor incident in 2008. Segment
Adjusted EBITDA Expense per ton in 2009 increased $1.59 per ton to $27.09 per ton compared to 2008 Segment Adjusted EBITDA Expense of $25.50 per ton.

Central AppalachiaSegment Adjusted EBITDA in 2009 decreased 22.1% to $41.1 million compared to $52.8 million in 2008. The decrease was primarily the result of lower sales volumes due to contract
deferrals and weak coal demand in the spot market during 2009, partially offset by improved contract pricing that resulted in an increase in the average coal sales price of $7.42 per ton to $67.91 per ton in 2009 compared to $60.49 per ton in 2008.
Central Appalachia coal production was also impacted by the idling of one of four continuous mining units at Pontikis Van Lear mine, which reduced coal production by approximately 140,000 tons. Although lower coal sales volumes resulted in a
12.2% decrease in 2009 Segment Adjusted EBITDA Expense to $138.5 million from $157.6 million in 2008, Segment Adjusted EBITDA Expense per ton sold increased by $6.44 per ton in 2009 to $52.41 per ton, or 14.0% over 2008 Segment Adjusted EBITDA per
ton of $45.97. The increase in the Segment Adjusted EBITDA Expense per ton resulted in part from decreased coal production primarily due to contractual deferrals, lower spot market demand and reduced clean coal recovery resulting partly from
Pontikis transition from the depleted Pond Creek coal seam into the thinner Van Lear coal seam in 2009 in addition to cost per ton increases described above under consolidated operating expenses. Segment Adjusted EBITDA in 2008 benefited from
the $2.8 million gain recognized on settlement of claims from the third-party that provided security services at the time of the MC Mining Fire Incident as discussed below under MC Mining Mine Fire.

Northern AppalachiaSegment Adjusted EBITDA decreased 60.6% to $15.6 million in 2009 compared to $39.5 million in 2008. This
decrease of $23.9 million was primarily the result of lower sales volumes reflecting reduced spot market sales and higher Segment Adjusted EBITDA Expense per ton sold in 2009 of $46.68 per ton, an increase of $5.15 per ton, or 12.4%, compared to
$41.53 per ton in 2008. Increased Segment Adjusted EBITDA Expense per ton in 2009 resulted primarily from lower production which was impacted by increased longwall move days in 2009, increased longwall maintenance expense per ton, lower clean coal
recovery due to mining conditions and a curtailment of third-party mining operations in 2009, as well as the other cost increases described above under consolidated operating expenses, including increased expenses incurred related to the ARLP
Partnerships Tunnel Ridge organic growth project. Although Segment Adjusted EBITDA Expense per ton sold increased in 2009, Segment EBITDA Expense in 2009 decreased 7.9% to $124.2 million from $134.8 million in 2008, primarily as a result of
lower coal sales volumes offset in part by higher expenses per ton as described above.

Other and CorporateSegment
Adjusted EBITDA increased to $9.2 million in 2009 from $7.9 million in 2008, primarily due to increased Matrix Design and Alliance Design product sales and service revenues and Mt. Vernon transloading revenue in 2009, partially offset by decreased
MAC product sales in 2009 and a $5.2 million gain on sale of non-core coal reserves in 2008. In addition, during 2009, the ARLP Partnership purchased a six-month UK treasury bill which matured in October 2009, resulting in a gain of $0.7 million.
The increase in Segment Adjusted EBITDA Expense primarily reflects increased costs associated with higher outside services revenue and product sales.



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Pattiki Vertical Hoist Conveyor System Failure

On May 13, 2010, White County Coals Pattiki mine was temporarily idled following the failure of the vertical hoist conveyor
system used in conveying raw coal out of the mine. The ARLP Partnerships operating expenses for the twelve months ended December 31, 2010 include $1.2 million for retirement of certain assets related to the failed vertical hoist conveyor
system in addition to other repair and clean-up expenses that were not significant on a consolidated or segment basis. The ARLP Partnership reviewed its commercial property (including business interruption) insurance policies and, as the loss on the
vertical hoist conveyor system did not exceed the ARLP Partnerships deductible for property damage, it does not expect any recovery under such policies.

While the Pattiki mine was temporarily idled, the ARLP Partnership expanded coal production at its other coal mines in the region, including the addition of the seventh and eighth production units at the
River View mine, to partially offset the loss of production from the Pattiki mine. Consequently, the temporary idling of the Pattiki mine did not have a material adverse impact on the ARLP Partnerships results of operations and cash flows. On
July 19, 2010, the Pattiki mine resumed limited production while White County Coal continued to assess the effectiveness and reliability of the repaired vertical hoist conveyor system. On January 3, 2011, the Pattiki mine returned to full
production capacity.

Ongoing Acquisition Activities

Consistent with its business strategy, from time to time the ARLP Partnership engages in discussions with potential sellers regarding possible acquisitions of certain assets and/or companies of the
sellers.

Liquidity and Capital Resources

Liquidity

Our only cash generating assets are limited and general
partnership interests in the ARLP Partnership, including IDRs, from which we receive quarterly distributions. We have no independent operations separate from those of the ARLP Partnership. We rely on distributions from the ARLP Partnership to fund
our cash requirements.

The ARLP Partnership has historically satisfied its working capital requirements and funded its
capital expenditures and debt service obligations from cash generated from operations, cash provided by the issuance of debt or equity and borrowings under revolving credit facilities. The ARLP Partnership believes that the current cash on hand,
cash generated from operations, cash from borrowings under its current credit facility, and cash provided from the issuance of debt or equity will be sufficient to meet its working capital requirements, anticipated capital expenditures, scheduled
debt payments and distribution payments. The ARLP Partnerships ability to satisfy its obligations and planned expenditures 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, which are beyond its control. Based on the ARLP Partnerships recent operating results, current cash position, anticipated future cash flows and sources of
financing that it expects to have available, it does not anticipate any significant liquidity constraints in the foreseeable future. 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 see Item 1A. Risk Factors.

Cash Flows

Cash provided by operating activities was $517.0 million in 2010 compared to $280.8 million in 2009. The increase in cash
provided by operating activities was principally attributable to higher net income, a reduction in coal inventory costs during 2010 as compared to a significant increase during 2009 and increases in certain operating liabilities, such as accounts
payable, accrued taxes other than income taxes, accrued payroll and related expenses. These increases in cash provided by operating activities were partially offset by increases in certain operating assets, such as accounts receivable.

Net cash used in investing activities was $295.0 million in 2010 compared to $320.1 million in 2009. The decrease in cash used for
investing activities was primarily attributable to decreased capital expenditures due to the completion of the ARLP Partnerships River View mine development and Warrior infrastructure additions in 2009, partially offset by an increase in
Tunnel Ridge capital expenditures in 2010 and timing differences in accounts payable and accrued liabilities compared to 2009.

Net cash provided by financing activities was $96.1 million in 2010 compared to net cash used in financing activities of $183.7 million
in 2009. The increase in cash provided by financing activities was primarily attributable to the proceeds from the ARLP Partnerships $300 million term loan completed on December 29, 2010 (see Debt Obligations) partially
offset by increased distributions paid to partners in 2010.



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The ARLP Partnership has various commitments primarily related to long-term debt, including
capital leases, operating lease commitments related to buildings and equipment, obligations for estimated future asset retirement obligations costs, workers compensation and pneumoconiosis, capital project commitments and pension funding. The
ARLP Partnership expects to fund these commitments with cash on hand, cash generated from operations and borrowings under its revolving credit facility. The following table provides details regarding the ARLP Partnerships contractual cash
obligations as of December 31, 2010 (in thousands):



|                                                    |  |       |           |  |                |   |         |          |  |   |          |  |  |                  |         |  |  |   |         | 
|--------------------------------------------------- |  | ----- | --------- |  | -------------- | - | ------- | -------- |  | - | -------- |  |  | ---------------- | ------- |  |  | - | ------- | 
|Contractual Obligations                             |  | Total |           |  | Lessthan 1year |   |         | 1-3years |  |   | 3-5years |  |  | More than5 years |        
|Long-term debt                                      |  | $     | 722,000   |  |                | $ | 18,000  |          |  | $ | 96,000   |  |  | $                | 463,000 |  |  | $ | 145,000 | 
|Future interest obligations(1)                      |  |       | 174,038   |  |                |   | 35,022  |          |  |   | 66,101   |  |  |                  | 48,663  |  |  |   | 24,252  | 
|Operating leases                                    |  |       | 4,775     |  |                |   | 1,901   |          |  |   | 1,130    |  |  |                  | 734     |  |  |   | 1,010   | 
|Capital leases(2)                                   |  |       | 1,107     |  |                |   | 515     |          |  |   | 592      |  |  |                  |        |  |  |   |        | 
|Purchase obligations for capital projects           |  |       | 86,788    |  |                |   | 86,788  |          |  |   |         |  |  |                  |        |  |  |   |        | 
|Coal purchase commitments                           |  |       | 14,070    |  |                |   | 14,070  |          |  |   |         |  |  |                  |        |  |  |   |        | 
|Reclamation obligations(3)                          |  |       | 130,978   |  |                |   | 2,182   |          |  |   | 3,502    |  |  |                  | 3,488   |  |  |   | 121,806 | 
|Workers compensation and pneumoconiosis benefit(3) |  |       | 327,845   |  |                |   | 14,281  |          |  |   | 21,125   |  |  |                  | 17,579  |  |  |   | 274,860 | 
|                                                    |  |       |           |  |                |   |         |          |  |   |          |  |  |                  |         |  |  |   |         | 
|                                                    |  | $     | 1,461,601 |  |                | $ | 172,759 |          |  | $ | 188,450  |  |  | $                | 533,464 |  |  | $ | 566,928 | 
|                                                    |  |       |           |  |                |   |         |          |  |   |          |  |  |                  |         |  |  |   |         | 



|(1) | Interest on variable rate long-term debt was calculated using rates elected by the ARLP Partnership at December 31, 2010 for the remaining term of outstanding
borrowings.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes amounts classified as interest and maintenance cost.
|--- | -------------------------------------------------------------



|(3) | Future commitments for reclamation obligations, workers compensation and pneumoconiosis are shown at undiscounted amounts.
|--- | ---------------------------------------------------------------------------------------------------------------------------

The ARLP Partnership expects to contribute $5.0 million to the defined benefit pension plan (Pension Plan) during 2011. The
ARLP Partnership estimates its income tax cash requirements to be approximately $1.3 million in 2011.

Off-Balance Sheet
Arrangements

In the normal course of business, the ARLP Partnership is a party to certain off-balance sheet arrangements.
These arrangements include related party guarantees and financial instruments with off-balance sheet risk, such as bank letters of credit and surety bonds. Liabilities related to these arrangements are not reflected in our consolidated balance
sheets, and we do not expect any material adverse effects on our financial condition, results of operations or cash flows to result from these off-balance sheet arrangements.

The ARLP Partnership uses a combination of surety bonds and letters of credit to secure its financial obligations for reclamation, workers compensation and other obligations as follows as of
December 31, 2010 (in thousands):



|                  |  |                       |        |  |                                |   |        |       |  |   |        |  |  |   |         | 
|----------------- |  | --------------------- | ------ |  | ------------------------------ | - | ------ | ----- |  | - | ------ |  |  | - | ------- | 
|                  |  | ReclamationObligation |        |  | WorkersCompensationObligation |   |        | Other |  |   | Total  | 
|Surety bonds      |  | $                     | 68,430 |  |                                | $ | 39,924 |       |  | $ | 11,665 |  |  | $ | 120,019 | 
|Letters of credit |  |                       |       |  |                                |   | 29,697 |       |  |   | 9,548  |  |  |   | 39,245  | 

Capital
Expenditures

Capital expenditures decreased to $289.9 million in 2010 compared to $328.2 million in 2009. See our
discussion of Cash Flows above concerning this decrease in capital expenditures.

The ARLP Partnership currently
projects average estimated annual maintenance capital expenditures over the next five years of approximately $4.70 per ton produced. The ARLP Partnerships anticipated total capital expenditures for



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2011 are estimated in a range of $320.0 to $360.0 million. Management anticipates funding 2011 capital requirements with the ARLP Partnerships December 31, 2010 cash and cash
equivalents of $339.6 million, cash flows provided by operations and borrowing available under its revolving credit facility as discussed below. 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 to the ARLP Partnership will depend upon prevailing market conditions, the market price of ARLPs common units and several other
factors over which the ARLP Partnership has limited control, as well as its financial condition and results of operations.

Insurance

During September 2010, the ARLP Partnership completed its annual property and casualty insurance renewal with various insurance coverages
effective October 1, 2010. The aggregate maximum limit in the commercial property program is $75.0 million per occurrence excluding a $1.5 million deductible for property damage, a 60-day waiting period for business interruption and a $10.0
million overall aggregate deductible. The aforementioned property and casualty insurance coverages, effective October 1, 2010, replaced the ARLP Partnerships prior year 14.7% participation rate with the deductibles mentioned above. The
ARLP Partnership can make no assurances that it will not experience significant insurance claims in the future that could have a material adverse effect on its business, financial condition, results of operations and ability to purchase property
insurance in the future.

Debt Obligations

Alliance Holdings GP, L.P.

We have a $2.0 million revolving credit
facility (AHGP Credit Facility) with C-Holdings, LLC (C-Holdings), which owns 100% of the members interest of our general partner, AGP, and is controlled by Mr. Craft. The AHGP Credit Facility matures
March 31, 2011 and is available for general partnership purposes. Any borrowings under the facility, as extended, bear interest at the London Interbank Offered Rate (LIBOR) plus 2.0%. We are not required to pay a commitment fee to
C-Holdings on the unused portion of the facility. At December 31, 2010, we had no borrowings outstanding under the AHGP Credit Facility. There are no material operating and financial restrictions and covenants in the AHGP Credit Facility.
C-Holdings may terminate the facility and demand payment of any amounts outstanding in the event we have a change of control.

Alliance Resource Partners, L.P.

ARLP Credit Facility. The Intermediate Partnership entered into a $150.0 million revolving credit facility (ARLP Credit Facility) dated September 25, 2007, which matures in 2012.
The ARLP Credit Facility was decreased to $142.5 million of availability on October 6, 2010 due to a defaulting lender, as discussed below. On September 30, 2009, the Intermediate Partnership entered into Amendment No. 2 (the
Credit Agreement) to the ARLP Credit Facility. The Credit Agreement increased the annual capital expenditure limits under the ARLP Credit Facility. The new limits, before carry forward considerations and exclusion of capital expenditures
related to acquisitions, are $350.0 million for 2011 and $250.0 million for 2012. The amount of any annual limit in excess of actual capital expenditures for that year carries forward and is added to the annual limit of the subsequent year. As a
result, the capital expenditure limit for 2011 is approximately $531.9 million.

Pursuant to the Credit Agreement, the
applicable margin for LIBOR borrowings under the ARLP Credit Facility was increased from a range of 0.625% to 1.150% (depending on the Intermediate Partnerships leverage margin) to a range of 1.115% to 2.000%, and the annual commitment fee was
increased from a range of 0.15% to 0.35% (also depending on the Intermediate Partnerships leverage margin) to a range of 0.25% to 0.50%. In addition, the Credit Agreement includes certain changes relating to a defaulting lender,
including changes which clarify that the overall ARLP Credit Facility commitment would be reduced by the commitment share of a defaulting lender but also provides the Intermediate Partnership with more flexibility in replacing a defaulting lender.

At December 31, 2010, the ARLP Partnership had $11.6 million of letters of credit outstanding with $130.9 million
available for borrowing under the ARLP Credit Facility. The ARLP Partnership had no borrowings outstanding under the ARLP Credit Facility as of December 31, 2010. The ARLP Partnership utilizes the ARLP Credit Facility, as appropriate, to meet
working capital requirements, anticipated capital expenditures, scheduled debt payments or distribution payments. The ARLP Partnership incurs an annual commitment fee of 0.25% on the undrawn portion of the ARLP Credit Facility.



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Lehman Commercial Paper, Inc. (Lehman), a subsidiary of Lehman Brothers Holding,
Inc., held a 5%, or $7.5 million, commitment in the original $150 million ARLP Credit Facility. Lehman filed for protection under Chapter 11 of the Federal Bankruptcy Code in early October 2008. On February 11, 2010, the ARLP Partnership gave
its lenders a notice of borrowing under the ARLP Credit Facility and, in response to that notice, Lehman notified the ARLP Partnership that it would not fund its proportionate share of the borrowing. As a result, as of February 11, 2010, Lehman
became a defaulting lender and on October 6, 2010, was removed as a commitment holder under the ARLP Credit Facility. Consequently, availability for borrowing under the ARLP Credit Facility was reduced by $7.5 million on October 6, 2010.
The ARLP Credit Facility is underwritten by a syndicate of eleven financial institutions (excluding Lehman) with no individual institution representing more than 11.9% of the $142.5 million revolving credit facility. In the event any other financial
institution in the ARLP Partnerships syndicate does not fund its future borrowing requests, the ARLP Partnerships borrowing available under the ARLP Credit Facility would be reduced. The obligations of the lenders under the ARLP Credit
Facility are individual obligations and the failure of one or more lenders does not relieve the remaining lenders of their funding obligations.

Senior Notes. The Intermediate Partnership has $72.0 million principal amount of 8.31% senior notes due August 20, 2014, payable in four remaining equal annual installments of $18.0 million
with interest payable semi-annually (ARLP Senior Notes).

Series A Senior Notes. On
June 26, 2008, the Intermediate Partnership entered into a Note Purchase Agreement (the 2008 Note Purchase Agreement) with a group of institutional investors in a private placement offering. The Intermediate Partnership issued
$205.0 million of Series A Senior Notes, which bear interest at 6.28% and mature on June 26, 2015 with interest payable semi-annually.

Series B Senior Notes.On June 26, 2008, the Intermediate Partnership issued under the 2008 Note Purchase Agreement $145.0 million of Series B Senior Notes, which bear interest at 6.72% and
mature on June 26, 2018 with interest payable semi-annually.

The proceeds from the Series A and Series B Senior Notes
(collectively, the 2008 Senior Notes) were used to repay $21.5 million outstanding under the ARLP Credit Facility and pay expenses associated with the offering of the 2008 Senior Notes. The remaining proceeds were primarily used to fund
the development of the River View and Tunnel Ridge mining complexes and for other general working capital requirements.

Term Loan.On December 29, 2010, the Intermediate Partnership entered into a term loan agreement
(the ARLP Term Loan Agreement) with various financial institutions for a term loan (the Loan) in the aggregate principal amount of $300 million. The Loan bears interest at a variable rate plus an applicable margin which
fluctuates depending upon whether the ARLP Partnership elects the Loan (or a portion thereof) to bear interest on the Base Rate or the Eurodollar Rate (as defined in the ARLP Term Loan Agreement). The ARLP Partnership elected the Eurodollar Rate on
December 30, 2010 which, with applicable margin, was 2.3% as of January 5, 2011. Interest for the period between initial funding of the Loan on December 29, 2010 and January 5, 2011, was calculated based on the Base Rate plus the
applicable margin. Interest is payable quarterly with principal due as follows: $15 million due per quarter beginning March 31, 2013 through December 31, 2013, $18.75 million due per quarter beginning March 31, 2014 through
September 30, 2015 and the balance of $108.75 million due on December 31, 2015. The ARLP Partnership has the option to prepay the Loan at any time in whole or in part subject to terms and conditions described in the ARLP Term Loan
Agreement. Upon a change of control (as defined in the ARLP Term Loan Agreement), the unpaid principal amount of the loan, all interest thereon and all other amounts payable under the ARLP Term Loan Agreement will become due and payable.

The net proceeds of the Loan will be used for the general corporate, business or working capital purposes of
the Intermediate Partnership and its subsidiaries, including, without limitation, (a) for capital expenditures and acquisitions (including mineral reserve acquisitions), and (b) for cash distributions to the ARLP Partnership to be used by
the ARLP Partnership for any business or corporate purpose deemed appropriate by the ARLP Partnership (or its managing general partner). The ARLP Partnership incurred debt issuance costs of approximately $1.4 million in 2010 associated with the ARLP
Term Loan Agreement, $0.3 million in 2009 associated with the ARLP Credit Facility and $1.7 million in 2008 associated with the 2008 Senior Notes, which have been deferred and are being amortized as a component of interest expense over the term of
the respective notes.

The ARLP Credit Facility, Senior Notes, 2008 Senior Notes and the ARLP Term Loan Agreement
(collectively, ARLP Debt Arrangements) are guaranteed by all of the direct and indirect subsidiaries of the Intermediate Partnership. The ARLP Debt Arrangements contain various covenants affecting the Intermediate Partnership and its
subsidiaries



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restricting, among other things, the amount of distributions by the Intermediate Partnership, the incurrence of additional indebtedness and liens, the sale of assets, the making of investments,
the entry into mergers and consolidations and the entry into transactions with affiliates, in each case subject to various exceptions. The ARLP Debt Arrangements also require the Intermediate Partnership to remain in control of a certain amount of
mineable coal reserves relative to its annual production. In addition, the ARLP Debt Arrangements require the Intermediate Partnership to maintain the following: (i) debt to cash flow ratio of not more than 3.0 to 1.0 and (ii) cash flow to
interest expense ratio of not less than 4.0 to 1.0 in each case, during the four most recently ended fiscal quarters. The ARLP Credit Facility, Senior Notes and the 2008 Senior Notes limit the Intermediate Partnerships maximum annual capital
expenditures, excluding acquisitions, as described above. The Credit Agreement did not change the required debt to cash flow or cash flow to interest expense ratios. The debt to cash flow ratio and cash flow to interest expense ratio were 1.4 to 1.0
and 16.5 to 1.0, for the trailing twelve months ended December 31, 2010. Actual capital expenditures were $289.9 million for the year ended December 31, 2010. The ARLP Partnership was in compliance with the covenants of the ARLP Debt
Arrangements as of December 31, 2010.

Other. In addition to the letters of credit available under the ARLP Credit
Facility discussed above, the ARLP Partnership also has agreements with two banks to provide additional letters of credit in an aggregate amount of $31.1 million to maintain surety bonds to secure certain asset retirement obligations and its
obligations for workers compensation benefits. At December 31, 2010, the ARLP Partnership had $30.7 million in letters of credit outstanding under agreements with these two banks. SGP guarantees $5.0 million of these outstanding letters
of credit.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based upon our consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the U.S. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial
statements. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We discuss these estimates and judgments with AGPs Audit Committee periodically. Actual results
may differ from these estimates. We have provided a description of all significant accounting policies in the notes to our consolidated financial statements. The following critical accounting policies are materially impacted by judgments,
assumptions and estimates used in the preparation of our consolidated financial statements:

Revenue Recognition

Revenues from coal sales are recognized when title passes to the customer as the coal is shipped. Some coal supply
agreements provide for price adjustments based on variations in quality characteristics of the coal shipped. In certain cases, a customers analysis of the coal quality is binding and the results of the analysis are received on a delayed basis.
In these cases, the ARLP Partnership estimates the amount of the quality adjustment and adjusts the estimate to actual when the information is provided by the customer. Historically such adjustments have not been material.

Non-coal sales revenues primarily consist of transloading fees, administrative service revenues from mine safety services and products,
rock dust sales and other handling and service fees. These non-coal sales revenues are recognized when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the
sellers price to the buyer is fixed or determinable; and collectability is reasonably assured.

Coal Reserve Values

All of the reserves presented in this Annual Report on Form 10-K constitute proven and probable reserves. There are
numerous uncertainties inherent in estimating quantities of reserves, including many factors beyond the ARLP Partnerships control. Estimates of coal reserves necessarily depend upon a number of variables and assumptions, any one of which may
vary considerably from actual results. These factors and assumptions relate to:



| |  |  | geological and mining conditions, which may not be fully identified by available exploration data and/or differ from the ARLP Partnerships
experiences in areas where it currently mines;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the percentage of coal in the ground ultimately recoverable;
| | - |  | ------------------------------------------------------------



| |  |  | historical production from the area compared with production from other producing areas;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the assumed effects of regulation and taxes by governmental agencies; and
| | - |  | -------------------------------------------------------------------------



| |  |  | assumptions concerning future coal prices, operating costs, capital expenditures, severance and excise taxes and development and reclamation costs.
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For these reasons, estimates of the recoverable quantities of coal attributable to any
particular group of properties, classifications of reserves based on risk of recovery and estimates of future net cash flows expected from these properties as prepared by different engineers, or by the same engineers at different times, may vary
substantially. Actual production, revenue and expenditures with respect to the ARLP Partnerships reserves will likely vary from estimates, and these variations may be material. Certain account classifications within our financial statements
such as depreciation, depletion, and amortization and certain liability calculations such as asset retirement obligations may depend upon estimates of coal reserve quantities and values. Accordingly, when actual coal reserve quantities and values
vary significantly from estimates, certain accounting estimates and amounts within our consolidated financial statements may be materially impacted. Coal reserve values are reviewed annually, at a minimum, for consideration in our consolidated
financial statements.

Workers Compensation and Pneumoconiosis (Black Lung) Benefits

The ARLP Partnership provides income replacement and medical treatment for work-related traumatic injury claims as required by applicable
state laws. The ARLP Partnership generally provides for these claims through self-insurance programs. Workers compensation laws also compensate survivors or workers who suffer employment related deaths. The liability for traumatic injury
claims is the ARLP Partnerships estimate of the present value of current workers compensation benefits, based on its actuary estimates. The ARLP Partnerships actuarial calculations are based on a blend of actuarial projection
methods and numerous assumptions including development patterns, mortality, medical costs and interest rates. The ARLP Partnership had accrued liabilities of $67.7 million and $63.2 million for these costs at December 31, 2010 and 2009,
respectively. A one-percentage-point reduction in the discount rate would have increased the liability at December 31, 2010 approximately $4.9 million, which would have a corresponding increase in operating expenses.

Coal mining companies are subject to CMHSA, as amended, and various state statutes for the payment of medical and disability benefits to
eligible recipients related to coal workers pneumoconiosis, or black lung. The ARLP Partnership provides for these claims through self-insurance programs. The black lung benefits liability is calculated using the service cost method based on
the actuarial present value of the estimated black lung obligation. The ARLP Partnerships actuarial calculations are based on numerous assumptions including disability incidence, medical costs, mortality, death benefits, dependents and
discount rates. The ARLP Partnership had accrued liabilities of $45.7 million and $34.9 million for these benefits at December 31, 2010 and 2009, respectively. A one-percentage-point reduction in the discount rate would have increased the
expense recognized for the year ended December 31, 2010 by approximately $0.8 million. Under the service cost method used to estimate the black lung benefits liability, actuarial gains or losses attributable to changes in actuarial assumptions,
such as the discount rate, are amortized over the remaining service period of active miners.

The discount rate for
workers compensation and black lung is derived by applying the Citigroup Pension Discount Curve to the projected liability payout. Other assumptions, such as development patterns, mortality, disability incidence and medical costs, are based
upon standard actuarial tables adjusted for the ARLP Partnerships actual historical experiences whenever possible. The ARLP Partnership reviews all actuarial assumptions annually for reasonableness and consistency and updates such factors when
underlying assumptions, such as discount rates, change or when sustained changes in the ARLP Partnerships historical experiences indicate a shift in the trend assumptions are warranted. For more information please see Item 7.
Managements Discussion and Analysis of Financial Condition and Results of OperationsHealth Care Reform, above.

Defined Benefit Plan

Eligible employees at certain of the ARLP
Partnerships mining operations participate in a Pension Plan that it sponsors. The benefit formula for the Pension Plan is a fixed dollar unit based on years of service. The calculation of the net periodic benefit cost (pension expense) and
benefit obligation (pension liability) associated with the Pension Plan requires the use of a number of assumptions. Changes in these assumptions can result in materially different pension expense and pension liability amounts. In addition, actual
experiences can differ materially from the assumptions. Significant assumptions used in calculating pension expense and pension liability are as follows:



| |  |  | The ARLP Partnerships expected long-term rate of return assumption is based on broad equity and bond indices, the investment goals and
objectives, the target investment allocation and on the long term historical rates of return for each asset class. The expected long-term rate of return used to determine the pension liability and pension expense was 8.35% for the years ended
December 31, 2010 and 2009, determined by the above
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| | factors and an asset allocation assumption of 60.0% invested in domestic equity securities with an expected long-term rate of return of 8.46%, 20.0% invested in international equities with an
expected long-term rate of return of 8.85% and 20.0% invested in fixed income securities with an expected long-term rate of return of 4.88%. The ARLP Partnerships expected long-term rate of return is based on a 20 year average annual total
return for each investment group. Additionally, the ARLP Partnership bases its determination of pension expense on a smoothed market-related valuation of assets equal to the fair value of assets, which immediately recognizes all investment gains or
losses. The actual return on plan assets was 10.4% and 23.7% for the years ended December 31, 2010 and 2009, respectively. Lowering the expected long-term rate of return assumption by 1.0% (from 8.35% to 7.35%) at December 31, 2009 would
have increased the ARLP Partnerships pension expense for the year ended December 31, 2010 by approximately $0.4 million; and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ARLP Partnerships weighted average discount rate used to determine its pension liability was 5.56% and 5.88% at December 31, 2010 and
2009, respectively. The weighted average discount rate used to determine pension expense was 5.88% and 6.15% at December 31, 2010 and 2009, respectively. The discount rate that the ARLP Partnership utilizes for determining its future pension
obligation is based on a review of currently available high-quality fixed-income investments that receive one of the two highest ratings given by a recognized rating agency. The ARLP Partnership has historically used the average monthly yield for
December of an A-rated utility bond index as the primary benchmark for establishing the discount rate. Lowering the discount rate assumption by 0.5% (from 5.88% to 5.38%) at December 31, 2009 would have increased pension expense for the year
ended December 31, 2010 by approximately $0.5 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Long-Lived Assets

The ARLP Partnership reviews the carrying value of long-lived assets and certain identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Long-lived assets and certain intangibles are not reviewed for impairment unless an impairment indicator is noted. Several examples of impairment indicators include:



| |  |  | A significant decrease in the market price of a long-lived asset;
| | - |  | -----------------------------------------------------------------



| |  |  | A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | A significant adverse change in the extent or manner in which a long-lived is being used or in its physical condition.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

The above factors are not all inclusive, and management of the ARLP Partnership must continually evaluate whether other factors are
present that would indicate a long-lived asset may be impaired. The amount of impairment is measured by the difference between the carrying value and the fair value of the asset. The ARLP Partnership has not recorded an impairment loss for any of
the periods presented.

Mine Development Costs

Mine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a units of production method based on the
estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground drifts, permanent excavations, roads and
tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. The ARLP Partnerships estimate of when construction of the mine
for economic extraction is substantially complete is based upon a number of assumptions, such as expectations regarding the economic recoverability of reserves, the type of mine under development, and completion of certain mine requirements, such as
ventilation. Coal extracted during the development phase is incidental to the mines production capacity and is not considered to shift the mine into the production phase. Amortization of capitalized mine development is computed based on the
estimated life of the mine and commences when production, other than production incidental to the mine development process, begins. At December 31, 2010 and 2009, mine development costs include $35.3 million and $16.4 million, respectively,
representing the carrying value of development costs attributable to properties where the ARLP Partnership is not currently engaged in mining operations or leasing to third-parties, and therefore, the mine development costs are not currently being
depleted. The ARLP Partnership believes that the carrying value of these development costs will be recovered.



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Asset Retirement Obligations

SMCRA and similar state statutes require that mined property be restored in accordance with specified standards and an approved
reclamation plan. A liability is recorded for the estimated cost of future mine asset retirement and closing procedures on a present value basis when incurred and a corresponding amount is capitalized by increasing the carrying amount of the related
long-lived asset. Those costs relate to permanently sealing portals at underground mines and to reclaiming the final pits and support acreage at surface mines. Examples of these types of costs, common to both types of mining, include, but are not
limited to, removing or covering refuse piles and settling ponds, water treatment obligations, and dismantling preparation plants, other facilities and roadway infrastructure. Accrued liabilities of $58.2 million and $55.9 million for these costs
are recorded at December 31, 2010 and 2009, respectively. The liability for asset retirement and closing procedures is sensitive to changes in cost estimates and estimated mine lives.

On at least an annual basis, the ARLP Partnerships reviews its entire asset retirement obligation liability and makes necessary
adjustments for permit changes as granted by state authorities, changes in the timing of reclamation activities, and revisions to cost estimates and productivity assumptions, to reflect current experience. Adjustments to the liability resulted in an
increase of $0.8 million for the year ended December 31, 2010 and a decrease in the liability of $4.9 million for the year ended December 31, 2009. These adjustments to the liability for the years ended December 31, 2010 and 2009 were
primarily attributable to fluctuations in refuse site reclamation disturbances at the ARLP Partnerships Hopkins County Coal operation, increased surface disturbances as a result of the new mine development work at Tunnel Ridge and River View
and the impact of favorable permit requirements regarding reduced liner and cover necessary for refuse storage at Gibson County Coal and a reduction in the impoundment cover material acreage at Pontiki and MC Mining, as well as overall general
changes in inflation and discount rates, current estimates of the costs and scope of remaining reclamation work and projected mine life estimates for coal reserve increases and decreases across all operations.

While the precise amount of these future costs cannot be determined with certainty, the ARLP Partnership has estimated the costs and
timing of future asset retirement obligations escalated for inflation, then discounted and recorded at the present value of those estimates. Discounting resulted in reducing the accrual for asset retirement obligations by $72.8 million and $68.0
million at December 31, 2010 and 2009. The ARLP Partnership estimates that the aggregate undiscounted cost of final mine closure is approximately $131.0 million at December 31, 2010. If the ARLP Partnerships assumptions differ from
actual experiences, or if changes in the regulatory environment occur, its actual cash expenditures and costs that it incurs could be materially different than currently estimated.

Contingencies

We are not engaged in any material litigation. The ARLP Partnership is currently involved in certain legal proceedings. The ARLP Partnerships estimates of the probable costs and probability of
resolution of these claims are based upon a number of assumptions, which it has developed in consultation with legal counsel involved in the defense of these matters and based upon an analysis of potential results, assuming a combination of
litigation and settlement strategies. 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.

Resale Shelf

In June 2007, we filed with the SEC a shelf registration statement registering the resale of an aggregate of 47,363,000 outstanding units of equity securities of which 249,999 have been sold by certain
common unitholders.

Related Party Transactions

ARLP Omnibus Agreement

Pursuant to the terms of an amended omnibus
agreement, AHGP agreed, and caused its controlled affiliates to agree, for so long as management controls MGP through its ownership of AHGP, not to engage in the business of mining,



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marketing or transporting coal in the U.S., unless ARLP is first offered the opportunity to engage in the potential activity or acquire a potential business, and the MGP Board of Directors with
the concurrence of the conflicts committee of MGP (MGP Conflicts Committee), elects to cause ARLP not to pursue such opportunity or acquisition. The amended omnibus agreement provides, among other things, that ARLP will be presumed to
desire to acquire the assets until such time as it advises AHGP that it has abandoned the pursuit of such business opportunity, and AHGP may not pursue the acquisition of such assets prior to that time. This restriction does not apply to: any
business owned or operated by AHGP and its affiliates at the closing of the IPO; any acquisition by AHGP or its affiliates, so long as the majority of the value of the acquisition does not derive from a restricted business and ARLP is offered the
opportunity to purchase the restricted business following its acquisition; or any business conducted by AHGP or our affiliates with the approval of the MGP Board of Directors or MGP Conflicts Committee. Except as provided in the amended omnibus
agreement, we and our affiliates are not prohibited from engaging in activities that directly compete with ARLP and our affiliates are not prohibited from engaging in activities that compete directly with us.

Registration Rights

In connection with the IPO, we agreed to register for sale under the Securities Act and applicable state securities laws, subject to certain limitations, any common units proposed to be sold by SGP and
the former owners of MGP or any of their respective affiliates. These registration rights required us to file one registration statement for each of these groups. We also agreed to include any securities held by the owners of SGP and the former
owners of MGP or any of their respective affiliates in any registration statement that we file to offer securities for cash, except an offering relating solely to an employee benefit plan and other similar exceptions. We satisfied our requirement by
registering 47,363,000 outstanding common units on Form S-3 filed with the SEC on June 1, 2007, declared outstanding effective on June 27, 2007, of which 249,999 have been sold. A prospectus supplement was filed with the SEC on
December 18, 2007. These registration rights are in addition to the registration rights that we agreed to provide AGP and its affiliates pursuant to our limited partnership agreement.

AGP

Our
partnership agreement requires us to reimburse AGP for all direct and indirect expenses it incurs or payments it makes on our behalf and all other expenses allocable to us or otherwise incurred by our general partner in connection with operating our
business. The amounts billed by AGP include $0.7 million, $0.5 million and $0.3 million for the years ended December 31, 2010, 2009 and 2008, respectively, for costs principally related to the Directors Annual Retainer and Deferred
Compensation Plan.

C-Holdings

At the closing of our IPO, we entered into the AHGP Credit Facility with C-Holdings, an entity controlled by Mr. Craft, as the lender. For the years ended December 31, 2010, 2009 and 2008, we
did not incur any interest expense or commitment fees to C-Holdings.

Option Agreements

On July 31, 2008, August 6, 2008 and August 7, 2008, we entered into agreements with certain current and former
members of management of the ARLP Partnership giving us the option to purchase 1,095,317 of our common units for the price of $29.98 per common unit at any time prior to October 28, 2008. We paid $0.02 per common unit for such option. On
October 28, 2008, the option agreements expired and were not exercised.

MAC

In September 2007, MAC entered into a $1.5 million Revolving Credit Agreement (Revolver) with ARLP. By amendment effective
April 1, 2008, the term of the Revolver was extended to June 30, 2009. On November 17, 2009, MAC entered into Amendment No. 2, effective June 30, 2009, which increased the Revolver to $1.75 million. The Revolver expired on
December 31, 2010. At December 31, 2010, MAC owed ARLP $1.6 million under the Revolver, which is classified as Due from Affiliates on our consolidated balance sheets. MAC repaid the amount due under the Revolver in January 2011.



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The ARLP Partnerships Related-Party Transactions

The MGP Board of Directors and the MGP Conflicts Committee review each of the ARLP Partnerships related-party transactions to
determine that such transactions reflect market-clearing terms and conditions customary in the coal industry. As a result of these reviews, the MGP Board of Directors and MGP Conflicts Committee approved each of the transactions described below as
fair and reasonable to the ARLP Partnership and its limited partners.

Administrative Services

On April 1, 2010, effective January 1, 2010, we entered into the Administrative Services Agreement (the Administrative
Services Agreement) with ARLP, MGP, the Intermediate Partnership, our general partner AGP, and ARH II, the indirect parent of SGP. The Administrative Services Agreement supersedes the administrative services agreement signed in connection with
our IPO in 2006. Under the Administrative Services Agreement, certain employees of ARLP, including some executive officers, provide administrative services to AHGP and ARH II and their respective affiliates. The ARLP Partnership is reimbursed for
services rendered by its employees on behalf of these affiliates as provided under the Administrative Services Agreement. On a consolidated basis, the ARLP Partnership billed and recognized administrative service revenue under this agreement of $0.2
million, $0.5 million and $0.5 million for the years ended December 31, 2010, 2009 and 2008, respectively, from ARH II. This administrative service revenue is included in other sales and operating revenues in our consolidated statements of
income.

Affiliate Contribution

During 2008, an affiliated entity controlled by Mr. Craft contributed to us 25,898 of our common units, valued at approximately $0.6 million at the time of contribution and $0.8 million of cash for
the purpose of funding certain expenses associated with the ARLP Partnerships employee compensation programs. Upon our receipt of the contribution, we immediately contributed the same to our subsidiary and ARLPs managing general partner,
MGP, which in turn contributed the same to Alliance Coal. Concurrent with this contribution, Alliance Coal distributed the common units to certain employees and recognized compensation expense of $1.4 million for the year ended December 31,
2008. The ARLP Partnership made a special allocation to MGP of certain general and administrative expenses equal to the amount of the contributions, MGP made an identical expense allocation to us, and we then made the same expense allocation to the
affiliated entity controlled by Mr. Craft.

SGP Land, LLC

On May 2, 2007, SGP Land, LLC (SGP Land), a subsidiary of SGP controlled by Mr. Craft, entered into a time sharing
agreement with Alliance Coal concerning the use of aircraft owned by SGP Land. In accordance with the provisions of the time sharing agreement as amended, the ARLP Partnership reimbursed SGP Land $0.8 million, $0.7 million and $0.7 million for the
years ended December 31, 2010, 2009 and 2008, respectively, for use of the aircraft.

On January 28, 2008, effective
January 1, 2008, the ARLP Partnership acquired, through its subsidiary Alliance Resource Properties, additional rights to approximately 48.2 million tons of coal reserves located in western Kentucky from SGP Land. The purchase price was
$13.3 million. At the time of the ARLP Partnerships acquisition, these reserves were leased by SGP Land to the ARLP Partnerships subsidiaries, Webster County Coal, Warrior and Hopkins County Coal through the mineral leases and sublease
agreements described below. Those mineral leases and sublease agreements between SGP Land and the ARLP Partnerships subsidiaries were assigned to Alliance Resource Properties by SGP Land in this transaction. The recoupable balances of advance
minimum royalties and other payments at the time of this acquisition, other than $0.4 million to the base lessors, are eliminated in our consolidated financial statements as of December 31, 2010 and 2009.

In 2001, SGP Land, as successor in interest to an unaffiliated third-party, entered into an amended mineral lease with MC Mining. Under
the terms of the lease, MC Mining has paid and will continue to pay an annual minimum royalty of $0.3 million until $6.0 million of cumulative annual minimum and/or earned royalty payments have been paid. MC Mining paid royalties of $0.3 million
during each of the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010, $2.1 million of advance minimum royalties paid under the lease is available for recoupment, and management expects that it will be
recouped against future production.

SGP

In January 2005, the ARLP Partnership acquired Tunnel Ridge from ARH. In connection with this acquisition, the ARLP Partnership assumed a coal lease with SGP. Under the terms of the lease, Tunnel Ridge
has paid and will continue to pay an annual minimum royalty of $3.0 million until the earlier of January 1, 2033 or the exhaustion of the



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mineable and merchantable leased coal. Tunnel Ridge paid advance minimum royalties of $3.0 million during each of the years ended December 31, 2010, 2009 and 2008. As of December 31,
2010, $17.9 million of advance minimum royalties paid under the lease is available for recoupment and management expects that it will be recouped against future production. In August 2010, the lease was amended to include approximately
34.4 million additional clean tons of recoverable coal reserves in the proven and probable categories.

Tunnel Ridge also
controls surface land and other tangible assets under a separate lease agreement with SGP. Under the terms of the lease agreement, Tunnel Ridge has paid and will continue to pay SGP an annual lease payment of $0.2 million. The lease agreement has an
initial term of four years, which may be extended to match the term of the coal lease. Lease expense was $0.2 million for each of the years ended December 31, 2010, 2009 and 2008, respectively.

The ARLP Partnership has a noncancelable operating lease arrangement with SGP for the coal preparation plant and ancillary facilities at
the Gibson County Coal mining complex. Pursuant to the lease, the ARLP Partnership made monthly payments of approximately $0.2 million through January 2011. Lease expense incurred for each of the years ended December 31, 2010, 2009 and 2008 was
$2.6 million, respectively. Effective February 1, 2011, the lease was amended to extend the term through January 2017 and modify other terms, including reducing the monthly payments to approximately $50,000.

The ARLP Partnership has agreements with two banks to provide letters of credit in an aggregate amount of $31.1 million. At
December 31, 2010, the ARLP Partnership had $30.7 million in outstanding letters of credit under these agreements. SGP guarantees $5.0 million of these outstanding letters of credit. SGP does not charge the ARLP Partnership for this guarantee.
Since the guarantee is made on behalf of entities within the consolidated partnership, the guarantee has no fair value under FASB ASC 460, Guarantees and does not impact our consolidated financial statements.

Accruals of Other Liabilities

The ARLP Partnership had accruals for other liabilities, including current obligations, totaling $196.9 million and $170.3 million at December 31, 2010 and 2009. These accruals were chiefly comprised
of workers compensation benefits, black lung benefits, and costs associated with asset retirement obligations. These obligations are self-insured except for certain excess insurance coverage for workers compensation. The accruals of
these items were based on estimates of future expenditures based on current legislation, related regulations and other developments. Thus, from time to time, the ARLP Partnerships results of operations may be significantly affected by changes
to these liabilities. Please see Item 8. Financial Statements and Supplementary DataNote 17. Asset Retirement Obligations and Note 18. Accrued Workers Compensation and Pneumoconiosis Benefits.

Pension Plan

The ARLP
Partnership maintains a Pension Plan, which covers employees at certain of its mining operations.

The ARLP Partnerships
pension expense was $2.2 million, $4.6 million and $1.9 million for the years ended December 31, 2010, 2009 and 2008. The ARLP Partnerships pension expense is based upon a number of actuarial assumptions, including an expected long-term
rate of return on the Pension Plan assets of 8.35% and discount rates of 5.88% and 6.15% for the years ended December 31, 2010 and 2009, respectively. The actual return on plan assets was 10.4% and 23.7% for the years ended December 31,
2010 and 2009, respectively. Additionally, the ARLP Partnership bases its determination of pension expense on a smoothed market-related valuation of assets equal to the fair value of assets, which immediately recognizes all investment gains or
losses.

The expected long-term rate of return assumption is based on broad equity and bond indices. At December 31,
2010, the ARLP Partnerships expected long-term rate of return assumption was 8.35% determined by the above factors and based on an asset allocation assumption of 60.0% invested in domestic equity securities, with an expected long-term rate of
return of 8.46%, 20.0% invested in international equities with an expected long-term rate of return of 8.85% and 20.0% invested in fixed income securities, with an expected long-term rate of return of 4.88%. The ARLP Partnership, along with its
Pension Plan investment manager and trustee and the compensation committee of the board of directors of its managing general partner (MGP Compensation Committee) regularly review its actual asset allocation in accordance with its
investment guidelines and periodically rebalance its investments to the targeted allocation when considered appropriate.



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The discount rate that the ARLP Partnership utilizes for determining its future pension
obligation is based on a review of currently available high-quality fixed-income investments that receive one of the two highest ratings given by a recognized rating agency. The ARLP Partnership has historically used the average monthly yield for
December of an A-rated utility bond index as the primary benchmark for establishing the discount rate. At December 31, 2010, the discount rate was determined using high quality bond yield curves adjusted to reflect the plans estimated
payout. The discount rate determined on this basis decreased from 5.88% at December 31, 2009 to 5.56% at December 31, 2010.

As of December 31, 2010, the Pension Plan was underfunded by approximately $13.3 million. The ARLP Partnership estimates that its Pension Plan expense and cash contributions will be approximately
$2.2 million and $5.0 million, respectively, in 2011. Future actual pension expense and contributions will depend on future investment performance, changes in future discount rates and various other factors related to the employees participating in
the Pension Plan.

Lowering the expected long-term rate of return assumption by 1.0% (from 8.35% to 7.35%) at
December 31, 2009 would have increased the ARLP Partnerships pension expense for the year ended December 31, 2010 by approximately $0.4 million. Lowering the discount rate assumption by 0.5% (from 5.88% to 5.38%) at December 31,
2009 would have increased pension expense for the year ended December 31, 2010 by approximately $0.5 million.

Inflation

At times, the ARLP Partnerships results have been significantly impacted by price increases affecting many of the
components of its operating expenses such as fuel, steel, maintenance expense and labor. The impact of recent governmental initiatives to stimulate economies worldwide remains unclear. Any resulting inflationary or deflationary pressures could
adversely affect the results of the ARLP Partnerships operations. Please see Item 1A. Risk Factors.

New Accounting
Standards

New Accounting Standards Issued and Adopted

In December 2009, the FASB issued Accounting Standards Update (ASU) 2009-17, Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 codified SFAS No. 167, Amendments to FASB Interpretation No. 46(R)),which changed the consolidation guidance applicable to a
variable interest entity (VIE). ASU 2009-17 updated the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate such VIE, by requiring a qualitative
analysis rather than a quantitative analysis. The qualitative analysis includes, among other things, consideration of whether the enterprise has the power to direct the activities of the entity that most significantly impact the entitys
economic performance and has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. ASU 2009-17 also requires continuous reassessments of whether an enterprise is the primary
beneficiary of a VIE. Previously, FASB ASC 810, Consolidation, required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. Qualifying special purpose entities, which were
previously exempt from the application of this standard, are now subject to the provisions of ASU 2009-17. In addition, ASU 2009-17 also requires enhanced disclosures about an enterprises involvement with a VIE. The provisions of ASU 2009-17
were effective as of the beginning of interim and annual reporting periods that began after November 15, 2009. Based on our evaluation of ASU 2009-17, the ARLP Partnership deconsolidated MAC upon adoption, effective January 1, 2010. The
deconsolidation of MAC did not have a material impact on our consolidated financial statements.

In January 2010, the FASB
issued ASU 2010-06, Improving Disclosures About Fair Value Measurements(ASU 2010-06). ASU 2010-06 amended guidance on certain aspects of FASB ASC 820, Fair Value Measurements and Disclosures,to add new requirements for
disclosures of transfers into and out of Level 1 and 2 measurements and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements, all on a gross basis. ASU 2010-06 also clarifies existing fair value
disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value. The provisions of ASU 2010-06 were effective for the first reporting period beginning after December 15, 2009, except for the
requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 did not have an impact on its
consolidated financial statements.



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New Accounting Standards Issued and Not Yet Adopted

In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for
Business Combinations (ASU 2010-29). ASU 2010-29 amended ASC 805, Business Combinations, to specify that if a public entity presents comparative financial statements and a business combination has occurred during the
current reporting period, then the public entity should disclose revenues and earnings of the combined entity as though the business combination that occurred during the current year had occurred at the beginning of the comparable prior annual
reporting period only. The amendments also expand the supplemental pro forma disclosures under ASC 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenues and earnings. The adoption of the ASU 2010-29 amendments are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2010. The ARLP Partnership does not anticipate the adoption of ASU 2010-29 on January 1, 2011 to have a material impact on its consolidated financial statements.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Commodity Price Risk

The ARLP Partnership has significant long-term coal
supply agreements as evidenced by approximately 92.4% of its sales tonnage, including approximately 94.5% of its medium- and high-sulfur coal sales tonnage, being sold under long-term contracts. Virtually all of the long-term coal supply agreements
are subject to price adjustment provisions, which permit an increase or decrease periodically in the contract price to principally reflect changes in specified price indices or items such as taxes, royalties or actual production costs resulting from
regulatory changes. For additional discussion of coal supply agreements, please see Item 1. Business.Coal Marketing and Sales and Item 8. Financial Statements and Supplementary Data.Note 21. Concentration of Credit Risk
and Major Customers. As of January 28, 2011, the ARLP Partnerships nominal commitment under long-term contracts was approximately 31.1 million tons in 2011, 27.3 million tons in 2012, 24.1 million tons in 2013 and
19.0 million tons in 2014.

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 diesel fuel, steel, explosives 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

In 2010, approximately 91.5% of the ARLP Partnerships sales tonnage was 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 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 prepayments 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. During 2009, the ARLP
Partnership entered into a contract to purchase longwall shields for the Tunnel Ridge mine from a foreign supplier for approximately £10.2 million. The ARLP Partnership paid £10.2 million to this foreign supplier through
December 31, 2010, thus fulfilling its obligation.

Interest Rate Risk

Borrowings under the ARLP Credit Facility and ARLP Term Loan 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 no borrowings under the ARLP Credit Facility and $300.0 million outstanding under the ARLP Term Loan Agreement at December 31, 2010. A one percentage point increase in the interest rates related to the ARLP Term
Loan Agreement would result in an annualized increase in 2011 interest



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expense of $3.0 million, based on borrowing levels at December 31, 2010. 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 $20.1 million in the estimated fair value of these borrowings.

The
table below provides information about the ARLP Partnerships market sensitive financial instruments and constitutes a forward-looking statement. 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 December 31, 2010 and 2009. The carrying amounts and fair values of financial instruments are as follows (in
thousands):



|                                                |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |            |   |         |       |  |   |                            |   |  |   |         |  |  |   |         | 
|----------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---------- | - | ------- | ----- |  | - | -------------------------- | - |  | - | ------- |  |  | - | ------- | 
|Expected Maturity Dates
as of December 31, 2010 |  | 2011 |        |   | 2012 |   |        | 2013 |  |   | 2014   |   |  | 2015 |        |   | Thereafter |   |         | Total |  |   | Fair
ValueDecember 31,2010 |  
|ARLP fixed rate debt                            |  | $    | 18,000 |   |      | $ | 18,000 |      |  | $ | 18,000 |   |  | $    | 18,000 |   |            | $ | 205,000 |       |  | $ | 145,000                    |   |  | $ | 422,000 |  |  | $ | 509,483 | 
|Weighted average interest rate                  |  |      | 6.75   | % |      |   | 6.68   | %    |  |   | 6.61   | % |  |      | 6.52   | % |            |   | 6.54    | %     |  |   | 6.72                       | % |  |   |         |  |  |   |         | 
|                                                |  |      |        |   |      |   |        |     
|ARLP variable rate debt                         |  | $    |       |   |      | $ |       |      |  | $ | 60,000 |   |  | $    | 75,000 |   |            | $ | 165,000 |       |  | $ |                           |   |  | $ | 300,000 |  |  | $ | 300,000 | 
|Weighted average interest rate (1)              |  |      | 2.30   | % |      |   | 2.30   | %    |  |   | 2.30   | % |  |      | 2.30   | % |            |   | 2.30    | %     |  |   |                            |   |  |   |         |  |  |   |         | 
|                                                |  |      |        |   |      |   |        |     
|Expected Maturity Dates
as of December 31, 2009 |  | 2010 |        |   | 2011 |   |        | 2012 |  |   | 2013   |   |  | 2014 |        |   | Thereafter |   |         | Total |  |   | Fair ValueDecember 31,2009 |  
|ARLP fixed rate debt                            |  | $    | 18,000 |   |      | $ | 18,000 |      |  | $ | 18,000 |   |  | $    | 18,000 |   |            | $ | 18,000  |       |  | $ | 350,000                    |   |  | $ | 440,000 |  |  | $ | 460,739 | 
|Weighted average interest rate                  |  |      | 6.82   | % |      |   | 6.75   | %    |  |   | 6.68   | % |  |      | 6.61   | % |            |   | 6.52    | %     |  |   | 6.65                       | % |  |   |         |  |  |   |         | 



|(1) | Interest rate on variable rate debt equal to the rate elected by the ARLP Partnership at December 31, 2010, held constant for the remaining term of the outstanding
borrowing.
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|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of the

General Partner and the Partners of

Alliance Holdings GP, L.P.:

We have audited
the accompanying consolidated balance sheets of Alliance Holdings GP, L.P. and subsidiaries (the AHGP Partnership) as of December 31, 2010 and 2009, and the related consolidated statements of income, cash flows and Partners
capital for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are
the responsibility of the AHGP Partnerships management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of Alliance Holdings GP, L.P. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity
with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the AHGP Partnerships internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2011 expressed an unqualified opinion on the AHGP Partnerships internal control over financial reporting.

/s/ Deloitte & Touche LLP

Tulsa, Oklahoma

March 8, 2011



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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2010 AND 2009

(In thousands, except unit data)



|                                                                                 |  |              |           |   |      |   |           |  
|-------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                                                                 |  | December 31, |          
|                                                                                 |  | 2010         |           |   | 2009 |  
|ASSETS                                                                           |  |              |           |   |      |   |           |  
|CURRENT ASSETS:                                                                  |  |              |           |   |      |   |           |  
|Cash and cash equivalents                                                        |  | $            | 342,237   |   |      | $ | 24,361    |  
|Trade receivables                                                                |  |              | 112,942   |   |      |   | 91,223    |  
|Other receivables                                                                |  |              | 2,537     |   |      |   | 3,159     |  
|Due from affiliates                                                              |  |              | 1,635     |   |      |   |          |  
|Inventories                                                                      |  |              | 31,548    |   |      |   | 64,357    |  
|Advance royalties                                                                |  |              | 4,812     |   |      |   | 3,629     |  
|Prepaid expenses and other assets                                                |  |              | 10,363    |   |      |   | 8,889     |  
|                                                                                 |  |              |           |   |      |   |           |  
|Total current assets                                                             |  |              | 506,074   |   |      |   | 195,618   |  
|PROPERTY, PLANT AND EQUIPMENT:                                                   |  |              |           |   |      |   |           |  
|Property, plant and equipment, at cost                                           |  |              | 1,598,130 |   |      |   | 1,378,914 |  
|Less accumulated depreciation, depletion and amortization                        |  |              | (648,883  | ) |      |   | (556,370  | )
|                                                                                 |  |              |           |   |      |   |           |  
|Total property, plant and equipment, net                                         |  |              | 949,247   |   |      |   | 822,544   |  
|OTHER ASSETS:                                                                    |  |              |           |   |      |   |           |  
|Advance royalties                                                                |  |              | 27,439    |   |      |   | 26,802    |  
|Other long-term assets                                                           |  |              | 21,312    |   |      |   | 9,303     |  
|                                                                                 |  |              |           |   |      |   |           |  
|Total other assets                                                               |  |              | 48,751    |   |      |   | 36,105    |  
|                                                                                 |  |              |           |   |      |   |           |  
|TOTAL ASSETS                                                                     |  | $            | 1,504,072 |   |      | $ | 1,054,267 |  
|                                                                                 |  |              |           |   |      |   |           |  
|LIABILITIES AND PARTNERS CAPITAL                                                |  |              |           |   |      |   |           |  
|CURRENT LIABILITIES:                                                             |  |              |           |   |      |   |           |  
|Accounts payable                                                                 |  | $            | 63,934    |   |      | $ | 63,496    |  
|Due to affiliates                                                                |  |              | 573       |   |      |   | 27        |  
|Accrued taxes other than income taxes                                            |  |              | 13,916    |   |      |   | 10,792    |  
|Accrued payroll and related expenses                                             |  |              | 30,773    |   |      |   | 22,101    |  
|Accrued interest                                                                 |  |              | 2,491     |   |      |   | 2,918     |  
|Workers compensation and pneumoconiosis benefits                                |  |              | 8,518     |   |      |   | 9,886     |  
|Current capital lease obligation                                                 |  |              | 295       |   |      |   | 324       |  
|Other current liabilities                                                        |  |              | 16,780    |   |      |   | 11,205    |  
|Current maturities, long-term debt                                               |  |              | 18,000    |   |      |   | 18,000    |  
|                                                                                 |  |              |           |   |      |   |           |  
|Total current liabilities                                                        |  |              | 155,280   |   |      |   | 138,749   |  
|LONG-TERM LIABILITIES:                                                           |  |              |           |   |      |   |           |  
|Long-term debt, excluding current maturities                                     |  |              | 704,000   |   |      |   | 422,000   |  
|Pneumoconiosis benefits                                                          |  |              | 45,039    |   |      |   | 34,344    |  
|Accrued pension benefit                                                          |  |              | 13,296    |   |      |   | 19,696    |  
|Workers compensation                                                            |  |              | 59,796    |   |      |   | 53,845    |  
|Asset retirement obligations                                                     |  |              | 56,045    |   |      |   | 53,116    |  
|Due to affiliates                                                                |  |              | 682       |   |      |   | 314       |  
|Long-term capital lease obligation                                               |  |              | 165       |   |      |   | 460       |  
|Other liabilities                                                                |  |              | 12,549    |   |      |   | 9,043     |  
|                                                                                 |  |              |           |   |      |   |           |  
|Total long-term liabilities                                                      |  |              | 891,572   |   |      |   | 592,818   |  
|                                                                                 |  |              |           |   |      |   |           |  
|Total liabilities                                                                |  |              | 1,046,852 |   |      |   | 731,567   |  
|                                                                                 |  |              |           |   |      |   |           |  
|COMMITMENTS AND CONTINGENCIES                                                    |  |              |           |   |      |   |           |  
|PARTNERSCAPITAL:                                                                |  |              |           |   |      |   |           |  
|Alliance Holdings GP, L.P. (AHGP) Partners Capital:                           |  |              |           |   |      |   |           |  
|Limited Partners - Common Unitholders 59,863,000 units outstanding, respectively |  |              | 330,346   |   |      |   | 269,742   |  
|Accumulated other comprehensive loss                                             |  |              | (8,138    | ) |      |   | (7,465    | )
|                                                                                 |  |              |           |   |      |   |           |  
|Total AHGP Partners Capital                                                     |  |              | 322,208   |   |      |   | 262,277   |  
|Noncontrolling interests                                                         |  |              | 135,012   |   |      |   | 60,423    |  
|                                                                                 |  |              |           |   |      |   |           |  
|Total Partners Capital                                                          |  |              | 457,220   |   |      |   | 322,700   |  
|                                                                                 |  |              |           |   |      |   |           |  
|TOTAL LIABILITIES AND PARTNERSCAPITAL                                           |  | $            | 1,504,072 |   |      | $ | 1,054,267 |  
|                                                                                 |  |              |           |   |      |   |           |  

See notes to consolidated financial statements.



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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

(In thousands, except unit and per unit data)



|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                      |  | Year Ended December 31, |           
|                                                                                      |  | 2010                    |            |   | 2009 |   |            | 2008 | 
|SALES AND OPERATING REVENUES:                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Coal sales                                                                            |  | $                       | 1,551,539  |   |      | $ | 1,163,871  |      |  | $ | 1,093,059  |  
|Transportation revenues                                                               |  |                         | 33,584     |   |      |   | 45,733     |      |  |   | 44,755     |  
|Other sales and operating revenues                                                    |  |                         | 24,620     |   |      |   | 20,998     |      |  |   | 18,327     |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|Total revenues                                                                        |  |                         | 1,609,743  |   |      |   | 1,230,602  |      |  |   | 1,156,141  |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|EXPENSES:                                                                             |  |                         |            |   |      |   |            |      |  |   |            |  
|Operating expenses (excluding depreciation, depletion and amortization)               |  |                         | 1,009,935  |   |      |   | 797,527    |      |  |   | 801,854    |  
|Transportation expenses                                                               |  |                         | 33,584     |   |      |   | 45,733     |      |  |   | 44,755     |  
|Outside coal purchases                                                                |  |                         | 17,078     |   |      |   | 7,524      |      |  |   | 23,776     |  
|General and administrative                                                            |  |                         | 54,215     |   |      |   | 42,875     |      |  |   | 38,857     |  
|Depreciation, depletion and amortization                                              |  |                         | 146,881    |   |      |   | 117,524    |      |  |   | 105,278    |  
|Gain from sale of coal reserves                                                       |  |                         |           |   |      |   |           |      |  |   | (5,159     | )
|Net gain from insurance settlement and other                                          |  |                         |           |   |      |   |           |      |  |   | (2,790     | )
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|Total operating expenses                                                              |  |                         | 1,261,693  |   |      |   | 1,011,183  |      |  |   | 1,006,571  |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|INCOME FROM OPERATIONS                                                                |  |                         | 348,050    |   |      |   | 219,419    |      |  |   | 149,570    |  
|Interest expense (net of interest capitalized of $888, $1,291 and $808, respectively) |  |                         | (30,062    | ) |      |   | (30,847    | )    |  |   | (22,145    | )
|Interest income                                                                       |  |                         | 204        |   |      |   | 1,066      |      |  |   | 3,776      |  
|Other income                                                                          |  |                         | 851        |   |      |   | 1,247      |      |  |   | 875        |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|INCOME BEFORE INCOME TAXES                                                            |  |                         | 319,043    |   |      |   | 190,885    |      |  |   | 132,076    |  
|INCOME TAX EXPENSE (BENEFIT)                                                          |  |                         | 1,742      |   |      |   | 709        |      |  |   | (480       | )
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|NET INCOME                                                                            |  |                         | 317,301    |   |      |   | 190,176    |      |  |   | 132,556    |  
|LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS                             |  |                         | (142,957   | ) |      |   | (75,960    | )    |  |   | (51,342    | )
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. (NET INCOME OF AHGP)          |  | $                       | 174,344    |   |      | $ | 114,216    |      |  | $ | 81,214     |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT                         |  | $                       | 2.91       |   |      | $ | 1.91       |      |  | $ | 1.36       |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT                                           |  | $                       | 1.90       |   |      | $ | 1.685      |      |  | $ | 1.3175     |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING  BASIC AND DILUTED                      |  |                         | 59,863,000 |   |      |   | 59,863,000 |      |  |   | 59,863,000 |  
|                                                                                      |  |                         |            |   |      |   |            |      |  |   |            |  

See notes to consolidated financial statements.



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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND
2008

(In thousands)



|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                         |  | Year Ended December 31, |         
|                                                                                         |  | 2010                    |          |   | 2009 |   |          | 2008 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                         |          |   |      |   |          |      |  |   |          |  
|Net income                                                                               |  | $                       | 317,301  |   |      | $ | 190,176  |      |  | $ | 132,556  |  
|Adjustments to reconcile net income to net cash provided by operating activities:        |  |                         |          |   |      |   |          |      |  |   |          |  
|Depreciation, depletion and amortization                                                 |  |                         | 146,881  |   |      |   | 117,524  |      |  |   | 105,278  |  
|Non-cash compensation expense                                                            |  |                         | 4,051    |   |      |   | 3,582    |      |  |   | 3,931    |  
|Asset retirement obligations                                                             |  |                         | 2,579    |   |      |   | 2,678    |      |  |   | 2,827    |  
|Coal inventory adjustment to market                                                      |  |                         | 498      |   |      |   | 3,030    |      |  |   | 452      |  
|Loss on retirement of vertical hoist conveyor system                                     |  |                         | 1,204    |   |      |   |         |      |  |   |         |  
|Net (gain) loss on foreign currency transaction                                          |  |                         | 274      |   |      |   | (653     | )    |  |   |         |  
|Net (gain) loss on sale of property, plant and equipment                                 |  |                         | 234      |   |      |   | 136      |      |  |   | (911     | )
|Gain from sale of coal reserves                                                          |  |                         |         |   |      |   |         |      |  |   | (5,159   | )
|Other                                                                                    |  |                         | 1,448    |   |      |   | 537      |      |  |   | 366      |  
|Changes in operating assets and liabilities:                                             |  |                         |          |   |      |   |          |      |  |   |          |  
|Trade receivables                                                                        |  |                         | (21,780  | ) |      |   | (3,301   | )    |  |   | 4,745    |  
|Other receivables                                                                        |  |                         | (689     | ) |      |   | 2,841    |      |  |   | (1,714   | )
|Inventories                                                                              |  |                         | 31,412   |   |      |   | (40,917  | )    |  |   | (960     | )
|Prepaid expenses and other assets                                                        |  |                         | (1,474   | ) |      |   | 1,273    |      |  |   | (881     | )
|Advance royalties                                                                        |  |                         | (1,820   | ) |      |   | (3,403   | )    |  |   | (4,244   | )
|Accounts payable                                                                         |  |                         | 7,975    |   |      |   | (6,222   | )    |  |   | 5,730    |  
|Due to affiliates                                                                        |  |                         | 818      |   |      |   | 184      |      |  |   | (1,186   | )
|Accrued taxes other than income taxes                                                    |  |                         | 3,124    |   |      |   | (443     | )    |  |   | 144      |  
|Accrued payroll and related benefits                                                     |  |                         | 8,670    |   |      |   | 1,546    |      |  |   | 5,375    |  
|Pneumoconiosis benefits                                                                  |  |                         | 3,647    |   |      |   | 2,908    |      |  |   | 2,044    |  
|Workers compensation                                                                    |  |                         | 4,583    |   |      |   | 6,526    |      |  |   | 4,931    |  
|Other                                                                                    |  |                         | 8,089    |   |      |   | 2,800    |      |  |   | 5,987    |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Total net adjustments                                                                    |  |                         | 199,724  |   |      |   | 90,626   |      |  |   | 126,755  |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                                |  |                         | 517,025  |   |      |   | 280,802  |      |  |   | 259,311  |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                         |          |   |      |   |          |      |  |   |          |  
|Property, plant and equipment:                                                           |  |                         |          |   |      |   |          |      |  |   |          |  
|Capital expenditures                                                                     |  |                         | (289,874 | ) |      |   | (328,162 | )    |  |   | (176,482 | )
|Changes in accounts payable and accrued liabilities                                      |  |                         | (7,480   | ) |      |   | 5,727    |      |  |   | 10,046   |  
|Proceeds from sale of property, plant and equipment                                      |  |                         | 381      |   |      |   | 8        |      |  |   | 2,708    |  
|Proceeds from sale of coal reserves                                                      |  |                         |         |   |      |   |         |      |  |   | 7,159    |  
|Purchase of marketable securities                                                        |  |                         |         |   |      |   | (4,527   | )    |  |   |         |  
|Proceeds from marketable securities                                                      |  |                         |         |   |      |   | 4,527    |      |  |   |         |  
|Payment for acquisition of coal reserves and other assets                                |  |                         |         |   |      |   |         |      |  |   | (29,800  | )
|Receipts on prior advances on Gibson rail project                                        |  |                         | 1,982    |   |      |   | 2,295    |      |  |   | 2,244    |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash used in investing activities                                                    |  |                         | (294,991 | ) |      |   | (320,132 | )    |  |   | (184,125 | )
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                         |          |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of long-term debt                                                 |  |                         |         |   |      |   |         |      |  |   | 350,000  |  
|Payments on long-term debt                                                               |  |                         | (18,000  | ) |      |   | (18,000  | )    |  |   | (18,000  | )
|Borrowings under term loan                                                               |  |                         | 300,000  |   |      |   |         |      |  |   |         |  
|Borrowings under revolving credit facilities                                             |  |                         | 95,000   |   |      |   |         |      |  |   | 88,850   |  
|Payments under revolving credit facilities                                               |  |                         | (95,000  | ) |      |   |         |      |  |   | (116,850 | )
|Payments on capital lease obligation                                                     |  |                         | (324     | ) |      |   | (351     | )    |  |   | (377     | )
|Payment of debt issuance costs                                                           |  |                         | (1,417   | ) |      |   | (339     | )    |  |   | (1,721   | )
|Contribution by limited partner - affiliate                                              |  |                         |         |   |      |   |         |      |  |   | 816      |  
|Purchase of options on limited partner common units                                      |  |                         |         |   |      |   |         |      |  |   | (22      | )
|Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan |  |                         | (1,265   | ) |      |   | (791     | )    |  |   |         |  
|Contributions to consolidated partnership from affiliate noncontrolling interest         |  |                         |         |   |      |   |         |      |  |   | 1        |  
|Distributions paid by consolidated partnership to noncontrolling interests               |  |                         | (69,138  | ) |      |   | (63,320  | )    |  |   | (54,089  | )
|Distributions paid to Partners                                                           |  |                         | (113,740 | ) |      |   | (100,869 | )    |  |   | (78,869  | )
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) financing activities                                      |  |                         | 96,116   |   |      |   | (183,670 | )    |  |   | 169,739  |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|EFFECT OF CURRENCY TRANSLATION ON CASH                                                   |  |                         | (274     | ) |      |   | 653      |      |  |   |         |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                                  |  |                         | 317,876  |   |      |   | (222,347 | )    |  |   | 244,925  |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         |  |                         | 24,361   |   |      |   | 246,708  |      |  |   | 1,783    |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                               |  | $                       | 342,237  |   |      | $ | 24,361   |      |  | $ | 246,708  |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  

See notes to consolidated financial statements, including Note 16 for supplemental cash flow information.



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ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF PARTNERS CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2010,
2009, AND 2008

(In thousands, except unit data)



|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|-------------------------------------------------------------------------------- |  | ----------------------------- | ---------- |  | ----------------------- | - | -------- | ------------------------------------------ |  | - | ---------------------- | - |  | ---------------------- | ------- | - |  | - | -------- | -
|                                                                                 |  | Alliance Holdings GP, L.P.    |            |  |                         |   |          |                                            | 
|                                                                                 |  | Number ofLimitedPartner Units |            |  | LimitedPartnersCapital |   |          | AccumulatedOtherComprehensiveIncome (Loss) |  |   | NoncontrollingInterest |   |  | Total PartnersCapital |        
|Balance at January 1, 2008                                                       |  |                               | 59,863,000 |  |                         | $ | 262,445  |                                            |  | $ | 48                     |   |  | $                      | 55,353  |   |  | $ | 317,846  |  
|Comprehensive income:                                                            |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Net income                                                                       |  |                               |           |  |                         |   | 81,214   |                                            |  |   |                       |   |  |                        | 51,342  |   |  |   | 132,556  |  
|Actuarially determined long-term liability adjustments                           |  |                               |           |  |                         |   |         |                                            |  |   | (8,721                 | ) |  |                        | (11,287 | ) |  |   | (20,008  | )
|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Total comprehensive income                                                       |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   | 112,548  |  
|Vesting of ARLP Long-Term Incentive Plan                                         |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (1,181  | ) |  |   | (1,181   | )
|Common unit-based compensation under ARLP Long-Term Incentive Plan               |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | 3,311   |   |  |   | 3,311    |  
|Common control acquisition (Note 3)                                              |  |                               |           |  |                         |   | (9,809   | )                                          |  |   |                       |   |  |                        |        |   |  |   | (9,809   | )
|Purchase of options on limited partner common units                              |  |                               |           |  |                         |   | (22      | )                                          |  |   |                       |   |  |                        |        |   |  |   | (22      | )
|Contributions to consolidated partnership from affiliate noncontrolling interest |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | 1       |   |  |   | 1        |  
|Contribution by limited partneraffiliate                                        |  |                               |           |  |                         |   | 1,436    |                                            |  |   |                       |   |  |                        |        |   |  |   | 1,436    |  
|Distributions on ARLP common unit-based compensation                             |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (793    | ) |  |   | (793     | )
|Distributions to AHGP Partners                                                   |  |                               |           |  |                         |   | (78,869  | )                                          |  |   |                       |   |  |                        |        |   |  |   | (78,869  | )
|Distributions paid by consolidated partnership to noncontrolling interest        |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (53,296 | ) |  |   | (53,296  | )
|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Balance at December 31, 2008                                                     |  |                               | 59,863,000 |  |                         |   | 256,395  |                                            |  |   | (8,673                 | ) |  |                        | 43,450  |   |  |   | 291,172  |  
|Comprehensive income:                                                            |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Net income                                                                       |  |                               |           |  |                         |   | 114,216  |                                            |  |   |                       |   |  |                        | 75,960  |   |  |   | 190,176  |  
|Actuarially determined long-term liability adjustments                           |  |                               |           |  |                         |   |         |                                            |  |   | 1,208                  |   |  |                        | 1,542   |   |  |   | 2,750    |  
|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Total comprehensive income                                                       |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   | 192,926  |  
|Vesting of ARLP Long-Term Incentive Plan                                         |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (791    | ) |  |   | (791     | )
|Common unit-based compensation under ARLP Long-Term Incentive Plan               |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | 3,582   |   |  |   | 3,582    |  
|Distributions on ARLP common unit-based compensation                             |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (1,026  | ) |  |   | (1,026   | )
|Distributions to AHGP Partners                                                   |  |                               |           |  |                         |   | (100,869 | )                                          |  |   |                       |   |  |                        |        |   |  |   | (100,869 | )
|Distributions paid by consolidated partnership to noncontrolling interest        |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (62,294 | ) |  |   | (62,294  | )
|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Balance at December 31, 2009                                                     |  |                               | 59,863,000 |  |                         |   | 269,742  |                                            |  |   | (7,465                 | ) |  |                        | 60,423  |   |  |   | 322,700  |  
|Comprehensive income:                                                            |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Net income                                                                       |  |                               |           |  |                         |   | 174,344  |                                            |  |   |                       |   |  |                        | 142,957 |   |  |   | 317,301  |  
|Actuarially determined long-term liability adjustments                           |  |                               |           |  |                         |   |         |                                            |  |   | (673                   | ) |  |                        | (899    | ) |  |   | (1,572   | )
|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Total comprehensive income                                                       |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   | 315,729  |  
|Deconsolidation of MAC (Note 13)                                                 |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (1,117  | ) |  |   | (1,117   | )
|Vesting of ARLP Long-Term Incentive Plan                                         |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (1,265  | ) |  |   | (1,265   | )
|Common unit-based compensation under ARLP Long-Term Incentive Plan               |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | 4,051   |   |  |   | 4,051    |  
|Distributions on ARLP common unit-based compensation                             |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (1,286  | ) |  |   | (1,286   | )
|Distributions to AHGP Partners                                                   |  |                               |           |  |                         |   | (113,740 | )                                          |  |   |                       |   |  |                        |        |   |  |   | (113,740 | )
|Distributions paid by consolidated partnership to noncontrolling interest        |  |                               |           |  |                         |   |         |                                            |  |   |                       |   |  |                        | (67,852 | ) |  |   | (67,852  | )
|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  
|Balance at December 31, 2010                                                     |  |                               | 59,863,000 |  |                         | $ | 330,346  |                                            |  | $ | (8,138                 | ) |  | $                      | 135,012 |   |  | $ | 457,220  |  
|                                                                                 |  |                               |            |  |                         |   |          |                                            |  |   |                        |   |  |                        |         |   |  |   |          |  

See notes to consolidated financial statements.



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##### Table of Contents

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009
AND 2008



|1. | ORGANIZATION AND PRESENTATION
|-- | -----------------------------

Significant Relationships Referenced in Notes to 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, which include 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, the managing general partner of Alliance Resource Partners, L.P.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | References to SGP mean Alliance Resource GP, LLC, the special general partner of Alliance Resource Partners, L.P.
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | References to Intermediate Partnership mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource
Partners, L.P.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | References to Alliance Coal mean Alliance Coal, LLC, the holding company for the 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 directly and indirectly 100% of the members interest in MGP,
ARLPs managing general partner. The ARLP Partnership is a diversified producer and marketer of coal to major U.S. utilities and industrial users. ARLP conducts substantially all of its business through its wholly-owned subsidiary, 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 and marketing assets of Alliance Resource Holdings, Inc.
(ARH), a Delaware Corporation. We and ARH, through its wholly-owned subsidiary, SGP, maintain general partner interests in ARLP and the Intermediate Partnership. In June 2006, ARH and its parent company became wholly-owned, directly and
indirectly, by Joseph W. Craft, III, the Chairman, President and Chief Executive Officer of AGP and a Director and the President and Chief Executive Officer of MGP.

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

Alliance Resource Management GP, LLC, a Delaware limited liability company, and ARM GP Holdings, Inc, a Delaware corporation, are our direct subsidiaries. The Delaware limited partnerships, limited
liability companies and corporation that comprise the ARLP Partnership, which we consolidate, are as follows: ARLP, Intermediate Partnership, Alliance Coal, Alliance Design Group, LLC (Alliance Design), Alliance Land, LLC, Alliance
Properties, LLC, Alliance Resource Properties, LLC, (Alliance Resource Properties) and its wholly-owned subsidiary, ARP Sebree, LLC, Alliance Service, Inc. (Alliance Service), Backbone Mountain, LLC, Excel Mining, LLC, Gibson
County Coal, LLC (Gibson County Coal), Gibson County Coal (South), LLC (Gibson South), Hopkins County Coal, LLC (Hopkins County Coal), Matrix Design Group, LLC (Matrix Design), MC Mining, LLC (MC
Mining), Mettiki Coal, LLC (Mettiki (MD)), Mettiki Coal (WV), LLC (Mettiki (WV)), Mt. Vernon Transfer Terminal, LLC (Mt. Vernon), Penn Ridge Coal, LLC (Penn Ridge), Pontiki Coal, LLC
(Pontiki), River View Coal, LLC (River View), the Sebree Mining, LLC (Sebree) property, Tunnel Ridge, LLC (Tunnel Ridge), Warrior Coal, LLC (Warrior), Webster County Coal, LLC
(Webster County Coal), and White County Coal, LLC (White County Coal).



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Initial Public Offering and Concurrent Transactions

On May 15, 2006, we completed our initial public offering (IPO) of 12,500,000 common units representing limited partner
interests in us at a price of $25.00 per unit. In connection with the IPO, Alliance Management Holdings, LLC (AMH) and AMH II, LLC (AMH II) (which were the previous owners of MGP), AHGP and SGP entered into a contribution
agreement (Contribution Agreement) pursuant to which 100% of the members interest in MGP (which includes ARLPs incentive distribution rights (IDRs) and MGPs general partner interests in ARLP), 15,550,628 of
ARLPs common units and a 0.001% managing interest in Alliance Coal were contributed to us. As consideration for this contribution and in accordance with the terms of the Contribution Agreement, we distributed substantially all of the proceeds
from our IPO to AMH and AMH II and issued 6,863,470, 19,858,362 and 20,641,168 of AHGPs common units to AMH, AMH II and SGP, respectively. In June 2006, subsequent to the IPO, the AHGP common units and substantially all of the IPO proceeds
distributed to AMH and AMH II were distributed to the individual members of AMH and AMH II. On April 26, 2007, our 0.001% managing interest in Alliance Coal was transferred to our subsidiary, MGP.

Contributions to ARLP

During 2008, an affiliated entity controlled by Mr. Craft contributed to us 25,898 of our common units valued at approximately $0.6
million at the time of contribution and $0.8 million of cash for the purpose of funding certain expenses associated with the ARLP Partnerships employee compensation programs. Upon our receipt of the contribution, we immediately contributed the
same to our subsidiary and ARLPs managing general partner, MGP, which in turn contributed the same to Alliance Coal. Concurrent with this contribution, Alliance Coal distributed the common units to certain employees and recognized compensation
expense of $1.4 million in 2008. The ARLP Partnership made a special allocation to MGP of certain general and administrative expenses equal to the amount of the contribution, MGP made an identical expense allocation to us, and we then made the same
expense allocation to the affiliated entity controlled by Mr. Craft (Note 19).

Basis of Presentation

The accompanying consolidated financial statements include the accounts and operations of the AHGP Partnership and present our financial
position as of December 31, 2010 and 2009, and results of our operations, cash flows and changes in partners capital for each of the three years in the period ended December 31, 2010. All of our intercompany transactions and accounts
have been eliminated.

The transfer of assets from prior years described above was between entities under common control. In
accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations, the transfer of assets was accounted for at historical cost, in a manner similar to a
pooling of interests.

Since we own MGP, our consolidated financial statements reflect the consolidated results of the ARLP
Partnership. The earnings of the ARLP Partnership allocated to its limited partners interests not owned by us and allocated to SGPs general partner interest in ARLP, are reflected as a noncontrolling interest in our consolidated income
statement 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 (Administrative Services Agreement) and amounts billed by, and reimbursed to, AGP under our partnership
agreement (Note 19).



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

EstimatesThe preparation of consolidated financial statements in conformity with generally accepted accounting principles (GAAP) of the United States
(U.S.) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates.



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Principles of Consolidation and Noncontrolling InterestsThe
consolidated financial statements include our accounts and those of MGP, ARLP, the Intermediate Partnership and the Intermediate Partnerships Operating subsidiaries in the consolidated group, after the elimination of intercompany accounts and
transactions. We evaluate our financial interests in companies to determine if we are the primary beneficiary and therefore the financial interest represents a variable interest entity (VIE). If such criteria are met, we consolidate the
financial statements of such businesses with those of our own.

The non-controlling interest on our consolidated balance sheet
reflects the outside ownership interest in ARLP as well as Mid-America Carbonates, LLC (MAC) (2009 only). See Basis of Presentation under Note 1 for information regarding our consolidation of ARLP. See also Note 12.
Noncontrolling Interests.

Earnings per UnitBasic earnings per limited partner unit is
computed by dividing net income or loss allocated to limited partner interests by the weighted-average number of distribution-bearing common units outstanding during a period. We currently have no dilutive securities. Total net income is allocated
to the limited partner interests because the general partners interest is non-economic.

Fair Value of Financial
InstrumentsThe carrying amounts for accounts receivable, marketable securities, and accounts payable approximate fair value because of the short maturity of those instruments. At December 31, 2010 and 2009, the estimated
fair value of the ARLP Partnerships long-term debt, including current maturities, was approximately $809.5 million and $460.7 million, respectively (Note 9).

Cash and Cash EquivalentsCash and cash equivalents include cash on hand and on deposit, including highly liquid investments with maturities of three months or less. We had no
restricted cash and cash equivalents at December 31, 2010 and 2009.

Cash ManagementThe cash
flows from operating activities section of our Consolidated Statements of Cash Flows reflect an adjustment for $10 million representing book overdrafts at December 31, 2008. The ARLP Partnership had no book overdrafts at December 31, 2010
and 2009, respectively.

InventoriesCoal inventories are stated at the lower of cost or market on a
first-in, first-out basis. Supply inventories are stated at the lower of cost or market on an average cost basis, less a reserve for obsolete and surplus items.

Property, Plant and EquipmentExpenditures which extend the useful lives of existing plant and equipment assets are capitalized. Maintenance and repairs that do not extend the
useful life or increase productivity of the asset are charged to operating expense as incurred. Exploration expenditures are charged to operating expense as incurred, including costs related to drilling and study costs incurred to convert or upgrade
mineral resources to reserves. Depreciation and amortization are computed principally on the straight-line method based upon the estimated useful lives of the assets or the estimated life of each mine, whichever is less, ranging from 1 to 23 years.
Depreciable lives for mining equipment and processing facilities range from 1 to 23 years. Depreciable lives for land and depletable lives for mineral rights range from 2 to 23 years. Depreciable lives for buildings, office equipment and
improvements range from 2 to 23 years. Gains or losses arising from retirements are included in current operations. Depletion of mineral rights is provided on the basis of tonnage mined in relation to estimated recoverable tonnage which equals
estimated proven and probable reserves. Therefore, the ARLP Partnerships mineral rights are depleted based on only proven and probable reserves derived in accordance with Industry Guide 7. At December 31, 2010 and 2009, land and mineral
rights include $33.0 million and $22.5 million, respectively, representing the carrying value of coal reserves attributable to properties where the ARLP Partnership is not currently engaged in mining operations or leasing to third-parties, and
therefore, the coal reserves are not currently being depleted. The ARLP Partnership believes that the carrying value of these reserves will be recovered.

Mine Development CostsMine development costs are capitalized until production, other than production incidental to the mine development process, commences and are amortized on a
units of production method based on the estimated proven and probable reserves. Mine development costs represent costs incurred in establishing access to mineral reserves and include costs associated with sinking or driving shafts and underground
drifts, permanent excavations, roads and tunnels. The end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Coal extracted during the
development phase is incidental to the mines production capacity and is not considered to shift the mine into the production phase. Amortization of capitalized mine development is computed based on the estimated life of the mine and commences
when production, other than production incidental to the mine development process, begins. At December 31, 2010 and 2009, mine development costs include $35.3 million and $16.4 million, respectively, representing the carrying value of



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development costs attributable to properties where we are not currently engaged in mining operations or leasing to third-parties, and therefore, the mine development costs are not currently being
depleted. The ARLP Partnership believes that the carrying value of these development costs will be recovered.

Long-Lived AssetsThe ARLP Partnership reviews the carrying value of long-lived assets and certain identifiable
intangibles whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based upon estimated undiscounted future cash flows. The amount of impairment is measured by the difference between the carrying value
and the fair value of the asset. The ARLP Partnership has not recorded an impairment loss for any of the periods presented.

Intangible AssetsCosts allocated to contracts with covenants not to compete (Non-Compete
Agreements) are amortized on a straight-line basis over the life of the Non-Compete Agreements. Amortization expense associated with Non-Compete Agreements was $1.1 million, $0.5 million and $0.5 million for the years ending December 31,
2010, 2009 and 2008, respectively. The Non-Compete Agreements are included in other long-term assets on the consolidated balance sheets at December 31, 2010 and 2009. The ARLP Partnerships Non-Compete Agreements at December 31, are
summarized as follows (in thousands):



|                                      |  |      |        |   |      |   |        |  
|------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                      |  | 2010 |        |   | 2009 |  
|Non-Compete Agreements, original cost |  | $    | 13,689 |   |      | $ | 4,153  |  
|Accumulated amortization              |  |      | (2,419 | ) |      |   | (1,330 | )
|                                      |  |      |        |   |      |   |        |  
|Non-Compete Agreements, net           |  | $    | 11,270 |   |      | $ | 2,823  |  
|                                      |  |      |        |   |      |   |        |  

Amortization expense related to Non-Compete Agreements is estimated to be $1.3 million per year in
2011-2015.

Advance RoyaltiesRights to coal mineral leases are often acquired and/or maintained
through advance royalty payments. Where royalty payments represent prepayments recoupable against future production, they are recorded as an asset, with amounts expected to be recouped within one year classified as a current asset. As mining occurs
on these leases, the royalty prepayments are charged to operating expenses. The ARLP Partnership assesses the recoverability of royalty prepayments based on estimated future production. Royalty prepayments estimated to be nonrecoverable are
expensed. The ARLP Partnerships advance royalties at December 31, are summarized as follows (in thousands):



|                                        |  |      |        |  |      |   |        | 
|--------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                        |  | 2010 |        |  | 2009 |  
|Advance royalties, affiliates (Note 19) |  | $    | 19,955 |  |      | $ | 16,811 | 
|Advance royalties, third-parties        |  |      | 12,296 |  |      |   | 13,620 | 
|                                        |  |      |        |  |      |   |        | 
|Total advance royalties                 |  | $    | 32,251 |  |      | $ | 30,431 | 
|                                        |  |      |        |  |      |   |        | 

Asset Retirement ObligationsThe ARLP Partnership records a liability for the
estimated cost of future mine asset retirement and closing procedures on a present value basis when incurred and a corresponding amount is capitalized by increasing the carrying amount of the related long-lived asset. Those costs relate to
permanently sealing portals at underground mines and to reclaiming the final pits and support acreage at surface mines. Examples of these types of costs, common to both types of mining, include, but are not limited to, removing or covering refuse
piles and settling ponds, water treatment obligations, and dismantling preparation plants, other facilities and roadway infrastructure. Amortization of the related asset is recorded on a units of production method generally based upon the estimated
life of the mine (Note 17).

Workers Compensation and Pneumoconiosis (Black Lung)
BenefitsThe ARLP Partnership is generally self-insured for workers compensation benefits, including black lung benefits. The ARLP Partnership accrues a workers compensation liability for the estimated present value
of workers compensation and black lung benefits based on its actuarial determined calculations (Note 18).

Income
TaxesWe are not a taxable entity for federal or state income tax purposes; the tax effect of our activities accrues to the unitholders. Although publicly-traded partnerships as a general rule will be taxed as corporations, we qualify
for an exemption because at least 90% of our income consists of qualifying income as defined in Section 7704(c) of the Internal Revenue Code. Net income for financial statement purposes may differ significantly from taxable income reportable to
unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under our partnership agreement. Individual unitholders have



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different investment bases depending upon the timing and price of acquisition of their partnership units. Furthermore, each unitholders tax accounting, which is partially dependent upon the
unitholders tax position, differs from the accounting followed in our consolidated financial statements. Accordingly, the aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined
because information regarding each unitholders tax attributes in our partnership is not available to us. The ARLP Partnerships subsidiary, Alliance Service, is subject to federal and state income taxes. Our tax counsel has provided an
opinion that AHGP, MGP, ARLP, the Intermediate Partnership and Alliance Coal will each be treated as a partnership. However, as is customary, no ruling has been or will be requested from the Internal Revenue Service (IRS) regarding the
AHGP Partnerships classification as a partnership for federal income tax purposes.

Pension
BenefitsThe ARLP Partnerships defined benefit pension obligation and the related benefit cost are accounted for in accordance with FASB ASC 715, Compensation-Retirement Benefits. Pension cost and obligations are
actuarially determined and are affected by assumptions including expected return on plan assets, discount rates, compensation increases, employee turnover rates and health care cost trend rates. The ARLP Partnership evaluates its assumptions
periodically and makes adjustments to these assumptions and the recorded liability as necessary (Note 14).

Revenue
RecognitionRevenues from coal sales are recognized when title passes to the customer as the coal is shipped. Some coal supply agreements provide for price adjustments based on variations in quality characteristics of the coal shipped.
In certain cases, a customers analysis of the coal quality is binding and the results of the analysis are received on a delayed basis. In these cases, the ARLP Partnership estimates the amount of the quality adjustment and adjusts the estimate
to actual when the information is provided by the customer. Historically such adjustments have not been material. Non-coal sales revenues primarily consist of transloading fees, mine safety services and products, rock dust sales (in 2009 and 2008
only) and other handling and service fees. Transportation revenues are recognized in connection with the ARLP Partnership incurring the corresponding costs of transporting coal to customers through third-party carriers for which it is directly
reimbursed through customer billings. We had no allowance for doubtful accounts for trade receivables at December 31, 2010 and 2009, respectively.

Common Unit-Based CompensationThe ARLP Partnership accounts for compensation expense attributable to non-vested restricted common units granted under the Long-Term Incentive
Plan (ARLP LTIP) based on requirements of FASB ASC 718, Compensation-Stock Compensation. Accordingly, the fair value of award grants are determined on the grant date of the award and this value is recognized as compensation
expense on a pro-rata basis, as appropriate over the requisite service period, and the corresponding liability is classified as equity and included in the Non-Affiliate component of noncontrolling interest in the consolidated financial statements
(Note 15).

New Accounting Standards Issued and AdoptedIn December 2009, the FASB issued Accounting
Standards Update (ASU) 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17). ASU 2009-17 codified Statement of Financial Accounting Standards No. 167,
Amendments to FASB Interpretation No. 46(R)),which changed the consolidation guidance applicable to a VIE. ASU 2009-17 updated the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE,
and is, therefore, required to consolidate such VIE, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis includes, among other things, consideration of whether the enterprise has the power to direct the
activities of the entity that most significantly impact the entitys economic performance and has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. ASU 2009-17 also
requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. Previously, FASB ASC 810, Consolidation, required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific
events had occurred. Qualifying special purpose entities, which were previously exempt from the application of this standard, are now subject to the provisions of ASU 2009-17. In addition, ASU 2009-17 also requires enhanced disclosures about an
enterprises involvement with a VIE. The provisions of ASU 2009-17 were effective as of the beginning of interim and annual reporting periods that began after November 15, 2009. Based on our evaluation of ASU 2009-17, the ARLP Partnership
deconsolidated MAC upon adoption, effective January 1, 2010 (Note 13). The deconsolidation of MAC did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair Value Measurements(ASU 2010-06). ASU 2010-06 amended guidance on certain aspects of FASB ASC 820,
Fair Value Measurements and Disclosures,to add new requirements for disclosures of transfers into and out of Level 1 and 2 measurements and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3
measurements, all on a gross basis. ASU 2010-06 also clarifies existing fair value disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value. The provisions of ASU 2010-06 were effective for
the first reporting period beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after
December 15, 2010. The adoption of ASU 2010-06 did not have an impact on our consolidated financial statements.



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New Accounting Standards Issued and Not Yet AdoptedIn December 2010, the
FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (ASU 2010-29). ASU 2010-29 amended ASC 805, Business Combinations, to specify
that if a public entity presents comparative financial statements and a business combination has occurred during the current reporting period, then the public entity should disclose revenues and earnings of the combined entity as though the business
combination that occurred during the current year had occurred at the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures under ASC 805 to include a description of the
nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenues and earnings. The adoption of the ASU 2010-29 amendments are effective prospectively for
business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The ARLP Partnership does not anticipate the adoption of ASU 2010-29 on
January 1, 2011 to have a material impact on our consolidated financial statements.



|3. | ACQUISITIONS
|-- | ------------

SGP Land Acquisition

On January 28, 2008, effective January 1, 2008, the ARLP Partnership, through its subsidiary Alliance Resource
Properties, acquired additional rights to approximately 48.2 million tons of coal reserves located in western Kentucky from SGP Land, LLC (SGP Land). SGP Land is a subsidiary of SGP and is indirectly owned by Mr. Craft. Because
the acquisition was between entities under common control, it was accounted for at historical cost. At the time of the ARLP Partnerships acquisition, these reserves were leased by SGP Land to the ARLP Partnerships subsidiaries, Webster
County Coal, Warrior and Hopkins County Coal through mineral leases and sublease agreements, pursuant to which the ARLP Partnership had paid advance royalties of approximately $8.0 million that had not yet been recouped against production royalties.
Those mineral leases and sublease agreements between SGP Land and the ARLP Partnerships subsidiaries were assigned to Alliance Resource Properties by SGP Land in this transaction. The recoupable balances of advance minimum royalties and other
payments at the time of this acquisition, other than $0.4 million paid to the base lessors, were eliminated upon consolidation of the ARLP Partnerships financial statements. The purchase price of $13.3 million cash paid at closing was
primarily attributable to the historical cost basis of the mineral rights included in property, plant and equipment. The ARLP Partnership financed this acquisition using a combination of existing cash on hand and borrowings under its revolving
credit facility.

The SGP Land transaction was a related-party transaction and, as such, was reviewed by the board of
directors of MGP (MGP Board of Directors) and its conflicts committee (MGP Conflicts Committee). Based upon the review, the MGP Board of Directors and MGP Conflicts Committee determined the transaction reflected
market-clearing terms and conditions customary in the coal industry. As a result, the MGP Board of Directors and the MGP Conflicts Committee approved the SGP Land transaction as fair and reasonable to the ARLP Partnership and its limited partners.
Because the SGP Land acquisition was between entities under common control, it was accounted for at historical cost.



|4. | PATTIKI VERTICAL HOIST CONVEYOR SYSTEM FAILURE
|-- | ----------------------------------------------

On May 13, 2010, White County Coals Pattiki mine was temporarily idled following the failure of the vertical hoist conveyor system used in conveying raw coal out of the mine. The ARLP
Partnerships operating expenses for the twelve months ended December 31, 2010 includes $1.2 million for retirement of certain assets related to the failed vertical hoist conveyor system in addition to other repair and clean-up expenses
that were not significant on a consolidated or segment basis. The ARLP Partnership reviewed its commercial property (including business interruption) insurance policies and, as the loss on the vertical hoist conveyor system did not exceed the ARLP
Partnerships deductible for property damage, it does not expect any recovery under such policies.

While the Pattiki
mine was temporarily idled, the ARLP Partnership expanded coal production at its other coal mines in the region, including the addition of the seventh and eighth production units at the River View mine, to partially offset the loss of production
from the Pattiki mine. Consequently, the temporary idling of the Pattiki mine did not have a material adverse impact on the ARLP Partnerships results of operations and cash flows. On July 19, 2010, the Pattiki mine resumed limited
production while White County Coal continued to assess the effectiveness and reliability of the repaired vertical hoist conveyor system. On January 3, 2011, the Pattiki mine returned to full production capacity.



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|5. | INVENTORIES
|-- | -----------

Inventories
consist of the following at December 31, (in thousands):



|                                                                              |  |      |        |  |      |   |        | 
|----------------------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                                              |  | 2010 |        |  | 2009 |  
|Coal                                                                          |  | $    | 11,897 |  |      | $ | 45,504 | 
|Supplies (net of reserve for obsolescence of $2,244 and $1,372, respectively) |  |      | 19,651 |  |      |   | 18,853 | 
|                                                                              |  |      |        |  |      |   |        | 
|Total inventory                                                               |  | $    | 31,548 |  |      | $ | 64,357 | 
|                                                                              |  |      |        |  |      |   |        | 



|6. | PROPERTY, PLANT AND EQUIPMENT
|-- | -----------------------------

Property, plant and equipment consist of the following at December 31, (in thousands):



|                                                          |  |      |           |   |      |   |           |  
|--------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                          |  | 2010 |           |   | 2009 |  
|Mining equipment and processing facilities                |  | $    | 1,056,670 |   |      | $ | 890,582   |  
|Land and mineral rights                                   |  |      | 140,432   |   |      |   | 117,380   |  
|Buildings, office equipment and improvements              |  |      | 155,621   |   |      |   | 136,713   |  
|Construction in progress                                  |  |      | 76,766    |   |      |   | 94,901    |  
|Mine development costs                                    |  |      | 168,641   |   |      |   | 139,338   |  
|                                                          |  |      |           |   |      |   |           |  
|Property, plant and equipment, at cost                    |  |      | 1,598,130 |   |      |   | 1,378,914 |  
|Less accumulated depreciation, depletion and amortization |  |      | (648,883  | ) |      |   | (556,370  | )
|                                                          |  |      |           |   |      |   |           |  
|Total property, plant and equipment, net                  |  | $    | 949,247   |   |      | $ | 822,544   |  
|                                                          |  |      |           |   |      |   |           |  

Equipment leased by the ARLP Partnership under lease agreements which are determined to be capital leases
are stated at an amount equal to the present value of the minimum lease payments during the lease term, less accumulated amortization. Equipment under capital leases totaling $1.9 million included in mining equipment and processing facilities is
amortized on the straight-line method over the shorter of its useful life or the related lease term. The provision for amortization of leased properties is included in depreciation, depletion and amortization expense. Accumulated amortization
related to the ARLP Partnerships capital lease was $1.1 million and $0.8 million as of December 31, 2010 and 2009, respectively, and amortization expense was $0.3 million, $0.2 million and $0.3 million for the years ended
December 31, 2010, 2009 and 2008, respectively.



|7. | GIBSON RAIL ADVANCES
|-- | --------------------

In
2007, Gibson County Coal, one of the ARLP Partnerships subsidiaries, entered into contracts with CSX Transportation, Inc. (CSX) and Norfolk Southern Railway Company (NS), pursuant to which Gibson County Coal constructed
a rail loop and the railroads constructed connections and siding facilities, in order to provide Gibson County Coal access to CSX and NS railways. Although these connections and siding facilities are assets of the respective rail companies, Gibson
County Coal advanced $8.2 million on a combined basis to CSX and NS during 2007 toward the cost of construction of their infrastructure. In 2010, 2009 and 2008, advances of $2.0 million, $2.3 million and $2.2 million, respectively, were repaid to
Gibson County Coal by rebates from CSX and NS as coal was shipped on their respective railways. The $1.7 million and $3.7 million of advances not yet repaid as of December 31, 2010 and 2009, respectively, are recorded in other receivables and
other long-term assets in our consolidated balance sheet. Gibson County Coal also received additional rebates from both CSX and NS that were not recoupment of advances.



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|8. | LONG-TERM DEBT
|-- | --------------

Long-term
debt consists of the following at December 31, (in thousands):



|                           |  |      |         |   |      |   |         |  
|-------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                           |  | 2010 |         |   | 2009 |  
|AHGP Credit facility       |  | $    |        |   |      | $ |        |  
|ARLP Credit facility       |  |      |        |   |      |   |        |  
|ARLP Senior notes          |  |      | 72,000  |   |      |   | 90,000  |  
|ARLP Series A senior notes |  |      | 205,000 |   |      |   | 205,000 |  
|ARLP Series B senior notes |  |      | 145,000 |   |      |   | 145,000 |  
|ARLP Term loan             |  |      | 300,000 |   |      |   |        |  
|                           |  |      |         |   |      |   |         |  
|                           |  |      | 722,000 |   |      |   | 440,000 |  
|Less current maturities    |  |      | (18,000 | ) |      |   | (18,000 | )
|                           |  |      |         |   |      |   |         |  
|Total long-term debt       |  | $    | 704,000 |   |      | $ | 422,000 |  
|                           |  |      |         |   |      |   |         |  

AHGP Partnership.We have a $2.0 million revolving credit facility (AHGP Credit
Facility) with C-Holdings, LLC (C-Holdings) which owns 100% of the members interest of our general partner, AGP, and is controlled by Mr. Craft, Chairman, President and Chief Executive Officer of AGP. The AHGP Credit
Facility matures March 31, 2011 and is available for general partnership purposes. Any borrowings under the facility, as extended, bear interest at the London Interbank Offered Rate (LIBOR) plus 2.0%. We are not required to pay a
commitment fee to C-Holdings on the unused portion of the facility. At December 31, 2010 and 2009, we had no borrowings outstanding under the AHGP Credit Facility. There are no material operating and financial restrictions and covenants in the
AHGP Credit Facility. C-Holdings may terminate the facility and demand payment of any amounts outstanding in the event we have a change of control.

ARLP Credit Facility.The Intermediate Partnership entered into a $150.0 million revolving credit facility (ARLP Credit Facility) dated September 25, 2007, which
matures in 2012. The ARLP Credit Facility was decreased to $142.5 million of availability on October 6, 2010 due to a defaulting lender, as discussed below. On September 30, 2009, the Intermediate Partnership entered into Amendment
No. 2 (the Credit Amendment) to the ARLP Credit Facility. The Credit Amendment increased the annual capital expenditure limits under the ARLP Credit Facility. The new limits, before carry forward considerations and exclusion of
capital expenditures related to acquisitions, are $350.0 million for 2011 and $250.0 million for 2012. The amount of any annual limit in excess of actual capital expenditures for that year carries forward and is added to the annual limit of the
subsequent year. As a result, the capital expenditure limit for 2011 is approximately $531.9 million.

Pursuant to the Credit
Amendment, the applicable margin for LIBOR borrowings under the ARLP Credit Facility was increased from a range of 0.625% to 1.150% (depending on the Intermediate Partnerships leverage margin) to a range of 1.115% to 2.000%, and the annual
commitment fee was increased from a range of 0.15% to 0.35% (also depending on the Intermediate Partnerships leverage margin) to a range of 0.25% to 0.50%. In addition, the Credit Amendment includes certain changes relating to a
defaulting lender, including changes which clarify that the overall ARLP Credit Facility commitment would be reduced by the commitment share of a defaulting lender but also provides the Intermediate Partnership with more flexibility in
replacing a defaulting lender.

At December 31, 2010, the ARLP Partnership had $11.6 million of letters of credit
outstanding with $130.9 million available for borrowing under the ARLP Credit Facility. The ARLP Partnership had no borrowings outstanding under the ARLP Credit Facility as of December 31, 2010 and 2009. The ARLP Partnership utilizes the ARLP
Credit Facility, as appropriate, to meet working capital requirements, anticipated capital expenditures, scheduled debt payments or distribution payments. The ARLP Partnership incurs an annual commitment fee of 0.25% on the undrawn portion of the
ARLP Credit Facility.

Lehman Commercial Paper, Inc. (Lehman), a subsidiary of Lehman Brothers Holding, Inc., held
a 5%, or $7.5 million, commitment in the original $150 million ARLP Credit Facility. Lehman filed for protection under Chapter 11 of the Federal Bankruptcy Code in early October 2008. On February 11, 2010, the ARLP Partnership gave its lenders
a notice of borrowing under the ARLP Credit Facility and, in response to that notice, Lehman notified the ARLP Partnership that it would not fund its proportionate share of the borrowing. As a result, as of February 11, 2010, Lehman became a
defaulting lender and on October 6, 2010, was removed as a commitment holder under the ARLP Credit Facility. Consequently, availability for borrowing under the ARLP Credit Facility was reduced by $7.5 million on October 6, 2010. The ARLP
Credit Facility is underwritten by a syndicate of eleven financial institutions (excluding Lehman) with no individual institution representing more than 11.9% of the $142.5 million revolving credit facility. In the event any other financial
institution in the ARLP Partnerships syndicate does not fund its future borrowing requests, the ARLP Partnerships borrowing available under the ARLP Credit Facility would be reduced. The obligations of the lenders under the ARLP Credit
Facility are individual obligations and the failure of one or more lenders does not relieve the remaining lenders of their funding obligations.



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Senior Notes.The Intermediate Partnership has $72.0 million principal amount
of 8.31% senior notes due August 20, 2014, payable in four remaining equal annual installments of $18.0 million with interest payable semi-annually (ARLP Senior Notes).

Series A Senior Notes.On June 26, 2008, the Intermediate Partnership entered into a Note
Purchase Agreement (the 2008 Note Purchase Agreement) with a group of institutional investors in a private placement offering. The Intermediate Partnership issued $205.0 million of Series A Senior Notes, which bear interest at 6.28% and
mature on June 26, 2015 with interest payable semi-annually.

Series B Senior Notes.On June 26, 2008,
the Intermediate Partnership issued under the 2008 Note Purchase Agreement $145.0 million of Series B Senior Notes, which bear interest at 6.72% and mature on June 26, 2018 with interest payable semi-annually.

The proceeds from the Series A and Series B Senior Notes (collectively, the 2008 Senior Notes) were used to repay $21.5
million outstanding under the ARLP Credit Facility and pay expenses associated with the offering of the 2008 Senior Notes. The remaining proceeds were primarily used to fund the development of the River View and Tunnel Ridge mining complexes and for
other general working capital requirements.

ARLP Term Loan. On December 29, 2010, the Intermediate
Partnership entered into a Term Loan Agreement, (the ARLP Term Loan Agreement) with various financial institutions for a term loan (the Loan) in the aggregate principal amount of $300 million. The Loan bears interest at a
variable rate plus an applicable margin which fluctuates depending upon whether we elect the Loan (or a portion thereof) to bear interest on the Base Rate or the Eurodollar Rate (as defined in the Term Loan Agreement). The ARLP Partnership elected
the Eurodollar Rate on December 30, 2010 which, with applicable margin, was 2.3% as of January 5, 2011. Interest for the period between initial funding of the Loan on December 29, 2010 and January 5, 2011, was calculated based on
the Base Rate plus the applicable margin. Interest is payable quarterly with principal due as follows: $15 million due per quarter beginning March 31, 2013 through December 31, 2013, $18.75 million due per quarter beginning March 31,
2014 through September 30, 2015 and the balance of $108.75 million due on December 31, 2015. The ARLP Partnership has the option to prepay the Loan at any time in whole or in part subject to terms and conditions described in the Term Loan
Agreement. Upon a change of control (as defined in the Term Loan Agreement), the unpaid principal amount of the loan, all interest thereon and all other amounts payable under the Term Loan Agreement will become due and payable.

The net proceeds of the Loan will be used for the general corporate, business or working capital purposes of the Intermediate
Partnership and its subsidiaries, including, without limitation, (a) for capital expenditures and acquisitions (including mineral reserve acquisitions), and (b) for cash distributions to the ARLP Partnership to be used by the ARLP
Partnership for any business or corporate purpose deemed appropriate by the Partnership (or its managing general partner). The ARLP Partnership incurred debt issuance costs of approximately $1.4 million in 2010 associated with the ARLP Term Loan
Agreement, $0.3 million in 2009 associated with the ARLP Credit Facility and $1.7 million in 2008 associated with the 2008 Senior Notes, which have been deferred and are being amortized as a component of interest expense over the term of the
respective notes.

The ARLP Credit Facility, Senior Notes, 2008 Senior Notes and the ARLP Term Loan Agreement (collectively,
the ARLP Debt Arrangements) are guaranteed by all of the direct and indirect subsidiaries of the Intermediate Partnership. The ARLP Debt Arrangements contain various covenants affecting the Intermediate Partnership and its subsidiaries
restricting, among other things, the amount of distributions by the Intermediate Partnership, the incurrence of additional indebtedness and liens, the sale of assets, the making of investments, the entry into mergers and consolidations and the entry
into transactions with affiliates, in each case subject to various exceptions. The ARLP Debt Arrangements also require the Intermediate Partnership to remain in control of a certain amount of mineable coal reserves relative to its annual production.
In addition, the ARLP Debt Arrangements require the Intermediate Partnership to maintain the following: (i) debt to cash flow ratio of not more than 3.0 to 1.0 and (ii) cash flow to interest expense ratio of not less than 4.0 to 1.0 in
each case, during the four most recently ended fiscal quarters. The ARLP Credit Facility, Senior Notes and the 2008 Senior Notes limits the Intermediate Partnerships maximum annual capital expenditures, excluding acquisitions, as described
above. The Credit Amendment did not change the required debt to cash flow or cash flow to interest expense ratios. The debt to cash flow ratio and cash flow to interest expense ratio were 1.4 to 1.0 and 16.5 to 1.0, for the trailing twelve months
ended December 31, 2010. Actual capital expenditures were $289.9 million for the year ended December 31, 2010. The ARLP Partnership was in compliance with the covenants of the ARLP Debt Arrangements as of December 31, 2010.

Other. In addition to the letters of credit available under the ARLP Credit Facility discussed above, the ARLP
Partnership also has agreements with two banks to provide additional letters of credit in an aggregate amount of $31.1



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million to maintain surety bonds to secure certain asset retirement obligations and its obligations for workers compensation benefits. At December 31, 2010, the ARLP Partnership had
$30.7 million in letters of credit outstanding under agreements with these two banks. SGP guarantees $5.0 million of these outstanding letters of credit (Note 19).

Aggregate maturities of long-term debt are payable as follows (in thousands):



|                         |  |   |         | 
|------------------------ |  | - | ------- | 
|Year Ending December 31, |  |   |        
|2011                     |  | $ | 18,000  | 
|2012                     |  |   | 18,000  | 
|2013                     |  |   | 78,000  | 
|2014                     |  |   | 93,000  | 
|2015                     |  |   | 370,000 | 
|Thereafter               |  |   | 145,000 | 
|                         |  |   |         | 
|                         |  | $ | 722,000 | 
|                         |  |   |         | 



|9. | FAIR VALUE MEASUREMENTS
|-- | -----------------------

We apply the provisions of FASB ASC 820, Fair Value Measurements and Disclosures which, among other things, defines fair value,
requires enhanced disclosures about assets and liabilities carried at fair value and establishes a hierarchal disclosure framework based upon the quality of inputs used to measure fair value.

Valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect our own market assumptions. These two types of inputs create the following fair value hierarchy:



| |  |  | Level 1Quoted prices for identical instruments in active markets.
| | - |  | ------------------------------------------------------------------



| |  |  | Level 2Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not
active; and model derived valuations whose inputs are observable or whose significant value drivers are observable.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3Instruments whose significant value drivers are unobservable.
| | - |  | ---------------------------------------------------------------------

The carrying amounts for accounts receivable and accounts payable approximate fair value because of the short maturity of those
instruments. At December 31, 2010 and 2009, the estimated fair value of the ARLP Partnerships fixed rate term debt, including current maturities, was approximately $809.5 million and $460.7 million, respectively, based on interest rates
that it believes is currently available to it for issuance of debt with similar terms and remaining maturities (see Note 8).



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|10. | DISTRIBUTIONS OF AVAILABLE CASH
|--- | -------------------------------

We distribute 100% of our available cash (including any held by MGP) within 50 days after the end of each quarter to unitholders of record. Available cash is generally defined in the partnership agreement
as all cash and cash equivalents of AHGP and its direct subsidiaries on hand at the end of each quarter less reserves established by AGP in its reasonable discretion for future cash requirements. These reserves are retained to provide for the
conduct of our business, the payment of debt principal and interest and to provide funds for future distributions.

Our cash
generating assets currently consist entirely of our partnership interests in ARLP, from which we receive quarterly cash distributions. At December 31, 2010, our assets consisted of the following partnership interests in ARLP: a 1.98% general
partner interest in ARLP, which we hold through our 100% ownership interest in MGP; the IDRs in ARLP, which we hold through our 100% ownership interest in MGP; 15,544,169 common units of ARLP, representing approximately 42.3% of the common units of
ARLP; and a 0.001% managing interest in Alliance Coal.

The following table summarizes the quarterly per unit distribution
paid during the respective quarter:



|               |  |      |        |  |      |   |        |      |  |   |        | 
|-------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|               |  | Year |       
|               |  | 2010 |        |  | 2009 |   |        | 2008 | 
|First Quarter  |  | $    | 0.4525 |  |      | $ | 0.4025 |      |  | $ | 0.2875 | 
|Second Quarter |  | $    | 0.4650 |  |      | $ | 0.4150 |      |  | $ | 0.2875 | 
|Third Quarter  |  | $    | 0.4825 |  |      | $ | 0.4275 |      |  | $ | 0.3525 | 
|Fourth Quarter |  | $    | 0.5000 |  |      | $ | 0.4400 |      |  | $ | 0.3900 | 

On January 28,
2011, we declared a quarterly distribution of $0.5275 per unit, totaling approximately $31.6 million, which was paid on February 18, 2011, to all unitholders of record on February 11, 2011.



|11. | INCOME TAXES
|--- | ------------

ARLPs
indirect subsidiary, Alliance Service, is subject to federal and state income taxes. Alliance Services income is principally due to its subsidiary, Matrix Design. Alliance Service has minor temporary differences between Matrix Designs
financial reporting basis and the tax basis of its assets and liabilities. Components of income tax expense (benefit) are as follows (in thousands):



|                             |  |                         |       |   |      |   |     |      |  |   |      |  
|---------------------------- |  | ----------------------- | ----- | - | ---- | - | --- | ---- |  | - | ---- | -
|                             |  | Year Ended December 31, |      
|                             |  | 2010                    |       |   | 2009 |   |     | 2008 | 
|Current:                     |  |                         |       |   |      |   |     |      |  |   |      |  
|Federal                      |  | $                       | 1,517 |   |      | $ | 620 |      |  | $ | (312 | )
|State                        |  |                         | 240   |   |      |   | 119 |      |  |   | (30  | )
|                             |  |                         |       |   |      |   |     |      |  |   |      |  
|                             |  |                         | 1,757 |   |      |   | 739 |      |  |   | (342 | )
|Deferred:                    |  |                         |       |   |      |   |     |      |  |   |      |  
|Federal                      |  |                         | (13   | ) |      |   | (25 | )    |  |   | (109 | )
|State                        |  |                         | (2    | ) |      |   | (5  | )    |  |   | (29  | )
|                             |  |                         |       |   |      |   |     |      |  |   |      |  
|                             |  |                         | (15   | ) |      |   | (30 | )    |  |   | (138 | )
|                             |  |                         |       |   |      |   |     |      |  |   |      |  
|Income tax expense (benefit) |  | $                       | 1,742 |   |      | $ | 709 |      |  | $ | (480 | )
|                             |  |                         |       |   |      |   |     |      |  |   |      |  

Reconciliations from the provision for income taxes at the U.S. federal statutory tax rate to the effective tax rate for the
provision for income taxes are as follows (in thousands):



|                                                                                       |  |                         |          |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                       |  | Year Ended December 31, |         
|                                                                                       |  | 2010                    |          |   | 2009 |   |         | 2008 | 
|Income taxes at statutory rate                                                         |  | $                       | 112,967  |   |      | $ | 67,570  |      |  | $ | 46,940  |  
|Less: Income taxes at statutory rate on Partnership income not subject to income taxes |  |                         | (111,345 | ) |      |   | (66,939 | )    |  |   | (47,402 | )
|Increase/(decrease) resulting from:                                                    |  |                         |          |   |      |   |         |      |  |   |         |  
|State taxes, net of federal income tax                                                 |  |                         | 162      |   |      |   | 70      |      |  |   | (6      | )
|Other                                                                                  |  |                         | (42      | ) |      |   | 8       |      |  |   | (12     | )
|                                                                                       |  |                         |          |   |      |   |         |      |  |   |         |  
|Income tax expense (benefit)                                                           |  | $                       | 1,742    |   |      | $ | 709     |      |  | $ | (480    | )
|                                                                                       |  |                         |          |   |      |   |         |      |  |   |         |  



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|12. | NONCONTROLLING INTERESTS
|--- | ------------------------

We apply the provisions of FASB ASC 810, Consolidation, which were amended on January 1, 2009 by FASB ASC 810-10-65 and FASB
ASC 810-10-45-16 and also amended on January 1, 2010 by ASU 2009-17 (Note 2).

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

The noncontrolling interests balance is comprised of
non-affiliate and affiliate ownership interests in the net assets of the ARLP Partnership that we consolidate (Note 1) and prior to January 1, 2010, a third-party ownership interest in MAC. The following table summarizes the components of
noncontrolling interests recorded in Partners Capital for the periods indicated (in thousands):



|                                                                              |  |              |          |   |      |   |          |  
|----------------------------------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                                              |  | December 31, |         
|                                                                              |  | 2010         |          |   | 2009 |  
|Noncontrolling interests reflected in Partners Capital:                      |  |              |          |   |      |   |          |  
|Affiliate (SGP)                                                               |  | $            | (303,816 | ) |      | $ | (303,830 | )
|Non-Affiliates (ARLPs non-affiliate limited partners)                        |  |              | 449,411  |   |      |   | 372,820  |  
|MAC                                                                           |  |              |         |   |      |   | 1,117    |  
|Accumulated other comprehensive loss attributable to noncontrolling interests |  |              | (10,583  | ) |      |   | (9,684   | )
|                                                                              |  |              |          |   |      |   |          |  
|Total noncontrolling interests                                                |  | $            | 135,012  |   |      | $ | 60,423   |  
|                                                                              |  |              |          |   |      |   |          |  

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

The noncontrolling interest designated as
Non-Affiliates represents the limited partners interest in ARLP controlled through the common unit ownership, excluding the 15,544,169 common units of ARLP held by us. The total obligation associated with ARLPs LTIP is also included in
the Non-Affiliates component of noncontrolling interest (Note 15).

For the year ending December 31, 2010, the
noncontrolling interest designated as MAC represents a 50% third-party interest in MAC. The ARLP Partnership deconsolidated MAC on January 1, 2010 (Note 13).

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



|                                                       |  |                          |         |  |      |   |        |      |  |   |        | 
|------------------------------------------------------ |  | ------------------------ | ------- |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                       |  | Years Ended December 31, |        
|                                                       |  | 2010                     |         |  | 2009 |   |        | 2008 | 
|Net income attributable to noncontrolling interest:    |  |                          |         |  |      |   |        |      |  |   |        | 
|Affiliate (SGP)                                        |  | $                        | 50      |  |      | $ | 27     |      |  | $ | 18     | 
|Non-Affiliates (ARLPs non-affiliate limited partners) |  |                          | 142,907 |  |      |   | 75,743 |      |  |   | 50,904 | 
|MAC                                                    |  |                          |        |  |      |   | 190    |      |  |   | 420    | 
|                                                       |  |                          |         |  |      |   |        |      |  |   |        | 
|                                                       |  | $                        | 142,957 |  |      | $ | 75,960 |      |  | $ | 51,342 | 
|                                                       |  |                          |         |  |      |   |        |      |  |   |        | 



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



|                                                           |  |                          |        |  |      |   |        |      |  |   |        | 
|---------------------------------------------------------- |  | ------------------------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                           |  | Years Ended December 31, |       
|                                                           |  | 2010                     |        |  | 2009 |   |        | 2008 | 
|Distributions paid to noncontrolling interests:            |  |                          |        |  |      |   |        |      |  |   |        | 
|Affiliate (SGP) (1)                                        |  | $                        | 36     |  |      | $ | 33     |      |  | $ | 27     | 
|Non-Affiliates (ARLPs non-affiliate limited partners) (1) |  |                          | 69,102 |  |      |   | 63,287 |      |  |   | 54,062 | 
|                                                           |  |                          |        |  |      |   |        |      |  |   |        | 
|                                                           |  | $                        | 69,138 |  |      | $ | 63,320 |      |  | $ | 54,089 | 
|                                                           |  |                          |        |  |      |   |        |      |  |   |        | 



|(1) | Distributions paid to noncontrolling Interest, in the table above, represent ARLPs quarterly distributions in accordance with the ARLP Partnership agreement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The Affiliate component of noncontrolling interests represents SGPs cumulative investment basis in the
net assets of the ARLP Partnership. After the consummation of the various transactions associated with the ARLP Partnerships formation and initial public offering transaction in 1999 (which included the contribution of net assets by SGP to the
ARLP Partnership, the retention by SGP of debt borrowings assumed by ARLP and a distribution by ARLP to SGP), SGPs investment basis in ARLP totaled $(303.9) million. SGPs investment basis as of December 31, 2010 and 2009 also
reflects the cumulative amount of nominal ARLP income allocations and distributions to SGP and nominal contributions by SGP to ARLP and the Intermediate Partnership to maintain its general partner interests.



|13. | MID-AMERICA CARBONATES
|--- | ----------------------

We apply the provisions of FASB ASC 810, Consolidation, which were amended on January 1, 2010. Based on our evaluation of
these amendments, the ARLP Partnership deconsolidated MAC effective January 1, 2010 (Note 2).

White County Coal and
Alexander J. House (House) entered into a limited liability company agreement in 2006 to form MAC, which manufactures and sells rock dust. Consistent with prior years, the ARLP Partnership has a 50% ownership interest in MAC. Previously,
the ARLP Partnership consolidated MACs financial results in accordance with FASB ASC 810. However, based on the provisions of ASU 2009-17, the ARLP Partnership concluded that it is no longer the primary beneficiary of MAC and thus
deconsolidated MAC as House has the power to direct the activities that most significantly impact the entitys economic performance.

We adopted the amendments to FASB ASC 810 on January 1, 2010. As a result, the ARLP Partnership reclassified $1.1 million from noncontrolling interest in partners capital to other long-term
assets in its consolidated balance sheets. The ARLP Partnership did not retrospectively apply the provisions of ASU 2009-17 as allowed by the amendments. The ARLP Partnerships equity investment in MAC is $1.3 million at December 31, 2010.

In September 2007, MAC entered into a $1.5 million Revolving Credit Agreement (Revolver) with ARLP. By amendment
effective April 1, 2008, the term of the Revolver was extended to June 30, 2009. On November 17, 2009, MAC entered into Amendment No. 2, effective June 30, 2009, which increased the Revolver to $1.75 million. The Revolver
expired on December 31, 2010. At December 31, 2010, MAC owed ARLP $1.6 million under the Revolver, which is classified as Due from Affiliates on our consolidated balance sheets. MAC repaid the amount due under the Revolver in January 2011.



|14. | EMPLOYEE BENEFIT PLANS
|--- | ----------------------

Defined Contribution PlansThe ARLP Partnerships eligible employees currently participate in a defined contribution
profit sharing and savings plan (PSSP) that it sponsors. The PSSP covers substantially all regular full-time employees. PSSP participants may elect to make voluntary contributions to this plan up to a specified amount of their
compensation. The ARLP Partnership makes matching contributions based on a percent of an employees eligible compensation and also makes an additional nonmatching contribution. The ARLP Partnerships contribution expense for the PSSP was
approximately $13.3 million, $11.2 million and $8.0 million for the years ended December 31, 2010, 2009 and 2008, respectively. The increase from 2009 to 2010 was primarily attributable to increased headcount and higher salaries and wages
included in the matching calculation. The increase from 2008 to 2009 was primarily attributable to a greater number of PSSP participants principally due to changes in the defined benefit plan (the Pension Plan) described below and higher
salaries and wages included in the matching calculation.



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Defined Benefit PlanEligible employees at certain of the ARLP
Partnerships mining operations participate in a Pension Plan that it sponsors. The benefit formula for the Pension Plan is a fixed dollar unit based on years of service. Effective during 2008, new employees of these participating operations
are no longer eligible to participate in the Pension Plan, but are eligible to participate in the PSSP that the ARLP Partnership sponsors. Additionally, certain employees participating in the Pension Plan, for some of those participating operations,
had the one-time option during 2008 to remain in the Pension Plan or participate in enhanced benefit provisions under the PSSP. The impact of the amendments to the Pension Plan was not material to the 2008 consolidated financial statements.

Beginning with the year ended December 31, 2009, we adopted amendments to FASB ASC 715, CompensationRetirement
Benefits. These amendments required us to provide more detailed annual disclosures of Pension Plan assets, concentrations of risk within Pension Plan assets, and valuation techniques used to measure the fair value of Pension Plan assets.

The following sets forth changes in benefit obligations and plan assets for the years ended December 31, 2010 and 2009
and the funded status of the Pension Plan reconciled with the amounts reported in our consolidated financial statements at December 31, 2010 and 2009, respectively (dollars in thousands):



|                                                                                                         |  |      |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                         |  | 2010 |         |   | 2009 |  
|Change in benefit obligations:                                                                           |  |      |         |   |      |   |         |  
|Benefit obligations at beginning of year                                                                 |  | $    | 57,790  |   |      | $ | 49,633  |  
|Service cost                                                                                             |  |      | 2,214   |   |      |   | 2,580   |  
|Interest cost                                                                                            |  |      | 2,924   |   |      |   | 3,083   |  
|Actuarial (gain) loss                                                                                    |  |      | (4,625  | ) |      |   | 3,369   |  
|Benefits paid                                                                                            |  |      | (1,025  | ) |      |   | (875    | )
|                                                                                                         |  |      |         |   |      |   |         |  
|Benefit obligation at end of year                                                                        |  |      | 57,278  |   |      |   | 57,790  |  
|                                                                                                         |  |      |         |   |      |   |         |  
|Change in plan assets:                                                                                   |  |      |         |   |      |   |         |  
|Fair value of plan assets at beginning of year                                                           |  |      | 38,094  |   |      |   | 29,681  |  
|Employer contribution                                                                                    |  |      | 3,159   |   |      |   | 2,150   |  
|Actual return on plan assets                                                                             |  |      | 3,754   |   |      |   | 7,138   |  
|Benefits paid                                                                                            |  |      | (1,025  | ) |      |   | (875    | )
|                                                                                                         |  |      |         |   |      |   |         |  
|Fair value of plan assets at end of year                                                                 |  |      | 43,982  |   |      |   | 38,094  |  
|                                                                                                         |  |      |         |   |      |   |         |  
|Funded status at the end of year                                                                         |  | $    | (13,296 | ) |      | $ | (19,696 | )
|                                                                                                         |  |      |         |   |      |   |         |  
|Amounts recognized in balance sheet:                                                                     |  |      |         |   |      |   |         |  
|Non-current liability                                                                                    |  | $    | (13,296 | ) |      | $ | (19,696 | )
|                                                                                                         |  |      |         |   |      |   |         |  
|                                                                                                         |  | $    | (13,296 | ) |      | $ | (19,696 | )
|                                                                                                         |  |      |         |   |      |   |         |  
|Amounts recognized in accumulated other comprehensive income consists of:                                |  |      |         |   |      |   |         |  
|Net actuarial loss                                                                                       |  | $    | (11,673 | ) |      | $ | (17,149 | )
|                                                                                                         |  |      |         |   |      |   |         |  
|Weighted-average assumptions as of December 31,                                                          |  |      |         |   |      |   |         |  
|Discount rate                                                                                            |  |      | 5.56    | % |      |   | 5.88    | %
|Expected rate of return on plan assets                                                                   |  |      | 8.35    | % |      |   | 8.35    | %
|Weighted-average assumptions used to determine net periodic benefit cost for the year ended
December 31, |  |      |         |   |      |   |         |  
|Discount rate                                                                                            |  |      | 5.88    | % |      |   | 6.15    | %
|Expected return on plan assets                                                                           |  |      | 8.35    | % |      |   | 8.35    | %

The actuarial gain
component of the change in benefit obligation in 2010 was primarily attributable to an update in assumptions related to Pension Plan participant retirement age. The actuarial loss component of the change in benefit obligation in 2009 was primarily
attributable to a decrease in the discount rate assumption.



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The expected long-term rate of return assumption is based on broad equity and bond indices,
the investment goals and objectives, the target investment allocation and on the long term historical rates of return for each asset class. The Pension Plans expected long-term rate of return of 8.35% is determined by the above factors and an
asset allocation assumption of 60.0% invested in domestic equity securities with an expected long-term rate of return of 8.46%, 20.0% invested in international equities with an expected long-term rate of return of 8.85% and 20.0% invested in fixed
income securities with an expected long-term rate of return of 4.88%. Expected long-term rate of return is based on a 20 year average annual total return for each investment group. The actual return on plan assets was 10.4% and 23.7% for the years
ended December 31, 2010 and 2009, respectively.



|                                         |  |                |        |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | 2010           |        |   | 2009 |   |        | 2008 | 
|                                         |  | (in thousands) |       
|Components of net periodic benefit cost: |  |                |        |   |      |   |        |      |  |   |        |  
|Service cost                             |  | $              | 2,214  |   |      | $ | 2,580  |      |  | $ | 2,555  |  
|Interest cost                            |  |                | 2,924  |   |      |   | 3,083  |      |  |   | 2,726  |  
|Expected return on plan assets           |  |                | (3,270 | ) |      |   | (2,518 | )    |  |   | (3,368 | )
|Amortization of net loss                 |  |                | 366    |   |      |   | 1,499  |      |  |   | 30     |  
|                                         |  |                |        |   |      |   |        |      |  |   |        |  
|Net periodic benefit cost                |  | $              | 2,234  |   |      | $ | 4,644  |      |  | $ | 1,943  |  
|                                         |  |                |        |   |      |   |        |      |  |   |        |  



|                                                                                                          |  |                |        |   |      |   |        |  
|--------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                                                                          |  | 2010           |        |   | 2009 |  
|                                                                                                          |  | (in thousands) |       
|Other changes in plan assets and benefit obligation recognized in accumulated other comprehensive income: |  |                |        |   |      |   |        |  
|Net actuarial gain                                                                                        |  | $              | (5,110 | ) |      | $ | (1,251 | )
|Reversal of amortization item:                                                                            |  |                |        |   |      |   |        |  
|Net actuarial gain                                                                                        |  |                | (366   | ) |      |   | (1,499 | )
|                                                                                                          |  |                |        |   |      |   |        |  
|Total recognized in accumulated other comprehensive income                                                |  |                | (5,476 | ) |      |   | (2,750 | )
|Net periodic benefit cost                                                                                 |  |                | 2,234  |   |      |   | 4,644  |  
|                                                                                                          |  |                |        |   |      |   |        |  
|Total recognized in net periodic benefit cost and accumulated other comprehensive loss                    |  | $              | (3,242 | ) |      | $ | 1,894  |  
|                                                                                                          |  |                |        |   |      |   |        |  

Estimated future benefit payments as of December 31, 2010 are as follows (in thousands):



|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Year Ending December 31, |  |   |       
|2011                     |  | $ | 1,174  | 
|2012                     |  |   | 1,378  | 
|2013                     |  |   | 1,627  | 
|2014                     |  |   | 1,907  | 
|2015                     |  |   | 2,219  | 
|2016-2020                |  |   | 17,086 | 
|                         |  |   |        | 
|                         |  | $ | 25,391 | 
|                         |  |   |        | 

The ARLP Partnership expects to contribute $5.0 million to the Pension Plan in 2011. The estimated net
actuarial loss for the Pension Plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost during the 2011 fiscal year is $0.5 million.

As permitted under ASC 715, CompensationRetirement Benefits, the amortization of any prior service cost is determined using
a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the Pension Plan.

The compensation committee of the MGP Board of Directors (MGP Compensation Committee) maintains a Funding and Investment Policy Statement (Policy Statement) for the Pension Plan.
The Policy Statement provides that the assets of the Pension Plan be invested in a prudent manner based on the stated purpose of the Pension Plan and diversified among a broad range of investments including domestic and international equity
securities, domestic fixed income securities and cash equivalents. The Pension Plan allows for the utilization of options in a collar strategy to limit potential exposure to market fluctuations. The investment goal of the Pension Plan is
to ensure that the assets



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provide sufficient resources to meet or exceed the benefit obligations as determined under terms and conditions of the Pension Plan. The Policy Statement provides that the Pension Plan shall be
funded by employer contributions in amounts determined in accordance with generally accepted actuarial standards. The investment objectives as established by the Policy Statement are, first, to increase the value of the assets under the Pension Plan
and, second, to control the level of risk or volatility of investment returns associated with Pension Plan investments.

The
ARLP Partnership had unfunded benefit obligations of approximately $13.3 million and $20.0 million at December 31, 2010 and 2009. In general, increases in benefit obligations will be offset by employer contributions and market returns. However,
general market conditions may result in market losses. When the Pension Plan experiences market losses, significant variations in the funded status of the Pension Plan can, and often do, occur. Actuarial methods utilized in determining required
future employer contributions take into account the long-term effect of market losses and result in increased future employer contributions, thus offsetting such market losses. Conversely, the long-term effect of market gains will result in
decreased future employer contributions. Total account performance is to be reviewed at least annually, using a dynamic benchmark approach to track investment performance.

The MGP Compensation Committee has selected an investment manager to implement the selection and on-going evaluation of Pension Plan investments. The investments shall be selected from the following
assets classes, which includes mutual funds, collective funds, or the direct investment in individual stocks, bonds or cash equivalent investments, including: (a) money market accounts, (b) U.S. Government bonds, (c) corporate bonds,
(d) large, mid, and small capitalization stocks, and (e) international stocks. The Policy Statement provides the following guidelines and limitations, subject to exceptions authorized by the MGP Compensation Committee under unusual market
conditions: (i) the maximum investment in any one stock should not exceed 10.0% of the total stock portfolio, (ii) the maximum investment in any one industry should not exceed 30.0% of the total stock portfolio, and (iii) the average
credit quality of the bond portfolio should be at least AA with a maximum amount of non-investment grade debt of 10.0%.

The
Policy Statements asset allocation guidelines are as follows:



|                             |  |                               |    |   |        |  |    |         |  |  |    |  
|---------------------------- |  | ----------------------------- | -- | - | ------ |  | -- | ------- |  |  | -- | -
|                             |  | Percentage of Total Portfolio |   
|                             |  | Minimum                       |    |   | Target |  |    | Maximum | 
|Domestic equity securities   |  |                               | 50 | % |        |  | 70 | %       |  |  | 90 | %
|Foreign equity securities    |  |                               | 0  | % |        |  | 10 | %       |  |  | 20 | %
|Fixed income securities/cash |  |                               | 5  | % |        |  | 20 | %       |  |  | 40 | %

Domestic equity securities
primarily include investments in individual common stocks or registered investment companies that hold positions in companies that are based in the U.S. Foreign equity securities primarily include investments in individual common stocks or
registered investment companies that hold positions in companies based outside the U.S. Fixed income securities primarily include individual bonds or registered investment companies that hold positions in U.S. Treasuries, U.S. government
obligations, corporate bonds, mortgage backed securities and preferred stocks. Short-term market conditions may result in actual asset allocations that fall outside the minimum or maximum guidelines reflected in the Policy Statement.

Asset allocations as of December 31,



|                             |  |      |     |   |      |  |     |  
|---------------------------- |  | ---- | --- | - | ---- |  | --- | -
|                             |  | 2010 |     |   | 2009 | 
|Domestic equity securities   |  |      | 59  | % |      |  | 57  | %
|Foreign equity securities    |  |      | 21  | % |      |  | 15  | %
|Fixed income securities/cash |  |      | 20  | % |      |  | 28  | %
|                             |  |      |     |   |      |  |     |  
|                             |  |      | 100 | % |      |  | 100 | %
|                             |  |      |     |   |      |  |     |  

The ARLP Partnership considers multiple factors in its investment strategy. The following factors have been
taken into consideration with respect to the Pension Plans long-term investment goals and objectives and in the establishment of the Pension Plans target investment allocation:



| |  |  | The long-term nature of providing retirement income benefits to Pension Plan participants;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | The projected annual funding requirements necessary to meet the benefit obligations;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | The current level of benefit payments to Pension Plan participants and beneficiaries; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Ongoing analysis of economic conditions and investment markets.
| | - |  | ---------------------------------------------------------------



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As required by FASB ASC 715, the following information discloses the fair values of the
Pension Plan assets, by asset category, consist of the following for the periods indicated (in thousands):



|                                             |  |                                                             |        |  |                                       |   |        |                                         |  |   |                                                             |  |  |                                       |        |  |                                         |   |        |   |  |   |   | 
|-------------------------------------------- |  | ----------------------------------------------------------- | ------ |  | ------------------------------------- | - | ------ | --------------------------------------- |  | - | ----------------------------------------------------------- |  |  | ------------------------------------- | ------ |  | --------------------------------------- | - | ------ | - |  | - | - | 
|                                             |  | December 31, 2010                                           |        |  | December 31, 2009                     |  
|                                             |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |        |  | SignificantObservableInputs(Level
 2) |   |        | SignificantUnobservableInputs(Level
 3) |  |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |  |  | SignificantObservableInputs(Level
 2) |        |  | SignificantUnobservableInputs(Level
 3) |  
|Cash and cash equivalents                    |  | $                                                           | 839    |  |                                       | $ |       |                                         |  | $ |                                                            |  |  | $                                     | 688    |  |                                         | $ |       |   |  | $ |  | 
|Equity securities (a):
U.S. large-cap growth |  |                                                             | 6,151  |  |                                       |   |       |                                         |  |   |                                                            |  |  |                                       | 5,515  |  |                                         |   |       |   |  |   |  | 
|U.S. large-cap value                         |  |                                                             | 5,922  |  |                                       |   |       |                                         |  |   |                                                            |  |  |                                       | 5,331  |  |                                         |   |       |   |  |   |  | 
|International large-cap core                 |  |                                                             | 2,725  |  |                                       |   |       |                                         |  |   |                                                            |  |  |                                       | 2,702  |  |                                         |   |       |   |  |   |  | 
|Fixed income securities:                     |  |                                                             |        |  |                                       |   |        |                                         |  |   |                                                             |  |  |                                       |        |  |                                         |   |        |   |  |   |   | 
|U.S. Treasury securities (b)                 |  |                                                             | 1,552  |  |                                       |   |       |                                         |  |   |                                                            |  |  |                                       | 1,812  |  |                                         |   |       |   |  |   |  | 
|Corporate bonds (c)                          |  |                                                             |       |  |                                       |   | 1,754  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 1,105  |   |  |   |  | 
|Preferred stock (a)                          |  |                                                             | 184    |  |                                       |   |       |                                         |  |   |                                                            |  |  |                                       | 134    |  |                                         |   |       |   |  |   |  | 
|Taxable municipal bonds (c)                  |  |                                                             |       |  |                                       |   | 271    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 219    |   |  |   |  | 
|International bonds (c)                      |  |                                                             |       |  |                                       |   | 673    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 343    |   |  |   |  | 
|Equity mutual funds (d):                     |  |                                                             |        |  |                                       |   |        |                                         |  |   |                                                             |  |  |                                       |        |  |                                         |   |        |   |  |   |   | 
|U.S. large-cap growth                        |  |                                                             |       |  |                                       |   | 225    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   |       |   |  |   |  | 
|U.S. large-cap value                         |  |                                                             |       |  |                                       |   | 747    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 866    |   |  |   |  | 
|U.S. mid-cap growth                          |  |                                                             |       |  |                                       |   | 4,172  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 2,739  |   |  |   |  | 
|U.S. mid-cap value                           |  |                                                             |       |  |                                       |   | 4,059  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 3,862  |   |  |   |  | 
|U.S. small cap growth                        |  |                                                             |       |  |                                       |   | 2,627  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 1,781  |   |  |   |  | 
|U.S. small cap value                         |  |                                                             |       |  |                                       |   | 2,195  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 1,529  |   |  |   |  | 
|International                                |  |                                                             |       |  |                                       |   | 4,020  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 2,516  |   |  |   |  | 
|Emerging Markets                             |  |                                                             |       |  |                                       |   | 2,534  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 517    |   |  |   |  | 
|Fixed income mutual funds (d):               |  |                                                             |        |  |                                       |   |        |                                         |  |   |                                                             |  |  |                                       |        |  |                                         |   |        |   |  |   |   | 
|U.S. treasury and agency                     |  |                                                             |       |  |                                       |   |       |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 739    |   |  |   |  | 
|Corporate bond                               |  |                                                             |       |  |                                       |   | 879    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 808    |   |  |   |  | 
|Mortgage backed-securities                   |  |                                                             |       |  |                                       |   | 722    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 1,332  |   |  |   |  | 
|Intermediate investment grade bond           |  |                                                             |       |  |                                       |   | 1,016  |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 2,804  |   |  |   |  | 
|High yield bond                              |  |                                                             |       |  |                                       |   | 644    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 564    |   |  |   |  | 
|International bond                           |  |                                                             |       |  |                                       |   | 297    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 230    |   |  |   |  | 
|Stock market index options (e):              |  |                                                             |        |  |                                       |   |        |                                         |  |   |                                                             |  |  |                                       |        |  |                                         |   |        |   |  |   |   | 
|Puts                                         |  |                                                             |       |  |                                       |   | 212    |                                         |  |   |                                                            |  |  |                                       |       |  |                                         |   | 26     |   |  |   |  | 
|Calls                                        |  |                                                             |       |  |                                       |   | (438   | )                                       |  |   |                                                            |  |  |                                       |       |  |                                         |   | (68    | ) |  |   |  | 
|                                             |  |                                                             |        |  |                                       |   |        |                                         |  |   |                                                             |  |  |                                       |        |  |                                         |   |        |   |  |   |   | 
|Total                                        |  | $                                                           | 17,373 |  |                                       | $ | 26,609 |                                         |  | $ |                                                            |  |  | $                                     | 16,182 |  |                                         | $ | 21,912 |   |  | $ |  | 
|                                             |  |                                                             |        |  |                                       |   |        |                                         |  |   |                                                             |  |  |                                       |        |  |                                         |   |        |   |  |   |   | 



|(a) | Equity securities include investments in publicly-traded common stock and preferred stock. Publicly-traded common stocks are traded on a national securities exchange
and investments in common and preferred stocks are valued using quoted market prices multiplied by the number of shares owned.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | U.S. Treasury securities include agency and treasury debt. These investments are valued using dealer quotes in an active market.
|--- | --------------------------------------------------------------------------------------------------------------------------------



|(c) | Bonds are valued utilizing a market approach that includes various valuation techniques and sources such as value generation models, broker quotes in active and
non-active markets, benchmark yields and securities, reported trades, issuer spreads, and/or other applicable reference data. The corporate bonds and notes category is primarily comprised of U.S. dollar denominated, investment grade securities. Less
than 5 percent of the securities have a rating below investment grade. The ARLP Partnership classified its investments in bond fixed income securities as Level 2 measurements at December 31, 2010 and reclassified prior year amounts for
consistency with its current year presentation.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Mutual funds are valued daily in actively traded markets by an independent custodian for the investment manager. For purposes of calculating the value, portfolio
securities and other assets for which market quotes are readily available are valued at market value. Market value is generally determined on a basis of last reported sales prices, or if not sales are reported, based on quotes obtained from a
quotation reporting system, established market makers, or pricing services. Investments initially valued in currencies other than the U.S. dollars are converted to the U.S. dollar using exchange rates obtained from pricing services.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | Options are valued utilizing a market approach that includes various valuation techniques and sources such as value generation models, broker quotes in active and
non-active markets, reported trades, issuer spreads, and/or other applicable reference data.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pension Plan
assets for which the fair value is based on quoted prices in active markets for identical assets are considered to be valued with Level 1 inputs in the fair value hierarchy. Pension Plan assets for which the fair value is based on quoted prices for
similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active are considered to be valued with Level 2 inputs in the fair value hierarchy.



|15. | COMPENSATION PLANS
|--- | ------------------

ARLP Partnership

The ARLP Partnership has established 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 of non-vested phantom or notional units, which upon the satisfaction of 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 the review and approval of the MGP Compensation Committee. The aggregate



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number of units reserved for issuance under the ARLP LTIP was 1.2 million prior to October 23, 2009. On October 23, 2009, the ARLP LTIP was amended to increase the number of common
units available for issuance from 1.2 million to 3.6 million.

On January 26, 2010, the MGP Compensation Committee
determined that the vesting requirements for the 2007 grants of 88,975 restricted units (which is net of 4,500 forfeitures) had been satisfied as of January 1, 2010. As a result of this vesting, on February 12, 2010, the ARLP Partnership
issued 55,826 unrestricted common units to ARLP LTIP participants. The remaining units were settled in cash to satisfy the tax withholding obligations for the ARLP LTIP participants. On January 25, 2011, the MGP Compensation Committee
authorized additional grants up to 110,000 restricted units, of which 106,330 were granted.

During the years ended
December 31, 2010 and 2009, the three months ended December 31, 2008 and the nine months ended September 30, 2008, the ARLP Partnership issued grants of 138,130 units, 9,625 units, 141,145 units and 93,600 units, respectively. Grants
issued during the year ended December 31, 2010 vest on January 1, 2013. Grants issued during the year ended December 31, 2009 and the three months ended December 31, 2008 vest on January 1, 2012. Grants issued during the
nine months ended September 30, 2008 vest on January 1, 2011. Vesting of all grants is subject to the satisfaction of certain financial tests that management currently believes it is probable will be satisfied. As of December 31,
2010, 9,777 of these outstanding ARLP LTIP grants have been forfeited. On January 25, 2011, the MGP Compensation Committee determined that the vesting requirements for the 2008 grants of 91,100 restricted units (which is net of 2,500
forfeitures) had been satisfied as of January 1, 2011. As a result of this vesting, on February 11, 2011, the ARLP Partnership issued 58,886 unrestricted common units to the ARLP LTIP participants. The remaining units were settled in cash
to satisfy the individual tax obligations of the ARLP LTIP participants. After consideration of the January 1, 2011 vesting and subsequent issuance of 58,886 common units, 2.3 million units remain available for issuance in the future,
assuming that all grants issued in 2009 and 2010 and currently outstanding are settled with common units, without reduction for tax withholding, and no future forfeitures occur.

For the years ended December 31, 2010, 2009 and 2008, ARLP LTIP expense was $4.1 million, $3.6 million and $3.3 million,
respectively. The total obligation associated with the ARLP LTIP as of December 31, 2010 and 2009 was $7.6 million and $6.8 million, respectively, and is included in the noncontrolling interests line item in our consolidated balance sheets.

The fair value of the 2010, 2009 and 2008 grants is based upon the intrinsic value at the date of grant, which was $39.59,
$25.60 and $31.27 per restricted unit, respectively, on a weighted average basis. 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 the
minimum statutory tax withholding requirements. As provided under the distribution equivalent rights provision of the ARLP LTIP, all non-vested grants include contingent rights to receive quarterly cash distributions in an amount equal to the cash
distribution the ARLP Partnership makes to unitholders during the vesting period.

A summary of non-vested ARLP LTIP grants as
of and for the year ended December 31, 2010 is as follows:



|                                       |  |  |         |  
|-------------------------------------- |  |  | ------- | -
|Non-vested grants at January 1, 2010   |  |  | 332,845 |  
|Granted                                |  |  | 138,130 |  
|Vested                                 |  |  | (88,975 | )
|Forfeited                              |  |  | (9,277  | )
|                                       |  |  |         |  
|Non-vested grants at December 31, 2010 |  |  | 372,723 |  
|                                       |  |  |         |  

As of December 31, 2010, there was $4.8 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 1.5 years. As of December 31, 2010, the intrinsic value of the non-vested ARLP LTIP grants was $24.5 million.

The ARLP Partnership has a Supplemental Executive Retirement Plan (the 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, which upon vesting, for accounts payable on or prior to January 1, 2011, were paid to
participants in cash only. The SERP is administered by the MGP Compensation Committee.

For the years ended December 31,
2010, 2009 and 2008, the ARLP Partnership recorded SERP expense (income) of $3.0 million, $2.1 million and $(0.5) million, respectively. The increase in SERP expense in 2010 and 2009 was principally attributable to an increase in the market value of
ARLPs common units from the beginning of the year to the



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end of the year. The SERP income for the year ended December 31, 2008 resulted from lower unit-based compensation accruals due to a decrease in market value of ARLP common units from the
beginning of the year to the end of the year. The total accrued liability associated with the SERP plan was $7.3 million and $4.7 million as of December 31, 2010 and 2009, respectively, and is included in other long-term liabilities in the
consolidated balance sheets.

Our directors and MGPs directors may participate in separate Deferred Compensation Plans
(collectively, the Deferred Compensation Plans). Pursuant to the Deferred Compensation Plans, for deferred amounts, a notional account is established and credited with notional common units of AHGP or ARLP, as appropriate, which are
described in the plans as phantom units. The number of phantom units credited is determined by dividing the amount deferred by the average closing unit price for the ten trading days immediately preceding the deferral date. When
quarterly cash distributions are made with respect to AHGP or ARLP common units, an amount equal to such quarterly distribution is credited to the notional account as additional phantom units.

Effective for accounts that become payable after January 1, 2011, both the Deferred Compensation Plans and the SERP require that
vested benefits be paid to participants in only common units of AHGP or ARLP, as appropriate, rather than cash. As a result, during January 2011, the vested units under each plan were reclassified to partners capital or noncontrolling
interest, as appropriate, in accordance with FASB ASC 718, Compensation-Stock Compensation. In addition, the effect of the phantom units associated with our plan will be considered in the calculation of earnings per unit (EPU)
beginning in the March 31, 2011 quarterly period. We do not expect the inclusion of these phantom units in the calculation of EPU to have a material impact on our consolidated financial statements.

AHGP Partnership

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.



|16. | SUPPLEMENTAL CASH FLOW INFORMATION
|--- | ----------------------------------



|                                                                                                                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|--------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                                                                                                  |  | Year Ended December 31, |       
|                                                                                                                                  |  | 2010                    |        |  | 2009 |   |        | 2008 | 
|                                                                                                                                  |  | (in thousands)          |       
|Cash Paid For:                                                                                                                    |  |                         |        |  |      |   |        |      |  |   |        | 
|Interest                                                                                                                          |  | $                       | 30,787 |  |      | $ | 32,186 |      |  | $ | 22,920 | 
|                                                                                                                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|Income taxes                                                                                                                      |  | $                       | 1,803  |  |      | $ | 226    |      |  | $ |       | 
|                                                                                                                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|Non-Cash Activity:                                                                                                                |  |                         |        |  |      |   |        |      |  |   |        | 
|Accounts payable for purchase of property, plant and equipment                                                                    |  | $                       | 13,339 |  |      | $ | 20,819 |      |  | $ | 15,092 | 
|                                                                                                                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|Non-cash contribution by limited partner - affiliate                                                                              |  | $                       |       |  |      | $ |       |      |  | $ | 620    | 
|                                                                                                                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|Market value of ARLP common units vested in ARLPs Long-Term Incentive Plan before minimum statutory tax withholding
requirements |  | $                       | 3,396  |  |      | $ | 2,333  |      |  | $ | 3,658  | 
|                                                                                                                                  |  |                         |        |  |      |   |        |      |  |   |        | 



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|17. | ASSET RETIREMENT OBLIGATIONS
|--- | ----------------------------

The majority of the ARLP Partnerships operations are governed by various state statutes and the Federal Surface Mining Control and Reclamation Act of 1977 (SMCRA), which establish
reclamation and mine closing standards. These regulations, among other requirements, require restoration of property in accordance with specified standards and an approved reclamation plan. The ARLP Partnership accounts for its asset retirement
obligations in accordance with FASB ASC 410, Asset Retirement and Environmental Obligations,which requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred. The ARLP
Partnership has estimated the costs and timing of future asset retirement obligations escalated for inflation, then discounted and recorded at the present value of those estimates.

Discounting resulted in reducing the accrual for asset retirement obligations by $72.8 million and $68.0 million at December 31,
2010 and 2009, respectively. Estimated payments of asset retirement obligations as of December 31, 2010 are as follows (in thousands):



|                                                    |  |   |         |  
|--------------------------------------------------- |  | - | ------- | -
|Year Ending December 31,                            |  |   |        
|2011                                                |  | $ | 2,182   |  
|2012                                                |  |   | 2,490   |  
|2013                                                |  |   | 1,012   |  
|2014                                                |  |   | 617     |  
|2015                                                |  |   | 2,871   |  
|Thereafter                                          |  |   | 121,806 |  
|                                                    |  |   |         |  
|Aggregate undiscounted asset retirement obligations |  |   | 130,978 |  
|Effect of discounting                               |  |   | (72,751 | )
|                                                    |  |   |         |  
|Total asset retirement obligations                  |  |   | 58,227  |  
|Less: current portion                               |  |   | (2,182  | )
|                                                    |  |   |         |  
|Asset retirement obligations                        |  | $ | 56,045  |  
|                                                    |  |   |         |  

The following table presents the activity affecting the asset retirement and mine closing liability (in
thousands):



|                                                                                                |  |                         |        |   |      |   |        |  
|----------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                |  | Year ended December 31, |       
|                                                                                                |  | 2010                    |        |   | 2009 |  
|Beginning balance                                                                               |  | $                       | 55,851 |   |      | $ | 58,589 |  
|Accretion expense                                                                               |  |                         | 2,574  |   |      |   | 2,678  |  
|Payments                                                                                        |  |                         | (966   | ) |      |   | (556   | )
|Allocation of liability associated with acquisition, mine development and change in assumptions |  |                         | 768    |   |      |   | (4,860 | )
|                                                                                                |  |                         |        |   |      |   |        |  
|Ending balance                                                                                  |  | $                       | 58,227 |   |      | $ | 55,851 |  
|                                                                                                |  |                         |        |   |      |   |        |  

For the year ended December 31, 2010, the allocation of liability associated with acquisition, mine
development and change in assumptions is a net increase of $0.8 million was primarily attributable to increased refuse site reclamation disturbances at the ARLP Partnerships Hopkins County Coal operation and new mine development work at Tunnel
Ridge, as well as the net impact of overall general changes in inflation and discount rates, current estimates of the costs and scope of remaining reclamation work and fluctuations in projected mine life estimates. These increases were offset in
part by a reduction in the impoundment cover material at Pontiki and MC Mining.

For the year ended December 31, 2009,
the allocation of liability associated with acquisition, mine development and change in assumptions is a net decrease of $4.9 million, and was primarily attributable to decreased refuse site reclamation disturbances at the ARLP Partnerships
Hopkins County Coal operation and the impact of favorable permit requirements regarding reduced liner and cover necessary for refuse storage at Gibson County Coal, as well as overall general changes in inflation and discount rates, current estimates
of the costs and scope of remaining reclamation work, and fluctuations in projected mine life estimates for coal reserve increases and decreases across all operations offset in part by increased surface disturbances as a result of the new mine
development work at Tunnel Ridge and River View.



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|18. | ACCRUED WORKERS COMPENSATION AND PNEUMOCONIOSIS BENEFITS
|--- | ---------------------------------------------------------

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 (CMSHA), as amended, to pay
pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents. In addition, the ARLP Partnership is liable for workers compensation benefits for traumatic injuries. Both black lung and traumatic claims
are covered through the ARLP Partnerships self-insured programs.

The ARLP Partnerships black lung benefits
liability is calculated using the service cost method that considers the calculation of the actuarial present value of the estimated black lung obligation. The ARLP Partnerships actuarial calculations are based on numerous assumptions
including disability incidence, medical costs, mortality, death benefits, dependents and interest rates. Actuarial gains or losses are amortized over the remaining service period of active miners.

The ARLP Partnership provides income replacement and medical treatment for work-related traumatic injury claims as required by applicable
state laws. Workers compensation laws also compensate survivors or workers who suffer employment related deaths. The ARLP Partnerships liability for traumatic injury claims is the estimated present value of current workers
compensation benefits, based on its actuarial estimates. The ARLP Partnerships actuarial calculations are based on a blend of actuarial projection methods and numerous assumptions including development patterns, mortality, medical costs and
interest rates. The discount rate used to calculate the estimated present value of future obligations for black lung was 5.38% and 5.80% at December 31, 2010 and 2009, respectively, and for workers compensation was 4.70% and 5.27% at
December 31, 2010 and 2009, respectively.

The black lung and workers compensation expense consists of the
following components for the year ended December 31, 2010, 2009 and 2008 (in thousands):



|                              |  |      |        |   |      |   |        |      |  |   |        |  
|----------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                              |  | 2010 |        |   | 2009 |   |        | 2008 | 
|Black lung benefits:          |  |      |        |   |      |   |        |      |  |   |        |  
|Service cost                  |  | $    | 2,359  |   |      | $ | 2,187  |      |  | $ | 1,415  |  
|Interest cost                 |  |      | 1,857  |   |      |   | 1,535  |      |  |   | 1,641  |  
|Net amortization              |  |      | (176   | ) |      |   | (536   | )    |  |   | (745   | )
|                              |  |      |        |   |      |   |        |      |  |   |        |  
|Total black lung              |  |      | 4,040  |   |      |   | 3,186  |      |  |   | 2,311  |  
|Workers compensation expense |  |      | 16,776 |   |      |   | 21,585 |      |  |   | 18,395 |  
|                              |  |      |        |   |      |   |        |      |  |   |        |  
|Total expense                 |  | $    | 20,816 |   |      | $ | 24,771 |      |  | $ | 20,706 |  
|                              |  |      |        |   |      |   |        |      |  |   |        |  

The following is a reconciliation of the changes in workers compensation liability (including current
and long-term liability balances) at December 31, 2010 and 2009 (in thousands):



|                   |  |      |        |   |      |   |         |  
|------------------ |  | ---- | ------ | - | ---- | - | ------- | -
|                   |  | 2010 |        |   | 2009 |  
|Beginning balance  |  | $    | 63,220 |   |      | $ | 56,671  |  
|Accruals           |  |      | 20,047 |   |      |   | 18,466  |  
|Payments           |  |      | (9,944 | ) |      |   | (12,534 | )
|Interest accretion |  |      | 3,332  |   |      |   | 3,455   |  
|Valuation gain     |  |      | (8,968 | ) |      |   | (2,838  | )
|                   |  |      |        |   |      |   |         |  
|Ending balance     |  | $    | 67,687 |   |      | $ | 63,220  |  
|                   |  |      |        |   |      |   |         |  



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The following is a reconciliation of the changes in black lung benefit obligations at
December 31, 2010 and 2009 (in thousands):



|                                         |  |      |        |   |      |   |        |  
|---------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                         |  | 2010 |        |   | 2009 |  
|Benefit obligations at beginning of year |  | $    | 34,855 |   |      | $ | 31,970 |  
|Service cost                             |  |      | 2,359  |   |      |   | 2,187  |  
|Interest cost                            |  |      | 1,857  |   |      |   | 1,535  |  
|Actuarial loss (gain)                    |  |      | 6,871  |   |      |   | (536   | )
|Benefits and expenses paid               |  |      | (276   | ) |      |   | (301   | )
|                                         |  |      |        |   |      |   |        |  
|Benefit obligations at end of year       |  | $    | 45,666 |   |      | $ | 34,855 |  
|                                         |  |      |        |   |      |   |        |  

Summarized below is information about the amounts recognized in the accompanying consolidated balance sheets
for black lung and workers compensation benefits at December 31, 2010 and 2009 (in thousands):



|                             |  |      |         |   |      |   |        |  
|---------------------------- |  | ---- | ------- | - | ---- | - | ------ | -
|                             |  | 2010 |         |   | 2009 |  
|Black lung claims            |  | $    | 45,666  |   |      | $ | 34,855 |  
|Workers compensation claims |  |      | 67,687  |   |      |   | 63,220 |  
|                             |  |      |         |   |      |   |        |  
|Total obligations            |  |      | 113,353 |   |      |   | 98,075 |  
|Less current portion         |  |      | (8,518  | ) |      |   | (9,886 | )
|                             |  |      |         |   |      |   |        |  
|Non-current obligations      |  | $    | 104,835 |   |      | $ | 88,189 |  
|                             |  |      |         |   |      |   |        |  

Both the black lung and workers compensation obligations were unfunded at December 31, 2010 and
2009.

As of December 31, 2010 and 2009, the ARLP Partnership had $69.6 million and $66.9 million, respectively, in
surety bonds and letters of credit outstanding to secure its workers compensation obligations.

The Patient Protection
and Affordable Care Act, which was signed into law by President Obama on March 23, 2010, amended previous legislation related to coal workers black lung providing automatic extension of awarded lifetime benefits to surviving spouses and
providing changes to the legal criteria used to assess and award claims. The impact of these changes to the ARLP Partnerships current population of beneficiaries and claimants resulted in an estimated $8.3 million increase to its black lung
obligation at the measurement date. As of December 31, 2010, the ARLP Partnership recorded this estimate as an increase to its black lung liability and a decrease to its actuarial gain included in accumulated other comprehensive income on our
consolidated balance sheet. This increase to its obligation excludes the impact of potential re-filing of closed claims and potential filing rates for employees who terminated more than seven years ago as the ARLP Partnership does not have
sufficient information to determine what, if any, claims will be filed until regulations are issued. The ARLP Partnership will continue to evaluate the impact of these changes on such claims and record any necessary changes in the period in which
the impact is estimable. For more information, please read Part II. Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsHealth Care Reform of this Annual Report on Form 10-K.



|19. | RELATED-PARTY TRANSACTIONS
|--- | --------------------------

ARLP Omnibus AgreementPursuant to the terms of an amended omnibus agreement, AHGP agreed, and caused its
controlled affiliates to agree, for so long as management controls MGP through its ownership of AHGP, not to engage in the business of mining, marketing or transporting coal in the U.S., unless ARLP is first offered the opportunity to engage in the
potential activity or acquire a potential business, and the MGP Board of Directors with the concurrence of the MGP Conflicts Committee, elects to cause ARLP not to pursue such opportunity or acquisition. The amended omnibus agreement provides, among
other things, that ARLP will be presumed to desire to acquire the assets until such time as it advises AHGP that it has abandoned the pursuit of such business opportunity, and AHGP may not pursue the acquisition of such assets prior to that time.
This restriction does not apply to: any business owned or operated by AHGP and its affiliates at the closing of the IPO; any acquisition by AHGP or its affiliates, so long as the majority of the value of the acquisition does not derive from a
restricted business and ARLP is offered the opportunity to purchase the restricted business following its acquisition; or any business conducted by AHGP or our affiliates with the approval of the MGP Board of Directors or MGP Conflicts Committee.



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Registration RightsIn connection with the Contribution Agreement,
we agreed to register for sale under the Securities Act of 1933 (Securities Act) and applicable state securities laws, subject to certain limitations, any common units proposed to be sold by SGP and the former owners of MGP or any of
their respective affiliates. These registration rights required us to file one registration statement for each of these groups. We also agreed to include any securities held by the owners of SGP and the former owners of MGP or any of their
respective affiliates in any registration statement that we file to offer securities for cash, except an offering relating solely to an employee benefit plan and other similar exceptions. We satisfied our requirement by registering 47,863,000
outstanding common units on Form S-3 filed with the U.S. Securities and Exchange Commission (SEC) on June 1, 2007, declared outstanding effective on June 27, 2007. A prospectus supplement was filed with the SEC on
December 18, 2007. These registration rights are in addition to the registration rights that we agreed to provide AGP and its affiliates pursuant to our limited partnership agreement.

AGPOur partnership agreement requires us to reimburse AGP for all direct and indirect expenses it incurs or
payments it makes on our behalf and all other expenses allocable to us or otherwise incurred by our general partner in connection with operating our business. The amounts billed by AGP to us include $0.7 million, $0.5 million and $0.3 million for
the years ended December 31, 2010, 2009 and 2008, respectively, for costs principally related to the Directors Annual Retainer and Deferred Compensation Plan.

C-HoldingsAt the closing of our IPO, we entered into the AHGP Credit Facility with C-Holdings, an entity controlled by Mr. Craft, as the lender (Note 8). For the years
ended December 31, 2010, 2009 and 2008, we did not incur any interest expense or commitment fees to C-Holdings.

Option AgreementsOn July 31, 2008, August 6, 2008 and August 7, 2008, we entered into
agreements with certain current and former members of management of the ARLP Partnership giving us the option to purchase 1,095,317 of our common units for the price of $29.98 per common unit at any time prior to October 28, 2008. We paid $0.02
per common unit for such option. On October 28, 2008, the option agreements expired and were not exercised.

MAC
(Note 13)In September 2007, MAC entered into a $1.5 million Revolver with ARLP. By amendment effective April 1, 2008, the term of the Revolver was extended to June 30, 2009. On November 17, 2009, MAC entered
into Amendment No. 2, effective June 30, 2009, which increased the Revolver to $1.75 million. The Revolver expired on December 31, 2010. At December 31, 2010, MAC owed ARLP $1.6 million under the Revolver, which is classified as
Due from Affiliates on our consolidated balance sheets. MAC repaid the amount due under the Revolver in January 2011.

The ARLP
Partnerships Related-Party Transactions

The MGP Board of Directors and MGP Conflicts Committee review each of the
ARLP Partnerships related-party transactions to determine that such transactions reflect market-clearing terms and conditions customary in the coal industry. As a result of these reviews, the MGP Board of Directors and MGP Conflicts Committee
approved each of the transactions described below as fair and reasonable to us and our limited partners.

Administrative
ServicesOn April 1, 2010, effective January 1, 2010, we entered into the Administrative Services Agreement with ARLP, MGP, the Intermediate Partnership, our general partner AGP, and ARH II, the indirect parent of SGP.
The Administrative Services Agreement supersedes the administrative services agreement signed in connection with our initial public offering in 2006. Under the Administrative Services Agreement, certain employees of ARLP, including some executive
officers, provide administrative services to AHGP and ARH II and their respective affiliates. The ARLP Partnership is reimbursed for services rendered by its employees on behalf of these affiliates as provided under the Administrative Services
Agreement. On a consolidated basis, the ARLP Partnership billed and recognized administrative service revenue under this agreement of $0.2 million, $0.5 million and $0.5 million for the years ended December 31, 2010, 2009 and 2008,
respectively, from ARH II. This administrative service revenue is included in other sales and operating revenues in our consolidated statements of income.

Affiliate ContributionDuring 2008, an affiliated entity controlled by Mr. Craft contributed to us 25,898 of our common units valued at approximately $0.6 million at the
time of contribution and $0.8 million of cash for the purpose of funding certain expenses associated with the ARLP Partnerships employee compensation programs. Upon our receipt of the contribution, we immediately contributed the same to our
subsidiary and ARLPs managing general partner, MGP, which in turn contributed the same to Alliance Coal. Concurrent with this contribution, Alliance Coal distributed the



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common units to certain employees and recognized compensation expense of $1.4 million. The ARLP Partnership made a special allocation to MGP of certain general and administrative expenses equal
to the amount of the contributions, MGP made an identical expense allocation to us, and we then made the same expense allocation to the affiliated entity controlled by Mr. Craft.

SGP Land, LLCOn May 2, 2007 SGP Land, a subsidiary of SGP controlled by Mr. Craft, entered into a
time sharing agreement with Alliance Coal concerning the use of aircraft owned by SGP Land. In accordance with the provisions of the time sharing agreement as amended, the ARLP Partnership reimbursed SGP Land $0.8 million, $0.7 million and $0.7
million for the years ended December 31, 2010, 2009 and 2008, respectively, for use of the aircraft.

On January 28,
2008, effective January 1, 2008, the ARLP Partnership acquired, through its subsidiary Alliance Resource Properties, additional rights to approximately 48.2 million tons of coal reserves located in western Kentucky from SGP Land. The
purchase price was $13.3 million. At the time of the ARLP Partnerships acquisition, these reserves were leased by SGP Land to the ARLP Partnerships subsidiaries, Webster County Coal, Warrior and Hopkins County Coal through the mineral
leases and sublease agreements described below. Those mineral leases and sublease agreements between SGP Land and the ARLP Partnerships subsidiaries were assigned to Alliance Resource Properties by SGP Land in this transaction. The recoupable
balances of advance minimum royalties and other payments at the time of this acquisition, other than $0.4 million to the base lessors, are eliminated in our consolidated financial statements as of December 31, 2010 and 2009.

In 2001, SGP Land, as successor in interest to an unaffiliated third-party, entered into an amended mineral lease with MC Mining. Under
the terms of the lease, MC Mining has paid and will continue to pay an annual minimum royalty of $0.3 million until $6.0 million of cumulative annual minimum and/or earned royalty payments have been paid. MC Mining paid royalties of $0.3 million
during each of the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010, $2.1 million of advance minimum royalties paid under the lease is available for recoupment, and management expects that it will be
recouped against future production.

SGPIn January 2005, the ARLP Partnership acquired Tunnel Ridge
from ARH. In connection with this acquisition, the ARLP Partnership assumed a coal lease with the SGP. Under the terms of the lease, Tunnel Ridge has paid and will continue to pay an annual minimum royalty of $3.0 million until the earlier of
January 1, 2033 or the exhaustion of the mineable and merchantable leased coal. Tunnel Ridge paid advance minimum royalties of $3.0 million during each of the years ended December 31, 2010, 2009 and 2008. As of December 31, 2010,
$17.9 million of advance minimum royalties paid under the lease is available for recoupment and management expects that it will be recouped against future production. In August 2010, the coal lease was amended to include approximately
34.4 million additional clean tons of recoverable coal reserves in the proven and probable categories.

Tunnel Ridge also
controls surface land and other tangible assets under a separate lease agreement with SGP. Under the terms of the lease agreement, Tunnel Ridge has paid and will continue to pay SGP an annual lease payment of $0.2 million. The lease agreement has an
initial term of four years, which may be extended to match the term of the coal lease. Lease expense was $0.2 million for each of the years ended December 31, 2010, 2009 and 2008.

The ARLP Partnership has a noncancelable operating lease arrangement with SGP for the coal preparation plant and ancillary facilities at
the Gibson County Coal mining complex. Based on the terms of the lease, the ARLP Partnership will make monthly payments of approximately $0.2 million through January 2011. Lease expense incurred for each of the years ended December 31, 2010,
2009 and 2008 was $2.6 million. Effective February 1, 2011, the lease was amended to extend the term through January 2017 and modify other terms, including reducing the monthly payments to approximately $50,000.

The ARLP Partnership has agreements with two banks to provide letters of credit in an aggregate amount of $31.1 million (Note 8). At
December 31, 2010, the ARLP Partnership had $30.7 million in outstanding letters of credit under these agreements. SGP guarantees $5.0 million of these outstanding letters of credit. SGP does not charge the ARLP Partnership for this guarantee.
Since the guarantee is made on behalf of entities within the consolidated partnership, the guarantee has no fair value under FASB ASC 460, Guarantees, and does not impact our consolidated financial statements.



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|20. | COMMITMENTS AND CONTINGENCIES
|--- | -----------------------------

CommitmentsThe ARLP Partnership leases buildings and equipment under operating lease agreements that provide for the payment of both minimum and contingent rentals. The ARLP
Partnership also has a noncancelable lease with SGP (Note 19) and a noncancelable lease for equipment under a capital lease obligation. Future minimum lease payments are as follows (in thousands):



|                                               |  |              |      |   |                        |   |     |        |  |   |       |  |  |   |       | 
|---------------------------------------------- |  | ------------ | ---- | - | ---------------------- | - | --- | ------ |  | - | ----- |  |  | - | ----- | 
|                                               |  |              |      |   | Other Operating Leases |  
|Year Ending December 31,                       |  | CapitalLease |      |   | Affiliate              |   |     | Others |  |   | Total | 
|2011                                           |  | $            | 346  |   |                        | $ | 456 |        |  | $ | 1,445 |  |  | $ | 1,901 | 
|2012                                           |  |              | 141  |   |                        |   |    |        |  |   | 763   |  |  |   | 763   | 
|2013                                           |  |              | 84   |   |                        |   |    |        |  |   | 367   |  |  |   | 367   | 
|2014                                           |  |              | 13   |   |                        |   |    |        |  |   | 367   |  |  |   | 367   | 
|2015                                           |  |              |     |   |                        |   |    |        |  |   | 367   |  |  |   | 367   | 
|Thereafter                                     |  |              |     |   |                        |   |    |        |  |   | 1,010 |  |  |   | 1,010 | 
|                                               |  |              |      |   |                        |   |     |        |  |   |       |  |  |   |       | 
|Total future minimum lease payments            |  | $            | 584  |   |                        | $ | 456 |        |  | $ | 4,319 |  |  | $ | 4,775 | 
|                                               |  |              |      |   |                        |   |     |        |  |   |       |  |  |   |       | 
|Less: amount representing interest             |  |              | (124 | ) |                        |   |     |        |  |   |       |  |  |   |       | 
|                                               |  |              |      |   |                        |   |     |        |  |   |       |  |  |   |       | 
|Present value of future minimum lease payments |  |              | 460  |   |                        |   |     |        |  |   |       |  |  |   |       | 
|Less: current portion                          |  |              | (295 | ) |                        |   |     |        |  |   |       |  |  |   |       | 
|                                               |  |              |      |   |                        |   |     |        |  |   |       |  |  |   |       | 
|Long-term capital lease obligation             |  | $            | 165  |   |                        |   |     |        |  |   |       |  |  |   |       | 
|                                               |  |              |      |   |                        |   |     |        |  |   |       |  |  |   |       | 

Rental expense (including rental expense incurred under operating lease agreements) was $7.2
million, $6.0 million and $5.6 million for the years ended December 31, 2010, 2009 and 2008, respectively.

The ARLP
Partnerships subsidiary, Mettiki (WV), entered into a capital lease agreement with Joy Technologies Inc., d/b/a Joy Mining Machinery, a Delaware corporation, on May 22, 2006, with an in-service date of November 20, 2006. The lease is
a 5-year noncancelable lease with monthly rental payments of $42,930 and has one renewal period for 2 years with monthly rental payments of $24,680. The effective interest rate on the capital lease is 6.195%.

Contractual CommitmentsIn connection with planned capital projects, the ARLP Partnership had contractual commitments
of approximately $86.8 million at December 31, 2010. As of December 31, 2010, the ARLP Partnership had commitments to purchase, from external production sources, coal at an estimated cost up to $14.1 million in 2011.

General Litigation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 an accrual for a potential loss related to these matters when, in managements opinion, such loss is 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.

The matters referenced in the previous paragraph include, but are not limited to, the Rector v. White County Coal, LLC lawsuit,
which is a royalty dispute involving certain coal leases that had previously terminated. Plaintiffs had alleged damages of $33 million or more and had also asserted a claim for punitive damages. During November 2010, the court found in favor of the
plaintiffs in the amount of $3.4 million of back royalty payments through August 2009 plus $0.4 million in related interest through the judgment date. The court also awarded plaintiffs overriding royalties on future coal production after August
2009, plus interest, which the ARLP Partnership estimates to total approximately $0.6 million through December 31, 2010 and approximately $2.1 million of royalties in the subsequent five years. The decision by the court did not have a material
adverse effect on the ARLP Partnerships business, financial position or results of operations. The ARLP Partnership continues to believe plaintiffs claims are without merit and is vigorously appealing the decision. Plaintiffs have cross
appealed on the issue of future royalties, asking to be awarded the present value of the future royalties. This legal matter is also discussed in Part I, Item 3. Legal Proceedings.

OtherDuring September 2010, the ARLP Partnership completed its annual property and casualty insurance renewal with
various insurance coverages effective October 1, 2010. The aggregate maximum limit in the commercial property program is $75.0 million per occurrence excluding a $1.5 million deductible for property damage, a 60-day waiting period for business
interruption and a $10.0 million overall aggregate deductible. The aforementioned property and casualty insurance coverages, effective October 1, 2010, replaced the ARLP Partnerships prior year 14.7% participation rate with the
deductibles mentioned above. The ARLP Partnership can make no assurances that it will not experience significant insurance claims in the future that could have a material adverse effect on its business, financial condition, results of operations and
ability to purchase property insurance in the future.



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|21. | CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
|--- | ------------------------------------------------

The ARLP Partnership has significant long-term coal supply agreements, some of which contain prospective price adjustment provisions designed to reflect changes in market conditions, labor and other
production costs and, in the infrequent circumstance when the coal is sold other than free on board the mine, changes in transportation rates. Total revenues from major customers, including transportation revenues, which are at least ten percent of
total revenues, are as follows (in thousands):



|           |  |                     |  |                         |         |  |      |   |         |      |  |   |         | 
|---------- |  | ------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|           |  |                     |  | Year Ended December 31, |        
|           |  | Segment (Note 22)   |  | 2010 (1)                |         |  | 2009 |   |         | 2008 | 
|Customer A |  | Illinois Basin      |  | $                       | 279,516 |  |      | $ | 120,915 |      |  | $ | 127,439 | 
|Customer B |  | Illinois Basin      |  |                         | 191,225 |  |      |   | 140,921 |      |  |   | 131,198 | 
|Customer C |  | Northern Appalachia |  |                         |        |  |      |   | 129,265 |      |  |   | 161,359 | 
|Customer D |  | Illinois Basin      |  |                         |        |  |      |   | 122,961 |      |  |   | 121,550 | 

Trade accounts
receivable from these customers totaled approximately $35.9 million and $38.0 million at December 31, 2010 and 2009, respectively. The ARLP Partnerships bad debt experience has historically been insignificant. Financial conditions of the
ARLP Partnerships customers could result in a material change to its bad debt expense in future periods. The ARLP Partnership has various coal agreements with its significant customers with expiration dates ranging from 2011 to 2016.

(1) Customer C & D are below the 10% threshold of total revenues for 2010.



|22. | SEGMENT INFORMATION
|--- | -------------------

The
ARLP Partnership operates in the eastern U.S. as a producer and marketer of coal to major utilities and industrial users. The ARLP Partnership aggregates multiple operating segments into four reportable segments: the Illinois Basin, Central
Appalachia, Northern Appalachia and Other and Corporate. The first three reportable segments correspond to the three major coal producing regions in the eastern U.S. Similar economic characteristics for the ARLP Partnerships operating segments
within each of these three reportable segments include coal quality, coal seam height, mining and transportation methods and regulatory issues.

The Illinois Basin reportable segment is comprised of multiple operating segments, including Webster County Coals Dotiki mining complex, Gibson County Coals Gibson North mining complex,
Hopkins County Coals Elk Creek mining complex, White County Coals Pattiki mining complex, Warriors mining complex, River Views mining complex which initiated operations in 2009, the Sebree property, the Gibson South property
and certain properties of Alliance Resource Properties and its wholly-owned subsidiary, ARP Sebree, LLC. The ARLP Partnership is in the process of permitting the Gibson South property and the Sebree property for future mine development.

The Central Appalachian reportable segment is comprised of two operating segments, the Pontiki and MC Mining mining complexes.

The Northern Appalachian reportable segment is comprised of multiple operating segments, including Mettiki (MD)s mining
complex, Mettiki (WV)s Mountain View mining complex, two small third-party mining operations, a mining complex currently under construction at Tunnel Ridge and the Penn Ridge property. In May 2010, incidental production began from mine
development activities at Tunnel Ridge, however, longwall production is not anticipated until early 2012. The ARLP Partnership is in the process of permitting the Penn Ridge property for future mine development.



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Other and Corporate includes ARLP Partnership and AHGP marketing and administrative
expenses, Matrix Design, Alliance Design (collectively, Matrix Design and Alliance Design are referred to as the Matrix Group), the Mt. Vernon dock activities, coal brokerage activity, the ARLP Partnerships equity investment in MAC
and certain properties of Alliance Resource Properties. Reportable segment results as of and for the years ended December 31, 2010, 2009 and 2008 are presented below:



|                                                                                           |  |                |           |  |                   |   |         |                    |  |   |                    |  |  |                |         |  |              |   |         |   |  |   |           | 
|------------------------------------------------------------------------------------------ |  | -------------- | --------- |  | ----------------- | - | ------- | ------------------ |  | - | ------------------ |  |  | -------------- | ------- |  | ------------ | - | ------- | - |  | - | --------- | 
|                                                                                           |  | IllinoisBasin  |           |  | CentralAppalachia |   |         | NorthernAppalachia |  |   | Other andCorporate |  |  | Elimination(1) |         |  | Consolidated |  
|                                                                                           |  | (in thousands) |          
|Reportable segment results as of and for the year ended December 31, 2010 were as follows: |  |                |           |  |                   |   |         |                    | 
|                                                                                           |  |                |           |  |                   |  
|Total revenues (2)                                                                         |  | $              | 1,202,442 |  |                   | $ | 165,175 |                    |  | $ | 219,211            |  |  | $              | 44,730  |  |              | $ | (21,815 | ) |  | $ | 1,609,743 | 
|Segment Adjusted EBITDA Expense (3)                                                        |  |                | 717,040   |  |                   |   | 128,318 |                    |  |   | 163,876            |  |  |                | 38,743  |  |              |   | (21,815 | ) |  |   | 1,026,162 | 
|Segment Adjusted EBITDA (4)                                                                |  |                | 460,592   |  |                   |   | 36,714  |                    |  |   | 46,702             |  |  |                | 5,989   |  |              |   |        |   |  |   | 549,997   | 
|Total assets                                                                               |  |                | 745,626   |  |                   |   | 81,818  |                    |  |   | 313,515            |  |  |                | 367,199 |  |              |   | (4,086  | ) |  |   | 1,504,072 | 
|Capital expenditures                                                                       |  |                | 149,149   |  |                   |   | 10,012  |                    |  |   | 128,961            |  |  |                | 1,752   |  |              |   |        |   |  |   | 289,874   | 
|                                                                                           |  |               
|Reportable segment results as of and for the year ended December 31, 2009 were as follows: |  |                |           |  |                   |   |         |                    | 
|                                                                                           |  |                |           |  |                   |  
|Total revenues (2)                                                                         |  | $              | 883,800   |  |                   | $ | 181,029 |                    |  | $ | 148,253            |  |  | $              | 40,012  |  |              | $ | (22,492 | ) |  | $ | 1,230,602 | 
|Segment Adjusted EBITDA Expense (3)                                                        |  |                | 532,549   |  |                   |   | 138,412 |                    |  |   | 124,176            |  |  |                | 30,789  |  |              |   | (22,122 | ) |  |   | 803,804   | 
|Segment Adjusted EBITDA (4)                                                                |  |                | 315,542   |  |                   |   | 41,149  |                    |  |   | 15,552             |  |  |                | 9,192   |  |              |   | (370    | ) |  |   | 381,065   | 
|Total assets                                                                               |  |                | 725,243   |  |                   |   | 86,011  |                    |  |   | 199,443            |  |  |                | 45,999  |  |              |   | (2,429  | ) |  |   | 1,054,267 | 
|Capital expenditures                                                                       |  |                | 228,522   |  |                   |   | 14,895  |                    |  |   | 81,009             |  |  |                | 3,736   |  |              |   |        |   |  |   | 328,162   | 
|                                                                                           |  |               
|Reportable segment results as of and for the year ended December 31, 2008 were as follows: |  |                |           |  |                   |   |         |                    | 
|                                                                                           |  |                |           |  |                   |  
|Total revenues (2)                                                                         |  | $              | 748,369   |  |                   | $ | 207,645 |                    |  | $ | 187,603            |  |  | $              | 23,138  |  |              | $ | (10,614 | ) |  | $ | 1,156,141 | 
|Segment Adjusted EBITDA Expense (3)                                                        |  |                | 522,575   |  |                   |   | 157,575 |                    |  |   | 134,800            |  |  |                | 20,441  |  |              |   | (10,636 | ) |  |   | 824,755   | 
|Segment Adjusted EBITDA (4)                                                                |  |                | 194,410   |  |                   |   | 52,812  |                    |  |   | 39,480             |  |  |                | 7,856   |  |              |   | 22      |   |  |   | 294,580   | 
|Total assets                                                                               |  |                | 543,175   |  |                   |   | 88,745  |                    |  |   | 136,515            |  |  |                | 264,264 |  |              |   | (73     | ) |  |   | 1,032,626 | 
|Capital expenditures (5)                                                                   |  |                | 141,843   |  |                   |   | 11,303  |                    |  |   | 19,986             |  |  |                | 3,350   |  |              |   |        |   |  |   | 176,482   | 



|(1) | The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from Matrix Group and MAC (for 2009 and 2008 only,
see Note 13) to the ARLP Partnerships mining operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Revenues included in the Other and Corporate column are primarily attributable to Matrix Group revenues, Mt. Vernon transloading revenues, MAC rock dust revenues (for
2009 and 2008 only, see Note 13) and brokerage sales (2010 and 2009 only).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Segment Adjusted EBITDA Expense includes operating expenses, outside 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



|                                                                        |  |                         |           |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                        |  | Year Ended December 31, |          
|                                                                        |  | 2010                    |           |   | 2009 |   |         | 2008 | 
|Segment Adjusted EBITDA Expense                                         |  | $                       | 1,026,162 |   |      | $ | 803,804 |      |  | $ | 824,755 |  
|Outside coal purchases                                                  |  |                         | (17,078   | ) |      |   | (7,524  | )    |  |   | (23,776 | )
|Other income                                                            |  |                         | 851       |   |      |   | 1,247   |      |  |   | 875     |  
|                                                                        |  |                         |           |   |      |   |         |      |  |   |         |  
|Operating expenses (excluding depreciation, depletion and amortization) |  | $                       | 1,009,935 |   |      | $ | 797,527 |      |  | $ | 801,854 |  
|                                                                        |  |                         |           |   |      |   |         |      |  |   |         |  



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|(4) | Segment Adjusted EBITDA is defined as net income (prior to the allocation of noncontrolling interest) before income taxes, net interest expense, depreciation, depletion
and amortization, and general and administrative expenses. 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. Consolidated Segment Adjusted EBITDA is reconciled to net income below (in thousands):
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|---------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                         |  | Year Ended December 31, |         
|                                         |  | 2010                    |          |   | 2009 |   |          | 2008 | 
|Consolidated Segment Adjusted EBITDA     |  | $                       | 549,997  |   |      | $ | 381,065  |      |  | $ | 294,580  |  
|General and administrative               |  |                         | (54,215  | ) |      |   | (42,875  | )    |  |   | (38,857  | )
|Depreciation, depletion and amortization |  |                         | (146,881 | ) |      |   | (117,524 | )    |  |   | (105,278 | )
|Interest expense, net                    |  |                         | (29,858  | ) |      |   | (29,781  | )    |  |   | (18,369  | )
|Income tax (expense) benefit             |  |                         | (1,742   | ) |      |   | (709     | )    |  |   | 480      |  
|                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net income                               |  | $                       | 317,301  |   |      | $ | 190,176  |      |  | $ | 132,556  |  
|                                         |  |                         |          |   |      |   |          |      |  |   |          |  



|(5) | Capital expenditures do not include acquisition of coal reserves and other assets in the Illinois Basin of $29.8 million for the year ended December 31, 2008
separately reported in our consolidated statements of cash flows.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|23. | SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
|--- | ---------------------------------------------

A summary of our consolidated quarterly operating results in 2010 and 2009 is as follows (in thousands, except unit and per unit data):



|                                                                 |  |               |            |  |              |   |            |                   |  |   |                      |  |  |   |            | 
|---------------------------------------------------------------- |  | ------------- | ---------- |  | ------------ | - | ---------- | ----------------- |  | - | -------------------- |  |  | - | ---------- | 
|                                                                 |  | Quarter Ended |           
|                                                                 |  | March 31,2010 |            |  | June 30,2010 |   |            | September 30,2010 |  |   | December 31,2010
(1) | 
|Revenues                                                         |  | $             | 380,617    |  |              | $ | 400,249    |                   |  | $ | 410,356              |  |  | $ | 418,521    | 
|Income from operations                                           |  |               | 82,304     |  |              |   | 92,682     |                   |  |   | 79,207               |  |  |   | 93,857     | 
|Net income                                                       |  |               | 74,442     |  |              |   | 85,174     |                   |  |   | 71,086               |  |  |   | 86,599     | 
|Net income of AHGP                                               |  |               | 41,028     |  |              |   | 46,234     |                   |  |   | 39,484               |  |  |   | 47,598     | 
|Basic and diluted net income per limited partner unit            |  | $             | 0.69       |  |              | $ | 0.77       |                   |  | $ | 0.66                 |  |  | $ | 0.80       | 
|Weighted average number of units outstanding  basic and diluted |  |               | 59,863,000 |  |              |   | 59,863,000 |                   |  |   | 59,863,000           |  |  |   | 59,863,000 | 
|                                                                 | 
|                                                                 |  | Quarter Ended |           
|                                                                 |  | March 31,2009 |            |  | June 30,2009 |   |            | September 30,2009 |  |   | December 31,2009
(1) | 
|Revenues                                                         |  | $             | 329,191    |  |              | $ | 303,798    |                   |  | $ | 299,537              |  |  | $ | 298,076    | 
|Income from operations                                           |  |               | 79,698     |  |              |   | 48,250     |                   |  |   | 44,002               |  |  |   | 47,469     | 
|Net income                                                       |  |               | 72,164     |  |              |   | 41,141     |                   |  |   | 35,989               |  |  |   | 40,882     | 
|Net income of AHGP                                               |  |               | 38,826     |  |              |   | 25,709     |                   |  |   | 23,689               |  |  |   | 25,992     | 
|Basic and diluted net income per limited partner unit            |  | $             | 0.65       |  |              | $ | 0.43       |                   |  | $ | 0.40                 |  |  | $ | 0.43       | 
|Weighted average number of units outstanding  basic             |  |               | 59,863,000 |  |              |   | 59,863,000 |                   |  |   | 59,863,000           |  |  |   | 59,863,000 | 



|(1) | The comparability of our December 31, 2010 and 2009 quarterly results were affected by a $13.9 million and $6.4 million decrease in the ARLP Partnerships
workers compensation liability, excluding discount rate changes, due to the completion of its annual actuarial study, which reflected a favorable development in the ARLP Partnerships disability emergence patterns and claims estimates, as
well as improved visibility of Mettiki (WV) claims experience.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|24. | SUBSEQUENT EVENTS
|--- | -----------------

Other
than those events described in Notes 4, 10, 15 and 19, there were no other subsequent events.



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SCHEDULE II

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

VALUATION AND QUALIFYING
ACCOUNTS

YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008



|                                |  |                            |   |  |                           |   |   |            |  |   |                        |  |  |   |   | 
|------------------------------- |  | -------------------------- | - |  | ------------------------- | - | - | ---------- |  | - | ---------------------- |  |  | - | - | 
|                                |  | Balance AtBeginningof Year |   |  | AdditionsCharged toIncome |   |   | Deductions |  |   | Balance AtEnd of 
Year | 
|                                |  | (in thousands)             |  
|2010                            |  |                            |   |  |                           |   |   |            |  |   |                        |  |  |   |   | 
|Allowance for doubtful accounts |  | $                          |  |  |                           | $ |  |            |  | $ |                       |  |  | $ |  | 
|                                |  |                            |   |  |                           |   |   |            |  |   |                        |  |  |   |   | 
|2009                            |  |                            |   |  |                           |   |   |            |  |   |                        |  |  |   |   | 
|Allowance for doubtful accounts |  | $                          |  |  |                           | $ |  |            |  | $ |                       |  |  | $ |  | 
|                                |  |                            |   |  |                           |   |   |            |  |   |                        |  |  |   |   | 
|2008                            |  |                            |   |  |                           |   |   |            |  |   |                        |  |  |   |   | 
|Allowance for doubtful accounts |  | $                          |  |  |                           | $ |  |            |  | $ |                       |  |  | $ |  | 
|                                |  |                            |   |  |                           |   |   |            |  |   |                        |  |  |   |   | 



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | -----------------------------------------------------------------------------------

None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure Controls and Procedures. We maintain controls and procedures designed to ensure that information required to be
disclosed in the reports we file with the 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 disclosures. An evaluation of 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) was performed as of the end of the period covered by the report. This evaluation was performed by our management, with the participation of our Chief Executive Officer and Chief
Financial Officer. Based on this evaluation of our disclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures are
effective.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our
disclosure controls or our internal controls over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the AHGP Partnership have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that simple errors or mistakes can occur. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override
of the control. The design of any system of controls also is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected. We monitor our disclosure controls and internal controls and make modifications as necessary; our intent in this regard is that the disclosure controls and the internal controls will
be maintained as systems change and conditions warrant.



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Managements Annual Report on Internal Control over Financial Reporting.
Management of the AHGP Partnership is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. The AHGP Partnerships internal
control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors of our general partner regarding the preparation and fair presentation of published financial statements. Our controls are designed
to provide reasonable assurance that the AHGP Partnerships assets are protected from unauthorized use and that transactions are executed in accordance with established authorizations and properly recorded. The internal controls are supported
by written policies and are complemented by a staff of competent business process owners and an internal auditor supported by competent and qualified external resources used to assist in testing the operating effectiveness of the AHGP
Partnerships internal control over financial reporting. Management concluded that the design and operations of our internal controls over financial reporting at December 31, 2010 are effective and provide reasonable assurance the books
and records accurately reflect the transactions of the AHGP Partnership.

Because of our inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on our assessment, management concluded
that, as of December 31, 2010, the AHGP Partnerships internal control over financial reporting was effective based on those criteria, and management believes that we have no material internal control weaknesses in our financial reporting
process.

Deloitte & Touche LLP, an independent registered public accounting firm, has made an independent assessment
of the effectiveness of our internal control over financial reporting as of December 31, 2010, as stated in their report which is included herein.

Changes in Internal Controls Over Financial Reporting. There has been no change in our internal controls over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) in the three months
ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of the

General
Partner and the Partners of

Alliance Holdings GP, L.P.:

We have audited the internal control over financial reporting of Alliance Holdings GP, L.P. and subsidiaries (the AHGP Partnership) as of December 31, 2010, based on criteria established
in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The AHGP Partnerships management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the AHGP Partnerships internal control over financial reporting based on our audit.

We conducted our audit in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive
and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override
of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the AHGP Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in
Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have
also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2010 of the AHGP
Partnership and our report dated March 8, 2011 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP

Tulsa, Oklahoma

March 8, 2011



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|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

Federal Mine Safety and Health Act Information

Workplace safety is fundamental to the ARLP Partnerships culture. The ARLP Partnerships operating subsidiaries empower their employees to be actively involved in continuous efforts to prevent
accidents. By providing a work environment that rewards safety and encourages employee participation in the safety process, its mining operations strive to be the leaders in safety performance in its industry.

The ARLP Partnership is also a leader in developing and implementing new technologies to improve safety throughout the industry. For
example, the ARLP Partnerships subsidiary Matrix Design recently announced the development of two innovative technologies designed to improve safety in underground mining operations  a portable, wireless communication and electronic
tracking system designed to allow surface personnel the ability to communicate with and locate underground mining personnel and a proximity detection system designed to improve the safety of continuous mining units used in underground operations.
Matrix Design has completed installation of its communication and tracking system at all of the ARLP Partnerships operating subsidiaries and has either installed or received orders to install this vital safety system at over half of the
operating underground coal mines in the U.S. In addition, Matrix Design has installed and is conducting field tests on sixteen of its proximity detection systems at eight of the ARLP Partnerships operating subsidiaries underground coal
mines.

The ARLP Partnerships industry is focused on improving employee safety and its safety
performance is continuously monitored, including through the mining industry standard of non-fatal days lost, or NFDL, which reflects both the frequency and severity of injuries incurred and, the ARLP Partnership believes, is
a better measure of safety performance than compliance statistics. As indicated in the chart below, these efforts have resulted in significant safety improvements as the industry average NFDL, as reported(a)by the MSHA, has decreased approximately 59% since 1998.

LOGO



|(a) | Data compiled for all U.S. underground bituminous coal mines and related surface facilities from the MSHA report Mine Injury and Worktime, Quarterly Closeout
Edition. Data for 1998 through 2009 reflects the January  December, Final report for each year. Data for 2010 reflects the January  December, Preliminary report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During this same time period, the combined NFDL rating of the ARLP Partnerships operating subsidiaries has averaged approximately
one-third better than the industry average. The average NFDL rating of its operating subsidiaries allowed the ARLP Partnership to achieve in 2010 its best annual NFDL results in its history.



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The ARLP Partnerships mining operations are subject to extensive and stringent
compliance standards established pursuant to the FMSHA, as amended by the MINER Act, (as amended, the Mine Act). MSHA monitors and rigorously enforces compliance with these standards, and its mining operations are inspected frequently.
During the three and twelve months ended December 31, 2010, the ARLP Partnerships mines were subject to 1,535 and 5,778 MSHA inspection days, respectively, with an average of only 0.18 and 0.20 significant and substantial, or
S&S, citations written per inspection day, respectively.

The ARLP Partnership endeavors to comply at all
times with all Mine Act regulations. However, the Mine Act has been construed as authorizing MSHA to issue citations and orders pursuant to the legal doctrine of strict liability, or liability without fault. If, in the opinion of an MSHA inspector,
a condition exists that violates the Mine Act or regulations promulgated thereunder, then a citation or order will be issued regardless of whether the ARLP Partnership had any knowledge of, or fault in, the existence of that condition. Many of the
Mine Act standards include one or more subjective elements, so that issuance of a citation often depends on the opinions or experience of the MSHA inspector involved and the frequency of citations will vary from inspector to inspector.

The number of citations issued also is affected by the size of the mine, in that the number of citations issued generally increases with
the size of the mine. The ARLP Partnerships mines typically are larger in scale than most underground coal mines in the U.S. in terms of area, production and employee hours.

The ARLP Partnership takes all allegations of violations of Mine Act standards seriously, and if it disagrees with the assertions of an
MSHA inspector, the ARLP Partnership exercises its right to challenge those findings by contesting the citation or order pursuant to the procedures established by the Mine Act and its regulations. During 2010, the ARLP Partnerships
operating subsidiaries have contested approximately 25% of all citations and the majority of S&S citations issued by MSHA inspectors. These contest proceedings frequently result in the dismissal or modification of previously issued citations,
substantial reductions in the penalty amounts originally assessed by MSHA, or both.

The DoddFrank Act requires issuers
to include in periodic reports filed with the SEC certain information relating to citations or orders for violations of standards under the Mine Act. Responding to that legislation, the ARLP Partnership reports that, for the three and twelve months
ended December 31, 2010, none of its operating subsidiaries (a) received any violations under section 110(b)(2) of the Mine Act for failure to make reasonable efforts to eliminate a known violation of a mandatory safety or health standard
that substantially proximately caused, or reasonably could have been expected to cause, death or serious bodily injury, (b) received any MSHA written notice under Mine Act section 104(e) of a pattern of violations of mandatory health or safety
standards or the potential to have such a pattern, or (c) had any legal proceedings (i.e. appeals before the Federal Mine Safety and Health Review Commission (the Commission)) pending. The ARLP Partnership has contests of 192 and
931 citations or orders pending before the administrative law judges of the Commission that were initiated during the three and twelve months ended December 31, 2010, respectively, and that involve all types of citations (i.e., not only S&S
citations). The ARLP Partnership had one fatality during the three months ended December 31, 2010 and three fatalities during the twelve months ended December 31, 2010.

The following table sets out additional information required by the DoddFrank Act for the three months ended December 31,
2010. The mine data retrieval system maintained by MSHA may show information that is different than what is provided herein. Any such difference may be attributed to the need to update that information on MSHAs system and /or other factors.



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|                                |  |                             |    |  |                          |  |   |                                       |  |  |                          |  |  |                                              |   |  |  |   |       | 
|------------------------------- |  | --------------------------- | -- |  | ------------------------ |  | - | ------------------------------------- |  |  | ------------------------ |  |  | -------------------------------------------- | - |  |  | - | ----- | 
|Subsidiary Name (1)             |  | Section 104(a)
Citations(2) |    |  | Section 104(b)
Orders(3) |  |   | Section 104(d)
Citations
andOrders(4) |  |  | Section 107(a)
Orders(5) |  |  | Total ProposedAssessments
(in 
thousands)(6) |  
|Illinois Basin Operations       |  |                             |    |  |                          |  |   |                                       |  |  |                          |  |  |                                              |  
|Webster County Coal, LLC (KY)   |  |                             | 61 |  |                          |  |  |                                       |  |  | 1                        |  |  |                                              |  |  |  | $ | 39.0  | 
|Warrior Coal, LLC (KY)          |  |                             | 31 |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 22.8  | 
|Hopkins County Coal, LLC (KY)   |  |                             | 19 |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 12.1  | 
|River View Coal, LLC (KY)       |  |                             | 25 |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 0 .9  | 
|White County Coal, LLC (IL)     |  |                             | 18 |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 2.7   | 
|Gibson County Coal, LLC (IN)    |  |                             | 36 |  |                          |  |  |                                       |  |  | 4                        |  |  |                                              |  |  |  | $ | 64.1  | 
|                                |  |                             |    |  |                         
|Central Appalachian Operations  |  |                             |    |  |                          |  |   |                                       |  |  |                          |  |  |                                              |  
|Pontiki Coal, LLC (KY)          |  |                             | 25 |  |                          |  | 1 |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 60.9  | 
|MC Mining, LLC (KY)             |  |                             | 43 |  |                          |  | 1 |                                       |  |  | 2                        |  |  |                                              | 2 |  |  | $ | 174.7 | 
|                                |  |                             |    |  |                         
|Northern Appalachian Operations |  |                             |    |  |                          |  |   |                                       |  |  |                          |  |  |                                              |  
|Mettiki Coal, LLC (MD)          |  |                             |   |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ |      | 
|Mettiki Coal (WV), LLC          |  |                             | 9  |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 6.4   | 
|Tunnel Ridge, LLC (PA/WV)       |  |                             | 8  |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 0.7   | 

The following table
sets out additional information required by the DoddFrank Act for the twelve months ended December 31, 2010:



|                                |  |                             |     |  |                          |  |   |                                       |  |  |                          |  |  |                                              |   |  |  |   |       | 
|------------------------------- |  | --------------------------- | --- |  | ------------------------ |  | - | ------------------------------------- |  |  | ------------------------ |  |  | -------------------------------------------- | - |  |  | - | ----- | 
|Subsidiary Name (1)             |  | Section 104(a)
Citations(2) |     |  | Section 104(b)
Orders(3) |  |   | Section 104(d)
Citations
andOrders(4) |  |  | Section 107(a)
Orders(5) |  |  | Total ProposedAssessments
(in 
thousands)(6) |  
|Illinois Basin Operations       |  |                             |     |  |                          |  |   |                                       |  |  |                          |  |  |                                              |  
|Webster County Coal, LLC (KY)   |  |                             | 227 |  |                          |  |  |                                       |  |  | 5                        |  |  |                                              |  |  |  | $ | 549.4 | 
|Warrior Coal, LLC (KY)          |  |                             | 138 |  |                          |  |  |                                       |  |  | 1                        |  |  |                                              |  |  |  | $ | 197.5 | 
|Hopkins County Coal, LLC (KY)   |  |                             | 81  |  |                          |  | 1 |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 93.8  | 
|River View Coal, LLC (KY)       |  |                             | 112 |  |                          |  |  |                                       |  |  | 1                        |  |  |                                              | 1 |  |  | $ | 64.2  | 
|White County Coal, LLC (IL)     |  |                             | 120 |  |                          |  |  |                                       |  |  | 4                        |  |  |                                              |  |  |  | $ | 252.5 | 
|Gibson County Coal, LLC (IN)    |  |                             | 98  |  |                          |  |  |                                       |  |  | 5                        |  |  |                                              |  |  |  | $ | 224.9 | 
|                                |  |                             |     |  |                         
|Central Appalachian Operations  |  |                             |     |  |                          |  |   |                                       |  |  |                          |  |  |                                              |  
|Pontiki Coal, LLC (KY)          |  |                             | 127 |  |                          |  | 1 |                                       |  |  | 1                        |  |  |                                              |  |  |  | $ | 401.5 | 
|MC Mining, LLC (KY)             |  |                             | 148 |  |                          |  | 3 |                                       |  |  | 2                        |  |  |                                              | 3 |  |  | $ | 386.1 | 
|                                |  |                             |     |  |                         
|Northern Appalachian Operations |  |                             |     |  |                          |  |   |                                       |  |  |                          |  |  |                                              |  
|Mettiki Coal, LLC (MD)          |  |                             | 10  |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 5.2   | 
|Mettiki Coal (WV), LLC          |  |                             | 46  |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 41.1  | 
|Tunnel Ridge, LLC (PA/WV)       |  |                             | 19  |  |                          |  |  |                                       |  |  |                         |  |  |                                              |  |  |  | $ | 2.7   | 



|(1) | The statistics reported for each of the ARLP Partnerships subsidiaries listed above include all components of the mining complex involved and therefore may
involve multiple MSHA identification numbers. Any S&S citations or orders issued to its subsidiary, Excel, are included in the statistics for either Pontiki Coal or MC Mining, depending on the mining complex involved.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Mine Act section 104(a) citations shown above are for alleged violations of health or safety standards that could significantly and substantially contribute to a
serious injury.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Mine Act section 104(b) orders are for alleged failures to totally abate a citation within the period of time specified in the citation.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(4) | Mine Act section 104(d) citations and orders are for an alleged unwarrantable failure (i.e. aggravated conduct constituting more than ordinary negligence) to comply
with a mining safety standard or regulation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(5) | Mine Act section 107(a) orders are for alleged conditions or practices which could reasonably be expected to cause death or serious physical harm before such condition
or practice can be abated and result in orders of immediate withdrawal from the area of the mine affected by the condition.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Amounts shown include assessments proposed by MSHA during the three months and twelve months ended December 31, 2010 on the citations and orders reflected in this
chart.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART III



|Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE GENERAL PARTNER
|-------- | -----------------------------------------------------------------------------

As is commonly the case with publicly-traded limited partnerships, we are managed and operated by our general partner. The following
table shows information for current executive officers and members of the Board of Directors of our general partner. Executive officers and directors are elected until death, resignation, retirement, disqualification, or removal.



|                        |  |     |    |  |                                     |                                                             
|----------------------- |  | --- | -- |  | ----------------------------------- | ------------------------------------------------------------
|Name                    |  | Age |    |  | Position With Our General Partner 1
|Joseph W. Craft III     |  |     | 60 |  |                                     | Chairman of the Board, President and Chief Executive Officer
|Brian L. Cantrell       |  |     | 51 |  |                                     | Senior Vice President and Chief Financial Officer           
|R. Eberley Davis        |  |     | 54 |  |                                     | Senior Vice President, General Counsel and Secretary        
|Robert G. Sachse        |  |     | 62 |  |                                     | Executive Vice PresidentMarketing                          
|Charles R. Wesley       |  |     | 56 |  |                                     | Executive Vice President                                    
|Thomas M. Wynne         |  |     | 54 |  |                                     | Senior Vice President and Chief Operating Officer           
|Thomas M. Davidson, Sr. |  |     | 74 |  |                                     | Director and Member of Audit and Conflicts* Committees      
|Robert J. Druten        |  |     | 63 |  |                                     | Director and Member of Audit and Conflicts Committees       
|Michael J. Hall         |  |     | 66 |  |                                     | Director and Member of Audit* Committee                     



|* | Indicates Chairman of Committee
|- | -------------------------------



|1 | Messrs. Sachse, Wesley and Wynne are officers of subsidiaries of our general partner as noted in their biographies below.
|- | -------------------------------------------------------------------------------------------------------------------------

Joseph W. Craft III has been Chairman of the Board, President and Chief Executive Officer since November 2005.
Mr. Craft has majority ownership of MGP, ARLPs managing general partner, and owns indirectly ARLPs special general partner and our general partner. Mr. Craft has served as President, Chief Executive Officer and a Director of
MGP since 1999. Previously Mr. Craft served as President of MAPCO Coal Inc. since 1986. During that period, he also was Senior Vice President of MAPCO Inc. and had previously been that companys General Counsel and Chief Financial Officer.
He is a former Chairman of the National Coal Council, a Board and Executive Committee Member and Chairman of the Safety, Health and Human Resources Committee of the National Mining Association, a Director of American Coalition for Clean Coal
Electricity, a Director of BOK Financial Corporation (NASDAQ: BOKF) since April of 2007, a member of the Board of Trustees for the University of Tulsa and a Director of the Tulsa Community Foundation. Mr. Craft holds a Bachelor of Science
degree in Accounting and a Juris Doctorate degree from the University of Kentucky. Mr. Craft also is a graduate of the Senior Executive Program of the Alfred P. Sloan School of Management at Massachusetts Institute of Technology. The specific
experience, qualifications, attributes or skills that led to the conclusion Mr. Craft should serve as a Director include his long history of significant involvement in the coal industry, his demonstrated business acumen and his exceptional
leadership of the Partnership since its inception.

Brian L. Cantrellhas been Senior Vice President and Chief
Financial Officer since November 2005. Mr. Cantrell also has served as Senior Vice President and Chief Financial Officer of MGP, the general partner of ARLP, since October 2003. Prior to his current position, Mr. Cantrell was President of
AFN Communications, LLC from November 2001 to October 2003 where he had previously served as Executive Vice President and Chief Financial Officer after joining AFN in September 2000. Mr. Cantrells previous positions include Chief
Financial Officer, Treasurer and Director with Brighton Energy, LLC from August 1997 to September 2000; Vice President  Finance of KCS Medallion Resources, Inc.; and Vice PresidentFinance, Secretary and Treasurer of Intercoast Oil and
Gas Company. Mr. Cantrell is a Certified Public Accountant and holds a Masters of Accountancy and Bachelor of Accountancy from the University of Oklahoma.



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R. Eberley Davis has been Senior Vice President, General Counsel and Secretary since
February 2007. Mr. Davis also serves as Senior Vice President, General Counsel and Secretary of MGP, the managing general partner of ARLP. Mr. Davis has over 25 years experience in the coal and energy industries. From 2003 to February
2007, Mr. Davis practiced law in the Lexington, Kentucky office of Stoll Keenon Ogden PLLC. Prior to joining Stoll Keenon Ogden, Mr. Davis was Vice President, General Counsel and Secretary of Massey Energy Company for one year.
Mr. Davis also served in various positions, including Vice President and General Counsel, for Lodestar Energy, Inc. from 1993 to 2002. Mr. Davis is an alumnus of the University of Kentucky, where he received a Bachelor of Arts degree in
Economics and his Juris Doctorate degree. He also holds a Masters of Business Administration degree from the University of Kentucky. Mr. Davis is a Trustee of the Energy and Mineral Law Foundation, and a member of the American, Kentucky and
Fayette County Bar Associations.

Robert G. Sachse has been Executive Vice President of MGP since August 2000.
Effective November 1, 2006, Mr. Sachse assumed responsibility for our coal marketing, sales and transportation functions. Mr. Sachse was also Vice Chairman of ARLPs managing general partner from August 2000 to January 2007.
Mr. Sachse was Executive Vice President and Chief Operating Officer of MAPCO Inc. from 1996 to 1998 when MAPCO merged with The Williams Companies. Following the merger, Mr. Sachse had a two year non-compete consulting agreement with The
Williams Companies. Mr. Sachse held various positions while with MAPCO Coal Inc. from 1982 to 1991, and was promoted to President of MAPCO Natural Gas Liquids in 1992. Mr. Sachse holds a Bachelor of Science degree in Business
Administration from Trinity University and a Juris Doctorate degree from the University of Tulsa.

Charles R. Wesleybecame a Director of MGP in January 2009 and has been Executive Vice President of MGP since March 2009. Mr. Wesley has served in a variety of capacities since joining the company in 1974, including as Senior Vice PresidentOperations
from August 1996 through February 2009. Mr. Wesley is a former Chairman of the Board of Directors of the Kentucky Coal Association and also has served the industry as past President of the West Kentucky Mining Institute and National Mine Rescue
Association Post 11, and as a director of the Kentucky Mining Institute. Mr. Wesley holds a Bachelor of Science degree in Mining Engineering from the University of Kentucky.The specific experience, qualifications, attributes or skills
that led to the conclusion Mr. Wesley should serve as a Director of MGP include his long history of significant involvement in the coal industry, his successful leadership of the Partnerships operations, and his knowledge and technical
expertise in all aspects of producing and marketing coal.

Thomas M. Wynnehas been Senior Vice President and Chief
Operating Officer of MGP since March 2009. Mr. Wynne joined the company in 1981 as a mining engineer and has held a variety of positions with the Partnership prior to his appointment in July 1998 as Vice PresidentOperations.
Mr. Wynne has served the coal industry on the National Executive Committee for National Mine Rescue and previously as a member of the Coal Safety Committee for the National Mining Association. Mr. Wynne holds a Bachelor of Science degree
in Mining Engineering from the University of Pittsburgh and a Masters of Business Administration degree from West Virginia University.

Thomas M. Davidson, Sr.became a Director in March 2006. In 1999, Mr. Davidson founded Davidson Capital Group, a niche investment bank headquartered in the Washington, D.C. area and engaged
primarily in assisting enterprises in merger and acquisition, financing, and other growth initiatives. Mr. Davidson is the President and Senior Managing Director of Davidson Capital Group and has served in such capacity since 1999. From 1986 to
1989, Mr. Davidson was Senior Vice President and General Counsel of The Peter Kiewit Companies, a coal mining and construction company headquartered in Omaha, Nebraska. From 1982 to 1985, Mr. Davidson was a senior law partner in the
corporate group in Akin, Gump, Strauss, Hauer and Feld in Washington, D.C. From 1977 to 1982, Mr. Davidson was Senior Vice President and General Counsel of MAPCO Inc., a diversified oil and gas and coal company headquartered in Tulsa, Oklahoma,
and a former parent of ARLPs predecessors. From 1974 to 1977, Mr. Davidson was Senior Vice President and General Counsel of Mesa Petroleum Corporation, an oil and gas exploration company headquartered in Amarillo, Texas. Mr. Davidson
holds a Bachelor degree in Political Science from Williams College and a Juris Doctorate degree from Duke University. Mr. Davidson is Chairman of the Conflicts Committee and a member of the Audit Committee. The specific experience,
qualifications, attributes or skills that led to the conclusion Mr. Davidson should serve as Director include his significant experience with both the legal and investment banking aspects of corporate financing and acquisition transactions and
his previous service in a management role in the coal mining industry.

Robert J. Druten became a Director in January
2007. From September 1994 until his retirement in August 2006, Mr. Druten served as Executive Vice President and Chief Financial Officer of Hallmark Cards, Inc. Mr. Druten holds a Bachelor of Science degree in Accounting from Kansas
University as well as a Masters of Business Administration from Rockhurst University. Mr. Druten currently serves as a member of the Board of Directors of Kansas City Southern Industries, Inc. (NYSE: KSU), a transportation and financial
services company, and is Chairman of its audit and finance committees. Mr. Druten is also a Trustee and Chairman of the Board of Entertainment Properties Trust (NYSE: EPR), a



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real estate investment trust focused on the acquisition of movie theatre complexes and other entertainment related properties, and is a member of its compensation, finance and governance
committees. Mr. Druten is a member of the Audit and Conflicts Committees. The specific experience, qualifications, attributes or skills that led to the conclusion Mr. Druten should serve as Director are demonstrated by his lengthy and
distinguished service as Chief Financial Officer of Hallmark, including direct oversight of a public company subsidiary, and his extensive experience serving as a director of public companies in multiple industries.

Michael J. Hall became a Director in March 2006. Mr. Hall is Chairman of the Board of Directors of Matrix Service Company
(Matrix) (NASDAQ: MTRX). Previously, Mr. Hall served as President and Chief Executive Officer of Matrix from March 2005 until he retired in November 2006. Mr. Hall also served as Vice PresidentFinance and Chief Financial
Officer, Secretary and Treasurer of Matrix from September 1998 to May 2004. Mr. Hall became a Director of Matrix in October 1998, and was elected Chairman of its Board in November 2006. Matrix is a company which provides general industrial
construction and repair and maintenance services principally to the petroleum, petrochemical, power, bulk storage terminal, pipeline and industrial gas industries. Prior to working for Matrix, Mr. Hall was Vice President and Chief Financial
Officer of Pexco Holdings, Inc., Vice PresidentFinance and Chief Financial Officer for Worldwide Sports & Recreation, Inc., an affiliated company of Pexco, and worked for T.D. Williamson, Inc., as Senior Vice President, Chief
Financial and Administrative Officer, and Director of OperationsEurope, Africa and Middle East Region. Mr. Hall was a member and Chairman of the Board of Directors of Integrated Electrical Services, Inc. (NASDAQ: IESC) and served in that
capacity from May 2006 to February 2011, and was a member of its audit, compensation and nominating/governance committees. Mr. Hall served as Chairman of the Board of Directors of American Performance Funds, was a member of its audit and
nominating committees and served as independent trustee from July 1990 to May 2008. Mr. Hall holds a Bachelor of Science degree in Accounting from Boston College and a Masters of Business Administration from Stanford University. Mr. Hall
is Chairman of the Audit Committee. Since March 2003, Mr. Hall has also been a Director of MGP, the managing general partner of ARLP. He is currently Chairman of MGPs Audit Committee and a member of the Compensation Committee. The
specific experience, qualifications, attributes or skills that led to the conclusion Mr. Hall should serve as a Director include his long history of service in senior corporate leadership positions, his significant knowledge of the energy
industry, and his extensive expertise and experience in financial reporting matters gained from his service as Chief Financial Officer of public companies.

Board of Directors

The leadership structure of our Board of Directors has
been consistent since the Partnerships inception. Mr. Craft, our President and Chief Executive Officer, is also the Chairman of our Board of Directors. We believe this structure is appropriate given Mr. Crafts significant
ownership position in and proven leadership of the Partnership.

Our Board of Directors generally administers its risk
oversight function through the board as a whole. Our President and Chief Executive Officer, who reports to the Board of Directors, and the other executives named above, who report to our President and Chief Executive Officer, have day-to-day risk
management responsibilities. At the request of the Board of Directors, each of these executives attends the meetings of our Board of Directors, where the Board of Directors routinely receives reports on our financial results and other aspects of
implementation of our business strategy, with ample opportunity for specific inquiries of management. Our Directors also regularly attend the meetings of the MGP Board of Directors where similar reports regarding the ARLP Partnership, as well as
reports regarding the status of the ARLP Partnership operations and safety performance, are made. In addition, management provides a monthly report of the Partnerships financial and operational performance to each member of the Board of
Directors, which often prompts questions or feedback from the Board of Directors. The Audit Committee provides additional risk oversight through its quarterly meetings, where it receives a report from the Partnerships internal auditor, who
reports directly to the Audit Committee, and reviews the Partnerships contingencies, significant transactions and subsequent events, among other matters, with management and our independent auditors. In addition, meetings of the Audit
Committee typically are held concurrently with meetings of the MGP Audit Committee.

The Board of Directors has selected as
director nominees individuals with experience, skills and qualifications relevant to the business of the Partnership, such as experience in energy or related industries or with financial markets, expertise in mining, engineering or finance, and a
history of service in senior leadership positions. The Board of Directors has not established a formal process for identifying director nominees, nor does it have a formal policy regarding consideration of diversity in identifying director nominees,
but has endeavored to assemble a diverse group of individuals with the qualities and attributes required to provide effective oversight of the Partnership.



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Audit Committee

The Audit Committee comprises three non-employee members of the Board of Directors (currently, Mr. Hall, Mr. Davidson and Mr. Druten). After reviewing the qualifications of the current
members of the Audit Committee, and any relationships they may have with us that might affect their independence, the Board of Directors has determined that all current Audit Committee members are independent as that concept is defined
in Section 10A of the Exchange Act, all current Audit Committee members are independent as that concept is defined in the applicable rules of NASDAQ Stock Market, LLC, all current Audit Committee members are financially literate,
and Mr. Hall qualifies as an audit committee financial expert under the applicable rules promulgated pursuant to the Exchange Act.

Report of the Audit Committee

The Audit Committee of AGP oversees our
financial reporting process on behalf of the Board of Directors. Management has primary responsibility for the financial statements and the reporting process including the systems of internal controls. The Audit Committee has responsibility for the
appointment, compensation and oversight of the work of our independent registered public accounting firm and assists the Board of Directors by conducting its own review of our:



| |  |  | filings with the SEC pursuant to the Securities Act and the Exchange Act (i.e., Forms 10-K, 10-Q, and 8-K);
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | press releases and other communications by us to the public concerning earnings, financial condition and results of operations, including changes in
distribution policies or practices affecting the holders of our units, if such review is not undertaken by the Board of Directors;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | systems of internal controls regarding finance and accounting that management and the Board of Directors have established; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | auditing, accounting and financial reporting processes generally.
| | - |  | -----------------------------------------------------------------

In fulfilling its oversight and other responsibilities, the Audit Committee met nine times during 2010. The Audit Committees
activities included, but were not limited to, (a) selecting the independent registered public accounting firm, (b) meeting periodically in executive session with the independent registered public accounting firm, (c) reviewing the
Quarterly Reports on Form 10-Q for the three months ended March 31, June 30, and September 30, 2010, (d) performing a self-assessment of the committee, (e) reviewing the Audit Committee charter, and (f) reviewing
the overall scope, plans and findings of our internal auditor. Based on the results of the annual self-assessment, the Audit Committee believes that it satisfied the requirements of its charter. The Audit Committee also reviewed and discussed with
management and the independent registered public accounting firm this Annual Report on Form 10-K, including the audited financial statements.

Our independent registered public accounting firm, Deloitte & Touche LLP, is responsible for expressing an opinion on the conformity of the audited financial statements with generally accepted
accounting principles. The Audit Committee reviewed with Deloitte & Touche LLP its judgment as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit
Committee under generally accepted auditing standards.

The Audit Committee discussed with Deloitte & Touche LLP the
matters required to be discussed by the Statement of Auditing Standards (SAS) 114, The Auditors Communication with Those Charged with Governance, as may be modified or supplemented. The Audit Committee received written
disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communication with the audit committee regarding
independence, and has discussed with Deloitte & Touche LLP its independence from management and the ARLP Partnership.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2010 for filing with the SEC.



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Members of the Audit Committee:

Michael J. Hall, Chairman

Thomas M. Davidson, Sr.

Robert J. Druten

Code of Ethics

We have
adopted a code of ethics with which our President and Chief Executive Officer and our senior financial officers (including our principal financial officer and our principal accounting officer or controller) are expected to comply. The code of ethics
is publicly available on our website under Investor Information at www.ahgp.com and is available in print without charge to any unitholder who requests it. Such requests should be directed to Investor Relations at
(918) 295-1415. If any substantive amendments are made to the code of ethics or if there is a grant of a waiver, including any implicit waiver, from a provision of the code to our President and Chief Executive Officer, chief financial officer,
chief accounting officer or controller, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K.

Communications with the Board

Unitholders or other interested parties can contact any director or committee of the Board of Directors by writing to them c/o Senior Vice President, General Counsel and Secretary, P. O. Box 22027, Tulsa,
Oklahoma 74121-2027. Comments or complaints relating to our accounting, internal accounting controls or auditing matters will also be referred to members of the Audit Committee. The Audit Committee has procedures for (a) receipt, retention and
treatment of complaints received by us regarding accounting, internal accounting controls, or auditing matters and (b) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act, as amended, requires directors, executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file
with the SEC initial reports of ownership and reports or changes in ownership of such equity securities. Such persons are also required to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of the
forms furnished to us and written representations from certain reporting persons, we believe that during 2010 none of our officers and directors were delinquent with respect to any of the filing requirements under Rule 16(a).



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

Compensation
Discussion and Analysis

Introduction

The executive officers named in our Summary Compensation Table(i) the President and Chief Executive Officer of our general partner,
our principal executive officer, (ii) the Senior Vice President and Chief Financial Officer of our general partner, our principal financial officer, and (iii) our three most highly compensated executive officers for 2010 (collectively, the
Named Executive Officers)are also executive officers of MGP, ARLPs managing general partner, of which we own 100% of the members interest. Our Named Executive Officers are also named in the Summary Compensation Table in
Item 11 of the 2010 Form 10-K for ARLP. The compensation of our Named Executive Officers described below is their compensation as executive officers of MGP. We do not provide our Named Executive Officers any additional compensation.

Our Named Executive Officers spend the majority of their time managing the business of the ARLP Partnership, and the ARLP Partnership is
responsible for the majority of their compensation. Therefore, our Board of Directors has delegated responsibility for decisions related to our Named Executive Officers compensation to the MGP Compensation Committee. Accordingly, this
Compensation Discussion and Analysis primarily addresses the ARLP Partnerships compensation program as it relates to our Named Executive Officers.

We reimburse the ARLP Partnership for a portion of the compensation expense for certain of our Named Executive Officers pursuant to the Administrative Services Agreement. Based on the estimated time spent
managing our affairs,



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the Board of Directors agreed that 5%, 4% and 8%, respectively, of the 2010 base salaries of Mr. Craft, the President and Chief Executive Officer of our general partner,
Mr. Cantrell, the Senior Vice President and Chief Financial Officer of our general partner, and Mr. Davis, the Senior Vice President, General Counsel and Secretary of our general partner, would be allocated to us. None of the 2010 base
salaries of Messrs. Sachse and Wynne were allocated to us. In addition, for 2010 we paid the ARLP Partnership a stipulated benefit burden equal to 40% of allocated base salary. We believe this percentage allocation is a reasonable estimation of the
ARLP Partnerships overall cost of cash compensation (i.e. compensation other than equity-based compensation) in excess of base salary, including, among other things, benefits, bonus and taxes. The Board of Directors reviews these allocations
annually to determine whether they are appropriate. Please see Item 13. Certain Relationships and Related Transactions, and Director IndependenceAdministrative Services.

The ARLP Partnerships Compensation Objectives and Philosophy

The compensation of our Named Executive Officers is designed to achieve two key objectives: (i) provide a competitive compensation
opportunity to allow the ARLP Partnership to recruit and retain key management talent, and (ii) motivate and reward the executive officers for creating sustainable, capital-efficient growth in available cash to maximize the ARLP
Partnerships distributions to its unitholders. In making decisions regarding executive compensation, the MGP Compensation Committee reviews current compensation levels of other companies in the coal industry and other peers, considers the
assessment of each of the other executives by MGPs President and Chief Executive Officer, and uses its discretion to determine an appropriate total compensation package of base salary and short-term and long-term incentives. The MGP
Compensation Committee intends for each executive officers total compensation to be competitive in the market place and to effectively motivate the individual. Based upon its review of the ARLP Partnerships overall executive compensation
program, the Board of Directors believes the program is appropriately applied to our Named Executive Officers and is necessary to attract and retain the executive officers who are essential to our continued development and success, to compensate
those executive officers for their contributions and to enhance unitholder value. Moreover, the Board of Directors believes the total compensation opportunities provided to our Named Executive Officers create alignment with our long-term interests
and those of our unitholders. As a result, we do not maintain unit ownership requirements for our Named Executive Officers.

Setting Executive Compensation

Role of the MGP Compensation Committee

The MGP Compensation Committee
discharges the MGP Board of Directors responsibilities relating to the ARLP Partnerships executive compensation program. The MGP Compensation Committee oversees the ARLP Partnerships compensation and benefit plans and policies,
administers its incentive bonus and equity participation plans, and reviews and approves annually all compensation decisions relating to its Named Executive Officers. The MGP Compensation Committee is empowered by the MGP Board of Directors and by
the MGP Compensation Committees charter to make all decisions regarding compensation for the Named Executive Officers without ratification or other action by the MGP Board of Directors. The MGP Compensation Committee has the authority to
secure services for executive compensation matters, legal advice, or other expert services, both from within and outside the company. While the MGP Compensation Committee is empowered to delegate all or a portion of its duties to a subcommittee, it
has not done so.

The MGP Compensation Committee is composed of all of directors of MGP who have been determined to be
independent by the MGP Board of Directors in accordance with applicable NASDAQ Stock Market, LLC and SEC regulations.

Role of Executive Officers

Each year, the President and Chief Executive
Officer of MGP submits recommendations to the MGP Compensation Committee for adjustments to the salary, bonuses and long-term equity incentive awards payable to the Named Executive Officers, excluding himself. The President and Chief Executive
Officer bases his recommendations on his assessment each of the executives performance, experience, demonstrated leadership, job knowledge and management skills. The MGP Compensation Committee considers the recommendations of the President and
Chief Executive Officer of MGP as one factor in making compensation decisions regarding the Named Executive Officers. Historically, and in 2010, the MGP Compensation Committee and the President and Chief Executive Officer have been substantially
aligned on decisions regarding compensation of the Named Executive Officers. As executive officers are promoted or hired during the year, the President and Chief Executive Officer makes compensation recommendations to the MGP Compensation Committee
and works closely with the MGP Compensation Committee to ensure that all compensation arrangements for



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executive officers are consistent with our compensation philosophy and are approved by the MGP Compensation Committee. At the direction of the MGP Compensation Committee, the President and Chief
Executive Officer and the Senior Vice President, General Counsel and Secretary of MGP attend certain meetings and work sessions of the MGP Compensation Committee.

Role of Compensation Consultants

The MGP Compensation Committee engaged
Mercer (US) Inc. (Mercer) as an outside compensation consultant to assist it in collecting and analyzing peer group compensation information and in assessing the competitiveness of the ARLP Partnerships compensation program in
2010. Mercer took instructions from and reported to the Chairman of the MGP Compensation Committee. Mercer reviewed published survey data and peer group proxy information, and provided a comparative analysis of competitive practices regarding base
salaries, short-term incentives, total cash compensation, long-term incentives and total direct compensation.

Mercer analyzed
survey sources published by Mercer and Watson Wyatt to collect compensation data for companies of similar size based on annual revenue. Mercers peer group proxy analysis included Peabody Energy Corp, CONSOL Energy Inc., Arch Coal, Inc., Massey
Energy Company, Alpha Natural Resources Inc., Foundation Coal Holdings Inc., Patriot Coal Corp., International Coal Group Inc., James River Coal Company and Westmoreland Coal Company. This peer group was selected by Mercer and approved by the MGP
Compensation Committee. Mercer did not provide any non-executive compensation services for ARLP during 2010.

Use of Peer
Group Comparisons and Survey Data

The MGP Compensation Committee believes that it is important to review and compare the
ARLP Partnerships performance with that of peer companies in the coal industry, and reviews the composition of the peer group annually. In setting executive compensation in 2010, the MGP Compensation Committee reviewed the compensation
information compiled by Mercer. The MGP Compensation Committee uses the peer group and survey data as a point of reference for comparative purposes, but it is not the determinative factor for the compensation of our Named Executive Officers. The MGP
Compensation Committee exercises discretion in determining the nature and extent of the use of comparative pay data.

Consideration of Equity Ownership

Mr. Craft, the President and Chief Executive Officer, is evaluated and treated differently with respect to compensation than our other Named Executive Officers. Mr. Craft and his related
entities own significant equity positions in us, and therefore the interests of Mr. Craft are directly aligned with those of our unitholders. Mr. Craft has not received an increase in base salary since 2002 and has not received a bonus
under the short-term incentive plan (STIP) or any grants of ARLP LTIP awards since 2005.

Compensation
Components

Overview

The principal components of compensation for our Named Executive Officers include:



| |  |  | base salary;
| | - |  | ------------



| |  |  | annual cash incentive bonus awards under the STIP; and
| | - |  | ------------------------------------------------------



| |  |  | awards of restricted units under the ARLP LTIP.
| | - |  | -----------------------------------------------

The relative amount of each component is not based on any formula, but rather is based on the recommendation of the President and Chief Executive Officer of MGP, subject to the discretion of the MGP
Compensation Committee to make any modifications it deems appropriate.

Each of our Named Executive Officers also receives
supplemental retirement benefits through the Supplemental Executive Retirement Plan (SERP). In addition, all of our executive officers are entitled to customary benefits available to our employees generally, including group medical,
dental, and life insurance and participation in our profit sharing and savings plan (PSSP). The ARLP Partnerships PSSP is a defined contribution plan and includes an



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employer matching contribution of 75% on the first 3% of eligible compensation (as defined by the IRS) contributed by the employee, an employer non-matching contribution of 0.75% of eligible
compensation, and an employer supplemental contribution of 5% of eligible compensation.

Base Salary

When reviewing base salaries, the MGP Compensation Committees policy is to consider the individuals experience, tenure and
performance, the individuals level of responsibility, the positions complexity and its importance to the ARLP Partnership in relation to other executive positions, the ARLP Partnerships financial performance, and competitive pay
practices. The MGP Compensation Committee also considers comparative compensation data of companies in the ARLP Partnerships peer group and the recommendation of the President and Chief Executive Officer of MGP. Base salaries are reviewed
annually to ensure continuing consistency with market levels, and adjustments to base salaries are made as needed to reflect movement in the competitive market as well as individual performance.

Annual Cash Incentive Bonus Awards

The STIP is designed to assist the ARLP Partnership in attracting, retaining and motivating qualified personnel by rewarding management, including its Named Executive Officers, and selected other salaried
employees with cash awards for the ARLP Partnership achievement of an annual financial performance target. The annual performance target is recommended by the President and Chief Executive Officer of MGP and approved by the MGP Compensation
Committee, typically in January of each year. The performance measure is subject to equitable adjustment in the sole discretion of the MGP Compensation Committee to reflect the occurrence of any significant events during the year.

The performance target historically has been EBITDA-derived, with items added or removed from the EBITDA calculation to ensure that the
performance target reflects the pure operating results of the core mining business. (EBITDA for the ARLP Partnership is defined as net income of ARLP before net interest expense, income taxes, depreciation, depletion and amortization and net income
attributable to noncontrolling interest.) The aggregate cash available for awards under the STIP each year is dependent on the ARLP Partnerships actual financial results for the year compared to the annual performance target, and it increases
in relationship to the ARLP Partnerships EBITDA, as adjusted, exceeding the minimum threshold. The MGP Compensation Committee may determine satisfactory results and adjust the size of the pay-out pool in its sole discretion. In 2010, the MGP
Compensation Committee approved a minimum financial performance target of $360.6 million in EBITDA from the ARLP Partnerships current operations, normalized by excluding any charges for unit-based compensation expense and affiliate
contributions, if any, and the ARLP Partnership exceeded the minimum target.

Awards to its Named Executive Officers each year
are determined by and in the discretion of the MGP Compensation Committee. As it does when reviewing base salaries, in determining individual awards under the STIP the MGP Compensation Committee considers its assessment of the individuals
performance, comparative compensation data of companies in our peer group and the recommendation of the President and Chief Executive Officer of MGP. The compensation expense associated with STIP awards is recognized by the ARLP Partnership in the
year earned, with the cash awards payable in the first quarter of the following calendar year. Termination of employment of an executive officer for any reason prior to payment of a cash award will result in forfeiture of any right to the award,
unless and to the extent waived by the MGP Compensation Committee in its discretion.

The performance measure for the STIP in
2011 will be EBITDA for current operations, excluding charges for unit-based compensation and affiliate contributions, if any. As discussed above, the MGP Compensation Committee may, in its discretion, make equitable adjustments to the performance
criteria under the STIP and adjust the amount of the aggregate pay-out. The MGP Compensation Committee believes that the STIP performance criteria for 2011 will be reasonably difficult to achieve and therefore support the key compensation objectives
discussed above.

Equity Awards under the ARLP LTIP

Equity compensation pursuant to the ARLP LTIP is a key component of the ARLP Partnerships executive compensation program. The ARLP
LTIP is sponsored by Alliance Coal. Under the ARLP LTIP, grants may be made of either (a) restricted ARLP units or (b) options to purchase ARLP common units, although to date, no grants of options have been made. The MGP Compensation
Committee has authority to determine the participants to whom restricted units are granted, the number of restricted units to be granted to each such participant, and the conditions under which the restricted units may become vested, including the
duration of any vesting period. Annual grant levels for designated participants (including the Named Executive Officers) are recommended by MGPs President and Chief Executive Officer, subject to review and approval by the MGP Compensation
Committee. Grant levels are intended to support the objectives of the



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comprehensive compensation package described above. The ARLP LTIP grants provide the Named Executive Officers with the opportunity to achieve a meaningful ownership stake in the ARLP Partnership,
thereby assuring that their interests are aligned with its success. However, as noted above, because Mr. Crafts interests are directly aligned with the interests of ARLPs unitholders as a result of his ownership positions,
Mr. Craft has not been granted any awards under the ARLP LTIP since 2005. There is no formula for determining the size of awards to any individual recipient and, as it does when reviewing base salaries and individual STIP payments, the MGP
Compensation Committee considers its assessment of the individuals performance, compensation levels at peer companies in the coal industry and the recommendation of the President and Chief Executive Officer. Amounts realized from prior grants,
including amounts realized due to changes in the value of ARLPs common units, are not considered in setting grant levels or other compensation for its Named Executive Officers.

Restricted Units.Restricted units granted under the ARLP LTIP are phantom or notional units that upon vesting entitle
the participant to receive an ARLP common unit. Restricted units granted under the ARLP LTIP vest at the end of a stated period from the grant date (which is currently approximately three years for all outstanding restricted units), provided the
ARLP Partnership achieves an aggregate performance target for that period. However, if a grantees employment is terminated for any reason prior to the vesting of any restricted units, those restricted units will be automatically forfeited,
unless the MGP Compensation Committee, in its sole discretion, determines otherwise. The number of units actually distributed upon satisfaction of the applicable vesting requirements is reduced to cover the minimum statutory income tax withholding
requirement for each individual participant based upon the fair market value of the common units as of the date of distribution. Pursuant to the distribution equivalent rights provision of the ARLP LTIP, all grants of restricted units include the
contingent right to receive quarterly cash distributions in an amount equal to the cash distributions the ARLP Partnership makes to unitholders during the vesting period

The performance target applicable to restricted unit awards under the ARLP LTIP is based on a normalized EBITDA measure, with that measure typically being the same as the STIP measure for the year of the
grant. The target, however, requires achieving an aggregate performance level for the three-year period. Historically, the ARLP Partnership has issued grants under the ARLP LTIP at the beginning of each year, with the exceptions of new employees who
begin employment with the ARLP Partnership at some other time and job promotions that may occur at some other time. In 2008, the ARLP Partnership also issued grants in October in lieu of issuing grants at the beginning of 2009. The compensation
expense associated with ARLP LTIP grants is recognized by the ARLP Partnership over the vesting period in accordance with FASB ASC 718, CompensationStock Compensation.

The policy of the MGP Compensation Committee is to grant restricted common units pursuant to the ARLP LTIP to serve as a means of
incentive compensation for performance. Therefore, no consideration will be payable by the ARLP LTIP participants upon receipt of the common units. Common units to be delivered upon the vesting of restricted units may be common units acquired by the
ARLP Partnership in the open market, common units acquired by the ARLP Partnership from any other person, common units already owned or newly issued by the ARLP Partnership, or any combination of the foregoing. If the ARLP Partnership issues new
common units upon payment of the restricted units instead of purchasing them, the total number of common units outstanding will increase.

The most recent grants under the ARLP LTIP, made January 25, 2011, will cliff vest on January 1, 2014 provided the ARLP Partnership achieves a target level of aggregate EBITDA for current
operations, excluding charges for unit-based compensation, if any, for the period January 1, 2011 through December 31, 2013. The ARLP LTIP provides the MGP Compensation Committee with discretion to determine the conditions for vesting (as
well as all other terms and conditions) associated with any award under the plan, and to amend any of those conditions so long as an amendment does not materially reduce the benefit to the participant. The MGP Compensation Committee believes the
performance-related vesting conditions of all outstanding awards under the ARLP LTIP will be reasonably difficult to satisfy and therefore support the key compensation objectives discussed above.

Unit Options. The ARLP Partnership has not made any grants of unit options. The MGP Compensation Committee, in the
future, may decide to make unit option grants to employees and directors on terms determined by the MGP Compensation Committee.

Grant Timing. The MGP Compensation Committee does not time, nor has the MGP Compensation Committee in the past timed, the grant of ARLP LTIP awards in coordination with the release of material
non-public information. Instead, ARLP LTIP awards are granted only at the time or times dictated by the ARLP Partnerships normal compensation process as developed by the MGP Compensation Committee.



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Effect of a Change in Control. Upon a change in control
as defined in the ARLP LTIP, all awards outstanding under the ARLP LTIP will automatically vest and become payable or exercisable, as the case may be, in full. Please see Item 11. Executive Compensation-Potential Payments Upon a Termination
or Change of Control.

Amendments and Termination. The MGP Board of Directors or the MGP
Compensation Committee may, in its discretion, terminate the ARLP LTIP at any time with respect to any common units for which a grant has not previously been made. Except as required by the rules of the exchange on which the common units may be
listed at that time, the MGP Board of Directors or the MGP Compensation Committee may alter or amend the ARLP LTIP in any manner from time to time; provided, however, that no change in any outstanding grant may be made that would materially impair
the rights of the participant without the consent of the affected participant. In addition, the MGP Board of Directors or the MGP Compensation Committee may, in its discretion, establish such additional compensation and incentive arrangements as it
deems appropriate to motivate and reward employees of the ARLP Partnership.

AHGP LTIP

We have also adopted 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.

Supplemental Executive Retirement Plan

The ARLP Partnership maintains the
SERP to help attract and motivate key employees, including its Named Executive Officers. The SERP is sponsored by Alliance Coal. Participation in the SERP aligns the interest of each Named Executive Officer with the interests of ARLPs
unitholders because all allocations made to participants under the SERP are made in the form of notional common units of ARLP, defined in the SERP as phantom units. The MGP Compensation Committee approves the SERP participants and their
percentage allocations, and can amend or terminate the plan at any time. All of the Named Executive Officers currently participate in the SERP.

Under the terms of the SERP, a participant is entitled to receive on December 31 of each year an allocation of phantom units having a fair market value equal to his or her percentage allocation
multiplied by the sum of the participants base salary and cash bonus received that year, then reduced by any supplemental contribution that was made to the ARLP Partnerships defined contribution PSSP for the participant that year. A
participants cumulative notional phantom unit account balance earns the equivalent of common unit distributions, which are added to the notional account balance in the form of additional phantom units. All amounts granted under the SERP vest
immediately and, with respect to terminations from employment occurring after January 1, 2011, are paid out upon the participants termination from employment in ARLP common units equal to the number of phantom units then credited to the
participants account, less the number of units required to satisfy the ARLP Partnerships tax withholding obligations; provided that a participant in the SERP shall not be entitled to an allocation for the year in which the
participants termination from employment occurs, except as described in the following paragraph.

A participant in the
SERP, including any of the Named Executive Officers, is entitled to receive an allocation under the SERP for the year in which his employment is terminated only if such termination results from one of the following events:



| | (1) | the participants employment is terminated other than for cause;
| | --- | ------------------------------------------------------------------



| | (2) | the participant terminates employment for good reason;
| | --- | --------------------------------------------------------



| | (3) | a change of control of the ARLP Partnership or MGP occurs and, as a result, the participants employment is terminated (whether voluntary or involuntary);
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | death of the participant;
| | --- | -------------------------



| | (5) | the participant attains (or has attained) retirement age of 65 years; or
| | --- | ------------------------------------------------------------------------



| | (6) | the participant incurs a total and permanent disability, which shall be deemed to occur if the participant is eligible to receive benefits under the terms of the
long-term disability program maintained by the ARLP Partnership.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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This allocation for the year in which a participants termination occurs shall equal
the participants eligible compensation for such year (including any severance amount, if applicable) multiplied by his percentage allocation under the SERP, reduced by any supplemental contribution that was made to the ARLP Partnerships
defined contribution PSSP for the participant that year.

Other Compensation-Related Matters

Trading in Derivatives

It is MGPs policy that directors and all officers, including the Named Executive Officers, may not purchase or sell options on ARLPs common units. In addition, it is our general partners
policy that directors and all officers, including our Named Executive Officers, may not purchase or sell options on AHGPs common units absent approval by our general partner.

Tax Deductibility of Compensation

With respect to the deduction limitations imposed under Section 162(m) of the Internal Revenue Code, we and the ARLP Partnership are a limited partnership and do not meet the definition of a
corporation under Section 162(m). Accordingly, such limitations do not apply to compensation paid to the Named Executive Officers.

Board of Directors Compensation Report

The Board of Directors has
submitted the following report for inclusion in this Annual Report on Form 10-K:

Our Board of Directors has reviewed and
discussed the Compensation Discussion and Analysis contained in this Annual Report on Form 10-K with management. Based on our Board of Directors review of and the discussions with management with respect to the Compensation Discussion and
Analysis, our Board of Directors recommends that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

The foregoing report is provided by the following directors, who constitute all the members of the Board of Directors:

Members of the Board of Directors:

Joseph W. Craft III

Michael J. Hall

Thomas M. Davidson, Sr.

Robert J. Druten

Notwithstanding anything to the contrary set forth in any of
our previous filings under the Securities Act or the Exchange Act, that incorporate future filings, including this Annual Report on Form 10-K, in whole or in part, the foregoing Board of Directors Compensation Report shall not be deemed to be
filed with the SEC or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference.

Summary Compensation Table for 2010

The following table provides a summary
of the total compensation paid to our Named Executive Officers by the ARLP Partnership for 2010. We do not provide our Named Executive Officers any additional compensation. Please see footnote (2) below for an explanation of the compensation
amounts we reimburse to the ARLP Partnership.



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|                                                                  |  |      |      |  |           |         |         |          |  |        |               |  |  |                 |         |  |                                         |   |   |                                                                       |  |         |                          |  |  |       |   |  |  |        |         |  |  |         |           | 
|----------------------------------------------------------------- |  | ---- | ---- |  | --------- | ------- | ------- | -------- |  | ------ | ------------- |  |  | --------------- | ------- |  | --------------------------------------- | - | - | --------------------------------------------------------------------- |  | ------- | ------------------------ |  |  | ----- | - |  |  | ------ | ------- |  |  | ------- | --------- | 
|Name and Principal Position                                       |  | Year |      |  | Salary(2) |         |         | Bonus(3) |  |        | UnitAwards(4) |  |  | OptionAwards(1) |         |  | Non-EquityIncentive PlanCompensation(5) |   |   | Change inPension ValueandNonqualifiedDeferredCompensationEarnings
(1) |  |         | All OtherCompensation(6) |  |  | Total |  
|Joseph W. Craft III,                                              |  |      | 2010 |  |           | $       | 334,828 |          |  | $      |              |  |  | $               |        |  |                                         | $ |  |                                                                       |  | $       |                         |  |  | $     |  |  |  | $      | 288,579 |  |  | $       | 623,407   | 
|President, Chief Executive                                        |  |      | 2009 |  |           |         | 341,267 |          |  |        |              |  |  |                 |        |  |                                         |   |  |                                                                       |  |         |                         |  |  |       |  |  |  |        | 197,634 |  |  |         | 538,901   | 
|Officer and Director                                              |  |      | 2008 |  |           |         | 334,828 |          |  |        |              |  |  |                 |        |  |                                         |   |  |                                                                       |  |         |                         |  |  |       |  |  |  |        | 163,909 |  |  |         | 498,737   | 
|                                                                  |  |      |      |  |           |         |         |          | 
|Brian L. Cantrell,                                                |  |      | 2010 |  |           |         | 237,269 |          |  |        |              |  |  |                 | 227,268 |  |                                         |   |  |                                                                       |  |         | 370,000                  |  |  |       |  |  |  |        | 43,599  |  |  |         | 878,136   | 
|Senior Vice President - Chief                                     |  |      | 2009 |  |           |         | 233,873 |          |  |        |              |  |  |                 |        |  |                                         |   |  |                                                                       |  |         | 175,000                  |  |  |       |  |  |  |        | 40,724  |  |  |         | 449,597   | 
|Financial Officer                                                 |  |      | 2008 |  |           |         | 218,619 |          |  |        |              |  |  |                 | 409,482 |  |                                         |   |  |                                                                       |  |         | 170,000                  |  |  |       |  |  |  |        | 33,848  |  |  |         | 831,949   | 
|                                                                  |  |      |      |  |           |         |         |          | 
|R. Eberley Davis                                                  |  |      | 2010 |  |           |         | 260,473 |          |  |        |              |  |  |                 | 227,268 |  |                                         |   |  |                                                                       |  |         | 370,000                  |  |  |       |  |  |  |        | 54,920  |  |  |         | 912,661   | 
|Senior Vice President,General Counsel and Secretary               |  |      | 2009 |  |           |         | 254,442 |          |  |        | 70,000        |  |  |                 |        |  |                                         |   |  |                                                                       |  |         | 185,000                  |  |  |       |  |  |  |        | 56,906  |  |  |         | 566,348   | 
|                                                                  |  | 2008 |      |  |           | 236,369 |         |          |  | 70,000 |               |  |  | 409,482         |         |  |                                         |  |   |                                                                       |  | 180,000 |                          |  |  |      |   |  |  | 46,510 |         |  |  | 942,361 |          
|                                                                  |  |      |      |  |           |         |         |          | 
|Robert G. Sachse,                                                 |  |      | 2010 |  |           |         | 283,577 |          |  |        |              |  |  |                 | 350,837 |  |                                         |   |  |                                                                       |  |         | 390,000                  |  |  |       |  |  |  |        | 84,419  |  |  |         | 1,108,833 | 
|Executive Vice                                                    |  |      | 2009 |  |           |         | 280,148 |          |  |        |              |  |  |                 |        |  |                                         |   |  |                                                                       |  |         | 220,000                  |  |  |       |  |  |  |        | 75,349  |  |  |         | 575,497   | 
|President-Marketing                                               |  |      | 2008 |  |           |         | 261,971 |          |  |        |              |  |  |                 | 409,482 |  |                                         |   |  |                                                                       |  |         | 190,000                  |  |  |       |  |  |  |        | 52,412  |  |  |         | 913,865   | 
|                                                                  |  |      |      |  |           |         |         |          | 
|Thomas M. Wynne,
Senior Vice President andChief Operating Officer |  |      | 2010 |  |           |         | 305,384 |          |  |        |              |  |  |                 | 332,828 |  |                                         |   |   |                                                                       |  |         | 390,000                  |  |  |       |  |  |  |        | 50,173  |  |  |         | 1,078,385 | 
|                                                                  |  | 2009 |      |  |           | 264,807 |         |          |  |       |               |  |  | 175,988         |         |  |                                         |   |   |                                                                       |  | 200,000 |                          |  |  |      |   |  |  | 54,387 |         |  |  | 695,182 |          
|                                                                  |  | 2008 |      |  |           | 197,992 |         |          |  |       |               |  |  |                |         |  |                                         |  |   |                                                                       |  | 155,000 |                          |  |  |      |   |  |  | 30,417 |         |  |  | 383,409 |          



|(1) | Column is not applicable.
|--- | -------------------------



|(2) | The table below reflects the portion of the Named Executive Officers total compensation expense for 2010 allocated to us by the ARLP Partnership. Based on the
estimated time each executive officer spent managing our affairs in 2010, Board of Directors agreed that 5%, 4% and 8%, respectively, of the beginning of the year base salaries of Messrs. Craft, Cantrell and Davis would be allocated to us. In
addition, for 2010, we were billed by the ARLP Partnership a stipulated benefit burden of 40% of allocated base salary. We believe this percentage allocation is a reasonable estimation of the ARLP Partnerships overall cost of cash compensation
(i.e. compensation other than equity-based compensation) in excess of base salary, including, among other things, benefits, bonus and taxes. Pursuant to the Administrative Services Agreement, this percentage allocation is applied to the total
allocated base salary cost of all employees of the ARLP Partnership who provide services to us, not just our Named Executive Officers, and is applied without regard to the amount of actual bonus, if any, received by any particular employee.
Accordingly, the amounts shown are not indicative of the actual bonus, if any, received by Mr. Craft, Mr. Cantrell or Mr. Davis.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    |  |                 |        |  |                          |   |       |                                       |  |   |                                                      |  |  |  |      |  
|------------------- |  | --------------- | ------ |  | ------------------------ | - | ----- | ------------------------------------- |  | - | ---------------------------------------------------- |  |  |  | ---- | -
|Name                |  | AllocatedSalary |        |  | AllocatedBenefit 
Burden |   |       | Total Allocationof 
Compensationto Us |  |   | Allocated Salaryas a %
ofTotal AllocatedCompensation | 
|Joseph W. Craft III |  | $               | 16,741 |  |                          | $ | 6,696 |                                       |  | $ | 23,437                                               |  |  |  | 71.4 | %
|Brian L. Cantrell   |  |                 | 9,491  |  |                          |   | 3,796 |                                       |  |   | 13,287                                               |  |  |  | 71.4 | %
|R. Eberley Davis    |  |                 | 20,838 |  |                          |   | 8,335 |                                       |  |   | 29,173                                               |  |  |  | 71.4 | %



|(3) | Amounts represent a retention bonus paid to Mr. Davis in 2009 and 2008.
|--- | -----------------------------------------------------------------------



|(4) | The Unit Awards represent the aggregate grant date fair value of equity awards granted (computed in accordance with FASB ASC 718) to each Named Executive Officer in the
respective year. Please see Item 11. Compensation Discussion and AnalysisCompensation Program ComponentsEquity Awards under the ARLP LTIP. Messrs. Cantrell, Davis and Sachse received awards in January 2008 and October
2008. The MGP Compensation Committee approved the awards in October 2008 in lieu of making awards in January 2009. The October 2008 awards increased the 2008 Unit Awards total for each of Messrs. Cantrell, Davis and Sachse by $199,928, based on the
grant date fair value.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Amounts represent the STIP bonus earned for the respective year. STIP payments are made in the first quarter of the year following the year in which they are earned.
Other than this bonus, there were no other applicable bonuses earned or deferred associated with year 2010. Please see Item 11. Compensation Discussion and AnalysisCompensation Program ComponentsAnnual Incentive Bonus
Awards.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(6) | For all Named Executive Officers, the amounts represent the sum of the (a) SERP phantom unit contributions valued at the market closing price on the date the
phantom unit was granted, (b) profit sharing savings plan employer contribution and (c) perquisites in excess of $10,000. A reconciliation of the amounts shown is as follows:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                  |  |      |      |  |      |   |         |                                         |  |   |                 |  |  |       |        |  |  |   |         | 
|----------------- |  | ---- | ---- |  | ---- | - | ------- | --------------------------------------- |  | - | --------------- |  |  | ----- | ------ |  |  | - | ------- | 
|                  |  | Year |      |  | SERP |   |         | Profit Sharing PlanEmployerContribution |  |   | Perquisites (a) |  |  | Total |       
|Joseph W. Craft   |  |      | 2010 |  |      | $ | 205,058 |                                         |  | $ | 19,600          |  |  | $     | 63,921 |  |  | $ | 288,579 | 
|                  |  |      | 2009 |  |      |   | 178,034 |                                         |  |   | 19,600          |  |  |       |       |  |  |   | 197,634 | 
|                  |  |      | 2008 |  |      |   | 145,627 |                                         |  |   | 18,282          |  |  |       |       |  |  |   | 163,909 | 
|Brian L. Cantrell |  |      | 2010 |  |      |   | 24,617  |                                         |  |   | 18,982          |  |  |       |       |  |  |   | 43,599  | 
|                  |  |      | 2009 |  |      |   | 22,014  |                                         |  |   | 18,710          |  |  |       |       |  |  |   | 40,724  | 
|                  |  |      | 2008 |  |      |   | 18,064  |                                         |  |   | 15,784          |  |  |       |       |  |  |   | 33,848  | 
|R. Eberley Davis  |  |      | 2010 |  |      |   | 35,320  |                                         |  |   | 19,600          |  |  |       |       |  |  |   | 54,920  | 
|                  |  |      | 2009 |  |      |   | 37,306  |                                         |  |   | 19,600          |  |  |       |       |  |  |   | 56,906  | 
|                  |  |      | 2008 |  |      |   | 29,208  |                                         |  |   | 17,302          |  |  |       |       |  |  |   | 46,510  | 
|Robert G. Sachse  |  |      | 2010 |  |      |   | 49,260  |                                         |  |   | 19,600          |  |  |       | 15,559 |  |  |   | 84,419  | 
|                  |  |      | 2009 |  |      |   | 41,854  |                                         |  |   | 19,600          |  |  |       | 13,895 |  |  |   | 75,349  | 
|                  |  |      | 2008 |  |      |   | 34,012  |                                         |  |   | 18,400          |  |  |       |       |  |  |   | 52,412  | 
|Thomas M. Wynne   |  |      | 2010 |  |      |   | 30,573  |                                         |  |   | 19,600          |  |  |       |       |  |  |   | 50,173  | 
|                  |  |      | 2009 |  |      |   | 22,582  |                                         |  |   | 19,600          |  |  |       | 12,205 |  |  |   | 54,387  | 
|                  |  |      | 2008 |  |      |   | 16,810  |                                         |  |   | 13,607          |  |  |       |       |  |  |   | 30,417  | 



| | a) | For Mr. Craft, the 2010 amount includes perquisites and other personal benefits totaling $63,921, comprising club dues of $8,621 and tax preparation fees of
$55,300. For Mr. Sachse, the 2010 amount includes perquisites and other personal benefits totaling $15,559, comprising club dues of $6,479 and tax preparation fees of $9,080 and the 2009 amount includes perquisites and other personal benefits
totaling $13,895, comprising club dues of $8,150 and tax preparation fees of $5,745. For Mr. Wynne, the 2009 amount includes perquisites and other personal benefits totaling $12,205, all of which were tax preparation fees.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Narrative Disclosure Relating to the Summary Compensation Table

Annual Cash Incentive Bonus Awards

Under the STIP, the Named Executive Officers are eligible for cash awards for the ARLP Partnership achieving an annual financial performance target. The annual performance target is recommended by the
MGPs President and Chief Executive Officer and approved by the MGP Compensation Committee, typically in January of each year. The performance target historically has been EBITDA-derived, with items added or removed from the EBITDA calculation
to ensure that the performance target reflects the pure operating results of the core mining business. (The ARLP Partnerships EBITDA is calculated as net income of ARLP before net interest expense, income taxes, depreciation, depletion and
amortization and net income attributable to noncontrolling interest.) The aggregate cash available for awards under the STIP each year is dependent on the ARLP Partnerships actual financial results for the year compared to the annual
performance target. The cash available generally increases in relationship to the ARLP Partnerships EBITDA, as adjusted, exceeding the minimum financial performance target and is subject to adjustment by the MGP Compensation Committee in its
discretion. Please see Item 11. Compensation Discussion and AnalysisCompensation ComponentsAnnual Incentive Bonus Awards.

Long Term Incentive Plan

Under the ARLP LTIP, grants may be made of either
(a) restricted ARLP units or (b) options to purchase ARLP common units, although to date, no grants of options have been made. Annual grant levels for designated participants (including the Named Executive Officers) are recommended by
MGPs President and Chief Executive Officer, subject to the review and approval of the MGP Compensation Committee. Restricted units granted under the ARLP LTIP are phantom or notional units that upon vesting entitle the participant
to receive an ARLP unit. Restricted units granted under the ARLP LTIP vest at the end of a stated period from the grant date (which is currently approximately three years for all outstanding restricted units), provided the ARLP Partnership achieves
an aggregate performance target for that period. The performance target is based on a normalized EBITDA measure, with that measure typically being the same as the STIP measure for the year of the grant. The target, however, requires achieving an
aggregate performance level for the three-year period as compared to aggregate budgeted performance for the period. Please see Item 11. Compensation Discussion and AnalysisCompensation ComponentsEquity Awards under the ARLP
LTIP.



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Supplemental Executive Retirement Plan

Under the terms of the SERP, participants are entitled to receive on December 31 of each year an allocation of phantom ARLP
units having a fair market value equal to his or her percentage allocation multiplied by the sum of base salary and cash bonus received that year, then reduced by any supplemental contribution that was made to the ARLP Partnerships defined
contribution PSSP for the participant that year. A participants cumulative notional phantom unit account balance earns the equivalent of common unit distributions. The calculated distributions are added to the notional account balance in the
form of additional phantom units. All amounts granted under the SERP vest immediately and are paid out upon the participants termination or death in ARLP common units equal to the number of phantom units then credited to the participants
account, subject to reduction of the number of units distributed to cover withholding obligations. Please see Item 11. Compensation Discussion and AnalysisCompensation ComponentsSupplemental Executive Retirement
Plan.

Director Compensation

The compensation of the directors of our general partner, AGP, is set by the Board of Directors. Mr. Craft, our only employee director, receives no director compensation. The directors of AGP devote
100% of their time as directors of AGP to the business of the AHGP Partnership.

Director Compensation Table for 2010



|                   |  |                                  |         |  |                    |   |        |                     |  |   |                                             |  |  |                                                                           |   |  |                             |   |   |           |  |   |       |  |  |   |         | 
|------------------ |  | -------------------------------- | ------- |  | ------------------ | - | ------ | ------------------- |  | - | ------------------------------------------- |  |  | ------------------------------------------------------------------------- | - |  | --------------------------- | - | - | --------- |  | - | ----- |  |  | - | ------- | 
|Name               |  | Fees earnedor Paid inCash ($)(2) |         |  | UnitAwards ($) (3) |   |        | OptionAwards ($)(1) |  |   | Non-EquityIncentive PlanCompensation ($)(1) |  |  | Change inPension
Valueand NonqualifiedDeferredCompensationEarnings ($)(1) |   |  | All OtherCompensation($)(4) |   |   | Total ($) | 
|Michael J. Hall    |  | $                                | 75,000  |  |                    | $ | 19,061 |                     |  | $ |                                            |  |  | $                                                                         |  |  |                             | $ |  |           |  | $ |      |  |  | $ | 94,061  | 
|Thomas M. Davidson |  |                                  | 115,000 |  |                    |   | 38,022 |                     |  |   |                                            |  |  |                                                                           |  |  |                             |   |  |           |  |   |      |  |  |   | 153,022 | 
|Robert J. Druten   |  |                                  | 115,000 |  |                    |   | 33,954 |                     |  |   |                                            |  |  |                                                                           |  |  |                             |   |  |           |  |   | 5,000 |  |  |   | 153,954 | 



|(1) | Column is not applicable.
|--- | -------------------------



|(2) | Amounts represent annual retainer paid in cash. Each non-employee director is eligible to defer all or part of the annual retainer pursuant to a deferred compensation
plan that is administered by the Board of Directors. Please see Narrative to Directors Compensation Table, below.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Amounts represent the grant date fair value of equity awards in 2010 related to deferrals of annual retainer and automatically deferred compensation. Please see
Narrative to Director Compensation Table, below. At December 31, 2010, each director had the following number of phantom AHGP common units credited to his notional account under the deferred compensation plan:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                   |  |                                      |       | 
|------------------ |  | ------------------------------------ | ----- | 
|Name               |  | DeferredCompensationPlan 
(in Units) |      
|Michael J. Hall    |  |                                      | 2,195 | 
|Thomas M. Davidson |  |                                      | 4,382 | 
|Robert J. Druten   |  |                                      | 7,594 | 



|(4) | Matching charitable contribution. We match individual contributions of $25 or more to educational institutions and not-for-profit organizations on a one-to-one basis up
to $5,000 per individual, per calendar year.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Narrative to Directors Compensation Table

Our directors compensation includes an annual cash retainer paid quarterly in advance on a pro rata basis (the Annual
Retainer). The Annual Retainer for calendar year 2010 was $115,000. Directors have the option to defer all or part of the Annual Retainer pursuant to AGPs Amended and Restated Annual Retainer and Deferred Compensation Plan



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(the Deferred Compensation Plan) by completing an election form prior to the beginning of each calendar year. In addition to the Annual Retainer, in 2010 Directors received
equity-based compensation that was automatically deferred under the Deferred Compensation Plan. The equity-based compensation in 2010 was $20,000 for each director other than Mr. Hall, with an additional $10,000 for each Committee chairman,
other than Mr. Hall (without duplication), and was credited quarterly in advance on a pro rata basis. At Mr. Halls request, his compensation in 2010 remained the same as 2009, comprising Annual Retainer of $75,000 and equity-based
compensation of $15,000. Mr. Hall, who is chairman of our Audit Committee, is also a director and chairman of the audit committee of MGP, the general partner of ARLP, and received like compensation for his service in those roles.

Pursuant to the Deferred Compensation Plan, for both deferred amounts of Annual Retainer and automatic deferrals of equity-based
compensation, a notional account is established and credited with notional common units of AHGP, described in the plan as phantom units. The number of phantom units credited is determined by dividing the amount deferred by
the average closing unit price for the ten trading days immediately preceding the deferral date. When quarterly cash distributions are made with respect to AHGP common units, an amount equal to such quarterly distribution is credited to the notional
account as additional phantom units. For notional accounts under the Deferred Compensation Plan payable after January 1, 2011, payment will be made in AHGP common units equal to the number of phantom units then credited to the
directors account.

Directors may elect to receive payment of the account resulting from deferrals during a plan year
either (a) on the January 1 on or next following his or her separation from service as a director or (b) on the earlier of a specified January 1 or the January 1 on or next following his or her separation from service. The
payment election must be made prior to each plan year; if no election is made, the account will be paid on the January 1 on or next following the directors separation from service. The Deferred Compensation Plan is administered by the
Board of Directors, may change or terminate the plan at any time; provided, however, that accrued benefits under the plan cannot be impaired.

Upon any recapitalization, reorganization, reclassification, split of common units, distribution or dividend of securities on AHGP common units, our consolidation or merger, or sale of all or
substantially all of our assets or other similar transaction which is effected in such a way that holders of common units are entitled to receive (either directly or upon subsequent liquidation) cash, securities or assets with respect to or in
exchange for AHGP common units, the Board of Directors shall, in its sole discretion (and upon the advice of financial advisors as may be retained by the Board of Directors), immediately adjust the notional balance of phantom units in each
directors account under the Deferred Compensation Plan to equitably credit the fair value of the change in the AHGP common units and/or the distributions (of cash, securities or other assets) received or economic enhancement realized by the
holders of the AHGP common units.

Our Board of Directors has established a policy that each non-employee director will
attain, by January 1, 2014 or five years following such persons election to the Board of Directors, and thereafter maintain during service on the Board of Directors, ownership of equity of AHGP (including phantom equity ownership under
the Deferred Compensation Plan) with value equal to or greater than three times the Annual Retainer amount.

Compensation Committee
Interlocks and Insider Participation

With the exception of MGP, none of our executive officers serves as a member of the
board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of the Board of Directors of our general partner.



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|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS
|-------- | ---------------------------------------------------------------------------------------------

The following table sets forth certain information as of February 28, 2011, regarding the beneficial ownership of both our common
units and the common units of ARLP by (a) each director of our general partner, (b) each executive officer identified in the Summary Compensation Table included in Item 11 above, (c) all such directors of our general partner and
such executive officers as a group, and (d) each person or group known by our general partner to be the beneficial owner of more than 5% of our common units. Our general partner is owned by C-Holdings, which is wholly-owned by Mr. Craft.
As of February 28, 2011, AHGP owns 42.3% of the outstanding common units of ARLP, and AHGP owns, directly or indirectly, all of the outstanding limited liability company interests of MGP, the managing general partner of ARLP. The address of
each of ARLP, C-Holdings, AGP and, unless otherwise indicated in the footnotes to the table below, each of the directors and executive officers reflected in the table below is 1717 South Boulder Avenue, Suite 400, Tulsa, Oklahoma 74119. Unless
otherwise indicated in the footnotes to the table below, our common units and the common units of ARLP reflected as being beneficially owned by the listed directors and executive officers are held directly by such directors and officers. The
percentage of our common units beneficially owned is based on 59,863,000 common units outstanding as of February 28, 2011, and the percentage of common units of ARLP beneficially owned is based on 36,775,741 common units outstanding as of
February 28, 2011.



|                                                            |  |                                |            |  |                                              |  |       |                                |  |  |                                              |  |  |  |       |  
|----------------------------------------------------------- |  | ------------------------------ | ---------- |  | -------------------------------------------- |  | ----- | ------------------------------ |  |  | -------------------------------------------- |  |  |  | ----- | -
|                                                            |  | Alliance Holdings GP, L.P.     |            |  | Alliance Resource Partners, L.P.             | 
|Name of Beneficial Owner                                    |  | Common 
UnitsBeneficiallyOwned |            |  | Percentage ofCommon 
UnitsBeneficially Owned |  |       | Common 
UnitsBeneficiallyOwned |  |  | Percentage ofCommon 
UnitsBeneficially Owned | 
|Directors and Executive Officers                            |  |                                |            |  |                                              |  |       |                                |  |  |                                              |  |  |  |       |  
|Joseph W. Craft III (1)(2)(4)                               |  |                                | 47,536,123 |  |                                              |  | 79.41 | %                              |  |  | 15,902,620                                   |  |  |  | 43.24 | %
|Thomas Davidson, Sr.                                        |  |                                |           |  |                                              |  | *     |                                |  |  |                                             |  |  |  | *     |  
|Robert J. Druten                                            |  |                                | 10,000     |  |                                              |  | *     |                                |  |  |                                             |  |  |  | *     |  
|Michael J. Hall                                             |  |                                |           |  |                                              |  | *     |                                |  |  | 29,951                                       |  |  |  | *     |  
|Brian L. Cantrell                                           |  |                                | 6,500      |  |                                              |  | *     |                                |  |  | 24,758                                       |  |  |  | *     |  
|R. Eberley Davis                                            |  |                                |           |  |                                              |  | *     |                                |  |  | 7,428                                        |  |  |  | *     |  
|Robert G. Sachse                                            |  |                                |           |  |                                              |  | *     |                                |  |  | 24,217                                       |  |  |  | *     |  
|Thomas M. Wynne (2)                                         |  |                                | 685,925    |  |                                              |  | *     |                                |  |  | 21,455                                       |  |  |  | *     |  
|All directors and executive officers as a group (8 persons) |  |                                | 47,552,623 |  |                                              |  | 79.44 | %                              |  |  | 16,010,429                                   |  |  |  | 43.54 | %
|5% Common Unitholders                                       |  |                                |            |  |                                              |  |       |                                |  |  |                                              |  |  |  |       |  
|Management Group (3)                                        |  |                                | 47,536,123 |  |                                              |  | 79.41 | %                              |  |  | N/A                                          |  |  |  | N/A   |  
|Alliance Holdings GP, L.P.                                  |  |                                | N/A        |  |                                              |  | N/A   |                                |  |  | 15,544,169                                   |  |  |  | 42.27 | %
|Neuberger Berman Group LLC                                  |  |                                | 2,993,598  |  |                                              |  | 5.00  | %                              |  |  | N/A                                          |  |  |  | N/A   |  



|* | Less than one percent
|- | ---------------------

Footnote related to
AHGP Common Units Beneficial Ownership



|(1) | The AHGP common units attributed to Mr. Craft consist of (i) 5,193,759 AHGP common units held by the JWC III Revocable Trust of which Mr. Craft is
trustee, (ii) 20,641,168 AHGP common units held by SGP, of which Mr. Craft is the indirect sole owner and President, Chief Executive Officer and sole director, (iii) 523,122 AHGP common units held by AMH III, of which Mr. Craft
may be deemed to be beneficial owner by virtue of his status as President and sole director of AMH III, and (iv) 21,178,074 AHGP common units held by certain current and former members of management of ARLP other than Mr. Craft with whom
he may be deemed to comprise a group under Rule 13d-5(b) of the Exchange Act, as more fully described in footnote (3) below. Of the common units referenced in clause (ii) of this footnote, 5,200,000 common units are subject to a pledge
granted by SGP under a Pledge Agreement, dated October 1, 2008, in favor of Bank of Oklahoma, N.A. The filing of this report shall not be deemed an admission that Mr. Craft beneficially owns the AHGP common units referenced in clauses
(iii) and (iv) of this footnote.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Mr. Wynne is part of the current and former members of management of ARLP with whom Mr. Craft may be deemed to comprise a group under Rule
13d-5(b) of the Exchange Act, as more fully described in clause (iv) of footnote (1) above and in footnote (4) below. The 1,304,372 AHGP common units collectively held, directly and through family trusts, by Mr. Wynne represent a
portion of the 21,178,074 AHGP common units attributed to Mr. Craft as referenced in clause (iv) of footnote (1) above. Accordingly, in order to avoid double counting, those
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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685,925 AHGP common units were not included in the line item of the above table entitled All directors and executive officers as a group (8 persons) for the calculation of the
aggregate number of AHGP common units beneficially owned by the listed officers and directors, and the corresponding percentage calculation.



|(3) | Members of the Management Group are parties to a Transfer Restrictions Agreement which contains certain provisions (e.g., drag-along rights granted to Mr. Craft)
that, pursuant to Exchange Act Rule 13d-5(b), may cause the Management Group to be deemed to comprise a group under Exchange Act Rule 13d-5(b). Accordingly, without affirming the existence of an Exchange Act Rule 13d-5(b) group, the Management Group
made a Schedule 13D filing pursuant to Exchange Act requirements. The Management Groups 47,536,123 AHGP common units listed in the table above consist of (i) 26,358,049 AHGP common units owned, directly or indirectly, or attributed to
Mr. Craft as described in clauses (i) through (iii) in footnote (1) above, and (ii) 21,178,074 AHGP common units held by the members of the Management Group other than Mr. Craft, as described in clause (iv) of
footnote (1) above.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In addition to Mr. Craft, two other members of the Management Group, Thomas L. Pearson and Charles R. Wesley, individually hold more than 5% of AHGPs common
units. Mr. Pearson directly holds 3,574,271 AHGP common units, representing 5.97% of the AHGP common units outstanding. Mr. Wesley holds directly and through a family trust 3,699,080 AHGP common units, representing 6.18% of the AHGP common
units outstanding. The reference in clause (ii) of footnote (3) above to 21,178,074 AHGP common units held by members of the Management Group other than Mr. Craft, includes the 3,574,271 and 3,699,080 AHGP common units held by
Mr. Pearson and Mr. Wesley.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Footnotes related to ARLP Common Units Beneficial Ownership



|(4) | Mr. Crafts ARLP common units consist of (i) 357,451 ARLP common units held directly by him, (ii) 1,000 ARLP common units held by his son, and
(iii) 15,544,169 ARLP common units held by AHGP. Mr. Craft is a director and, through his ownership of C-Holdings, the indirect sole owner of AGP, the general partner of AHGP, and he holds, directly or indirectly, or may be deemed to be
the beneficial owner of, a majority of the outstanding common units of AHGP (as described in footnote (1) above). As of February 28, 2011, AHGP owns 42.3% of ARLPs common units. Mr. Craft disclaims beneficial ownership of the
ARLP common units held by AHGP except to the extent of his pecuniary interest therein.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equity Compensation Plan Information



|                                                   |  |                                                                                                                     |         |  |                                                                           |  |     |                                                                                                                |  |  |           | 
|-------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------- |  | --- | -------------------------------------------------------------------------------------------------------------- |  |  | --------- | 
|Plan Category                                      |  | Number of units to be issued uponexercise/vesting of outstandingoptions, warrants and rightsas
of December 31, 2010 |         |  | Weighted-average exerciseprice of
outstandingoptions, warrants and rights |  |     | Number of units 
remainingavailable for future issuanceunder equity compensation 
plansas of December 31, 2010 | 
|Equity compensation plans approved by unitholders: |  |                                                                                                                     |         |  |                                                                           |  |     |                                                                                                                |  |  |           | 
|ARLP Long-Term Incentive Plan                      |  |                                                                                                                     | 372,723 |  |                                                                           |  | N/A |                                                                                                                |  |  | 2,302,591 | 
|AHGP Long-Term Incentive Plan                      |  |                                                                                                                     |        |  |                                                                           |  | N/A |                                                                                                                |  |  | 5,215,000 | 



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|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

Certain Relationships and Related Transactions

As of December 31,
2010, we owned 15,544,169 common units of ARLP, representing 42.3% of its outstanding common units. In addition, as of December 31, 2010 the Management Group owned approximately 44.9% of our outstanding common units, and ARLPs special
general partner owned approximately 34.5%.

Certain of the officers and directors of our general partner are also officers
and/or directors of ARLPs managing general partner, including Mr. Craft, the Chairman, President and Chief Executive Officer of our general partner, Mr. Hall, a Director and Chairman of our general partners Audit Committee,
Mr. Cantrell, the Senior Vice President and Chief Financial Officer of our general partner, and Mr. Davis, the Senior Vice President, General Counsel and Secretary of our general partner.

Omnibus Agreement

Pursuant to the terms of an amended omnibus agreement, AHGP agreed, and caused its controlled affiliates to agree, for so long as management controls MGP through its ownership of AHGP, not to engage in
the business of mining, marketing or transporting coal in the U.S., unless ARLP is first offered the opportunity to engage in the potential activity or acquire a potential business, and the MGP Board of Directors with the concurrence of its
conflicts committee, elects to cause ARLP not to pursue such opportunity or acquisition. The ARLP amended omnibus agreement provides, among other things, that ARLP will be presumed to desire to acquire the assets until such time as it advises AHGP
that it has abandoned the pursuit of such business opportunity, and AHGP may not pursue the acquisition of such assets prior to that time. This restriction does not apply to: any business we or our affiliates owned or operated at the closing of our
IPO; any acquisition by us or our affiliates so long as the majority of the value of the acquisition does not derive from a restricted business and ARLP is offered the opportunity to purchase the restricted business following its acquisition; or any
business conducted by us or our affiliates with the approval of MGPs Board of Directors or MGPs Conflicts Committee. Except as provided in the amended omnibus agreement, we and our affiliates are not prohibited from engaging in
activities that directly compete with ARLP. In addition, our affiliates are not prohibited from engaging in activities that compete directly with us.

Transactions Between Us, ARLP, SGP, SGP Land, AGP, C-Holdings, ARH, and ARH II

The Board of Directors of our general partner and its conflicts committee review each of our related-party transactions to determine that each such transaction reflects market-clearing terms and
conditions customary in the coal industry. As a result of these reviews, the Board of Directors and its conflicts committee approved each of the transactions described below as fair and reasonable to us and our limited partners.

AGP

Our
partnership agreement requires us to reimburse AGP for all direct and indirect expenses it incurs or payments it makes on our behalf and all other expenses allocable to us or otherwise incurred by our general partner in connection with operating our
business. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to AGP by its affiliates. The amount billed by AGP to us totaled $0.7
million for the year ended December 31, 2010, for costs principally related to the Deferred Compensation Plan.

C-Holdings

At the closing of our IPO, we entered into the AHGP Credit Facility with C-Holdings, an entity controlled by Mr. Craft, as the lender. The AHGP Credit Facility is available to us for our general
partnership purposes. The facility will expire on March 31, 2011 and borrowings under the facility will bear interest at LIBOR plus 2.0%. We are not required to pay a commitment fee to C-Holdings on the unused portion of the facility. We had no
borrowings under the AHGP Credit Facility during the year ended December 31, 2010.



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Administrative Services

On April 1, 2010, effective January 1, 2010, we entered into the Administrative Services Agreement with ARLP, MGP, the
Intermediate Partnership, our general partner AGP, and ARH II, the indirect parent of SGP. The Administrative Services Agreement supersedes the administrative services agreement signed in connection with our IPO in 2006. Under the Administrative
Services Agreement, certain employees of ARLP, including some executive officers, provide administrative services to AHGP and ARH II and their respective affiliates. The ARLP Partnership is reimbursed for services rendered by its employees on behalf
of these affiliates as provided under the Administrative Services Agreement. We paid the ARLP Partnership $0.3 million under this agreement for the year ended December 31, 2010.

The ARLP Partnerships Related-Party Transactions

The MGP Board of Directors and its conflicts committee review each of the ARLP Partnerships related-party transactions to determine that each such transaction reflects market-clearing terms and
conditions customary in the coal industry. As a result of these reviews, the MGP Board of Directors and its conflicts committee approved each of the transactions described below as fair and reasonable to the ARLP Partnership and its limited
partners.

SGP Land, LLC

SGP Land is owned by ARLPs special general partner, which is owned indirectly by Mr. Craft.

On May 2, 2007, Alliance Coal, the ARLP Partnerships operating subsidiary, entered into a time sharing agreement with SGP Land concerning the use of aircraft owned by SGP Land. In accordance
with the provisions of the time sharing agreement as amended, the ARLP Partnership reimbursed SGP Land $0.8 million for the year ended December 31, 2010 for use of the aircraft.

In 2001, SGP Land, as successor in interest to an unaffiliated third-party, entered into an amended mineral lease with MC Mining. Under
the terms of the lease, MC Mining has paid and will continue to pay an annual minimum royalty of $0.3 million until $6.0 million of cumulative annual minimum and/or earned royalty payments have been paid. MC Mining paid royalties of $0.3 million
during the year ended December 31, 2010. As of December 31, 2010, $2.1 million of advance minimum royalties paid under the lease is available for recoupment.

SGP

In 2005, Tunnel Ridge entered into a coal lease agreement with the
SGP, ARLPs special general partner, requiring advance minimum royalty payments of $3.0 million per year. As of December 31, 2010, Tunnel Ridge had paid $17.9 million of advance minimum royalty payments pursuant to the lease. The advance
royalty payments are fully recoupable against earned royalties. In August 2010, the coal lease was amended to include approximately 34.4 million additional clean tons of recoverable coal reserves in the proven and probable categories. Tunnel
Ridge also controls surface land and other tangible assets under a separate lease agreement with the SGP. Under the terms of the lease agreement, Tunnel Ridge has paid and will continue to pay the SGP an annual lease payment of $0.2 million. The
lease agreement has an initial term of four years, which may be extended to be coextensive with the term of the coal lease. Lease expense was $0.2 million for the year ended December 31, 2010.

The ARLP Partnership has a noncancelable operating lease arrangement with the SGP for the coal preparation plant and ancillary facilities
at the Gibson mining complex. Under the terms of the lease, the ARLP Partnership will make monthly payments of approximately $0.2 million through January 2011. Lease expense incurred for the year ended December 31, 2010 was $2.6 million.
Effective February 1, 2011, the lease was amended to extend the term through January 2017 and modify other terms, including reducing the monthly payments to approximately $50,000.

The ARLP Partnership has agreements with two banks to provide letters of credit in an aggregate amount of $31.1 million. At
December 31, 2010 the ARLP Partnership had $30.7 million in outstanding letters of credit under these agreements. The SGP guarantees $5.0 million of these outstanding letters of credit. The SGP does not charge the ARLP Partnership for this
guarantee.



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Director Independence

As a publicly-traded limited partnership listed on the NASDAQ Global Select Market, we are required to maintain a sufficient number of independent directors on the board of our general partner to satisfy
the audit committee requirement set forth in NASDAQ Rule 4350(d)(2). Rule 4350(d)(2) requires us to maintain an audit committee of at least three members, each of whom must, among other requirements, be independent as defined under NASDAQ Rule
4200(a)(15) and meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act (subject to the exemptions provided in Rule 10A-3(c)).

In 2010, the Board of Directors of our general partner affirmatively determined that the members of the Audit Committee of our general partnerMessrs. Hall, Davidson and Drutenare independent
directors as defined under applicable NASDAQ and Exchange Act rules. Please see Item 10. Directors, Executive Officers and Corporate Governance of the Managing General PartnerAudit Committee.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The firm of Deloitte & Touche LLP is our independent registered public accounting firm. Fees paid to Deloitte & Touche LLP during the last two fiscal years were as follows:

Audit Fees. Fees for audit services provided during each of the years ended December 31, 2010 and 2009 were $0.1
million and $0.2 million, respectively. Audit services consist primarily of the audit and quarterly reviews of the consolidated financial statements, but can also be related to statutory audits of subsidiaries required by governmental or regulatory
bodies, attestation services required by statute or regulation, comfort letters, consents, assistance with and review of documents filed with the SEC, work performed by tax professionals in connection with the audit and quarterly reviews, and
accounting and financial reporting consultations and research work necessary to comply with GAAP.

Audit-Related Fees. There were no audit-related fees for the years ended December 31, 2010 and 2009.

Tax Fees. There were no fees for tax services for the years ended December 31, 2010 and 2009.

All Other Fees. There were no other fees for the years ended December 31, 2010 and 2009.

In addition, ARLP paid audit, audit-related and tax fees of $0.6 million and $0.8 million for the years ended December 31, 2010 and
2009, respectively.

The charter of the Audit Committee provides that the committee is responsible for the pre-approval of all
auditing services and permitted non-audit services to be performed for us by our independent registered public accounting firm, subject to the requirements of applicable law. In accordance with such charter, the Audit Committee may delegate the
authority to grant such pre-approvals to the Audit Committee chairman or a sub-committee of the Audit Committee, which pre-approvals are then reviewed by the full Audit Committee at its next regular meeting. Typically, however, the Audit Committee
itself reviews the matters to be approved. The Audit Committee periodically monitors the services rendered by and actual fees paid to the independent registered public accounting firm to ensure that such services are within the parameters approved
by the Audit Committee.



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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES



|               |  |                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) (1)        |  | Financial Statements.                                                                                                                                                                                                                                                                                                 
|               | 
|               |  | The response to this portion of Item 15 is submitted as a separate section herein under Part II, Item 8. Financial Statements and Supplementary Data.                                                                                                                                                                
|               | 
|(a)(2)         |  | Financial Statement Schedule.                                                                                                                                                                                                                                                                                         
|               | 
|               |  | Schedule IIValuation and Qualifying AccountsYears ended December 31, 2010, 2009 and 2008, is set forth under Part II Item 8. Financial Statements and
Supplementary Data. All other schedules are omitted because they are not applicable or the information is shown in the financial statements or notes thereto.
|               | 
|(a)(3) and (c) |  | The exhibits listed below are filed as part of this annual report.                                                                                                                                                                                                                                                    



|              |  |                                                                                                                                                                                         |  |                           |  |                         |  |         |  |             |  |              
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ------- |  | ----------- |  | -------------
|              |  |                                                                                                                                                                                         |  | Incorporated by Reference
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                     |  | Form                      |  | SECFile No. andFilm No. |  | Exhibit |  | Filing Date |  | FiledHerewith
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|2.1           |  | Contribution Agreement by and among Alliance Holdings GP, L.P., Alliance GP, LLC, Alliance Management Holdings, LLC, AMH II, LLC and Alliance Resources GP, LLC dated November 18,
2005 |  | S-1                       |  | 333-129883051220816     |  | 2.1     |  | 11/22/2005  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.1           |  | Amended and Restated Agreement of Limited Partnership of Alliance Holdings GP, L.P., dated as of May 15, 2006                                                                           |  | 8-K                       |  | 000-5195206849300       |  | 3.1     |  | 05/17/2006  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.2           |  | Amended and Restated Limited Liability Company Agreement of Alliance GP, LLC                                                                                                            |  | 8-K                       |  | 000-5195206849300       |  | 3.2     |  | 05/17/2006  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.3           |  | Certificate of Limited Partnership of Alliance Holdings GP, L.P.                                                                                                                        |  | S-1                       |  | 333-129883051220816     |  | 3.1     |  | 11/22/2005  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.4           |  | Certificate of Formation of Alliance GP, LLC                                                                                                                                            |  | S-1                       |  | 333-129883051220816     |  | 3.3     |  | 11/22/2005  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.5(1)        |  | Second Amended and Restated Agreement of Limited Partnership of Alliance Resource Partners, L.P.                                                                                        |  | 8-K                       |  | 000-26823051159681      |  | 3.1     |  | 10/27/2005  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.6(1)        |  | Amended and Restated Agreement of Limited Partnership of Alliance Resource Operating Partners, L.P.                                                                                     |  | 10-K                      |  | 000-26823583595         |  | 3.2     |  | 03/29/2000  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.7(1)        |  | Certificate of Limited Partnership of Alliance Resource Partners, L.P.                                                                                                                  |  | S-1                       |  | 333-7884599630855       |  | 3.6     |  | 05/20/1999  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.8(1)        |  | Certificate of Limited Partnership of Alliance Resource Operating Partners, L.P.                                                                                                        |  | S-1/A                     |  | 333-7884599669102       |  | 3.8     |  | 07/23/1999  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.9(1)        |  | Certificate of Formation of Alliance Resource Management GP, LLC                                                                                                                        |  | S-1/A                     |  | 333-7884599669102       |  | 3.7     |  | 07/23/1999  |  |              
|              |  |                                                                                                                                                                                         |  |                           |  |                        
|3.10(1)       |  | Amended and Restated Operating Agreement of Alliance Resource Management GP, LLC                                                                                                        |  | S-3                       |  | 333-8528202596627       |  | 3.4     |  | 04/01/2002  |  |              



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|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                         |  |         |  |             |  |               |  | 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ------- |  | ----------- |  | ------------- |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  | Incorporated by Reference | 
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                           |  | Form                      |  | SECFile No. andFilm No. |  | Exhibit |  | Filing Date |  | FiledHerewith | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|3.11(1)       |  | Amendment No. 1 to Amended and Restated Operating Agreement of Alliance Resource Management GP, LLC                                                                                                                                                                                                                                           |  | S-3                       |  | 333-8528202596627       |  | 3.5     |  | 04/01/2002  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|3.12(1)       |  | Amendment No. 2 to Amended and Restated Operating Agreement of Alliance Resource Management GP, LLC                                                                                                                                                                                                                                           |  | S-3                       |  | 333-8528202596627       |  | 3.6     |  | 04/01/2002  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|3.13(1)       |  | Amendment No. 2 to Second Amended and Restated Agreement of Limited Partnership of Alliance Resource Partners, L. P. dated October 25, 2007                                                                                                                                                                                                   |  | 10-K                      |  | 000-2682308654096       |  | 3.10    |  | 02/29/2008  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|3.14          |  | Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Alliance Holdings GP, L.P.                                                                                                                                                                                                                                        |  | 10-K                      |  | 000-5195208673302       |  | 3.14    |  | 03/07/2008  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|4.1           |  | Form of our Common Unit Certificate                                                                                                                                                                                                                                                                                                           |  | S-1                       |  | 333-12988306714705      |  | 4.1     |  | 03/28/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|4.2           |  | Form of Registration Rights Agreement                                                                                                                                                                                                                                                                                                         |  | S-1                       |  | 333-129883051220816     |  | 4.2     |  | 11/22/2005  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.1(2)       |  | Alliance Holdings GP, L.P. Long-Term Incentive Plan                                                                                                                                                                                                                                                                                           |  | 8-K                       |  | 000-5195206849300       |  | 10.1    |  | 05/17/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.2          |  | Revolving Credit Agreement dated May 15, 2006 between Alliance Holdings GP, L.P. and C-Holdings, LLC                                                                                                                                                                                                                                          |  | 8-K                       |  | 000-5195206849300       |  | 10.2    |  | 05/17/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.3          |  | Omnibus Agreement dated August 20, 1999 among Alliance Resource Partners, L.P., Alliance Resource Holdings, Inc., Alliance Resource GP, LLC, Alliance Resource Management GP, LLC and
Alliance Resource Partners, L.P.                                                                                                                        |  | 8-K                       |  | 000-5195206849300       |  | 10.3    |  | 05/17/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.4          |  | Amendment to Omnibus Agreement dated May 8, 2002 among Alliance Resource Partners, L.P., Alliance Resource Holdings, Inc., Alliance Resource GP, LLC, Alliance Resource Management
GP, LLC and Alliance Resource Partners, L.P.                                                                                                               |  | 8-K                       |  | 000-5195206849300       |  | 10.4    |  | 05/17/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.5          |  | Second Amendment dated May 15, 2006 to the Omnibus Agreement amount Alliance Resource Partners, L.P., Alliance Resource Holdings, Inc., Alliance Resource GP, LLC, Alliance Resource
Management GP, LLC, AMH II, LLC, Alliance Resource Holdings II, Inc., Alliance Management Holdings, LLC, Alliance Holdings GP, L.P. and Alliance GP, LLC |  | 8-K                       |  | 000-5195206849300       |  | 10.5    |  | 05/17/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.6          |  | Administrative Services Agreement dated May 15, 2006 among Alliance Resource Partners, L.P., Alliance Resource Management GP, LLC, Alliance Resource Holdings II, Inc., Alliance
Holdings GP, L.P. and Alliance GP, LLC                                                                                                                       |  | 8-K                       |  | 000-5195206849300       |  | 10.6    |  | 05/17/2006  |  |               |  | 



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|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                         |  |         |  |             |  |               |  | 
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------------- |  | ------- |  | ----------- |  | ------------- |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  | Incorporated by Reference | 
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                           |  | Form                      |  | SECFile No. andFilm No. |  | Exhibit |  | Filing Date |  | FiledHerewith | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.7          |  | Registration Rights Agreement dated May 15, 2006 among Alliance Holdings GP, L.P., Alliance GP, LLC and each of the other parties identified on the signature pages                                                                                                                                           |  | 10-Q                      |  | 000-51952061031259      |  | 10.7    |  | 08/14/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.8          |  | Transfer Restrictions Agreement, dated as of June 13, 2006, by and among Alliance Holdings GP, L.P., Alliance GP, LLC, C-Holdings, LLC, Alliance Resource Holdings II, Inc. Alliance
Resource Holdings, Inc., Alliance Resource GP, LLC, and the individuals and trusts listed on the signature pages thereof |  | 8-K                       |  | 000-5195206909836       |  | 4.1     |  | 06/16/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.9          |  | Amended and Restated Registration Rights Agreement, dated as of June 13, 2006, by and among Alliance Holdings GP, L.P., Alliance GP, LLC, Alliance Management Holdings, LLC, AMH II,
LLC, and Alliance Resource GP, LLC                                                                                       |  | 8-K                       |  | 000-5195206909836       |  | 4.2     |  | 06/16/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.10         |  | Alliance GP, LLC Deferred Compensation Plan for Directors                                                                                                                                                                                                                                                     |  | 10-Q                      |  | 000-51952061205903      |  | 10.1    |  | 11/13/2006  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.11         |  | Amended and Restated Charter for the Audit Committee of the Board of Directors dated March 5, 2009                                                                                                                                                                                                            |  | 10-K                      |  | 000-5195209660970       |  | 10.12   |  | 03/06/2009  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.12(1)      |  | Note Purchase Agreement, dated as of August 16, 1999, among Alliance Resource GP, LLC and the purchasers named therein                                                                                                                                                                                        |  | 10-K                      |  | 000-26823583595         |  | 10.20   |  | 03/29/2000  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.13(1)      |  | Promissory Note Agreement dated as of October 2, 2001, between Alliance Resource Partners, L.P. and Bank of the Lakes, N.A.                                                                                                                                                                                   |  | 10-Q                      |  | 000-268231782487        |  | 10.26   |  | 11/13/2001  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.14(1)      |  | Guarantee Agreement, dated as of October 2, 2001, between Alliance Resource GP, LLC and Bank of the Lakes, N.A.                                                                                                                                                                                               |  | 10-Q                      |  | 000-268231782487        |  | 10.27   |  | 11/13/2001  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.15(1)      |  | Contribution and Assumption Agreement, dated August 16, 1999, among Alliance Resource Holdings, Inc., Alliance Resource Management GP, LLC, Alliance Resource GP, LLC, Alliance
Resource Partners, L.P., Alliance Resource Operating Partners, L.P. and the other parties named therein                       |  | 10-K                      |  | 000-26823583595         |  | 10.3    |  | 03/29/2000  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.16(1)      |  | Omnibus Agreement, dated August 16, 1999, among Alliance Resource Holdings, Inc., Alliance Resource Management GP, LLC, Alliance Resource GP, LLC and Alliance Resource Partners,
L.P.                                                                                                                        |  | 10-K                      |  | 000-26823583595         |  | 10.4    |  | 03/29/2000  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.17(1)(2)   |  | Amended and Restated Alliance Coal, LLC 2000 Long-Term Incentive Plan                                                                                                                                                                                                                                         |  | 10-K                      |  | 000-2682304667577       |  | 10.17   |  | 03/15/2004  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.18(1)(2)   |  | First Amendment to the Alliance Coal, LLC 2000 Long-Term Incentive Plan                                                                                                                                                                                                                                       |  | 10-K                      |  | 000-2682304667577       |  | 10.18   |  | 03/15/2004  |  |               |  | 
|              |  |                                                                                                                                                                                                                                                                                                               |  |                           |  |                        
|10.19(1)(2)   |  | Alliance Coal, LLC Short-Term Incentive Plan                                                                                                                                                                                                                                                                  |  | 10-K                      |  | 000-26823583595         |  | 10.12   |  | 03/29/2000  |  |               |  | 



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|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  |  |  | 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----- |  | ----------------------- |  | ------------------ | ------- |  |  | ----------- |  |  | ------------- | ---------- |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  | Incorporated by Reference |      
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                 |  | Form                      |       |  | SECFile No. andFilm No. |  |                    | Exhibit |  |  | Filing Date |  |  | FiledHerewith |           
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.20(1)(2)   |  | Alliance Coal, LLC Supplemental Executive Retirement Plan                                                                                                                                                                                                                                                                                           |  |                           | S-8   |  |                         |  | 333-8525802595143  |         |  |  | 99.2        |  |  |               | 04/01/2002 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.21(1)(2)   |  | Alliance Resource Management GP, LLC Deferred Compensation Plan for Directors                                                                                                                                                                                                                                                                       |  |                           | S-8   |  |                         |  | 333-8525802595143  |         |  |  | 99.3        |  |  |               | 04/01/2002 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.22(1)      |  | Restated and Amended Coal Supply Agreement, dated February 1, 1986, among Seminole Electric Cooperative, Inc., Webster County Coal Corporation and White County Coal
Corporation                                                                                                                                                                    |  |                           | S-1/A |  |                         |  | 333-7884599667220  |         |  |  | 10.9        |  |  |               | 07/20/1999 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.23(1)      |  | Amendment No. 1 to the Restated and Amended Coal Supply Agreement effective April 1, 1996, between MAPCO Coal Inc., Webster County Coal Corporation, White County Coal Corporation,
and Seminole Electric Cooperative, Inc.                                                                                                                         |  |                           | 10-Q  |  |                         |  | 000-26823693139    |         |  |  | 10.14       |  |  |               | 08/11/2000 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.24(1)      |  | Agreement for the Supply of Coal to the Mt. Storm Power Station, dated June 22, 2005, between Virginia Electric and Power Company and Alliance Coal, LLC                                                                                                                                                                                            |  |                           | 8-K   |  |                         |  | 000-2682305917813  |         |  |  | 10.1        |  |  |               | 06/27/2005 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.25(1)(3)   |  | Ancillary Services Agreement, dated June 22, 2005, between Virginia Electric and Power Company and Alliance Coal, LLC                                                                                                                                                                                                                               |  |                           | 8-K   |  |                         |  | 000-2682305917813  |         |  |  | 10.2        |  |  |               | 06/27/2005 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.26(1)(3)   |  | Amended and Restated Lease Agreement, dated June 22, 2005, between Virginia Electric and Power Company and Mettiki Coal, LLC                                                                                                                                                                                                                        |  |                           | 8-K   |  |                         |  | 000-2682305917813  |         |  |  | 10.3        |  |  |               | 06/27/2005 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.27(1)(3)   |  | Amended and Restated Equipment Lease Agreement (Existing Truck Unloading Facility), dated June 22, 2005, between Virginia Electric and Power Company and Mettiki Coal,
LLC                                                                                                                                                                          |  |                           | 8-K   |  |                         |  | 000-2682305917813  |         |  |  | 10.4        |  |  |               | 06/27/2005 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.28(1)      |  | Guaranty by Alliance Coal, LLC dated October 25, 2005                                                                                                                                                                                                                                                                                               |  |                           | 10-K  |  |                         |  | 000-2682306691048  |         |  |  | 10.28       |  |  |               | 03/16/2006 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.29(1)(3)   |  | Amendment No. 1 to the Agreement for the Supply of Coal to Mt. Storm Power Station, made effective January 1, 2007, between Virginia Electric and Power Company and Alliance Coal,
LLC                                                                                                                                                              |  |                           | 8-K   |  |                         |  | 000-2682307634133  |         |  |  | 10.1        |  |  |               | 02/20/2007 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.30(1)(3)   |  | Memorandum of Understanding, made effective January 1, 2007, between Virginia Electric and Power Company, and Alliance Coal, LLC, Mettiki Coal (WV), LLC and Mettiki Coal,
LLC                                                                                                                                                                      |  |                           | 10-K  |  |                         |  | 000-2682307660999  |         |  |  | 10.33       |  |  |               | 03/01/2007 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                     |  |                           |       | 
|10.31(1)      |  | Second Amendment to the Omnibus Agreement dated May 15, 2006 by and among Alliance Resource Partners, L.P., Alliance Resource GP, LLC, Alliance Resource Management GP, LLC, Alliance
Resource Holdings, Inc., Alliance Resource Holdings II, Inc., AMH-II, LLC, Alliance Holdings GP, L.P., Alliance GP, LLC and Alliance Management Holdings, LLC |  |                           | 10-Q  |  |                         |  | 000-26823061017824 |         |  |  | 10.1        |  |  |               | 08/09/2006 |  |  |  |  | 



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|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  |  |  | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---- |  | ----------------------- |  | ------------------ | ------- |  |  | ----------- |  |  | ------------- | ---------- |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Incorporated by Reference |     
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Form                      |      |  | SECFile No. andFilm No. |  |                    | Exhibit |  |  | Filing Date |  |  | FiledHerewith |           
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.32(1)      |  | Administrative Services Agreement dated May 15, 2006 among Alliance Resource Partners, L.P., Alliance Resource Management GP, LLC, Alliance Resource Holdings II, Inc., Alliance
Holdings GP, L.P. and Alliance GP, LLC                                                                                                                                                                                                                                                                                                                      |  |                           | 10-Q |  |                         |  | 000-26823061017824 |         |  |  | 10.2        |  |  |               | 08/09/2006 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.33(1)(3)   |  | Financial Covenants Agreement dated October 25, 2005 by and between Seminole Electric Corporation, Inc. and Alliance Coal, LLC                                                                                                                                                                                                                                                                                                                                                                                                               |  |                           | 10-K |  |                         |  | 000-2682306691048  |         |  |  | 10.29       |  |  |               | 03/16/2006 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.34(1)(2)   |  | First Amendment to the Amended and Restated Alliance Coal, LLC Supplemental Executive Retirement Plan                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           | 10-K |  |                         |  | 000-2682307660999  |         |  |  | 10.50       |  |  |               | 03/01/2007 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.35(1)(2)   |  | Second Amendment to the Amended and Restated Alliance Coal, LLC Supplemental Executive Retirement Plan                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                           | 10-K |  |                         |  | 000-2682308654096  |         |  |  | 10.50       |  |  |               | 02/29/2008 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.36(1)(2)   |  | Second Amendment to the Amended and Restated Alliance Coal, LLC Long-Term Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                           | 10-K |  |                         |  | 000-2682307660999  |         |  |  | 10.51       |  |  |               | 03/01/2007 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.37(1)(2)   |  | First Amendment to the Alliance Coal, LLC Short-Term Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                           | 10-K |  |                         |  | 000-2682307660999  |         |  |  | 10.52       |  |  |               | 03/01/2007 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.38(1)(2)   |  | Second Amendment to the Alliance Coal, LLC Short-Term Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                           | 10-K |  |                         |  | 000-2682308654096  |         |  |  | 10.53       |  |  |               | 02/29/2008 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.39(1)(2)   |  | First Amendment to the Alliance Resource Management GP, LLC Deferred Compensation Plan for Directors                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                           | 10-K |  |                         |  | 000-2682307660999  |         |  |  | 10.53       |  |  |               | 03/01/2007 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.40(1)(2)   |  | Second Amendment to the Alliance Resource Management GP, LLC Deferred Compensation Plan for Directors                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           | 10-K |  |                         |  | 000-2682308654096  |         |  |  | 10.55       |  |  |               | 02/29/2008 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.41(1)      |  | Amendment No. 2 to Letter of Credit Facility Agreement between Alliance Resource Partners, L.P. and Bank of the Lakes, National Association, dated April 13, 2009                                                                                                                                                                                                                                                                                                                                                                            |  |                           | 10-Q |  |                         |  | 000-2682309811514  |         |  |  | 10.1        |  |  |               | 05/08/2009 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.42         |  | Amendment No. 2, dated as of September 30, 2009, to the Second Amended and Restated Credit Agreement, dated as of September 25, 2007, among Alliance Resource Operating Partners,
L.P. as Borrower, the Initial Lenders, Initial Issuing Banks and Swing Line Bank, in each case as named therein, JPMorgan Chase Bank, N.A. as Paying Agent, Citicorp USA, Inc. and JPMorgan Chase Bank, N.A. as Co-Administrative Agents, and Citigroup
Global Markets Inc. and J.P. Morgan Securities, Inc. as Joint Lend Arrangers and Joint Bookrunners |  |                           | 8-K  |  |                         |  | 000-51952091107772 |         |  |  | 10.1        |  |  |               | 10/06/2009 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.43         |  | Amendment No. 1 to Revolving Credit Facility dated March 12, 2007 between Alliance Holdings GP, L.P. and C-Holdings, LLC                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                           | 10-K |  |                         |  | 000-5195207695716  |         |  |  | 10.63       |  |  |               | 03/15/2007 |  |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                           |      | 
|10.44         |  | Amendment No. 2 to Revolving Credit Facility dated March 5, 2008 between Alliance Holdings GP, L.P. and C-Holdings, LLC                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                           | 10-K |  |                         |  | 000-5195208673302  |         |  |  | 10.67       |  |  |               | 03/07/2008 |  |  |  |  | 



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|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  |  |   | 
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---- |  | ----------------------- |  | ------------------ | ------- |  |  | ----------- |  |  | ------------- | ---------- |  |  |  | - | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Incorporated by Reference |     
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Form                      |      |  | SECFile No. andFilm No. |  |                    | Exhibit |  |  | Filing Date |  |  | FiledHerewith |           
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.45(2)      |  | First Amendment to the Alliance GP, LLC Directors Annual Retainer and Deferred Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                           | 10-K |  |                         |  | 000-5195208673302  |         |  |  | 10.68       |  |  |               | 03/07/2008 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.46(2)      |  | Amended and Restated Alliance GP, LLC Directors Annual Retainer and Deferred Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                           | 10-K |  |                         |  | 000-5195209660970  |         |  |  | 10.60       |  |  |               | 03/06/2009 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.47(2)      |  | Amended and Restated Alliance GP, LLC Deferred Compensation Plan for Directors dated as of January 1, 2011                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  |  | x | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.48         |  | Second Amended and Restated Credit Agreement, dated as of September 25, 2007, among Alliance Resource Operating Partners, L.P. as Borrow and the Initial Lenders, Initial Issuing
Banks and Swing Line Bank and JPMorgan Chase Bank, N.A. as Paying Agent and Citicorp USA, Inc. and JP Morgan Chase Bank, N.A. as Co-Administrative Agents and Citigroup Global Markets Inc. and J.P. Morgan Securities In. as Joint Lead Arrangers and
Joint Bookrunners                                                                                     |  |                           | 8-K  |  |                         |  | 000-51952071138110 |         |  |  | 99.1        |  |  |               | 09/27/2007 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.49         |  | Note Purchase Agreement, 6.28% Senior Notes Due June 26, 2015, and 6.72% Senior Notes due June 26, 2018, dated as of June 26, 2008, by and among Alliance Resource Operating
Partners, L.P. and various investors                                                                                                                                                                                                                                                                                                                              |  |                           | 8-K  |  |                         |  | 000-5195208928983  |         |  |  | 10.1        |  |  |               | 07/01/2008 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.50         |  | First Amendment, dated as of June 26, 2008, to the Note Purchase Agreement, dated August 16, 1999, 8.31% Senior Notes due August 20, 2014, by and among Alliance Resource Operating
Partners, L.P. (as successor to Alliance Resource GP, LLC) and various investors                                                                                                                                                                                                                                                                           |  |                           | 8-K  |  |                         |  | 000-5195208928983  |         |  |  | 10.2        |  |  |               | 07/01/2008 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.51         |  | Letter Amendment No. 1, dated as of June 26, 2008, to the Second Amended and Restated Credit Agreement, dated as of September 25, 2007, among Alliance Resource Operating Partners,
L.P. as Borrower, the Initial Lenders, Initial Issuing Banks and Swing Line Bank, in each case as named therein, JPMorgan Chase Bank, N.A. as Paying Agent, Citicorp USA, Inc. and JPMorgan Chase Bank, N.A. as Co-Administrative Agents, and Citigroup
Global Markets Inc. and J.P. Morgan Securities, Inc. as Joint Lead Arrangers and Joint Bookrunners |  |                           | 8-K  |  |                         |  | 000-5195208928983  |         |  |  | 99.1        |  |  |               | 07/01/2008 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.52         |  | Term Loan Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                           | 8-K  |  |                         |  | 000-5195211502830  |         |  |  | 99.1        |  |  |               | 01/04/2011 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.53(1)(2)   |  | Third Amendment to the Amended and Restated Alliance Coal, LLC Supplemental Executive Retirement Plan                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                           | 10-K |  |                         |  | 000-2682309647063  |         |  |  | 10.52       |  |  |               | 03/02/2009 |  |  |  |   | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                           |      | 
|10.54(1)(2)   |  | Amended and Restated Alliance Coal, LLC Supplemental Executive Retirement Plan dated as of January 1, 2011                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                           | 10-K |  |                         |  | 000-2682311645603  |         |  |  | 10.40       |  |  |               | 02/28/2011 |  |  |  |   | 



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|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  |   |  | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---- |  | ----------------------- |  | ------------------ | ------- |  |  | ----------- |  |  | ------------- | ---------- |  |  | - |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Incorporated by Reference |     
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Form                      |      |  | SECFile No. andFilm No. |  |                    | Exhibit |  |  | Filing Date |  |  | FiledHerewith |           
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|10.55(1)(2)   |  | Second Amended and Restated Alliance Resource Management GP, LLC Deferred Compensation Plan for Directors                                                                                                                                                                                                                                                                                                                              |  |                           | 10-K |  |                         |  | 000-2682309647063  |         |  |  | 10.53       |  |  |               | 03/02/2009 |  |  |   |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|10.56(1)(2)   |  | Amended and Restated Alliance Resource Management GP, LLC Deferred Compensation Plan for Directors dated as of January 1, 2011                                                                                                                                                                                                                                                                                                         |  |                           | 10-K |  |                         |  | 000-2682311645603  |         |  |  | 10.42       |  |  |               | 2/28/2011  |  |  |   |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|10.57(1)(2)   |  | Agreement for the Supply of Coal, dated August 20, 2009 between Tennessee Valley Authority and Alliance Coal, LLC                                                                                                                                                                                                                                                                                                                      |  |                           | 10-Q |  |                         |  | 000-51952091164905 |         |  |  | 10.2        |  |  |               | 11/06/2009 |  |  |   |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|10.58(3)      |  | Amendment No. 5 effective January 1, 2010, between Seminole Electric Cooperative, Inc. and Webster County Coal, LLC (successor-in-interest to Webster County Coal Corporation), White
County Coal, LLC (successor-in-interest to White County Coal Corporation), and Alliance Coal, LLC, as successor-in-interest to Mapco Coal, Inc. and agent for Webster County Coal, LLC and White County Coal, LLC, to the Coal Supply
Agreement. |  |                           | 10-Q |  |                         |  | 000-5195210811713  |         |  |  | 10.1        |  |  |               | 05/07/2010 |  |  |   |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|10.59         |  | Amended and Restated Administrative Services Agreement effective January 1, 2010, among Alliance Resource Partners, L.P., Alliance Resource Management GP, LLC, Alliance Resource
Holdings II, Inc., Alliance Resource Operating Partners, L.P., Alliance Holdings GP, L.P. and Alliance GP, LLC.                                                                                                                                      |  |                           | 10-Q |  |                         |  | 000-5195210111584  |         |  |  | 10.1        |  |  |               | 08/09/2010 |  |  |   |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|10.60         |  | Uncommitted Line of Credit and Reimbursement Agreement dated April 9, 2010 between Alliance Resource Partners, L.P. and Fifth Third Bank.                                                                                                                                                                                                                                                                                              |  |                           | 10-Q |  |                         |  | 000-5195210111584  |         |  |  | 10.2        |  |  |               | 08/09/2010 |  |  |   |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|14.1          |  | Code of Ethics for Principal Executive Officers and Senior Financial Officers                                                                                                                                                                                                                                                                                                                                                          |  |                           | 10-K |  |                         |  | 000-5195207695716  |         |  |  | 14.1        |  |  |               | 03/15/2007 |  |  |   |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|21.1          |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  | x |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|23.1          |  | Consent of Deloitte and Touche LLP regarding Form S-3, Registration Statement No. 333-143463.                                                                                                                                                                                                                                                                                                                                          |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  | x |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|31.1          |  | Certification of Joseph W. Craft III, President and Chief Executive Officer of Alliance GP, LLC, the managing general partner of Alliance Holdings GP, L.P., dated March 8, 2011,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                           |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  | x |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|31.2          |  | Certification of Brian L. Cantrell, Senior Vice President and Chief Financial Officer of Alliance GP, LLC, the managing general partner of Alliance Holdings GP, L.P., dated March 8,
2011, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                 |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  | x |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                           |      | 
|32.1          |  | Certification of Joseph W. Craft III, President and Chief Executive Officer of Alliance GP, LLC, the managing general partner of Alliance Holdings GP, L.P., dated March 8, 2011,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                           |  |                           |      |  |                         |  |                    |         |  |  |             |  |  |               |            |  |  | x |  | 



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|              |  |                                                                                                                                                                                                                                                        |  |                           |  |  |                          |  |  |         |  |  |             |  |  |               |  |  |  |  
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------- |  |  | ------------------------ |  |  | ------- |  |  | ----------- |  |  | ------------- |  |  |  | -
|              |  |                                                                                                                                                                                                                                                        |  | Incorporated by Reference
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                    |  | Form                      |  |  | SECFile No. 
andFilm No. |  |  | Exhibit |  |  | Filing Date |  |  | FiledHerewith
|              |  |                                                                                                                                                                                                                                                        |  |                           |  | 
|32.2          |  | Certification of Brian L. Cantrell, Senior Vice President and Chief Financial Officer of Alliance GP, LLC, the managing general partner of Alliance Holdings GP, L.P., dated March 8,
2011, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |  |                           |  |  |                          |  |  |         |  |  |             |  |  |               |  |  |  | x



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

|(2) | Denotes management contract or compensatory plan or arrangement.
|--- | ----------------------------------------------------------------

|(3) | Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended, and the
omitted material has been separately filed with the Securities and Exchange Commission.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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 March 8, 2011.



ALLIANCE HOLDINGS GP, L.P.By:

Alliance GP, LLCits general partner/s/ Joseph W. Craft IIIJoseph W. Craft IIIPresident, Chief Executive Officer and Director/s/ Brian L. CantrellBrian L. CantrellSenior Vice President and Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                            |  |                                                                                                |  |              
|------------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------
|Signature                                   |  | Title                                                                                          |  | Date         
|                                            |  |                                                                                               
|/s/ Joseph W. Craft III Joseph W. Craft III |  | President, Chief Executive Officer, and Director (Principal Executive Officer)                 |  | March 8, 2011
|                                            |  |                                                                                               
|/s/ Brian L. Cantrell Brian L. Cantrell     |  | Senior Vice President and
Chief Financial Officer (Principal Financial and
Accounting Officer) |  | March 8, 2011
|                                            |  |                                                                                               
|/s/ Michael J. Hall Michael J. Hall         |  | Director                                                                                       |  | March 8, 2011
|                                            |  |                                                                                               
|/s/ Thomas M. Davidson Thomas M. Davidson   |  | Director                                                                                       |  | March 8, 2011
|                                            |  |                                                                                               
|/s/ Robert J. Druten Robert J. Druten       |  | Director                                                                                       |  | March 8, 2011



146