1086600--3/16/2006--ALLIANCE_RESOURCE_PARTNERS

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Risks Inherent in an Investment in us A substantial or extended decline in coal prices could negatively impact our results of operations. A material amount of our net income and cash flow is dependent on our continued ability to realize direct or indirect benefits from federal income tax credits such as non-conventional source fuel tax credits. If the benefit to us from any of these tax credits is materially reduced, it could negatively impact our results of operations and reduce our cash available for distributions. The non-conventional source fuel tax credit is scheduled to expire on December 31, 2007. A loss of the benefit from state tax credits may adversely affect our ability to pay our quarterly distribution Competition within the coal industry may adversely affect our ability to sell coal, and excess production capacity in the industry could put downward pressure on coal prices. Any change in consumption patterns by utilities away from the use of coal could affect our ability to sell the coal we produce. From time to time conditions in the coal industry may make it more difficult for us to extend existing or enter into new long-term coal supply agreements. This could affect the stability and profitability of our operations. Some of our long-term coal supply agreements contain provisions allowing for the renegotiation of prices and, in some instances, the termination of the contract or the suspension of purchases by customers. Extensive environmental laws and regulations affect coal consumers, which have corresponding effects on the demand for our coal as a fuel source. We depend on a few customers for a significant portion of our revenues, and the loss of one or more significant customers could affect our ability to maintain the sales volume and price of the coal we produce. Litigation relating to disputes with our customers may result in substantial costs, liabilities and loss of revenues. Our profitability may decline due to unanticipated mine operating conditions and other factors that are not within our control. Coal mining is subject to inherent risks that are beyond our control, and these risks may not be fully covered under our insurance policies. A shortage of skilled labor may make it difficult for us to maintain labor productivity and competitive costs and could adversely affect our profitability. Although none of our employees are members of unions, our work force may not remain union-free in the future. We may be unable to obtain and renew permits necessary for our operations, which could reduce our production, cash flow and profitability. Fluctuations in transportation costs and the availability or reliability of transportation could reduce revenues by causing us to reduce our production or by impairing our ability to supply coal to our customers. Expansions of existing mines that we have completed since our formation, as well as mine expansions that we may undertake in the future, involve a number of risks, any of which could cause us not to realize the anticipated benefits. We may not be able to successfully grow through future acquisitions, and we may not be able to effectively integrate the various businesses or properties we acquire. The unavailability of an adequate supply of coal reserves that can be mined at competitive costs could cause our profitability to decline. The estimates of our coal reserves may prove inaccurate, and you should not place undue reliance on these estimates. Mining in certain areas in which we operate is more difficult and involves more regulatory constraints than mining in other areas of the United States, which could affect the mining operations and cost structures of these areas. Unexpected increases in raw material costs could significantly impair our operating profitability. Cash distributions are not guaranteed and may fluctuate with our performance. In addition, our managing general partner s discretion in establishing financial reserves may negatively impact our receipt of cash distributions. Our indebtedness may limit our ability to borrow additional funds, make distributions to unitholders or capitalize on business opportunities. Federal and state laws require bonds to secure our obligations related to the statutory requirement that we return mined property to its approximate original condition and workers compensation and black lung benefits. Our inability to acquire or failure to maintain surety bonds that are required by state and federal law would have a material adverse effect on us. Our 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 our ability to produce coal. Some of our operating subsidiaries lease a portion of the surface properties upon which their mining facilities are located. Tax Risks to Our Common Unitholders If we were to become subject to entity-level taxation for federal or state tax purposes, then our cash available for distribution to you would be substantially reduced. A successful IRS contest of the federal income tax positions we take may adversely impact the market for our common units, and the costs of any contest will reduce cash available for distribution to 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. Tax gain or loss on the disposition of our units could be different than expected. Tax-exempt entities and foreign persons face unique tax issues from owning units that may result in adverse tax consequences to them. We will 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. You will likely be subject to state and local taxes and income tax return filing requirements as a result of investing in our units. The sale or exchange of 50% or more of our capital and profits interests within a 12-month period will result in the termination of our partnership for federal income tax purposes.

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1086600--3/16/2006--ALLIANCE_RESOURCE_PARTNERS_LP