Edgar Filing: CONSOL Energy Inc

CNX-6.30.11-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

__________________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2011



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-14901

__________________________________________________

CONSOL Energy Inc.

(Exact name of registrant as specified in its charter)



Delaware		51-0337383
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1000 CONSOL Energy Drive

Canonsburg, PA 15317-6506

(724) 485-4000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

__________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.



Class		Shares outstanding as of July 19, 2011
Common stock, $0.01 par value		226,743,672

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION

ITEM 1.	Condensed Financial Statements
	Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010	3
	Consolidated Balance Sheets at June 30, 2011 and December 31, 2010	4
	Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2011	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010	7
	Notes to Unaudited Consolidated Financial Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	86

ITEM 4.	Controls and Procedures	87

PART II OTHER INFORMATION

ITEM 1.	Legal Proceedings	88

ITEM 5.	Other Information	88

ITEM 6.	Exhibits	91

PART I

FINANCIAL INFORMATION


ITEM 1.	CONDENSED FINANCIAL STATEMENTS

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Sales—Outside	$	1,486,000	$	1,220,116		$	2,871,478	$	2,389,630
Sales—Gas Royalty Interests	16,273		14,151			35,108		28,490
Sales—Purchased Gas	1,162		1,740			2,142		4,756
Freight—Outside	59,572		28,075			96,440		59,275
Other Income	24,921		25,265			48,137		47,256
Total Revenue and Other Income	1,587,928		1,289,347			3,053,305		2,529,407
Cost of Goods Sold and Other Operating Charges (exclusive of depreciation, depletion and amortization shown below)	927,399		818,771			1,741,108		1,585,633
Acquisition and Financing Fees	—		17,515			—		64,078
Loss on Debt Extinguishment	16,090		—			16,090		—
Gas Royalty Interests Costs	14,366		11,528			31,173		23,725
Purchased Gas Costs	1,776		1,339			2,452		3,647
Freight Expense	59,572		28,075			96,251		59,275
Selling, General and Administrative Expenses	43,423		39,045			83,619		69,175
Depreciation, Depletion and Amortization	157,800		132,764			306,862		251,950
Abandonment of Long-Lived Assets	115,479		—			115,479		—
Interest Expense	64,597		65,038			131,079		73,183
Taxes Other Than Income	88,642		79,124			179,331		160,425
Total Costs	1,489,144		1,193,199			2,703,444		2,291,091
Earnings Before Income Taxes	98,784		96,148			349,861		238,316
Income Taxes	21,400		25,248			80,328		59,534
Net Income	77,384		70,900			269,533		178,782
Less: Net Income Attributable to Noncontrolling Interest	—		(4,232		)	—		(11,845		)
Net Income Attributable to CONSOL Energy Inc. Shareholders	$	77,384	$	66,668		$	269,533	$	166,937
Earnings Per Share:
Basic	$	0.34	$	0.30		$	1.19	$	0.82
Dilutive	$	0.34	$	0.29		$	1.18	$	0.81
Weighted Average Number of Common Shares Outstanding:
Basic	226,647,752		225,715,539			226,499,994		203,842,526
Dilutive	229,138,024		228,081,103			228,917,335		206,311,383
Dividends Paid Per Share	$	0.10	$	0.10		$	0.20	$	0.20

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



	(Unaudited)
	June 30, 2011		December 31, 2010
ASSETS
Current Assets:
Cash and Cash Equivalents	$	26,519	$	32,794
Accounts and Notes Receivable:
Trade	433,626		252,530
Other Receivables	23,318		21,589
Accounts Receivable—Securitized	70,000		200,000
Inventories	259,663		258,538
Deferred Income Taxes	174,612		174,171
Recoverable Income Taxes	44,920		32,528
Prepaid Expenses	118,192		142,856
Total Current Assets	1,150,850		1,115,006
Property, Plant and Equipment:
Property, Plant and Equipment	15,070,923		14,951,358
Less—Accumulated Depreciation, Depletion and Amortization	4,826,375		4,822,107
Total Property, Plant and Equipment—Net	10,244,548		10,129,251
Other Assets:
Deferred Income Taxes	461,581		484,846
Restricted Cash	20,291		20,291
Investment in Affiliates	100,951		93,509
Other	222,897		227,707
Total Other Assets	805,720		826,353
TOTAL ASSETS	$	12,201,118	$	12,070,610

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)



	(Unaudited)
	June 30, 2011			December 31, 2010
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	351,356		$	354,011
Short-Term Notes Payable	260,750			284,000
Current Portion of Long-Term Debt	25,283			24,783
Borrowings Under Securitization Facility	70,000			200,000
Other Accrued Liabilities	836,862			801,991
Total Current Liabilities	1,544,251			1,664,785
Long-Term Debt:
Long-Term Debt	3,126,061			3,128,736
Capital Lease Obligations	56,186			57,402
Total Long-Term Debt	3,182,247			3,186,138
Deferred Credits and Other Liabilities:
Postretirement Benefits Other Than Pensions	3,085,834			3,077,390
Pneumoconiosis Benefits	175,523			173,616
Mine Closing	401,439			393,754
Gas Well Closing	116,096			130,978
Workers’ Compensation	149,025			148,314
Salary Retirement	136,366			161,173
Reclamation	46,661			53,839
Other	149,627			144,610
Total Deferred Credits and Other Liabilities	4,260,571			4,283,674
TOTAL LIABILITIES	8,987,069			9,134,597
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 227,289,426 Issued and 226,695,195 Outstanding at June 30, 2011; 227,289,426 Issued and 226,162,133 Outstanding at December 31, 2010	2,273			2,273
Capital in Excess of Par Value	2,207,429			2,178,604
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding	—			—
Retained Earnings	1,883,610			1,680,597
Accumulated Other Comprehensive Loss	(850,554		)	(874,338		)
Common Stock in Treasury, at Cost—594,231 Shares at June 30, 2011 and 1,127,293 Shares at December 31, 2010	(23,580		)	(42,659		)
Total CONSOL Energy Inc. Stockholders’ Equity	3,219,178			2,944,477
Noncontrolling Interest	(5,129		)	(8,464		)
TOTAL EQUITY	3,214,049			2,936,013
TOTAL LIABILITIES AND EQUITY	$	12,201,118		$	12,070,610

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)



	Common Stock		Capital in Excess of Par Value		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Common Stock in Treasury			Total CONSOL Energy Inc. Stockholders’ Equity			Non- Controlling Interest			Total Equity
Balance at December 31, 2010	$	2,273	$	2,178,604	$	1,680,597		$	(874,338	)	$	(42,659	)	$	2,944,477		$	(8,464	)	$	2,936,013
(Unaudited)
Net Income	—		—		269,533			—			—			269,533			—			269,533
Treasury Rate Lock (Net of $59 Tax)	—		—		—			(96		)	—			(96		)	—			(96		)
Gas Cash Flow Hedge (Net of $2,332 Tax)	—		—		—			(2,944		)	—			(2,944		)	—			(2,944		)
Actuarially Determined Long-Term Liability Adjustments (Net of $16,693 Tax)	—		—		—			26,824			—			26,824			—			26,824
Comprehensive Income (Loss)	—		—		269,533			23,784			—			293,317			—			293,317
Issuance of Treasury Stock	—		—		(21,227		)	—			19,079			(2,148		)	—			(2,148		)
Tax Benefit From Stock-Based Compensation	—		3,250		—			—			—			3,250			—			3,250
Amortization of Stock-Based Compensation Awards	—		25,575		—			—			—			25,575			—			25,575
Net Change in Crown Drilling Noncontrolling Interest	—		—		—			—			—			—			3,335			3,335
Dividends ($0.20 per share)	—		—		(45,293		)	—			—			(45,293		)	—			(45,293		)
Balance at June 30, 2011	$	2,273	$	2,207,429	$	1,883,610		$	(850,554	)	$	(23,580	)	$	3,219,178		$	(5,129	)	$	3,214,049

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)



	Six Months Ended
	June 30,
	2011			2010
Operating Activities:
Net Income	$	269,533		$	178,782
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Depreciation, Depletion and Amortization	306,862			251,950
Abandonment of Long-Lived Assets	115,479			—
Stock-Based Compensation	25,575			20,049
Gain on Sale of Assets	(5,139		)	(866		)
Loss on Debt Extinguishment	16,090			—
Amortization of Mineral Leases	3,578			3,981
Deferred Income Taxes	7,592			7,740
Equity in Earnings of Affiliates	(11,312		)	(8,692		)
Changes in Operating Assets:
Accounts and Notes Receivable	(51,097		)	(76,977		)
Inventories	(1,708		)	13,607
Prepaid Expenses	23,679			4,712
Changes in Other Assets	15,307			19,475
Changes in Operating Liabilities:
Accounts Payable	21,184			25,409
Other Operating Liabilities	23,391			64,643
Changes in Other Liabilities	29,607			(18,008		)
Other	6,862			20,037
Net Cash Provided by Operating Activities	795,483			505,842
Investing Activities:
Capital Expenditures	(585,441		)	(577,625		)
Acquisition of Dominion Exploration and Production Business	—			(3,475,665		)
Purchase of CNX Gas Noncontrolling Interest	—			(991,034		)
Proceeds from Sales of Assets	7,480			2,487
Net Investment in Equity Affiliates	3,870			5,101
Net Cash Used in Investing Activities	(574,091		)	(5,036,736		)
Financing Activities:
Payments on Short-Term Borrowings	(23,250		)	(114,300		)
Payments on Miscellaneous Borrowings	(7,105		)	(5,590		)
(Payments on) Proceeds from Securitization Facility	(130,000		)	150,000
Payments on Long-Term Notes, Including Redemption Premium	(265,785		)	—
Proceeds from Issuance of Long-Term Notes	250,000			2,750,000
Tax Benefit from Stock-Based Compensation	4,181			9,714
Dividends Paid	(45,293		)	(40,694		)
Proceeds from Issuance of Common Stock	—			1,828,862
Issuance of Treasury Stock	5,012			2,175
Debt Issuance and Financing Fees	(15,427		)	(80,567		)
Net Cash (Used In) Provided By Financing Activities	(227,667		)	4,499,600
Net Decrease in Cash and Cash Equivalents	(6,275		)	(31,294		)
Cash and Cash Equivalents at Beginning of Period	32,794			65,607
Cash and Cash Equivalents at End of Period	$	26,519		$	34,313

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 1—BASIS OF PRESENTATION:

The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for future periods.

The balance sheet at December 31, 2010 has been derived from the Audited Consolidated Financial Statements at that date but does not include all the notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the Consolidated Financial Statements and related notes for the year ended December 31, 2010 included in CONSOL Energy Inc.'s Form 10-K.

Basic earnings per share are computed by dividing net income by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from the assumed exercise of stock options and performance stock options and the assumed vesting of restricted and performance stock units, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and performance share options were exercised, that outstanding restricted and performance share units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period. CONSOL Energy Inc. (CONSOL Energy or Company) includes the impact of pro forma deferred tax assets in determining potential windfalls and shortfalls for purposes of calculating assumed proceeds under the treasury stock method. The table below sets forth the share-based awards that have been excluded from the computation of the diluted earnings per share because their effect would be anti-dilutive:



	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011	2010	2011	2010
Anti-Dilutive Options	987,471	822,749	1,005,303	822,749
Anti-Dilutive Restricted Stock Units	2,099	1,960	—	1,960
	989,570	824,709	1,005,303	824,709

The table below sets forth the share based awards that have been exercised or released:



	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011	2010	2011	2010
Options	58,353	62,813	238,749	122,793
Restricted Stock Units	63,228	31,576	404,369	305,344
Performance Share Units	—	—	40,752	109,955
	121,581	94,389	683,870	538,092

The weighted average exercise price per share of the options exercised during the three months ended June 30, 2011 and 2010 was $22.50 and $15.56, respectively. The weighted average exercise price per share of the options exercised during the six months ended June 30, 2011 and 2010 was $21.00 and $18.02, respectively.

The computations for basic and dilutive earnings per share from continuing operations are as follows:



	Three Month Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Net income attributable to CONSOL Energy Inc. shareholders	$	77,384	$	66,668	$	269,533	$	166,937
Weighted average shares of common stock outstanding:
Basic	226,647,752		225,715,539		226,499,994		203,842,526
Effect of stock-based compensation awards	2,490,272		2,365,564		2,417,341		2,468,857
Dilutive	229,138,024		228,081,103		228,917,335		206,311,383
Earnings per share:
Basic	$	0.34	$	0.30	$	1.19	$	0.82
Dilutive	$	0.34	$	0.29	$	1.18	$	0.81

NOTE 2—ACQUISITIONS AND DISPOSITIONS:

On April 30, 2010, CONSOL Energy completed the acquisition of the Appalachian oil and gas exploration and production business of Dominion Resources, Inc. (Dominion Acquisition) for a cash payment as of June 30, 2010 of $3,475,665. The final purchase price of $3,470,212 was principally allocated to oil and gas properties, wells and well-related equipment. The acquisition, which was accounted for under the acquisition method of accounting, includes approximately 1 trillion cubic feet equivalents (Tcfe) of net proved reserves and 1.46 million net acres of oil and gas rights within the Appalachian Basin. Included in the acreage holdings are approximately 500 thousand prospective net Marcellus Shale acres located predominantly in southwestern Pennsylvania and northern West Virginia. Dominion is a producer and transporter of natural gas as well as a provider of electricity and related services. The acquisition enhanced CONSOL Energy’s position in the strategic Marcellus Shale fairway by increasing its development assets.

The unaudited pro forma results for the three and six months ended June 30, 2010, assuming the acquisition had occurred at January 1, 2010, are presented below. Pro forma adjustments include estimated operating results, acquisition and financing fees incurred, additional interest related to the $2.75 billion of senior unsecured notes and 44,275,000 shares of common stock issued in connection with the transaction.



	Three Months		Six Months
	Ended		Ended
	June 30,		June 30,
	2010		2010
Total Revenue and Other Income	$	1,302,850	$	2,596,394
Earnings Before Income Taxes	$	105,912	$	184,608
Net Income Attributable to CONSOL Energy Inc. Shareholders	$	72,502	$	134,916
Basic Earnings Per Share	$	0.32	$	0.60
Dilutive Earnings Per Share	$	0.32	$	0.59

The pro forma results are not necessarily indicative of what actually would have occurred if the Dominion Acquisition had been completed as of January 1, 2010, nor are they necessarily indicative of future consolidated results.

On June 1, 2010, CONSOL Energy completed the acquisition of CNX Gas Corporation (CNX Gas) outstanding common stock for a cash payment of $966,811 pursuant to a tender offer followed by a short-form merger in which CNX Gas became a wholly owned subsidiary of CONSOL Energy (CNX Gas Acquisition). All of the shares of CNX Gas that were not already owned by CONSOL Energy were acquired at a price of $38.25 per share. CONSOL Energy previously owned approximately 83.3% of the approximately 151 million shares of CNX Gas common stock outstanding. An additional $24,223 cash payment was made to cancel previously vested but unexercised CNX Gas stock options. CONSOL Energy financed the acquisition of CNX Gas shares by means of internally generated funds, borrowings under its credit facilities and proceeds from its offering of common stock.

CONSOL Energy incurred $17,515 and $64,078 of acquisition-related costs as a direct result of the Dominion and CNX Gas Acquisitions for the three and six months ended June 30, 2010, respectively. These expenses have been included within Acquisition and Financing Fees on the Consolidated Statements of Income for the period ended June 30, 2010.

In June 2010, CONSOL Energy paid Yukon Pocahontas Coal Company $30,000 cash to acquire certain coal reserves and $20,000 cash in advanced royalty payments recoupable against future production. Both payments were made per a settlement agreement in regards to the depositing of untreated water from Buchanan Mine, a mine operated by one of our subsidiaries, into the void spaces of the nearby mines of one of our other subsidiaries, Island Creek Coal Company.

In March 2010, CONSOL Energy completed the sale of the Jones Fork Mining Complex as part of a litigation settlement with Kentucky Fuel Corporation. No cash proceeds were received and $10,482 of litigation settlement expense was recorded in Cost of Goods Sold and Other Operating Charges. The loss recorded was net of $8,700 related to the fair value of estimated amounts to be collected related to an overriding royalty on future mineable and merchantable coal extracted and sold from the property.

NOTE 3—COMPONENTS OF PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS NET PERIODIC BENEFIT COSTS:

Components of net periodic costs for the three and six months ended June 30 are as follows:



	Pension Benefits												Other Postretirement Benefits
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2011			2010			2011			2010			2011			2010			2011			2010
Service cost	$	4,440		$	3,736		$	8,729		$	7,213		$	2,862		$	2,808		$	6,839		$	6,540
Interest cost	9,794			9,369			18,872			18,597			47,665			40,874			89,869			81,366
Expected return on plan assets	(9,631		)	(9,206		)	(19,261		)	(18,524		)	—			—			—			—
Amortization of prior service cost (credits)	(166		)	(183		)	(333		)	(367		)	(11,600		)	(11,604		)	(23,199		)	(23,207		)
Recognized net actuarial loss	9,905			8,070			19,051			15,935			30,318			17,674			52,682			35,072
Net periodic benefit cost	$	14,342		$	11,786		$	27,058		$	22,854		$	69,245		$	49,752		$	126,191		$	99,771

For the six months ended June 30, 2011, $31,868 in contributions were paid to the pension trust and to pension benefits from operating cash flows. CONSOL Energy expects to contribute to the pension trust using prudent funding methods. Currently, depending on asset values and asset returns held in the trust, we expect to contribute $71,700 to the pension trust in 2011.

CONSOL Energy does not expect to contribute to the other postemployment benefit plan in 2011. We intend to pay benefit claims as they become due. For the six months ended June 30, 2011, $84,862 of other postemployment benefits have been paid.

For the six months ended June 30, 2011, $7,781 of proceeds were received under the Patient Protection and Affordable Care Act related to reimbursements from the Federal government for retiree health spending. The proceeds were recorded in Accumulated Other Comprehensive Income in the Consolidated Balance Sheets. There is no guarantee that additional proceeds will be received under this program.

NOTE 4—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

Components of net periodic costs (benefits) for the three and six months ended June 30 are as follows:



	CWP												Workers’ Compensation
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2011			2010			2011			2010			2011			2010			2011			2010
Service cost	$	1,155		$	1,040		$	2,310		$	2,986		$	4,468		$	6,754		$	8,936		$	13,508
Interest cost	2,332			2,681			4,665			5,427			2,059			2,289			4,119			4,578
Amortization of actuarial gain	(5,477		)	(5,777		)	(10,955		)	(10,758		)	(976		)	(768		)	(1,953		)	(1,536		)
State administrative fees and insurance bond premiums	—			—			—			—			1,986			1,799			3,208			4,218
Legal and administrative costs	750			750			1,500			1,500			719			785			1,437			1,570
Net periodic (benefit) cost	$	(1,240	)	$	(1,306	)	$	(2,480	)	$	(845	)	$	8,256		$	10,859		$	15,747		$	22,338

CONSOL Energy does not expect to contribute to the CWP plan in 2011. We intend to pay benefit claims as they become due. For the six months ended June 30, 2011, $6,346 of CWP benefit claims have been paid.

CONSOL Energy does not expect to contribute to the workers’ compensation plan in 2011. We intend to pay benefit claims as they become due. For the six months ended June 30, 2011, $16,002 of workers’ compensation benefits, state administrative fees and surety bond premiums have been paid.

NOTE 5—INCOME TAXES:

The following is a reconciliation, stated in dollars and as a percentage of pretax income, of the U.S. statutory federal income tax rate to CONSOL Energy’s effective tax rate:



	For the Six Months Ended June 30,
	2011					2010
	Amount			Percent		Amount			Percent
Statutory U.S. federal income tax rate	$	122,451		35.0	%	$	83,411		35.0	%
Excess tax depletion	(52,839		)	(15.1	)	(30,186		)	(12.7	)
Effect of domestic production activities	(5,131		)	(1.5	)	(3,293		)	(1.4	)
Net effect of state income taxes	11,906			3.4		8,009			3.4
Other	3,941			1.2		1,593			0.7
Income Tax Expense / Effective Rate	$	80,328		23.0	%	$	59,534		25.0	%

The effective rate for the six months ended June 30, 2011 was calculated using the annual effective rate projection on recurring earnings. The effective rate for the six months ended June 30, 2010 was calculated using the annual effective rate projection on recurring earnings and includes tax liabilities related to certain discrete transactions which are described below.

CONSOL Energy was advised by the Canadian Revenue Agency and various provinces that its appeal of tax deficiencies paid as a result of the Agency's audit of the Canadian tax returns filed for years 1997 through 2003 had been successfully resolved. As a result of the audit settlement, the Company reflected $3,450 as a discrete reduction to foreign income tax expense in the six months ended June 30, 2010. As a result of the foreign income tax reduction, the Company reflected an additional $1,457 as discrete federal income tax expense. This discrete transaction was reflected in the Other line of the rate reconciliation in 2010.

As a result of the Dominion Acquisition, CONSOL Energy recognized a discrete state income tax expense of $1,782 due to the impact of the acquisition on existing deferred tax assets and liabilities in the six months ended June 30, 2010. Accordingly, a discrete reduction to federal income tax expense of $624 was also recognized related to this transaction. This discrete transaction was reflected in the Net effect of state income taxes line of the rate reconciliation in 2010.

CONSOL Energy was notified by the state of Ohio that the state had completed its audit of the Company's net operating loss (NOL) carryovers. In 2010, Ohio completed a transition from an income and franchise tax to a Commercial Activities Tax (CAT). The state's audit concluded that the CONSOL Energy is entitled to a credit for unused NOLs against future CAT liabilities. These NOLs were previously fully reserved. In the six months ended June 30, 2010, CONSOL Energy recognized a discrete reduction to state income tax expense of $2,068 related to the reversal of the previously recognized NOL allowance based on the audit settlement. This discrete transaction was reflected in the Net effect of state income taxes line of the rate reconciliation in 2010.

The total amounts of uncertain tax positions at June 30, 2011 and 2010 were $65,510 and $56,916, respectively. If these uncertain tax positions were recognized, approximately $16,802 and $15,502, respectively, would affect CONSOL Energy’s effective tax rate. There were no new uncertain tax positions taken during the six months ended June 30, 2011 and 2010.

CONSOL Energy and its subsidiaries file income tax returns in the U.S. federal, various states and Canadian tax jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2005.

CONSOL Energy recognizes interest accrued related to uncertain tax positions in its interest expense. As of June 30, 2011 and 2010, the Company reported an accrued interest liability relating to uncertain tax positions of $13,043 and $9,831, respectively. The accrued interest liability includes $2,269 and $1,493 of interest expense that is reflected in the Company’s Consolidated Statements of Income for the six months ended June 30, 2011 and 2010, respectively.

CONSOL Energy recognizes penalties accrued related to uncertain tax positions in its income tax expense. As of June 30, 2011 and 2010, CONSOL Energy had no accrued liability for tax penalties.

NOTE 6—INVENTORIES:

Inventory components consist of the following:



	June 30, 2011		December 31, 2010
Coal	$	105,860	$	108,694
Merchandise for resale	50,299		50,120
Supplies	103,504		99,724
Total Inventories	$	259,663	$	258,538

Merchandise for resale is valued using the last-in, first-out (LIFO) cost method. The excess of replacement cost of merchandise for resale inventories over carrying LIFO value was $24,608 and $19,624 at June 30, 2011 and December 31, 2010, respectively.

NOTE 7—ACCOUNTS RECEIVABLE SECURITIZATION:

CONSOL Energy and certain of our U.S. subsidiaries are party to a trade accounts receivable facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. The facility allows CONSOL Energy to receive on a revolving basis up to $200,000. The facility also allows for the issuance of letters of credit against the $200,000 capacity. At June 30, 2011, there were no letters of credit outstanding against the facility.

CNX Funding Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary, buys and sells eligible trade receivables generated by certain subsidiaries of CONSOL Energy. Under the receivables facility, CONSOL Energy and certain subsidiaries, irrevocably and without recourse, sell all of their eligible trade accounts receivable to CNX Funding Corporation, who in turn sells these receivables to financial institutions and their affiliates, while maintaining a subordinated interest in a portion of the pool of trade receivables. This retained interest, which is included in Accounts and Notes Receivable Trade in the Consolidated Balance Sheets, is recorded at fair value. Due to a short average collection cycle for such receivables, our collection experience history and the composition of the designated pool of trade accounts receivable that are part of this

program, the fair value of our retained interest approximates the total amount of the designated pool of accounts receivable. CONSOL Energy will continue to service the sold trade receivables for the financial institutions for a fee based upon market rates for similar services.

The cost of funds under this facility is based upon commercial paper rates, plus a charge for administrative services paid to the financial institutions. Costs associated with the receivables facility totaled $572 and $1,297 for three and six months ended June 30, 2011, respectively. Costs associated with the receivables facility totaled $552 and $1,005 for three and six months ended June 30, 2010, respectively. These costs have been recorded as financing fees which are included in Cost of Goods Sold and Other Operating Charges in the Consolidated Statements of Income. No servicing asset or liability has been recorded. The receivables facility expires in April 2012.

At June 30, 2011 and December 31, 2010, eligible accounts receivable totaled $200,000. There was subordinated retained interest of $130,000 at June 30, 2011 and there was no subordinated retained interest at December 31, 2010. At June 30, 2011 and December 31, 2010, $70,000 and $200,000, respectively, were recorded as Accounts Receivable – Securitization and Borrowings under the Securitization Facility on the Consolidated Balance Sheet. For the six months ended June 30, 2011 and 2010, the respective $130,000 decrease and $150,000 increase in the accounts receivable securitization program were reflected in Net Cash (Used in) Provided by Financing Activities in the Consolidated Statement of Cash Flows. In accordance with the facility agreement, the Company is able to receive proceeds based upon the eligible accounts receivable at the previous month end.

NOTE 8—PROPERTY, PLANT AND EQUIPMENT:



	June 30, 2011		December 31, 2010
Coal & other plant and equipment	$	5,059,020	$	5,100,085
Unproven gas properties	2,214,010		2,206,399
Proven gas properties	1,671,584		1,662,605
Coal properties and surface lands	1,303,991		1,292,701
Intangible drilling cost	1,285,908		1,116,884
Gas gathering equipment	1,025,893		941,772
Airshafts	673,830		662,315
Leased coal lands	539,943		536,603
Mine development	424,918		587,518
Coal advance mining royalties	393,970		389,379
Gas wells and related equipment	391,290		367,448
Other gas assets	83,216		84,571
Gas advance royalties	3,350		3,078
Total property, plant and equipment	15,070,923		14,951,358
Less Accumulated depreciation, depletion and amortization	4,826,375		4,822,107
Total Net Property, Plant and Equipment	$	10,244,548	$	10,129,251

Long-Lived Asset Abandonment

In June 2011, CONSOL Energy decided to permanently close its Mine 84 mining operation located near Washington, PA. This decision is part of CONSOL Energy's ongoing effort to reallocate resources into more profitable coal operations and Marcellus Shale drilling operations. The closure decision resulted in the recognition of an abandonment expense of $115,479 for the three and six months ended June 30, 2011. The abandonment expense resulted from the removal of the June 30, 2011 carrying value of the following Mine 84 related assets from the Consolidated Balance Sheets: Mine development - $92,136, Airshafts - $15,352, Coal equipment - $2,080, Inventories - $419, and Prepaid Expenses - $385. Additionally, the Mine 84 abandonment expense also includes the recognition of a Mine Closing expense of $5,107. The effect on net income of the Mine 84 abandonment expense was $75,061 for the three and six months ended June 30, 2011, or $0.33 per share, both basic and diluted, for both periods.

NOTE 9—SHORT-TERM NOTES PAYABLE:

On April 12, 2011, CONSOL Energy amended and extended its $1,500,000 Senior Secured Credit Agreement through April 12, 2016. The previous facility was set to expire on May 7, 2014. The amendment provides more favorable pricing and the facility continues to be secured by substantially all of the assets of CONSOL Energy and certain of its subsidiaries. CONSOL Energy's credit facility allows for up to $1,500,000 of borrowings and letters of credit. CONSOL Energy can request an additional $250,000 increase in the aggregate borrowing limit amount. Fees and interest rate spreads are based on a ratio of financial covenant debt to twelve-month trailing earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), measured quarterly. The facility includes a minimum interest coverage ratio covenant of no less than 2.50 to 1.00, measured quarterly. The interest coverage ratio was 4.90 to 1.00 at June 30, 2011. The facility includes a maximum leverage ratio covenant of not more than 4.75 to 1.00, measured quarterly. The leverage ratio was 2.42 to 1.00 at June 30, 2011. The facility also includes a senior secured leverage ratio covenant of not more than 2.00 to 1.00, measured quarterly. The senior secured leverage ratio was 0.21 to 1.00 at June 30, 2011. Affirmative and negative covenants in the facility limit our ability to dispose of assets, make investments, purchase or redeem CONSOL Energy common stock, pay dividends, merge with another corporation and amend, modify or restate the senior unsecured notes. At June 30, 2011, the $1,500,000 facility had no borrowings outstanding and $266,778 of letters of credit outstanding, leaving $1,233,222 of capacity available for borrowings and the issuance of letters of credit. The average interest rate for the three months and six months ended June 30, 2011 was 4.54% and 4.09%, respectively. Accrued interest of $148 and $249 is included in Other Accrued Liabilities in the Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, respectively.

On April 12, 2011, CNX Gas entered into a $1,000,000 Senior Secured Credit Agreement which extends until April 12, 2016. It replaced the $700,000 Senior Secured Credit Facility which was set to expire on May 6, 2014. The amendment provides more favorable pricing and the facility continues to be secured by substantially all of the assets of CNX Gas and its subsidiaries. CNX Gas' credit facility allows for up to $1,000,000 for borrowings and letters of credit. CNX Gas can request an additional $250,000 increase in the aggregate borrowing limit amount. The facility was established to meet the asset development needs of the company. Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Covenants in the facility limit CNX Gas’ ability to dispose of assets, make investments, pay dividends and merge with another corporation. The facility includes a maximum leverage ratio covenant of not more than 3.50 to 1.00, measured quarterly. The leverage ratio was 1.15 to 1.00 at June 30, 2011. The facility also includes a minimum interest coverage ratio covenant of no less than 3.00 to 1.00, measured quarterly. This ratio was 44.69 to 1.00 at June 30, 2011. At June 30, 2011, the $1,000,000 facility had $260,750 of borrowings outstanding and $70,203 of letters of credit outstanding, leaving $669,047 of capacity available for borrowings and the issuance of letters of credit. The facility bore a weighted average interest rate of 1.76% at June 30, 2011. The average interest rate for the three months and six months ended June 30, 2011 was 1.98% and 2.19%, respectively. Accrued interest of $228 and $98 is included in Other Accrued Liabilities in the Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, respectively.

NOTE 10—LONG-TERM DEBT:



	June 30, 2011		December 31, 2010
Debt:
Senior notes due April 2017 at 8.00%, issued at par value	$	1,500,000	$	1,500,000
Senior notes due April 2020 at 8.25%, issued at par value	1,250,000		1,250,000
Senior notes due March 2021 at 6.375%, issued at par value	250,000		—
Senior secured notes due March 2012 at 7.875% (par value of $250,000 less unamortized discount of $242 at December 31, 2010)	—		249,758
Baltimore Port Facility revenue bonds in series due September 2025 at 5.75%	102,865		102,865
Advance royalty commitments (7.56% weighted average interest rate for June 30, 2011 and December 31, 2010)	32,211		32,211
Note Due December 2012 at 4.28%	7,648		10,438
Other long-term notes maturing at various dates through 2031	80		93
	3,142,804		3,145,365
Less amounts due in one year	16,743		16,629
Long-Term Debt	$	3,126,061	$	3,128,736

On March 9, 2011 CONSOL Energy closed the offering of $250,000 of 6.375% senior notes which mature on March 1, 2021. The notes are guaranteed by substantially all of our existing wholly owned domestic subsidiaries.

On April 11, 2011, CONSOL Energy redeemed all of its outstanding $250,000, 7.875% senior secured notes due March 1, 2012 in accordance with the terms of the indenture governing these notes. The redemption price included principal of $250,000, a make-whole premium of $15,785 and accrued interest of $2,188 for a total redemption cost of $267,973. The loss on extinguishment of debt was $16,090, which primarily represents the interest that would have been paid on these notes if held to maturity.

Accrued interest related to Long-Term Debt of $62,870 and $64,009 was included in Other Accrued Liabilities in the Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, respectively.

NOTE 11—COMMITMENTS AND CONTINGENCIES:

CONSOL Energy and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations including environmental remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. Our current estimates related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of CONSOL Energy. However, it is reasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims, individually and in the aggregate, may be material to the financial position, results of operations or cash flows of CONSOL Energy.

Ryerson Dam Litigation: In 2008, the Pennsylvania Department of Conservation and Natural Resources (the Commonwealth) filed a six-count Complaint in the Court of Common Pleas of Allegheny County, Pennsylvania, claiming that the Company's underground longwall mining activities at its Bailey Mine caused cracks and seepage damage to the Ryerson Park Dam. The Commonwealth subsequently altered the dam, thereby eliminating the Ryerson Park Lake. The Commonwealth claimed that the Company is liable for dam reconstruction costs, lake restoration costs and natural resource damages totaling $58,000. The Court stayed the proceedings in the state court, holding that the Commonwealth should pursue administrative agency review of the claim. Furthermore, the Court found that the Commonwealth could not recover natural resource damages under applicable law. The Commonwealth then filed a subsidence-damage claim with the Pennsylvania Department of Environmental Protection (DEP) and the DEP reviewed the issue of whether the dam was damaged by subsidence. On February 16, 2010, the DEP issued its interim report, concluding that the alleged damage was subsidence related. In the next phase of the DEP proceeding, which was the damage phase, the DEP determined that the Company must repair the dam. The DEP estimated the cost of repair to be approximately $20,000. The Company has appealed the DEP's findings to the Pennsylvania Environmental Hearing Board (PEHB), which will consider the case de novo, meaning without regard to the DEP's decision, as to any finding of causation of damage and/or the amount of damages. In order to perfect its appeal to the PEHB under the applicable statute, the Company deposited $20,291 into escrow as security for the DEP's estimated cost of repair. This amount is reflected as restricted cash on the Consolidated Balance Sheets at June 30, 2011 and December 31, 2010.

The Company is seeking to substitute an appeal bond for the cash deposit. Either party may appeal the decision of the PEHB to the Pennsylvania Commonwealth Court, and then, as may be allowed, to the Pennsylvania Supreme Court. On March 31, 2011, the DEP informed the parties that it was withdrawing its Order requiring the Company to repair the dam because of additional movements of the dam site, well after mining had ceased; therefore, that movement would preclude repair of the dam as a remedy. On May 18, 2011, the DEP attempted to reinstate its order requiring repair of the dam. The Company filed a motion to vacate that order, arguing that the DEP cannot reinstate an order which was withdrawn in the manner in which the DEP attempted to do so. As to the underlying claim, the Company believes it is not responsible for the damage to the dam and that numerous grounds exist upon which to attack the propriety of the claims.

Asbestos-Related Litigation: One of our subsidiaries, Fairmont Supply Company (Fairmont), which distributes industrial supplies, currently is named as a defendant in approximately 7,500 asbestos-related claims in state courts in Pennsylvania, Ohio, West Virginia, Maryland, New Jersey, Texas and Illinois. This number has been reduced from the 22,500 pending claims that were previously reported after a review of the dockets where these cases are pending found that approximately 15,000 cases had been dismissed by administrative order, without the payment of any damages or settlement amounts. Because a very small percentage of products manufactured by third parties and supplied by Fairmont in the past may have contained asbestos and many of the pending claims are part of mass complaints filed by hundreds of plaintiffs against a hundred or more defendants, it has been difficult for Fairmont to determine how many of the cases actually involve valid claims or plaintiffs who were actually exposed to asbestos-containing products supplied by Fairmont. In addition, while Fairmont may be entitled to indemnity or contribution in certain jurisdictions from manufacturers of identified products, the availability of such indemnity or contribution is unclear at this time, and in recent years, some of the manufacturers named as defendants in these actions have sought protection from these claims under bankruptcy laws. Fairmont has no insurance coverage with respect to these asbestos cases. Past payments by Fairmont with respect to asbestos cases have not been material.

Ward Transformer Superfund Site: CONSOL Energy was notified in November 2004 by the United States Environmental Protection Agency (EPA) that it is a potentially responsible party (PRP) under the Superfund program established by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA), with respect to the Ward Transformer site in Wake County, North Carolina. At that time, the EPA also identified 38 other PRPs for the Ward Transformer site. The EPA, CONSOL Energy and two other PRPs entered into an administrative Settlement Agreement and Order of Consent, requiring those PRPs to undertake and complete a PCB soil removal action, at and in the vicinity of the Ward Transformer property. Another party joined the participating PRPs and reduced CONSOL Energy's interim allocation share from 46% to 32%. In June 2008, while conducting the PCB soil excavation on the Ward property, it was determined that PCBs have migrated onto adjacent properties. The current estimated cost of remedial action for the area CONSOL Energy was originally named a PRP, including payment of the EPA's past and future cost, is approximately $65,000. The current estimated cost of the most likely remediation plan for the additional areas discovered is approximately $11,000. Also, in September 2008, the EPA notified CONSOL Energy and sixty other PRPs that there were additional areas of potential contamination allegedly related to the Ward Transformer Site. Current estimates of the cost or potential range of cost for this area are not yet available. There was no expense recognized in the three and six months ended June 30, 2011 related to this matter. There was $2,880 of expense recognized in cost of goods sold and other charges in the three and six months ended June 30, 2010 related to this matter. CONSOL Energy funded $250 in the six months ended June 30, 2011 to an independent trust established for this remediation. CONSOL Energy funded $1,209 in the six months ended June 30, 2010 to the trust. As of June 30, 2011, CONSOL Energy and the other participating PRPs had asserted CERCLA cost recovery and contribution claims against approximately 225 nonparticipating PRPs to recover a share of the costs incurred and to be incurred to conduct the removal actions at the Ward Site. CONSOL Energy's portion of recoveries from settled claims is $4,372. Accordingly, the liability reflected in Other Accrued Liabilities was reduced by these settled claims. The remaining net liability at June 30, 2011 is $3,588.

C. L. Ritter: On March 1, 2011, the Company was served with a complaint instituted by C. L. Ritter Lumber Company Incorporated against Consolidation Coal Company (CCC), Island Creek Coal Company, (ICCC), CNX Gas Company LLC, subsidiaries of CONSOL Energy Inc., as well as CONSOL Energy itself in the Circuit Court of Buchanan County, Virginia, seeking damages and injunctive relief in connection with the deposit of untreated water from mining activities at CCC's Buchanan Mine into nearby void spaces at one of the mines of ICCC. The suit alleges damages of up to $300,000 for alleged damage to coal and coalbed methane, as well as breach of contract damages. We have removed the case to federal court and filed a motion to dismiss. Three similar lawsuits were filed recently in the same court by other plaintiffs; the Company intends to file motions to dismiss those suits as well. CCC believes that it had, and continues to have, the right to store water in these void areas. CCC and the other named CONSOL Energy defendants deny all liability and intend to vigorously defend the action filed against them in connection with the removal and deposit of water from the Buchanan Mine. Consequently, we have not recognized any liability related to these actions.

South Carolina Gas & Electric Company Arbitration: South Carolina Electric & Gas Company (SCE&G), a utility, has demanded arbitration, seeking $36,000 in damages against CONSOL of Kentucky and CONSOL Energy Sales Company. SCE&G claims it suffered damages in obtaining cover coal to replace coal which was not delivered in 2008 under a coal sales agreement. The Company counterclaimed against SCE&G for $9,400 for terminating coal shipments under the sales agreement which SCE&G had agreed could be made up in 2009. A hearing on the claims is scheduled for October 2011. The named CONSOL Energy defendants deny all liability and intend to vigorously defend the action filed against them.

Northern Appalachia Water Issues: In the Fall of 2009, a fish kill occurred in Dunkard Creek, which is a creek with segments in both Pennsylvania and West Virginia. The fish kill was caused by the growth of golden algae in the creek, which appears to be an invasive species. Our subsidiary, CCC, discharges treated mine water into Dunkard Creek from its Blacksville No. 2 Mine and from its Loveridge Mine. The discharges have levels of chlorides that cause Dunkard Creek to exceed West Virginia in-stream water quality standards. Prior to the fish kill and continuing thereafter, CCC was subject to an Agreed Order with the West Virginia Department of Environmental Protection (WVDEP) that set forth a schedule for compliance with these in-stream chloride limits. On December 18, 2009, the WVDEP issued a Unilateral Order that imposed additional conditions on CCC's discharges into Dunkard Creek and required CCC to develop a plan for long-term treatment of those and other high-chloride discharges. Pursuant to the Unilateral Order as well as a subsequent Unilateral Order issued by the WVDEP, CCC submitted a plan and schedule to WVDEP which provides for construction of a centralized advanced technology mine water treatment plant by May 31, 2013 to achieve compliance with chloride effluent limits and in-stream chloride water quality standards. The cost of the treatment plant and related facilities may reach or exceed $200,000. CCC negotiated a joint Consent Decree with the U.S. Environmental Protection Agency (EPA) and the WVDEP that includes a compliance plan and schedule. The Consent Decree, which has been finalized, included a civil penalty of $5,500, which was previously accrued, to settle alleged past violations related to chlorides, without any admission of liability. CCC also negotiated a settlement with the WVDEP and the West Virginia Department of Natural Resources settling state claims for natural resource damages for $500, without any admission of liability.

CNX Gas Shareholders Litigation: CONSOL Energy has been named as a defendant in five putative class actions brought by alleged shareholders of CNX Gas challenging the tender offer by CONSOL Energy to acquire all of the shares of CNX Gas common stock that CONSOL Energy did not already own for $38.25 per share. The two cases filed in Pennsylvania Common Pleas Court have been stayed and the three cases filed in the Delaware Chancery Court have been consolidated under the caption In Re CNX Gas Shareholders Litigation (C.A. No. 5377-VCL). With one exception, these cases also name CNX Gas and certain officers and directors of CONSOL Energy and CNX Gas as defendants. All five actions generally allege that CONSOL Energy breached and/or aided and abetted in the breach of fiduciary duties purportedly owed to CNX Gas public shareholders, essentially alleging that the $38.25 per share price that CONSOL Energy paid to CNX Gas shareholders in the tender offer and subsequent short-form merger was unfair. Among other things, the actions sought a permanent injunction against or rescission of the tender offer, damages, and attorneys' fees and expenses. The Delaware Court of Chancery denied an injunction against the tender offer and CONSOL Energy completed the acquisition of the outstanding shares of CNX Gas on June 1, 2010. The Delaware Court of Chancery certified to the Delaware Supreme Court the question of what legal standard should be applied to the tender offer, which would effectively determine whether the shareholders can proceed with a damage claim. The Delaware Supreme Court declined to accept the appeal pending a final judgment. Therefore, the lawsuit will likely go to trial, possibly later in 2011. There may be mediation prior to any trial. CONSOL Energy believes that these actions are without merit and intends to defend them vigorously.

Hale Litigation: A purported class action lawsuit was filed on September 23, 2010 in U.S. District Court in Abingdon, Virginia styled Hale v. CNX Gas Company LLC et. al. The lawsuit alleges that the plaintiff class consists of oil and gas owners, that the Virginia Supreme Court has decided that coalbed methane (CBM) belongs to the owner of the oil and gas estate, that the Virginia Gas and Oil Act of 1990 unconstitutionally allows force pooling of CBM, that the Act unconstitutionally provides only a 1/8 royalty to CBM owners for gas produced under the force pooling orders, and that the Company only relied upon control of the coal estate in force pooling the CBM notwithstanding the Virginia Supreme Court decision holding that if only the coal estate is controlled, the CBM is not thereby controlled. The lawsuit seeks a judicial declaration of ownership of the CBM and that the entire net proceeds of CBM production (that is, the 1/8 royalty and the 7/8 of net revenues since production began) be distributed to the class members. The Magistrate Judge issued a Report and Recommendation in which she recommended that the District Judge decide that the deemed lease provision of the Gas and Oil Act is constitutional as is the 1/8 royalty, and that CNX Gas need not distribute the net proceeds to class members. The Magistrate Judge recommended against the dismissal of certain other claims, none of which are believed to have any significance. We have appealed that recommendation to the trial judge and are awaiting a decision. CONSOL Energy believes that the case is without merit and intends to defend it vigorously.

Addison Litigation: A purported class action lawsuit was filed on April 28, 2010 in Federal court in Virginia styled Addison v. CNX Gas Company LLC. The case involves two primary claims: (i) the plaintiff and similarly situated CNX Gas lessors identified as conflicting claimants during the force pooling process before the Virginia Gas and Oil Board are the owners of the CBM and, accordingly, the owners of the escrowed royalty payments being held by the Commonwealth of Virginia; and (ii) CNX Gas failed to either pay royalties due these conflicting claimant lessors or paid them less than required because of the alleged practice of improper below market sales and/or taking alleged improper post-production deductions. Plaintiffs seek a declaratory judgment regarding ownership and compensatory and punitive damages for breach of contract; conversion; negligence (voluntary undertaking), for force pooling coal owners after the Ratliff decision declared coal owners did not own the CBM; negligent breach of duties as an operator; breach of fiduciary duties; and unjust enrichment. We filed a Motion to Dismiss in this case, which is pending. CONSOL Energy believes that the case is without merit and intends to defend it vigorously.

Hall Litigation: A purported class action lawsuit was filed on December 23, 2010 styled Hall v. CONSOL Gas Company in Allegheny County Pennsylvania Common Pleas Court. The named plaintiff is Earl D. Hall. The purported class plaintiffs are all Pennsylvania oil and gas lessors to Dominion Exploration and Production Company, whose leases were acquired by CONSOL Energy. The complaint alleges more than 1,000 similarly situated lessors. The lawsuit alleges that CONSOL Energy incorrectly calculated royalties by (i) calculating line loss on the basis of allocated volumes rather than on a well-by-well basis, (ii) possibly calculating the royalty on the basis of an incorrect price, (iii) possibly taking unreasonable deductions for post-production costs and costs that were not arms-length, (iv) not paying royalties on gas lost or used before the point of sale, and (v) not paying royalties on oil production. The complaint also alleges that royalty statements were false and misleading. The complaint seeks damages, interest and an accounting on a well-by-well basis. The plaintiff amended the complaint and we have filed preliminary objections. In response to our preliminary objections, the Court dismissed the plaintiffs' claims for underpayment of royalties on gas lost or used before the point of sale and allowed the plaintiffs to amend their complaint to specifically state their claim on oil production. CONSOL Energy believes that the case is without merit and intends to defend it vigorously.

Kennedy Litigation: The Company is a party to a case filed on March 26, 2008 captioned Earl Kennedy (and others) v. CNX Gas and CONSOL Energy in the Court of Common Pleas of Greene County, Pennsylvania. The lawsuit alleges that CNX Gas and CONSOL Energy trespassed and converted gas and other minerals allegedly belonging to the plaintiffs in connection with wells drilled by CNX Gas. The complaint, as amended, seeks injunctive relief, including removing CNX Gas from the property, and compensatory damages of $20,000. The suit also sought to overturn existing law as to the ownership of coalbed methane in Pennsylvania, but that claim was dismissed by the court; the plaintiffs are seeking to appeal that dismissal. The suit also seeks a determination that the Pittsburgh 8 coal seam does not include the “roof/rider” coal. The court denied the plaintiff's summary judgment motion on that issue. The court will hold a bench trial on the “roof/rider” coal issue in 2011. CNX Gas and CONSOL Energy believe this lawsuit to be without merit and intends to vigorously defend it.

Severance Tax Litigation: In December 2010, Tazewell County, Virginia asserted a claim for the tax year 2007, although the County has not filed a lawsuit against CNX Gas Company LLC. The complaint alleged that CNX Gas' calculation of the license tax on the basis of the wellhead value (sales price less post production costs) rather than the sales price is improper. We continued to pay Tazewell County taxes based on our method of calculating the taxes. CONSOL Energy is evaluating the merits of that claim.

Decker/Gillingham Litigation: Two contractor employees-Messrs. Decker and Gillingham-were injured when a stairway affixed to the exterior of a building collapsed at CONSOL Energy's Research and Development facility in Allegheny County, Pennsylvania in 2007. Mr. Decker sustained a broken hip and leg. Mr. Gillingham sustained a torn rotator cuff. Both men have recovered and are working, although both claim that the accident has limited their ability to perform their jobs. Messrs. Decker and Gillingham sued CONSOL Energy on June 4, 2008 and June 20, 2008, respectively, in Allegheny County Common Pleas Court, alleging, among other things, that CONSOL Energy was negligent in the maintenance of the stairway. The cases were consolidated. In late November, 2010, after a jury trial, the jury found that CONSOL Energy was negligent in maintaining the stairway and the jury awarded Mr. Decker and his spouse $5,000 and Mr. Gillingham and his spouse $2,800. These amounts included compensatory damages, as well as damages for pain and suffering, embarrassment and humiliation, and loss of ability to enjoy the pleasures of life. We intend to appeal the verdict. We have accrued $5,000 which was included in Other Accrued Liabilities for this claim. CONSOL Energy maintains insurance for damages and costs in excess of $5,000.

Royalty Owners Group Litigation: These five separate but related cases, filed on February 13, 2006 in the Circuit Court of Buchanan County, Virginia, involve claims by several of CNX Gas's lessors in southwest Virginia that certain improper deductions have been made on their royalty payments by CNX Gas with respect to the period from 1999 to the present. The deductions at issue primarily relate to post production expenses of gathering, compression and transportation. Specifically, the plaintiffs allege that (i) CNX Gas' gathering system in its Virginia field is over built, (ii) CNX Gas is not entitled to deductions for certain compression costs, because that is a production activity, not a post-production activity, and (iii) CNX Gas is not

entitled to a deduction for firm transportation expense, because that is a marketing activity, not a post-production cost. The litigation has settled, with the Company paying the lessors $1,000, which was previously accrued, and the Company will take a fixed deduction from royalties going forward.

Comer: In 2005, plaintiffs Ned Comer and others filed a purported class action lawsuit in the U.S. District Court for the Southern District of Mississippi against a number of companies in energy, fossil fuels and chemical industries, including CONSOL Energy styled, Comer, et al. v. Murphy Oil, et al. The plaintiffs, residents and owners of property along the Mississippi Gulf coast, alleged that the defendants caused the emission of greenhouse gasses that contributed to global warming, which in turn caused a rise in sea levels and added to the ferocity of Hurricane Katrina, which combined to destroy the plaintiffs' property. The District Court dismissed the case and the plaintiffs appealed. The Circuit Court panel reversed and the defendants sought a rehearing before the entire court. A rehearing before the entire court was granted, which had the effect of vacating the panel's reversal, but before the case could be heard on the merits, a number of judges recused themselves and there was no longer a quorum. As a result, the District Court's dismissal was effectively reinstated. The plaintiffs asked the U.S. Supreme Court to require the Circuit Court to address the merits of their appeal. On January 11, 2011, the Supreme Court denied that request. Although that should have resulted in the dismissal being a finality, the plaintiffs filed a lawsuit on May 27, 2011, in the same jurisdiction against essentially the same defendants making nearly identical allegations as in the original lawsuit. The defendants intend to seek an early dismissal of the case.

Rasnake Litigation: On August 28, 2006, plaintiffs filed a complaint in Russell County Circuit Court of Lebanon, Virginia, involving the CBM located on four separate tracts of land located in Russell and Buchanan Counties, Virginia (the “Subject Property”). Plaintiffs allege that CNX Gas is trespassing upon the Subject Property by producing CBM therefrom without authorization. Plaintiffs also allege that CNX Gas has committed slander on plaintiffs' title by failing to properly recognize their ownership interest in the Subject Property when submitting pooling applications to the Virginia Gas and Oil Board. The plaintiffs seek trespass damages in an amount equal to the total revenue from the wells. We believe that their trespass claim is without merit because we produced the gas pursuant to a force pooling order from the Virginia Gas and Oil Board and we believe total revenue is not the proper remedy for trespass damages. CONSOL Energy believes that the case is without merit and intends to defend it vigorously.

Rowland Litigation: Rowland Land Company filed a complaint in May 2011 against CONSOL Energy, CNX Gas, Dominion Resources, and EQT Production Company (EQT) in Raleigh County Circuit Court, West Virginia. Rowland is the lessor on a 33,000 acre oil and gas lease in southern West Virginia. EQT was the original lessee, but they farmed out the development of the lease to Dominion, in exchange for an overriding royalty. Dominion sold the indirect subsidiary that held the lease to a subsidiary of CONSOL Energy on April 30, 2010. Subsequent to that acquisition, the subsidiary that held the lease was merged into CNX Gas as part of an internal reorganization. Rowland alleges that (i) Dominion's sale of the subsidiary to CONSOL Energy was a change in control that required its consent under the terms of the farmout agreement and lease, and (ii) the subsequent merger of the subsidiary into CNX Gas was an assignment that required its consent under the lease. Rowland alleges that the failure to obtain the required consent constitutes a breach of the lease and it seeks damages and a forfeiture of the lease. CONSOL Energy and CNX Gas have filed a motion to dismiss the complaint, arguing among other things, that Dominion's sale of the indirect subsidiary was not a change in control; that even if the sale constituted a change in control, the purchase agreement between Dominion and CONSOL Energy did not give effect to the transfer so the transfer never occurred; that the mergers did not require consent; and that Rowland did not provide timely notice of breach of the lease in accordance with its terms. CONSOL Energy believes that the case is without merit and intends to defend it vigorously.

Majorsville Storage Field Declaratory Judgment: On March 3, 2011, an attorney sent a letter to CNX Gas regarding certain leases that CNX Gas obtained from Columbia Gas in Greene County, Pennsylvania involving the Majorsville Storage Field. The letter was written on behalf of three lessors alleging that the leases totaling 525 acres are invalid, and had expired by their terms. The plaintiffs' theory is that the rights of storage and production are severable under the leases. Ignoring the fact that the leases have been used for gas storage, they claim that since there has been no production or development of production, the right to produce gas expired at the end of the primary terms. On June 16, 2011 in the Court of Common Pleas of Greene County, Pennsylvania, the Company filed a declaratory judgment action, seeking to have a court confirm the validity of the leases. We believe that we will prevail in this litigation based on the language of the leases and the current status of the law.

At June 30, 2011, CONSOL Energy has provided the following financial guarantees, unconditional purchase obligations and letters of credit to certain third parties, as described by major category in the following table. These amounts represent the maximum potential total of future payments that we could be required to make under these instruments. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities on the financial statements. CONSOL Energy management believes that these guarantees will expire without being funded, and therefore the commitments will not have a material adverse effect on financial condition.



	Amount of Commitment Expiration Per Period
	Total Amounts Committed		Less Than 1 Year		1-3 Years		3-5 Years		Beyond 5 Years
Letters of Credit:
Employee-Related	$	199,553	$	97,110	$	102,443	$	—	$	—
Environmental	56,994		55,266		1,728		—		—
Gas	70,203		55,270		14,933		—		—
Other	10,305		10,141		164		—		—
Total Letters of Credit	337,055		217,787		119,268		—		—
Surety Bonds:
Employee-Related	205,645		194,145		11,500		—		—
Environmental	434,652		426,171		8,481		—		—
Gas	6,542		6,541		—		—		1
Other	17,039		17,039		—		—		—
Total Surety Bonds	663,878		643,896		19,981		—		1
Guarantees:
Coal	91,678		70,158		16,020		1,000		4,500
Gas	95,198		42,067		22,509		—		30,622
Other	372,531		70,765		119,976		71,817		109,973
Total Guarantees	559,407		182,990		158,505		72,817		145,095
Total Commitments	$	1,560,340	$	1,044,673	$	297,754	$	72,817	$	145,096

Employee-related financial guarantees have primarily been provided to support the United Mine Workers’ of America’s 1992 Benefit Plan and various state workers’ compensation self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Gas financial guarantees have primarily been provided to support various performance bonds related to land usage and restorative issues. Other guarantees have been extended to support insurance policies, legal matters and various other items necessary in the normal course of business. Other guarantees have also been provided to promise the full and timely payments to lessors of mining equipment and support various other items necessary in the normal course of business.

CONSOL Energy and CNX Gas enter into long-term unconditional purchase obligations to procure major equipment purchases, natural gas firm transportation, gas drilling services and other operating goods and services. These purchase obligations are not recorded on the Consolidated Balance Sheet. As of June 30, 2011, the purchase obligations for each of the next five years and beyond were as follows:



Obligations Due	Amount
Less than 1 year	$	216,374
1 - 3 years	226,744
3 - 5 years	72,423
More than 5 years	294,978
Total Purchase Obligations	$	810,519

Costs related to these purchase obligations include:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Major equipment purchases	$	9,522	$	8,946	$	17,177	$	27,151
Firm transportation expense	15,316		9,408		28,134		16,103
Gas drilling obligations	26,244		832		52,062		1,437
Other	89		150		190		180
Total costs related to purchase obligations	$	51,171	$	19,336	$	97,563	$	44,871

NOTE 12—DERIVATIVE INSTRUMENTS:

CONSOL Energy enters into financial derivative instruments to manage our exposure to commodity price volatility. We measure each derivative instrument at fair value and record it on the balance sheet as either an asset or liability. Changes in the fair value of the derivatives are recorded currently in earnings unless special hedge accounting criteria are met. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported in Other Comprehensive Income or Loss (OCI) and reclassified into earnings in the same period or periods which the forecasted transaction affects earnings. The ineffective portions of hedges are recognized in earnings in the current period. CONSOL Energy currently utilizes only cash flow hedges that are considered highly effective.

CONSOL Energy formally assesses both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in the fair values or the cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, CONSOL Energy will discontinue hedge accounting prospectively.

CONSOL Energy is exposed to credit risk in the event of nonperformance by counterparties. The creditworthiness of counterparties is subject to continuing review. The Company has not experienced any issues of non-performance by derivative counterparties.

CONSOL Energy has entered into swap contracts for natural gas to manage the price risk associated with the forecasted natural gas revenues. The objective of these hedges is to reduce the variability of the cash flows associated with the forecasted revenues from the underlying commodity. As of June 30, 2011, the total notional amount of the Company’s outstanding natural gas swap contracts was 158.1 billion cubic feet. These swap contracts are forecasted to settle through December 31, 2014 and meet the criteria for cash flow hedge accounting. During the next twelve months, $29,762 of unrealized gain is expected to be reclassified from Other Comprehensive Income and into earnings, as a result of the settlement of cash flow hedges. No gains or losses have been reclassified into earnings as a result of the discontinuance of cash flow hedges.

The fair value at June 30, 2011 of CONSOL Energy's derivative instruments, which were all natural gas swaps and qualify for hedging, were an asset of $76,734 and a liability of $5,807. The total asset is comprised of $51,374 and $25,360 which were included in Prepaid Expense and Other Assets, respectively, on the Consolidated Balance Sheets. The total liability is comprised of $2,447 and $3,360 which were included in Other Accrued Liabilities and Other Liabilities, respectively, on the Consolidated Balance Sheets.

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended June 30, 2011 is as follows:



Derivative in Cash Flow Hedging Relationship	Amount of Gain Recognized in OCI on Derivative 2011		Location of Gain Reclassified from Accumulated OCI into Income	Amount of Gain Reclassified from Accumulated OCI into Income 2011		Location of Gain Recognized in Income on Derivative	Amount of Gain Recognized in Income on Derivative 2011
Natural Gas Price Swaps	$	28,503	Outside Sales	$	16,905	Outside Sales	$	72
Total	$	28,503		$	16,905		$	72

The effect of derivative instruments on the Consolidated Statements of Income for the six months ended June 30, 2011 is as follows:



Derivative in Cash Flow Hedging Relationship	Amount of Gain Recognized in OCI on Derivative 2011		Location of Gain Reclassified from Accumulated OCI into Income	Amount of Gain Reclassified from Accumulated OCI into Income 2011		Location of (Loss) Recognized in Income on Derivative	Amount of (Loss) Recognized in Income on Derivative 2011
Natural Gas Price Swaps	$	32,765	Outside Sales	$	35,745	Outside Sales	$	(36	)
Total	$	32,765		$	35,745		$	(36	)

The fair value at December 31, 2010 of CONSOL Energy's derivative instruments, which were all natural gas swaps and qualify for hedging, were an asset of $79,960 and a liability of $3,720. The total asset is comprised of $52,022 and $27,938 which were included in Prepaid Expense and Other Assets, respectively, on the Consolidated Balance Sheets. The total liability is comprised of $3,191 and $529 which were included in Other Accrued Liabilities and Other Liabilities, respectively, on the Consolidated Balance Sheets.

The effect of derivative instruments on the Consolidated Statements of Income for the three months ended June 30, 2010 is as follows:



Derivative in Cash Flow Hedging Relationship	Amount of Gain Recognized in OCI on Derivative 2010		Location of Gain Reclassified from Accumulated OCI into Income	Amount of Gain Reclassified from Accumulated OCI into Income 2010		Location of Gain Recognized in Income on Derivative	Amount of Gain Recognized in Income on Derivative 2010
Natural Gas Price Swaps	$	14,820	Outside Sales	$	54,535	Outside Sales	$	290
Total	$	14,820		$	54,535		$	290

The effect of derivative instruments on the Consolidated Statements of Income for the six months ended June 30, 2010 is as follows:



Derivative in Cash Flow Hedging Relationship	Amount of Gain Recognized in OCI on Derivative 2010		Location of Gain Reclassified from Accumulated OCI into Income	Amount of Gain Reclassified from Accumulated OCI into Income 2010		Location of (Loss) Recognized in Income on Derivative	Amount of Gain Recognized in Income on Derivative 2010
Natural Gas Price Swaps	$	89,528	Outside Sales	$	97,934	Outside Sales	$	148
Total	$	89,528		$	97,934		$	148

NOTE 13—OTHER COMPREHENSIVE LOSS:

Total comprehensive income (loss), net of tax, for the six months ended June 30, 2011 is as follows:



	Treasury Rate Lock			Change in Fair Value of Cash Flow Hedges			Adjustments for Actuarially Determined Liabilities			Accumulated Other Comprehensive Loss
Balance at December 31, 2010	$	96		$	46,087		$	(920,521	)	$	(874,338	)
Net increase in value of cash flow hedges	—			32,765			—			32,765
Reclassification of cash flow hedges from other comprehensive income to earnings	—			(35,709		)	—			(35,709		)
Current period change	(96		)	—			26,824			26,728
Balance at June 30, 2011	$	—		$	43,143		$	(893,697	)	$	(850,554	)

NOTE 14—FAIR VALUE OF FINANCIAL INSTRUMENTS:

The financial instruments measured at fair value on a recurring basis are summarized below:



	Fair Value Measurements at June 30, 2011						Fair Value Measurements at December 31, 2010
Description	Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Gas Cash Flow Hedges	$	—	$	70,927	$	—	$	—	$	76,240	$	—

The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

Cash and cash equivalents: The carrying amount reported in the balance sheets for cash and cash equivalents approximates its fair value due to the short-term maturity of these instruments.

Restricted cash: The carrying amount reported in the balance sheets for restricted cash approximates its fair value due to the short-term maturity of these instruments.

Short-term notes payable: The carrying amount reported in the balance sheets for short-term notes payable approximates its fair value due to the short-term maturity of these instruments.

Borrowings under Securitization Facility: The carrying amount reported in the balance sheets for borrowings under the securitization facility approximates its fair value due to the short-term maturity of these instruments.

Long-term debt: The fair values of long-term debt are estimated using discounted cash flow analyses, based on current market rates for instruments with similar cash flows.

The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:



	June 30, 2011						December 31, 2010
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Cash and cash equivalents	$	26,519		$	26,519		$	32,794		$	32,794
Restricted cash	$	20,291		$	20,291		$	20,291		$	20,291
Short-term notes payable	$	(260,750	)	$	(260,750	)	$	(284,000	)	$	(284,000	)
Borrowings under Securitization Facility	$	(70,000	)	$	(70,000	)	$	(200,000	)	$	(200,000	)
Long-term debt	$	(3,142,804	)	$	(3,361,209	)	$	(3,145,365	)	$	(3,341,406	)

NOTE 15—SEGMENT INFORMATION:

CONSOL Energy has two principal business divisions: Coal and Gas. The principal activities of the Coal division are mining, preparation and marketing of steam coal, sold primarily to power generators, and metallurgical coal, sold to metal and coke producers. The Coal division includes four reportable segments. These reportable segments are Steam, Low Volatile Metallurgical, High Volatile Metallurgical and Other Coal. Each of these reportable segments includes a number of operating segments (mines or type of coal sold). For the three and six months ended June 30, 2011, the Steam aggregated segment includes the following mines: Bailey, Blacksville #2, Enlow Fork, Fola Complex, Loveridge, McElroy, Miller Creek Complex, Robinson Run and Shoemaker. For the three and six months ended June 30, 2011, the Low Volatile Metallurgical aggregated segment includes the Buchanan Mine. For the three and six months ended June 30, 2011, the High Volatile Metallurgical aggregated segment includes: Bailey, Blacksville #2, Enlow Fork, Fola Complex, Loveridge, Miller Creek Complex and Robinson Run coal sales. The Other Coal segment includes our purchased coal activities, idled mine activities, as well as various other activities assigned to the coal segment but not allocated to each individual mine. The principal activity of the Gas division is to produce pipeline quality methane gas for sale primarily to gas wholesalers. The Gas division includes four reportable segments. These reportable segments are Coalbed Methane, Marcellus, Conventional and Other Gas. The Other Gas segment includes our purchased gas activities as well as various other activities assigned to the gas division but not allocated to each individual well type. CONSOL Energy’s All Other segment includes terminal services, river and dock services, industrial supply services and other business activities. Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses.

Industry segment results for three months ended June 30, 2011 are:



	Steam		Low Volatile Metallurgical		High Volatile Metallurgical		Other Coal			Total Coal		Coalbed Methane		Marcellus Shale		Conventional Gas			Other Gas			Total Gas		All Other		Corporate, Adjustments & Eliminations			Consolidated
Sales—outside	$	781,395	$	279,171	$	117,688	$	33,493		$	1,211,747	$	115,985	$	27,640	$	42,180		$	3,236		$	189,041	$	85,212	$	—		$	1,486,000
Sales—purchased gas	—		—		—		—			—		—		—		—			1,162			1,162		—		—			1,162
Sales—gas royalty interests	—		—		—		—			—		—		—		—			16,273			16,273		—		—			16,273
Freight—outside	—		—		—		59,572			59,572		—		—		—			—			—		—		—			59,572
Intersegment transfers	—		—		—		—			—		—		—		—			929			929		55,243		(56,172		)	—
Total Sales and Freight	$	781,395	$	279,171	$	117,688	$	93,065		$	1,271,319	$	115,985	$	27,640	$	42,180		$	21,600		$	207,405	$	140,455	$	(56,172	)	$	1,563,007
Earnings (Loss) Before Income Taxes	$	109,815	$	184,374	$	46,973	$	(189,012	)	$	152,150	$	39,413	$	6,497	$	(511	)	$	(17,153	)	$	28,246	$	4,422	$	(86,034	)	$	98,784	(A)
Segment assets										$	5,026,836											$	6,096,958	$	317,677	$	759,647		$	12,201,118	(B)
Depreciation, depletion and amortization										$	101,915											$	51,314	$	4,571	$	—		$	157,800
Capital expenditures										$	152,700											$	168,599	$	9,364	$	—		$	330,663


(A)	Includes equity in earnings of unconsolidated affiliates of $4,240, $517 and $1,074 for Coal, Gas and All Other, respectively.


(B)	Includes investments in unconsolidated equity affiliates of $26,995, $24,570 and $49,386 for Coal, Gas and All Other, respectively.

Industry segment results for three months ended June 30, 2010 are:



	Steam		Low Volatile Metallurgical		High Volatile Metallurgical		Other Coal		Total Coal		Coalbed Methane		Marcellus Shale		Conventional Gas		Other Gas		Total Gas		All Other		Corporate, Adjustments & Eliminations	Consolidated
Sales—outside	$	745,596	$	149,145	$	55,655	$	6,098	$	956,494	$	149,304	$	10,399	$	30,067	$	1,659	$	191,429	$	72,193