SunCoke Energy, Inc.SXC
SunCoke Energy, Inc. Commitments Disclosure
13. Commitments and Contingent Liabilities
Legal Matters
Between 2005 and 2012, the EPA and the Ohio Environmental Protection Agency (“OEPA”) issued Notices of Violations (“NOVs”), alleging violations of air emission operating permits for our Haverhill and Granite City cokemaking facilities. We worked in a cooperative manner with the EPA, the OEPA and the Illinois Environmental Protection Agency to address the allegations and, in November 2014, entered into a consent decree with these parties in federal district court in the
Southern District of Illinois. The consent decree included a civil penalty paid in December 2014, and a commitment to undertake capital projects to improve reliability and enhance environmental performance. All projects regarding the consent decree have been completed. On March 25, 2025, the consent decree was terminated for the Haverhill facility. The consent decree remains in effect for the Granite City facility and is being overseen for compliance.
The Company is a party to certain pending and threatened claims, including matters related to commercial disputes, employment claims, personal injury claims, common law tort claims, and environmental claims. Although the ultimate outcome of these claims cannot be ascertained at this time, it is reasonably possible that some portion of these claims could be resolved unfavorably to the Company. Management of the Company believes that any liability which may arise from these claims would likely not have a material adverse impact on our consolidated financial statements. SunCoke's threshold for disclosing material legal proceedings involving a government authority where potential monetary sanctions are involved is $1 million.
Black Lung Benefit Liabilities
The Company has obligations to provide certain black lung benefits to legacy coal miners and their dependents under Title IV of the Federal Coal Mine Health and Safety Act of 1969, as amended (“Black Lung Benefits Act”), as well as for black lung benefits in the states of Virginia, Kentucky and West Virginia pursuant to state workers’ compensation legislation.
We adjust our liability each year based upon actuarial calculations of our expected future payments for these benefits. Our independent actuarial consultants calculate the present value of the estimated black lung liability annually in the fourth quarter, unless there are changes in facts and circumstances that could materially alter the amount of the liability, based on actuarial models utilizing our population of legacy coal miners, historical payout patterns of both the Company and the industry, expected claim filing patterns, expected claimant success rates, actuarial mortality rates, medical costs, death benefits, dependents, discount rates and the current federally mandated payout rates. The estimated liability may be impacted by future changes in the applicable laws, as interpreted by the courts, and changes in filing patterns by claimants and their advisors, the impact of which cannot be estimated.
On February 1, 2013, SunCoke obtained commercial insurance for state and federal black lung claims, in excess of a deductible, for employees with a last date of employment after that date. For claims based on employment that ended prior to February 1, 2013, SunCoke was reauthorized by the U.S. Department of Labor’s Division of Coal Mine Workers Compensation (“DCMWC”) to self-insure its black lung liabilities for $8.4 million. On February 21, 2020, DCMWC made an initial security determination to increase the amount of SunCoke’s collateral requirement for self-insured claims to $40.4 million. The Company appealed the security determination to the DCMWC. On August 13, 2024, the Company and DCMWC agreed that the Company would make a lump sum payment of $36.0 million to satisfy its self-insured federal black lung liabilities, with limited exceptions estimated to be approximately $1.4 million. In exchange, the DCMWC agreed to permanently assume responsibility for payment of black lung benefits for claims based on employment that ended prior to February 1, 2013, and SunCoke received a certificate of exemption that eliminates the Company’s responsibility for future payments arising from claims based on employment that ended prior to February 1, 2013, excluding limited exceptions estimated to be approximately $1.4 million. This agreement resulted in a reduction of $45.5 million of the Company's black lung liability, and a one-time gain of $9.5 million within selling, general and administrative expenses on the Consolidated Statements of Operations during the year ended December 31, 2024. The Company no longer maintains any collateral to self-insure its former black lung liabilities incurred prior to February 1, 2013. The Company’s commercially insured federal and state black lung liabilities are not impacted by this agreement.
Additionally, on January 19, 2023, the Department of Labor proposed a new rule that would require self-insured operators to post collateral in the amount of 120 percent of the company's total expected lifetime black lung liabilities as determined by the DCMWC. This proposed new rule and any future rulings would not apply to SunCoke as a result of the regulatory exemption detailed above.
The following table summarizes discount rates utilized, active claims and total black lung liabilities:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
Discount rate(1) | 4.5 | % | 4.5 | % | |||||||
| Active claims | 48 | 57 | |||||||||
Total black lung liability, discounted(2) | $ | 12.6 | $ | 13.7 | |||||||
| Total black lung liability, undiscounted | $ | 23.4 | $ | 25.3 | |||||||
(1)The discount rate is determined based on a portfolio of high-quality corporate bonds with maturities that are consistent with the estimated duration of our black lung obligations. A decrease of 25 basis points in the discount rate would have increased black lung expense by $0.4 million in 2025.
(2)The current portion of the black lung liability was $0.9 million and $1.0 million at December 31, 2025 and 2024, respectively, and was included in accrued liabilities on the Consolidated Balance Sheets.
Expected payments for each of the five succeeding years and the aggregate amount thereafter as of December 31, 2025:
| (Dollars in millions) | |||||
| 2026 | $ | 0.9 | |||
| 2027 | 0.8 | ||||
| 2028 | 1.3 | ||||
| 2029 | 1.0 | ||||
| 2030 | 0.9 | ||||
| 2031-Thereafter | 18.5 | ||||
| Total | $ | 23.4 | |||
The following table reconciles the expected aggregate undiscounted amount to amounts recognized in the Consolidated Balance Sheets:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
| Black lung liability, undiscounted | $ | 23.4 | $ | 25.3 | |||||||
| Impact of discounting | (10.8) | (11.6) | |||||||||
| Black lung liability, discounted | $ | 12.6 | $ | 13.7 | |||||||
The following table summarizes the annual black lung payments and (benefit) expense:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
Payments(1) | $ | 1.0 | $ | 40.4 | $ | 5.4 | |||||||||||
(Benefit) expense(2) | $ | (0.1) | $ | (4.1) | $ | 5.5 | |||||||||||
(1)Payments for the year ended December 31, 2024 represent $4.4 million of black lung benefit payments made by the Company and the $36.0 million payment made to the DCMWC related to the regulatory exemption detailed above.
(2)The benefit for the year ended December 31, 2024 includes $5.4 million of accretion expense of the black lung liability and a $9.5 million gain related to the regulatory exemption detailed above. The $9.5 million gain is included in selling, general and administrative expense on the Consolidated Statements of Operations.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.