Edgar Filing: CONSOL Energy Inc

CNX-12.31.12-10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-K

__________________________________________________

(Mark One)



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

For the fiscal year ended December 31, 2012



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)

__________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class				Name of exchange on which registered
Common Stock ($.01 par value)				New York Stock Exchange
Preferred Share Purchase Rights				New York Stock Exchange

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

__________________________________________________

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

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

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large accelerated filer 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

The aggregate market value of voting stock held by nonaffiliates of the registrant as of June 30, 2012, the last business day of the registrant's most recently completed second fiscal quarter, based on the closing price of the common stock on the New York Stock Exchange on such date was $2,829,700,137.

The number of shares outstanding of the registrant's common stock as of January 17, 2013 is 228,132,961 shares.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of CONSOL Energy's Proxy Statement for the Annual Meeting of Shareholders to be held on May 8, 2013, are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III.

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	Business	5
ITEM 1A.	Risk Factors	38
ITEM 1B.	Unresolved Staff Comments	55
ITEM 2.	Properties	55
ITEM 3.	Legal Proceedings	55
ITEM 4.	Mine Safety and Health Administration Safety Data	55

PART II
ITEM 5.	Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities	55
ITEM 6.	Selected Financial Data	58
ITEM 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	63
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	120
ITEM 8.	Financial Statements and Supplementary Data	122
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	195
ITEM 9A.	Controls and Procedures	195
ITEM 9B.	Other Information	197

PART III
ITEM 10.	Directors and Executive Officers of the Registrant	197
ITEM 11.	Executive Compensation	198
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	198
ITEM 13.	Certain Relationships and Related Transactions and Director Independence	198
ITEM 14.	Principal Accounting Fees and Services	198

PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	200
SIGNATURES		207

FORWARD-LOOKING STATEMENTS

We are including the following cautionary statement in this Annual Report on Form 10-K to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of us. With the exception of historical matters, the matters discussed in this Annual Report on Form 10-K are forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words “believe,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this Annual Report on Form 10-K speak only as of the date of this Annual Report on Form 10-K; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:


•	deterioration in global economic conditions in any of the industries in which our customers operate, or sustained uncertainty in financial markets cause conditions we cannot predict;


•	an extended decline in demand for or prices we receive for our coal and natural gas affecting our operating results and cash flows;


•	our customers extending existing contracts or entering into new long-term contracts for coal;


•	our reliance on major customers;


•	our inability to collect payments from customers if their creditworthiness declines;


•	the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coal and natural gas to market;


•	a loss of our competitive position because of the competitive nature of the coal and natural gas industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability;


•	our inability to maintain satisfactory labor relations;


•	coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions;


•	the impact of potential, as well as any adopted regulations relating to greenhouse gas emissions on the demand for coal and natural gas;


•	foreign currency fluctuations could adversely affect the competitiveness of our coal abroad;


•	the risks inherent in coal and natural gas operations being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions which could impact financial results;


•	decreases in the availability of, or increases in, the price of commodities or capital equipment used in our mining operations;


•	decreases in the availability of, an increase in the prices charged by third party contractors or, failure of third party contractors to provide quality services to us in a timely manner could impact our profitability;


•	obtaining and renewing governmental permits and approvals for our coal and gas operations;


•	the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our coal and natural gas operations;


•	our ability to find adequate water sources for our use in gas drilling, or our ability to dispose of water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules;


•	the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down a mine or natural gas well;


•	the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current coal and gas operations;


•	the effects of mine closing, reclamation, gas well closing and certain other liabilities;


•	uncertainties in estimating our economically recoverable coal and gas reserves;


•	defects may exist in our chain of title and we may incur additional costs associated with perfecting title for coal or gas rights on some of our properties or failing to acquire these additional rights may result in a reduction of our estimated reserves;


•	the impacts of various asbestos litigation claims;


•	the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934;


•	increased exposure to employee-related long-term liabilities;


•	exposure to multi-employer pension plan liabilities;


•	minimum funding requirements by the Pension Protection Act of 2006 (the Pension Act) coupled with the significant investment and plan asset losses suffered during the recent economic decline has exposed us to making additional required cash contributions to fund the pension benefit plans which we sponsor and the multi-employer pension benefit plans in which we participate;


•	lump sum payments made to retiring salaried employees pursuant to our defined benefit pension plan exceeding total service and interest cost in a plan year;


•	acquisitions that we recently have completed or may make in the future including the accuracy of our assessment of the acquired businesses and their risks, achieving any anticipated synergies, integrating the acquisitions and unanticipated changes that could affect assumptions we may have made and divestitures we anticipate may not occur or produce anticipated proceeds;


•	the terms of our existing joint ventures restrict our flexibility, actions taken by the other party in our gas joint ventures may impact our financial position and various circumstances could cause us not to realize the benefits we anticipate receiving from these joint ventures;


•	the anti-takeover effects of our rights plan could prevent a change of control;


•	risks associated with our debt;


•	replacing our natural gas reserves, which if not replaced, will cause our gas reserves and gas production to decline;


•	our hedging activities may prevent us from benefiting from price increases and may expose us to other risks;


•	changes in federal or state income tax laws, particularly in the area of percentage depletion and intangible drilling costs, could cause our financial position and profitability to deteriorate; and


•	other factors discussed in this 2012 Form 10-K under “Risk Factors,” as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.

PART I


ITEM 1.	Business

CONSOL Energy's Business Introduction

CONSOL Energy safely and responsibly produces coal and natural gas for global energy and raw material markets, which include the electric power generation industry and the steelmaking industry. During the year ended December 31, 2012, we produced 56.0 million tons of high-British thermal unit (Btu) bituminous coal from eleven mining complexes in the United States, excluding our portion of production from two equity affiliate complexes. During this same period, our natural gas production totaled 156.3 net billion cubic feet equivalent (Bcfe) from approximately 15,000 gross natural gas wells primarily in Appalachia.

Additionally, we provide energy services, including river and dock services, terminal services, industrial supply services, water services and land resource management services.

CONSOL Energy's History

CONSOL Energy was incorporated in Delaware in 1991. Our coal operations began in 1864. CONSOL Energy's beginnings as the “Consolidation Coal Company” in Western Maryland led to growth and expansion through all major coal producing regions in the United States. CONSOL Energy entered the natural gas business in the 1980s to increase the safety and efficiency of our coal mines by capturing methane from coal seams prior to mining, which makes the mining process safer and more efficient. Over the past six years, CONSOL Energy's natural gas business has grown by over 168% to produce 156.3 net Bcfe in 2012. This business has grown from coalbed methane production in Virginia into other unconventional production, such as Marcellus Shale, in the Appalachian basin. This growth was accelerated with the 2010 asset acquisition of the Appalachian Exploration & Production business of Dominion Resources, Inc. (Dominion Acquisition). Subsequently, in August and September 2011, we announced two strategic joint ventures, one with Noble Energy, Inc. (Noble) and one with a subsidiary of Hess Corporation (Hess). These joint ventures allow the acceleration of development of the assets acquired in the Dominion Acquisition and focus on the development of our Marcellus Shale and Utica Shale asset holdings.

CONSOL Energy's Strategy

CONSOL Energy's strategy is to continue to build the Company into a large integrated energy company.

CONSOL Energy defines itself through its core values which are:


•	Safety,


•	Compliance, and


•	Continuous Improvement.

These values are the foundation of CONSOL Energy's identity and are the basis for how management defines continued success. We believe CONSOL Energy's rich resource base, coupled with these core values, allows management to create value for the long-term. The electric power industry generates over two-thirds of its output by burning coal or natural gas, the two fuels we produce. We believe that the use of coal and natural gas will continue for many years as the principal fuel sources for electricity in the United States. Additionally, we believe that as worldwide economies grow, the demand for electricity from fossil fuels will grow as well, resulting in expansion of worldwide demand for our coal and potentially natural gas.



U.S. ELECTRIC SUPPLY by ENERGY SOURCE
In percent of total
	Actuals		Preliminary	Projected
	2010	2011	2012	2013
Coal	44.8%	42.3%	37.5%	39.0%
Natural Gas	23.9%	24.7%	30.3%	27.9%
Nuclear	19.6%	19.3%	18.9%	19.2%
Conventional Hydro	6.3%	7.8%	6.8%	6.9%
Renewables	3.9%	4.6%	5.3%	5.8%
Others	1.5%	1.3%	1.2%	1.2%

________________

Source: U.S. Energy Information Administration

Although coal has lost five percent of market share in the U.S. electric generation market (based on preliminary 2012 results), we believe that our efficient, long-lived, well capitalized longwall mines that operate near major U.S. population centers will continue to maintain their existing market share in the U.S. thermal coal market.

We expect natural gas to become a more significant contributor to the domestic electric generation mix as well as fueling industrial growth in the U.S. economy. Also, natural gas may potentially become a significant contributor to the transportation market. Our increasing gas production will allow CONSOL Energy to participate in these growing markets.

The following charts show CONSOL Energy's coal in international and metallurgical markets:

CONSOL Energy's Capital Expenditure Budget

CONSOL Energy expects to invest $835 - $865 million in its coal, gas and water businesses in 2013, after adjusting for certain expected proceeds from asset sales. The projected 2013 net investment includes capital expenditures of $1,290 million to $1,505 million. Capital expenditures were $1,575 million in 2012. The budget reflects both our ability to invest in organic growth opportunities in coal, gas and liquids, while selling assets that have more value to others. Once the BMX Mine development is complete in early 2014, CONSOL Energy does not expect to invest in new major coal growth projects. Therefore, in 2014 and beyond, annual coal investment is expected to approach maintenance-of-production levels of $5 to $6 per ton. CONSOL Energy has the ability to adjust these planned investments should circumstances warrant.

The table below categorizes the 2012 actual capital expenditures and the planned 2013 capital expenditures budget.



	2012			Forecasted 2013
	Actual Capital			Expenditures
	Expenditures			Low			High
	(in millions)

Coal and Other Operations	$	921		$	410		$	520
Gas Operations	528			835			935
Water Operations	126			45			50
Total Capital Expenditures	$	1,575		$	1,290		$	1,505
Less: Asset Sale Proceeds	(647		)	(455		)	(640		)
Net Investments	$	928		$	835		$	865

CONSOL Energy's Operations

The following map provides the location of CONSOL Energy's coal and gas operations by region:

CONSOL Energy Operations Highlights – Coal

We have consistently ranked among the largest coal producers in the United States based upon total revenue, net income and operating cash flow. We produced 56.0 million tons of coal in 2012. Our production of 62.0 million tons of coal in 2011 accounted for approximately 6% of the total tons produced in the United States and almost 14% of the total tons produced east of the Mississippi River during 2011, the latest year for which statistics are available. CONSOL Energy controls approximately 4.2

billion tons of proved and probable coal reserves located in northern Appalachia (66%), the mid-western United States (17%), central Appalachia (16%), and in the western United States (1%) at December 31, 2012. We are one of the premier coal producers in the United States by several measures:


•	We produce one of the largest amounts of coal east of the Mississippi River;


•	We control one of the largest amounts of recoverable coal reserves east of the Mississippi River;


•	We control the fourth largest amount of recoverable coal reserves among United States coal producers; and


•	We are one of the largest United States producers of coal from underground mines.

The following table ranks the 20 largest underground mines in the United States by tons of coal produced in calendar year 2011, the latest year for which statistics are available.



MAJOR U.S. UNDERGROUND COAL MINES–2011
In millions of tons

Mine Name	Operating Company	Production
Bailey	CONSOL Energy	10.8
Enlow Fork	CONSOL Energy	10.2
McElroy	CONSOL Energy	9.3
River View	River View Coal, LLC (Alliance)	7.6
Twentymile	Peabody Energy	7.5
Mach No. 1	Williamson Energy, LLC (Foresight Energy)	7.2
Century	American Energy Corp. (Murray)	7.1
Powhatan No. 6	The Ohio Valley Coal Company (Murray)	6.3
Cumberland	Cumberland Coal Resources (Alpha)	6.2
SUFCO	Arch Coal	6.1
Robinson Run	CONSOL Energy	6.0
West Elk	Arch Coal	5.7
Buchanan	CONSOL Energy	5.7
Loveridge	CONSOL Energy	5.6
Warrior	Warrior Coal LLC (Alliance)	5.4
Shoemaker	CONSOL Energy	5.1
Bull Mountain	Signal Peak Energy LLC	5.1
New Era	American Energy Corp. (Murray)	5.0
Blackville No. 2	CONSOL Energy	4.3
San Juan	BHP Billiton-New Mexico Coal	4.0

________________

Source: National Mining Association

CONSOL Energy continues to derive a substantial portion of its revenue from sales of coal to electricity generators in the United States. In 2012, sales to domestic electric generators comprised approximately 68% of coal revenue and 53% of total revenue. For the year ended December 31, 2012, we derived over 10% of our total revenues from sales to two coal customers individually and more than 35% of our total revenue from sales to our four largest coal and gas customers. As natural gas revenue continues to grow, we expect the relative contribution of our largest coal customers to diminish.

CONSOL Energy Operations Highlights – Gas

CONSOL Energy is a leader in developing unconventional gas resources including the early development of coalbed methane (CBM) production in the Eastern United States. Our gas operations produced 156.3 net Bcfe made up of a combination of CBM (56%), which is gas that resides in coal seams, natural gas from the Marcellus Shale (23%), natural gas from various shallow oil and gas sites (19%), and other unconventional reservoirs (2%) for the year ended December 31, 2012. CONSOL Energy reported estimated net proved gas reserves of 4.0 trillion cubic feet at December 31, 2012. These net proved reserves were made up of

CBM (37%), Marcellus Shale (45%), shallow oil and gas (15%) and other (3%). CONSOL Energy controls considerable resource positions in other unconventional shale plays including: Chattanooga, New Albany, Utica, Huron and other shales.

Our position as a gas producer is highlighted by several measures:


•	We are one of the largest natural gas producers in Appalachia with approximately 15,000 total gross wells in Appalachia comprising 8% of all Appalachian wells based on 2011 U.S. Energy Information Administration data, the latest year for which statistics are available.


•	We are one of the largest CBM producers, with production equal to approximately 40% of total Appalachian CBM production and 75% of Northern Appalachian production (excluding Alabama) based on 2011 U.S. Energy Information Administration data, the latest year for which statistics are available.


•	We gather essentially all of our own production independently or through company operated joint ventures, and we operate one of the largest gas gathering networks in Appalachia. We also own or operate over 4,500 miles of gathering pipelines.


•	We have been a pioneer in the exploration of unconventional gas including coalbed methane, Marcellus, Utica, Chattanooga, Huron and New Albany Shales.

In 2012, CONSOL Energy's sales of CBM gas comprised approximately 53% of gas revenue and 8% of total revenue. Sales of Marcellus Shale gas for the same time period comprised approximately 19% of gas revenue and 3% of total revenue, and sales of shallow oil and gas comprised 19% of gas revenue and 3% of total revenue.

Coal Competition

The United States coal industry is highly competitive, with numerous producers selling into all markets that use coal. CONSOL Energy competes against several other large producers and numerous small producers in the United States and overseas. The five largest producers are estimated by the 2011 National Mining Association Survey to have produced approximately 58% (based on tonnage produced) of the total United States production in 2011. The U.S. Department of Energy reported 1,325 active coal mines in the United States in 2011, the latest year for which government statistics are available. Demand for our coal by our principal customers is affected by many factors including:


•	the price of competing coal and alternative fuel supplies, including nuclear, natural gas, oil and

renewable energy sources, such as hydroelectric power, wind or solar;


•	environmental and government regulation;


•	coal quality;


•	transportation costs from the mine to the customer;


•	the reliability of fuel supply;


•	worldwide demand for steel;


•	natural/weather disasters; and


•	political changes in international governments.

Continued demand for CONSOL Energy's coal and the prices that CONSOL Energy obtains are affected by demand for electricity, technological developments, environmental and governmental regulation, and the availability and price of competing coal and alternative fuel supplies. We sell coal to foreign electricity generators and to the more specialized metallurgical coal markets, both of which are significantly affected by international demand and competition.

Natural Gas Competition

The United States natural gas industry is highly competitive and more diversified than the coal industry. CONSOL Energy competes with other large producers, as well as thousands of smaller producers, pipeline imports from Canada, and Liquefied Natural Gas (LNG) from around the globe. According to data from the Natural Gas Supply Association and the Energy Information Agency (EIA), the five largest producers of natural gas produced about 20% of dry gas production in the first nine months of 2012. The EIA reported 514,637 producing natural gas wells in the United States in 2011, the latest year for which government statistics are available.

CONSOL Energy's gas operations are primarily in the eastern United States. The gas market is highly fragmented and not dominated by any single producer. We believe that competition within our market is based primarily on natural gas commodity trading fundamentals and pipeline transportation availability to the various markets.

Continued demand for CONSOL Energy's natural gas and the prices that CONSOL Energy obtains are affected by natural gas use in the production of electricity, U.S. manufacturing and the overall strength of the economy, environmental and government regulation, technological developments and the availability and price of competing alternative fuel supplies.

Industry Segments

Financial information concerning industry segments, as defined by accounting principles generally accepted in the United States, for the years ended December 31, 2012, 2011 and 2010 is included in Note 24 - Segment Information in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K and incorporated herein.

DETAIL COAL OPERATIONS

Mining Complexes

The following table provides the location of CONSOL Energy's active mining complexes and the coal reserves associated with each.



CONSOL ENERGY MINING COMPLEXES
Proven and Probable Assigned and Accessible Coal Reserves as of December 31, 2012 and 2011

							Recoverable
				Average	As Received Heat		Reserves(2)
				Seam	Value(1)				Tons in
		Reserve	Coal	Thickness	(Btu/lb)		Owned	Leased	Millions
Mine/Reserve	Location	Class	Seam	(feet)	Typical	Range	(%)	(%)	12/31/2012	12/31/2011
ASSIGNED–OPERATING									(4)
Thermal Reserves
Enlow Fork (3)	Enon, PA	Assigned	Pittsburgh	5.4	12,940	12,860 – 13,060	100%	—%	27.0	28.5
		Accessible	Pittsburgh	5.3	13,040	12,850 – 13,120	79%	21%	232.8	204.5
Bailey (3)	Enon, PA	Assigned	Pittsburgh	5.5	12,950	12,860 – 13,060	46%	54%	92.2	101.6
		Accessible	Pittsburgh	5.7	12,930	12,770 – 13,090	89%	11%	303.0	334.4
McElroy	Glen Easton, WV	Assigned	Pittsburgh	5.7	12,570	12,450 – 12,650	94%	6%	101.8	105.7
		Accessible	Pittsburgh	5.9	12,650	12,490 – 12,700	96%	4%	86.9	90.0
Shoemaker	Moundsville, WV	Assigned	Pittsburgh	5.6	12,300	11,800 – 12,400	100%	—%	62.5	68.3
Loveridge	Metz, WV	Assigned	Pittsburgh	7.5	13,050	12,850 – 13,150	78%	22%	21.5	26.4
		Accessible	Pittsburgh	7.6	13,010	13,010 – 13,010	95%	5%	16.5	13.6
Robinson Run	Shinnston, WV	Assigned	Pittsburgh	7.5	12,950	12,600 – 13,300	84%	16%	45.1	46.7
		Accessible	Pittsburgh	6.6	12,900	12,850 – 12,950	74%	26%	269.3	156.7
Blacksville #2 (3)	Wana, WV	Assigned	Pittsburgh	6.7	13,000	12,800 – 13,150	83%	17%	17.7	20.3
		Accessible	Pittsburgh	6.9	12,950	12,950 – 12,950	99%	1%	16.3	16.5
Amvest-Fola Complex (3)	Bickmore, WV	Assigned	Multiple	4.6	12,380	12,250 – 12,550	86%	14%	73.4	92.2
Miller Creek Complex	Delbarton, WV	Assigned	Multiple	4.1	12,000	11,600 – 12,650	—%	100%	13.4	5.6
		Accessible	Multiple	3.7	12,440	12,440 – 12,440	4%	96%	8.2	—

Metallurgical Reserves
Buchanan	Mavisdale, VA	Assigned	Pocahontas 3	6.2	13,650	13,400 – 14,000	19%	81%	51.7	58.0
		Accessible	Pocahontas 3	5.9	13,630	13,540 – 13,780	14%	86%	46.3	37.0
Amonate Complex	Amonate, VA	Assigned	Multiple	4.3	13,150	12,850 – 13,350	52%	48%	14.8	4.9
		Accessible	Multiple	5.2	13,110	13,110 – 13,110	100%	—%	6.6	—
Total Assigned Operating and Accessible									1,507.0	1,410.9

_____________


(1)	The heat value shown for Assigned Operating reserves is based on the quality of coal mined and processed during the year ended December 31, 2012. The heat value shown for accessible reserves are based on as received, dry values obtained from drill hole analysis prorated by the associated Assigned Operating reserve values to account for similar mining and processing methods.

(2)

Recoverable reserves are calculated based on the area in which mineable coal exists, coal seam thickness and average density determined by laboratory testing of drill core samples. This calculation is adjusted to account for coal that will not be recovered during mining and for losses that occur if the coal is processed after mining. Reserve calculations do not include adjustments for moisture that may be added during mining or processing, nor do the calculations include adjustments for dilution from rock lying above or below the coal seam. Reserves are reported only for those coal seams that are controlled by ownership or leases.


(3)	A portion of these reserves contain metallurgical qualities and are currently being sold on the metallurgical market.

(4)

The table excludes 11 million tons of recoverable reserves which represents CONSOL Energy's portion of tonnage held by two equity affiliates. CONSOL Energy owns a 49% interest in both of these affiliates. Also, excluded from the table above are approximately 209.3 million tons of reserves at December 31, 2012 that are assigned to projects that have not produced coal in 2012. These assigned reserves are in the Northern Appalachia (northern West Virginia and Pennsylvania), Central Appalachia (Virginia and eastern Kentucky), the Western U.S. (Utah) and Illinois Basin (Illinois) regions. These reserves are approximately 64% owned and 36% leased.

CONSOL Energy assigns coal reserves to each of our mining complexes. The amount of coal we assign to a mining complex generally is sufficient to support mining through the duration of our current mining permit. Under federal law, we must renew our mining permits every five years. All assigned reserves have their required permits or governmental approvals, or there is a high probability that these approvals will be secured.

In addition, our mining complexes may have access to additional reserves that have not yet been assigned. We refer to these reserves as accessible. Accessible reserves are proven and probable reserves that can be accessed by an existing mining complex, utilizing the existing infrastructure of the complex to mine and to process the coal in this area. Mining an accessible reserve does not require additional capital spending beyond that required to extend or to continue the normal progression of the mine, such as the sinking of airshafts or the construction of portal facilities.

Some reserves may be accessible by more than one mining complex because of the proximity of many of our mining complexes to one another. In the table above, the accessible reserves indicated for a mining complex are based on our review of current mining plans and reflect our best judgment as to which mining complex is most likely to utilize the reserve.

Assigned and unassigned coal reserves are proven and probable reserves which are either owned or leased. The leases have terms extending up to 30 years and generally provide for renewal through the anticipated life of the associated mine. These renewals are exercisable by the payment of minimum royalties. Under current mining plans, assigned reserves reported will be mined out within the period of existing leases or within the time period of probable lease renewal periods.

Coal Reserves

At December 31, 2012, CONSOL Energy had an estimated 4.2 billion tons of proven and probable reserves, excluding equity affiliates. Reserves are the portion of the proven and probable tonnage that meet CONSOL Energy's economic criteria regarding mining height, preparation plant recovery, depth of overburden and stripping ratio. Generally, these reserves would be commercially mineable at year-end price and cost levels.

Reserves are defined in Securities and Exchange Commission (SEC) Industry Guide 7 as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Proven and probable coal reserves are defined by SEC Industry Guide 7 as follows:

Proven (Measured) Reserves- Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so close and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.

Probable (Indicated) Reserves- Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.

Spacing of points of observation for confidence levels in reserve calculations is based on guidelines in U.S. Geological Survey Circular 891 (Coal Resource Classification System of the U.S. Geological Survey). Our estimates for proven reserves have the highest degree of geologic assurance. Estimates for proven reserves are based on points of observation that are equal to or less than 0.5 miles apart. Estimates for probable reserves have a moderate degree of geologic assurance and are computed from points of observation that are between 0.5 to 1.5 miles apart.

An exception is made concerning spacing of observation points with respect to our Pittsburgh coal seam reserves. Because of the well-known continuity of this seam, spacing requirements are 3,000 feet or less for proven reserves and between 3,000 and 8,000 feet for probable reserves.

CONSOL Energy's estimates of proven and probable reserves do not rely on isolated points of observation. Small pods of reserves based on a single observation point are not considered; continuity between observation points over a large area is necessary for proven or probable reserves.

Our reserve estimates are predicated on information obtained from our ongoing exploration drilling and in-mine sampling programs. Data including coal seam elevation, thickness, and, where samples are available, coal quality is entered into a computerized geological database. This information is then combined with data on ownership or control of the mineral and surface interests to determine the extent of reserves in a given area. Reserve estimates include mine recovery rates that reflect CONSOL Energy's experience in various types of underground and surface coal mines.

CONSOL Energy's reserve estimates are based on geological, engineering and market data assembled and analyzed by our staff of geologists and engineers located at individual mines, operations offices and at our principal office. The reserve estimates are reviewed and adjusted annually to reflect production of coal from reserves, analysis of new engineering and geological data, changes in property control, modification of mining methods and other factors. Information, including the quantity and quality of reserves, coal and surface control, and other information relating to CONSOL Energy's coal reserve and land holdings, is maintained through a system of interrelated computerized databases.

Our estimate of proven and probable coal reserves has been determined by CONSOL Energy's geologists and mining engineers. Our coal reserves are periodically reviewed by an independent third party consultant. In previous years, the independent consultant has reviewed the procedures used by us to prepare our internal estimates, verified the accuracy of our property reserve estimates and retabulated reserve groups according to standard classifications of reliability.

CONSOL Energy's proven and probable coal reserves fall within the range of commercially marketed coals in the United States. The marketability of coal depends on its value-in-use for a particular application, and this is affected by coal quality, such as, sulfur content, ash and heating value. Modern power plant boiler design aspects can compensate for coal quality differences that occur. Therefore, any of CONSOL Energy's coals can be marketed for the electric power generation industry. Additionally, the growth in worldwide demand for metallurgical coals allows some of our proven and probable coal reserves, currently classified as thermal coals, that possess certain qualities to be sold as metallurgical coal. The addition of this cross-over market adds additional assurance to CONSOL Energy that all of its proven and probable coal reserves are commercially marketable.

The following table sets forth our unassigned proven and probable reserves by region:



CONSOL Energy UNASSIGNED Recoverable Coal Reserves as of December 31, 2012 and 2011

					Recoverable
		Recoverable Reserves(2)			Reserves
				Tons in	(tons in
	As Received Heat	Owned	Leased	Millions	Millions)
Coal Producing Region	Value(1) (Btu/lb)	(%)	(%)	12/31/2012	12/31/2011
Northern Appalachia (Pennsylvania, Ohio, Northern West Virginia)	11,400 – 13,600	72%	28%	1,424.0	1,448.1
Central Appalachia (Virginia, Southern West Virginia, Eastern Kentucky)	11,400 – 14,100	53%	47%	354.7	421.3
Illinois Basin (Illinois, Western Kentucky, Indiana)	11,600 – 12,000	45%	55%	733.6	750.7
Total		60%	40%	2,512.3	2,620.1

_______________

(1)

The heat value estimates for Northern Appalachian and Central Appalachian Unassigned coal reserves include adjustments for moisture that may be added during mining or processing as well as for dilution by rock lying above or below the coal seam. The mining and processing methods currently in use are used for these estimates. The heat value estimates for the Illinois Basin, and the Western U.S. Unassigned reserves are based primarily on exploration drill core data that may not include adjustments for moisture added during mining or processing or for dilution by rock lying above or below the coal seam.

(2)

Recoverable reserves are calculated based on the area in which mineable coal exists, coal seam thickness, and average density determined by laboratory testing of drill core samples. This calculation is adjusted to account for coal that will not be recovered during mining and for losses that occur if the coal is processed after mining. Reserve calculations do not include adjustment for moisture that may be added during mining or processing, nor do the calculations include adjustments for dilution from rock lying above or below the coal seam. Reserves are only reported for those coal seams that are controlled by ownership or leases.

The following table summarizes our proven and probable reserves as of December 31, 2012 by region and type of coal or sulfur content (sulfur content per million British thermal units). Proven and probable reserves include both assigned and unassigned reserves. The table classifies bituminous coal by rank. Rank (High volatile A, B and C) of bituminous coals are classified on the basis of heat value. The table also classifies bituminous coals as medium and low volatile which are classified on the basis of fixed carbon and volatile matter. Coal is ranked by the degree of alteration it has undergone since the initial deposition of the organic material. The lowest ranked coal, lignite, has undergone less transformation than the highest ranked coal, anthracite. From the lowest to the highest rank, the coals are: lignite; sub-bituminous; bituminous and anthracite. The ranking is determined by measuring the fixed carbon to volatile matter ratio and the heat content of the coal. As rank increases, the amount of fixed carbon increases, volatile matter decreases, and heat content increases. Bituminous coals are further characterized by the amount of volatile matter present. Bituminous coals with high volatile matter content are also ranked. High volatile “A” bituminous coals have higher heat content than high volatile “C” bituminous coals. These characterizations of coal allow a user to predict the behavior of a coal when burned in a boiler to produce heat or when it is heated in the absence of oxygen to produce coke for steel production.



CONSOL Energy Proven and Probable Recoverable Coal Reserves
By Producing Region and Product (In Millions of Tons) As of December 31, 2012

		≤ 1.20 lbs.						> 1.20 ≤ 2.50 lbs.						> 2.50 lbs.
		S02/MMBtu						S02/MMBtu						S02/MMBtu								Percent
		Low		Med		High		Low		Med		High		Low		Med		High				By
By Region		Btu		Btu		Btu		Btu		Btu		Btu		Btu		Btu		Btu		Total		Region
Northern Appalachia:
Metallurgical(1):
	High Vol A Bituminous	—		—		—		—		—		162.3		—		—		—		162.3		3.8	%
Thermal(1):
	High Vol A Bituminous	—		—		—		—		—		103.5		57.6		109.7		2,305.8		2,576.6		61.0	%
	Low Vol Bituminous	—		—		—		—		—		33.6		—		—		—		33.6		0.8	%
	Region Total	—		—		—		—		—		299.4		57.6		109.7		2,305.8		2,772.5		65.6	%
Central Appalachia:
Metallurgical:
	High Vol A Bituminous	—		—		6.2		—		—		46.5		—		—		—		52.7		1.2	%
	Med Vol Bituminous	—		3.0		55.9		—		—		2.9		—		—		—		61.8		1.5	%
	Low Vol Bituminous	—		—		188.9		—		—		55.2		—		—		—		244.1		5.8	%
Thermal:
	High Vol A Bituminous	33.6		80.4		2.8		42.0		116.9		2.1		9.4		15.0		8.2		310.4		7.3	%
	Region Total	33.6		83.4		253.8		42.0		116.9		106.7		9.4		15.0		8.2		669.0		15.8	%
Midwest-Illinois Basin:
Thermal:
	High Vol B Bituminous	—		—		—		—		63.6		—		—		425.5		—		489.1		11.6	%
	High Vol C Bituminous	—		—		—		—		159.5		—		108.3		—		—		267.8		6.3	%
	Region Total	—		—		—		—		223.1		—		108.3		425.5		—		756.9		17.9	%
Utah-Emery Field:
Thermal:
	High Vol B Bituminous	—		17.9		—		—		12.3		—		—		—		—		30.2		0.7	%
	Region Total	—		17.9		—		—		12.3		—		—		—		—		30.2		0.7	%
	Total Company	33.6		101.3		253.8		42.0		352.3		406.1		175.3		550.2		2,314.0		4,228.6		100.0	%
	Percent of Total	0.8	%	2.4	%	6.0	%	1.0	%	8.3	%	9.6	%	4.1	%	13.0	%	54.8	%	100.0	%

The following table classifies CONSOL Energy coals by rank, projected sulfur dioxide emissions and heating value (British thermal units per pound). The table also classifies bituminous coals as high, medium and low volatile which is based on fixed carbon and volatile matter.



CONSOL Energy Proven and Probable Recoverable Coal Reserves
By Product (In Millions of Tons) As of December 31, 2012

		≤ 1.20 lbs.						> 1.20 ≤ 2.50 lbs.						> 2.50 lbs.
		S02/MMBtu						S02/MMBtu						S02/MMBtu
		Low		Med		High		Low		Med		High		Low		Med		High				Percent By
By Region		Btu		Btu		Btu		Btu		Btu		Btu		Btu		Btu		Btu		Total		Product
Metallurgical(1):
	High Vol A Bituminous	—		—		6.2		—		—		208.8		—		—		—		215.0		5.1	%
	Med Vol Bituminous	—		3.0		55.9		—		—		2.9		—		—		—		61.8		1.5	%
	Low Vol Bituminous	—		—		188.9		—		—		55.2		—		—		—		244.1		5.7	%
	Total Metallurgical	—		3.0		251.0		—		—		266.9		—		—		—		520.9		12.3	%
Thermal(1):
	High Vol A Bituminous	33.6		80.4		2.8		42.0		116.9		105.6		67.0		124.7		2,314.0		2,887.0		68.3	%
	High Vol B Bituminous	—		17.9		—		—		75.9		—		—		425.5		—		519.3		12.3	%
	High Vol C Bituminous	—		—		—		—		159.5		—		108.3		—		—		267.8		6.3	%
	Low Vol Bituminous	—		—		—		—		—		33.6		—		—		—		33.6		0.8	%
	Total Thermal	33.6		98.3		2.8		42.0		352.3		139.2		175.3		550.2		2,314.0		3,707.7		87.7	%
	Total	33.6		101.3		253.8		42.0		352.3		406.1		175.3		550.2		2,314.0		4,228.6		100.0	%
	Percent of Total	0.8	%	2.4	%	6.0	%	1.0	%	8.3	%	9.6	%	4.1	%	13.0	%	54.8	%	100.0	%

The tables above excludes 41 million tons of reserves held by two equity affiliates. CONSOL Energy owns 49% of both of these affiliates.

The following table categorizes the relative Btu values (low, medium and high) for each of CONSOL Energy's producing regions in Btu's per pound of coal.



Region	Low	Medium	High
Northern, Central Appalachia and Canada (1)	< 12,500	12,500 – 13,000	> 13,000
Midwest Appalachia	< 11,600	11,600 – 12,000	> 12,000
Northern Powder River Basin	< 8,400	8,400 – 8,800	> 8,800
Colorado and Utah	< 11,000	11,000 – 12,000	> 12,000

Title to coal properties that we lease or purchase and the boundaries of these properties are verified by law firms retained by us at the time we lease or acquire the properties. Consistent with industry practice, abstracts and title reports are reviewed and updated approximately five years prior to planned development or mining of the property. If defects in title or boundaries of undeveloped reserves are discovered in the future, control of and the right to mine reserves could be adversely affected.

The following table sets forth, with respect to properties that we lease to other coal operators, the total royalty tonnage, acreage leased and the amount of income (net of related expenses) we received from royalty payments for the years ended December 31, 2012, 2011 and 2010.



	Total	Total	Total
	Royalty	Coal	Royalty
	Tonnage	Acreage	Income
Year	(in thousands)	Leased	(in thousands)
2012	8,326	271,760	$16,479
2011	8,488	289,833	$17,998
2010	8,606	226,524	$14,073

Royalty tonnage leased to third parties is not included in the amounts of produced tons that we report. Proven and probable reserves do not include reserves attributable to properties that we lease to third parties.

Compliance Compared to Non-Compliance Coal

Coals are sometimes characterized as compliance or non-compliance coal. The term "compliance coal," as it is commonly used in the coal industry, refers to compliance only with former national sulfur dioxide emissions standards and indicates that when burned, the coal will produce emissions that will not exceed 1.2 pounds of sulfur dioxide per million British thermal units (1.2lb S02/MM Btu). A coal considered a compliance coal for meeting this former sulfur dioxide standard may not meet an emission standard for a different pollutant such as mercury, and may not even meet newer sulfur emission standards for all power plants. More recent clean air regulations that further restrict sulfur dioxide emissions significantly reduce the amount of coal that can be used without post-combustion emission control technologies. Currently, a compliance coal will meet the power plant emission standard of 1.2 lb S02/MM Btu of fuel consumed. At December 31, 2012, approximately 0.4 billion tons, or approximately 9%, of our coal reserves, excluding equity affiliates, met that standard as a compliance coal. It is likely that, within several years, no coal will be "compliant" because new federal regulations will require emissions-control technology to be used regardless of the coal's sulfur content. In many cases, our customers have responded to ever-tightening emissions requirements by retrofitting flue gas desulfurization systems (scrubbers) to existing power plants. Because these systems remove sulfur dioxide before it is emitted into the atmosphere, those customers are less concerned about the sulfur content of coal and more concerned about the delivered price per British Thermal Unit (BTU).

As a result of a 1998 court decision forcing the establishment of mercury emissions standards for power plants, the Environmental Protection Agency (EPA) was required to promulgate a regulatory program for controlling mercury. CONSOL Energy coals have mercury contents typical for their rank and location (approximately 0.07-0.15 parts mercury on a dry coal basis). Since CONSOL Energy coals have high heating values, they have lower mercury contents on a weight per energy basis (typically measured in pounds per trillion Btu) than lower rank coals at a given mercury concentration. Eastern bituminous coals also tend to produce a greater proportion of flue gas mercury in the ionic or oxidized form (which is more easily captured by scrubbers installed for sulfur control) than sub-bituminous coal, including coals produced in the Powder River Basin. Both high rank and low rank coals are also amenable to other methods of controlling mercury emissions, such as by activated carbon injection. The Mercury and Air Toxics Rule (MATs) (remanded by the court and reproposed by the EPA in November 2012) requiring reductions in emissions of mercury, sulfur dioxides, nitrogen oxides, and particulate matter may require the installation of additional costly control technology or the implementation of other measures, including trading of emission allowances and switching to alternative fuels. These additional reductions in permissible emission levels of impurities by coal-fired plants will likely make it more costly to operate coal-fired electric power plants and make coal a less attractive fuel alternative for electric power generation in the future. Some states have already adopted a control program for mercury emissions from coal-fired power plants.

Production

In the year ended December 31, 2012, 96% of CONSOL Energy's production came from underground mines and 4% from surface mines. Where the geology is favorable and reserves are sufficient, CONSOL Energy employs longwall mining systems in our underground mines. For the year ended December 31, 2012, 92% of our production came from mines equipped with longwall mining systems. Underground longwall systems are highly mechanized, capital intensive operations. Mines using longwall systems have a low variable cost structure compared with other types of mines and can achieve high productivity levels compared with

those of other underground mining methods. Because CONSOL Energy has substantial reserves readily suitable to these operations, CONSOL Energy believes that these longwall mines can increase capacity at a low incremental cost.

The following table shows the production, in millions of tons, for CONSOL Energy's mines in the years ended December 31, 2012, 2011 and 2010, the location of each mine, the type of mine, the type of equipment used at each mine, method of transportation and the year each mine was established or acquired by us.



					Tons Produced			Year
		Mine	Mining		(in millions)			Established
Mine	Location	Type	Equipment	Transportation	2012	2011	2010	or Acquired
Thermal
McElroy	Glen Easton, WV	U	LW/CM	CB B	9.4	9.3	10.1	1968
Bailey (3)	Enon, PA	U	LW/CM	R R/B	8.6	8.7	9.8	1984
Enlow Fork (3)	Enon, PA	U	LW/CM	R R/B	8.0	8.3	9.1	1990
Robinson Run (1)	Shinnston, WV	U	LW/CM	R CB	5.0	5.6	5.5	1966
Loveridge	Metz, WV	U	LW/CM	R T	5.8	5.5	5.9	1956
Shoemaker	Moundsville, WV	U	LW/CM	B	5.3	5.1	3.9	1966
Blacksville #2(1)	Wana, WV	U	LW/CM	R R/B T	3.0	4.2	4.5	1970
Miller Creek Complex(2)	Delbarton, WV	U/S	CM/S/L	R T	2.9	2.8	3.0	2004
AMVEST-Fola Complex(1)(2)	Bickmore, WV	U/S	A/S/L/CM	R T	0.8	2.1	1.9	2007

Emery(1)	Emery Co., UT	U/S	CM	T	—	—	1.0	1945
Buchanan-Thermal(1)	Mavisdale, VA	U	LW/CM	R	—	—	0.2	1983
Jones Fork Complex(1)(2)	Mousie, KY	U/S	CM/S/L	R T	—	—	0.1	1992
High Volatile Metallurgical
Bailey-Met (3)	Enon, PA	U	LW/CM	R R/B	1.5	2.1	1.2	1984
Enlow Fork-Met (3)	Enon, PA	U	LW/CM	R R/B	1.5	1.8	1.1	1990
Robinson Run-Met	Shinnston, WV	U	LW/CM	R CB	—	0.4	—	1966
Blacksville #2(1)-Met	Wana, WV	U	LW/CM	R R/B T	0.2	0.1	—	1970

Loveridge-Met	Metz, WV	U	LW/CM	R T	0.1	0.1	—	1956
AMVEST-Fola Complex(1)(2)-Met	Bickmore, WV	U/S	A/S/L/CM	R T	0.3	0.1	—	2007
AMVEST-Terry Eagle Complex(1)(2)-Met	Jodie, WV	U/S	CM/A/S/L	R T	—	0.1	—	2007
Low Volatile Metallurgical
Buchanan(1)	Mavisdale, VA	U	LW/CM	R T	3.5	5.7	4.5	1983
Amonate (1)(2)	Amonate, VA	U/S	S/CM	R T	0.1	—	—	2012
Total					56.0	62.0	61.8

CONSOL Energy Portion of Equity Affiliates
Harrison Resources(2)(4)	Cadiz, OH	S	S/L	R T	0.4	0.4	0.4	2007
Western Allegheny-Knob Creek(2)(4)	Young Township, PA	U	CM	R T	0.1	0.1	0.1	2010
Total CONSOL Energy Portion of Equity Affiliates					0.5	0.5	0.5

___________



A	–	Auger
S	–	Surface
U	–	Underground
LW	–	Longwall
CM	–	Continuous Miner
S/L	–	Stripping Shovel and Front End Loaders
R	–	Rail
B	–	Barge
R/B	–	Rail to Barge
T	–	Truck
CB	–	Conveyor Belt
(1)	–	Mine was idled for part of the year(s) presented due to market conditions.
(2)	–	Harrison Resources, Miller Creek Complex, AMVEST–Fola Complex, AMVEST–Terry Eagle Complex, Jones Fork Complex, Amonate Complex and Western Allegheny–Knob Creek include facilities operated by independent contractors.
(3)	–	Mine was idle for three weeks due to a structural failure at the above-ground conveyor system at the Bailey Preparation Plant. Production was then resumed at a reduced capacity.
(4)	–	Production amounts represent CONSOL Energy's 49% ownership interest.

Coal Capital Projects

CONSOL Energy expects to invest between $410 million to $520 million for the coal segment and other segment in 2013. This compares to $921 million invested in the coal and other segments in 2012. CONSOL Energy anticipates investing $318 million for maintenance-of-production projects. Other major projects include $166 million for the BMX Mine (see below for BMX description), as well as $80 million for the Enlow Fork overland belt project. The BMX Mine is scheduled for completion during the first quarter of 2014, when 5 million annual tons of high-quality Pittsburgh seam coal will be available to be sold in either the high-vol or thermal markets. In 2012, CONSOL Energy contracted and paid significant deposits to secure replacement longwall mining shields at three of its mining complexes and new longwall mining shields at the BMX mining complex. The company is nearing the end of a process to fund this capital commitment through an operating lease in 2013. This amount has been netted from the expected coal operations capital expenditures.

In 2012, capital projects included the continued development of the BMX Mine. This project is expected to add 5 million tons a year of high-quality Pittsburgh seam coal, which will be sold in either the high-volatile metallurgical or thermal markets. This extension of the Bailey Mine began in 2009 and production from the first longwall panel is expected to start in early 2014. The total cost of the project is expected to be approximately $672 million of which approximately $171 million was incurred in 2012. As of December 31, 2012, total project-to-date expenditures were approximately $346 million. Included within the scope of this project are certain surface facility upgrades at the Bailey Preparation Plant which are necessary in order for the plant to process the additional coal from the BMX Mine. These upgrades include the construction of several new raw and clean coal silos, expansion of existing railroad facilities, and installation of additional raw coal material handling systems.

Construction of a new slope and overland belt at the Enlow Fork Mine in Pennsylvania began in 2010 and is expected to be completed by the end of 2013. Overland belt projects are expected to enhance safety, improve productivity, increase production and reduce costs. Modern conveyor systems typically provide high availability rates, thereby allowing mining equipment to produce at higher levels. Overland belts do not require the daily maintenance of the mine roof that underground haulage systems require allowing manpower to be reduced or redeployed to more productive work. Mine safety is expected to be enhanced by overland belts because older underground belt areas will be sealed. The total cost of the project is expected to be approximately $208 million of which there was approximately $98 million of expenditures in 2012. As of December 31, 2012, total project-to-date expenditures were approximately $136 million.

Also, in accordance with a consent decree with the U.S Environmental Protection Agency and the West Virginia Environmental Protection Agency, CONSOL Energy continued construction of an advance water processing system (RO) in Northern West Virginia in 2012. The RO will provide a treatment system for the mine water generated from the Robinson Run, Loveridge, and Blacksville #2 Mines to be in compliance with the existing National Pollution Discharge Elimination System (NPDES) permits. Construction was started in April 2011 and final commissioning of the RO system is expected to be complete by the end of May 2013. Expenditures related to the Northern West Virginia plant of $114 million were incurred in 2012 and total costs related to the construction of this plant and related facilities is expected to be approximately $200 million. As of December 31, 2012, total project-to-date expenditures were approximately $162 million.

Coal Marketing and Sales

Our sales of bituminous coal were at average sales price per ton sold as follows:



	Years Ended December 31,
	2012		2011		2010
Average Sales Price Per Ton Sold– Thermal Coal	$	61.99	$	58.87	$	53.76
Average Sales Price Per Ton Sold– High Volatile Met Coal	$	63.76	$	78.06	$	72.89
Average Sales Price Per Ton Sold– Low Volatile Met Coal	$	140.11	$	191.81	$	146.32
Average Sales Price Per Ton Sold– Total Company	$	67.11	$	72.25	$	61.33

We sell coal produced by our mining complexes and additional coal that is purchased by us for resale from other producers. We maintain United States sales offices in Charlotte, Philadelphia and Pittsburgh. In addition, we sell coal through agents and to brokers and unaffiliated trading companies.

A breakdown of total coal sales is as follows:



	Tons	Percent of
	Sold	Total
Thermal	49.1	88	%
High Volatile Metallurgical	3.6	6	%
Low Volatile Metallurgical	3.6	6	%
Total tons sold	56.3	100	%

Approximately 68% of our 2012 coal sales were made to U. S. electric generators, 22% of our 2012 coal sales were priced on export markets and 10% of our coal sales were made to other domestic customers. We had approximately 75 customers in 2012. During 2012, two coal customers individually accounted for more than 10% of total revenue, and the top four coal and gas customers accounted for more than 35% of our total revenues.

Coal Contracts

We sell coal to an established customer base through opportunities as a result of strong business relationships, or through a formalized bidding process. Contract volumes range from a single shipment to multi-year agreements for millions of tons of coal. The average contract term is between one to three years. However, several multi-year agreements have terms ranging from five to twenty years. As a normal course of business, efforts are made to renew or extend contracts scheduled to expire. Although there are no guarantees, we generally have been successful in renewing or extending contracts in the past. For the year ended December 31, 2012, over 86% of all the coal we produced was sold under contracts with terms of one year or more.

The following table sets forth as of January 12, 2013, CONSOL Energy's estimated production and sales for 2013 through 2015.



COAL DIVISION GUIDANCE
(Tons in millions)

	Q1 2013	2013	2014	2015
Estimated Coal Production	14.0	56.3	61.6	63.8
Estimated Low-Vol Met Sales	0.9	3.9	5.0	5.1
Tonnage - Firm	0.8	1.5	—	—
Average Price - Sold (firm)	$121.48	$115.63	—	—
Estimated High-Vol Met Sales	1.1	1.8	4.8	6.3
Tonnage - Firm	1.1	1.4	0.2	0.2
Average Price - Sold (firm)	$64.24	$62.95	$75.53	$74.74
Estimated Thermal Sales	11.9	50.1	51.1	51.7
Tonnage - Firm	11.5	48.7	23.7	15.0
Average Price - Sold (firm)	$58.76	$59.06	$59.92	$61.42

Note: While the data in the table are presented as single point estimates, the inherent uncertainty of markets and mining operations means that investors should consider a reasonable range around these estimates. CONSOL Energy has chosen not to forecast prices for open tonnage due to ongoing customer negotiations. In the thermal sales category, the open tonnage includes two items: sold, but unpriced tons and collared tons. There are no collared tons in 2013. Collared tons in 2014 are 7.0 million tons, with a ceiling of $55.90 per ton and a floor of $46.32 per ton. Collared tons in 2015 are 8.7 million tons, with a ceiling of $57.43 per ton and a floor of $44.86 per ton. Calendar years 2013, 2014, and 2015 include 0.5, 0.7 and 0.7 million tons, respectively, from Amonate. The Amonate tons are not included in the category breakdowns.

Coal pricing for contracts with terms of one year or less is generally fixed. Coal pricing for multiple-year agreements generally provides the opportunity to periodically adjust the contract prices through pricing mechanisms consisting of one or more of the following:


•	Fixed price contracts with pre-established prices; or


•	Periodically negotiated prices that reflect market conditions at the time; or


•	Price restricted to an agreed-upon percentage increase or decrease; or


•	Base-price-plus-escalation methods which allow for periodic price adjustments based on inflation indices, or other negotiated indices.

The volume of coal to be delivered is specified in each of our coal contracts. Although the volume to be delivered under the coal contracts is stipulated, the parties may vary the timing of the deliveries within specified limits.

Coal contracts typically contain force majeure provisions allowing for the suspension of performance by either party for the duration of specified events. Force majeure events include, but are not limited to, labor disputes and unexpected significant geological conditions. Depending on the language of the contract, some contracts may terminate upon continuance of an event of force majeure that extends for a period greater than three to twelve months.

Distribution

Coal is transported from CONSOL Energy's mining complexes to customers by railroad cars, river barges, trucks, conveyor belts or a combination of these means of transportation. We employ transportation specialists who negotiate freight and equipment agreements with various transportation suppliers, including railroads, barge lines, terminal operators, ocean vessel brokers and trucking companies for certain customers.

At December 31, 2012 we owned/operated 21 towboats, 5 harbor boats and a fleet of approximately 600 barges that serve customers along the Ohio, Allegheny, Kanawha and Monongahela Rivers. The barge operation allows us to control delivery schedules and has served as temporary floating storage for coal when land storage is unavailable.

DETAIL GAS OPERATIONS

Our Gas operations are located throughout Appalachia. While CBM remains our largest share of production much of our future growth will likely come from the development of our Marcellus Shale play and the exploration of our Utica Shale play.

Coalbed Methane (CBM)

We have the rights to extract CBM in Virginia from approximately 271,000 net CBM acres, which cover a portion of our coal reserves in Central Appalachia. We produce gas primarily from the Pocahontas #3 seam which is the main coal seam mined by our Buchanan Mine. This seam is generally found at depths of 2,000 feet and generally ranges from 3 to 6 feet thick. The gas content of this seam is typically between 400 and 600 cubic feet of gas per ton of coal in place. In addition, there are as many as 50 thinner seams present in the several hundred feet above the main Pocahontas #3 seam. Collectively, this series of coal seams represents a total thickness ranging from 15 to 40 feet. We have access to core hole data that allows us to determine the amount of coal present, the geologic structure of the coal seam and the gas content of the coal. For 2013, we expect to drill fewer than 100 CBM wells in Virginia, including gob wells which directly support the de-gasifciation of the Buchanan Mine.

We also have the right to extract CBM in northwestern West Virginia and southwestern Pennsylvania from approximately 902,000 net CBM acres, which contain most of our recoverable coal reserves in Northern Appalachia. We produce gas primarily from the Pittsburgh #8 coal seam. This seam is generally found at depths of less than 1,000 feet and generally ranges from 4 to 7 feet thick. The gas content of this seam is typically between 100 and 250 cubic feet of gas per ton of coal in place. There are additional coal seams above and below the Pittsburgh #8 seam. Collectively, this series of coal seams represents a total thickness ranging from 10 to 30 feet. We have access to information that allows us to determine the amount of coal present, the geologic structure of the coal seam and the gas content of the coal.

There are additional coal seams above and below the Pittsburgh #8 seam. Collectively, this series of coal seams represents a total thickness ranging from 10 to 30 feet. We have access to information that allows us to determine the amount of coal present, the geologic structure of the coal seam and the gas content of the coal.

In central Pennsylvania we have the right to extract CBM from approximately 263,000 net CBM acres, which contain most of our recoverable coal reserves as well as significant leases from other coal owners. In addition, we control 810,000 net CBM acres in Illinois, Kentucky, Indiana, and Tennessee. We also have the right to extract CBM on 139,000 net acres in the San Juan Basin, 128,000 net acres in eastern Ohio and central West Virginia, and 20,000 net acres in the Powder River Basin. For 2013, we have no plans to drill CBM wells in these areas.

Marcellus Shale

We have the rights to extract natural gas in Pennsylvania, West Virginia and New York from approximately 347,000 net Marcellus Shale acres at December 31, 2012. In September 2011, CONSOL Energy entered into a joint venture with Noble Energy regarding our Marcellus Shale oil and gas assets and properties in West Virginia and Pennsylvania. The joint venture holds approximately 624,000 net Marcellus Shale acres in those states as well as the producing Marcellus Shale Wells which we had owned. We hold a 50% interest in the joint venture. We also hold a 50% interest in a related gathering company to which we contributed our existing Marcellus Shale gathering assets. Joint operations are conducted in accordance with a joint development agreement.

CONSOL Energy and Noble Energy drilled a record 89 gross wells in the Marcellus Shale in 2012. CONSOL Energy drilled 64 of those wells in the dry gas area of the formation. The geographic breakdown was 45 wells in Southwestern Pennsylvania, 13 wells in Central Pennsylvania, and 6 wells in Northern West Virginia. Noble Energy drilled 25 wells in the wet gas area of the play.

CONSOL Energy also completed 51 Marcellus Shale wells in 2012. The average lateral length was 5,514 feet in 2012, or a 43% increase over the previous year's lateral length of 3,853 feet. These longer drilled laterals enabled the company to perform more hydraulic fracturing, or “fracking,” to complete the wells. In 2012, the average completed well had 18 frack stages, or a 50% increase over the 12 stages from the previous year. Longer lateral lengths and more frack stages per well lead to enhanced well economics. For 2013, the company expects that average lateral lengths could average approximately 6,000 feet.

In 2013, the company expects the Marcellus Shale drilling to be the primary driver of gas production growth. Current plans are for CONSOL Energy to drill 36 wells in the dry gas portion of the formation, while Noble Energy expects to drill

85-90 wells in the wet area of the formation. CONSOL Energy will continue to evaluate the number of dry gas wells for the 2013 program in light of the commodity price curve.

CONSOL Energy and Noble Energy have been emphasizing drilling in the wet area of the formation, since, in the current pricing environment, the sale of liquids into the flow stream is resulting in much-improved well economics.

Shallow Oil and Gas

The shallow oil and gas acreage position of CONSOL Energy is approximately 648,000 net acres mainly in West Virginia, Pennsylvania, Virginia, New York, San Juan Basin and Powder River Basin at December 31, 2012. The majority of our shallow oil and gas leasehold position is held by production and all of it is extensively overlain by existing third party gas gathering and transmission infrastructure. The shallow oil and gas assets provide multiple synergies with our CBM and unconventional shale operations, and the held by production nature of the shallow oil and gas properties affords CONSOL Energy considerable flexibility to choose when to exploit those and other gas assets including shale assets. For 2013, the company is de-emphasizing its shallow oil and gas program, although some small amount of drilling could occur to hold leases.

Other Gas

Utica

CONSOL Energy also controls approximately 83,000 net acres of Utica Shale potential in eastern Ohio at December 31, 2012. Additionally, CONSOL Energy controls a large number of acres in southwestern Pennsylvania and northern West Virginia that contain the rights to the Utica Shale. These acres are disclosed in other plays because the Utica Shale is not the primary drilling target as of December 31, 2012. The thickness of the Utica Shale in this area ranges from 200 to 450 feet.

To facilitate the delineation and the development of the Utica Shale in Ohio, CONSOL Energy entered into a joint venture with Hess Ohio Developments, LLC (Hess) in the fourth quarter of 2011. The Hess joint venture owns approximately 160,000 net acres of Utica Shale rights in Ohio. We hold a 50% interest in the joint venture. Joint operations are conducted in accordance with a joint development agreement.

Further drilling of the Ohio portion of the Utica acreage is planned for 2013. The company plans to drill 11 wells, all of which are expected to be in Noble County, as the program transitions from an exploration play to a development play.

In 2013, Hess currently plans to drill 16 wells in the Ohio counties of Harrison, Jefferson, Guernsey, and Belmont.

New Albany

We control approximately 277,000 net acres of rights to gas in the New Albany Shale in Kentucky, Illinois, and Indiana. The New Albany Shale is a formation containing gaseous hydrocarbons, and our acreage position has thickness of 50-300 feet at an average depth of 2,500-4,000 feet. For 2013, the company does not plan to drill more than a few wells in this area.

Chattanooga

The Chattanooga Shale in Tennessee is a Devonian-age shale found at a depth of approximately 3,500 feet. The shale thickness is between 40-80 feet, and CONSOL Energy has found it to be rich in total organic content. CONSOL Energy has 248,000 net acres of Chattanooga Shale. This largely contiguous acreage is composed of only a small number of leases, a rarity in Appalachia. CONSOL Energy is the operator of all of its Chattanooga Shale wells. For 2013, the company does not plan to drill more than a few wells in this area.

Huron

We have 451,000 net acres of Huron Shale potential in Kentucky, West Virgina, and Virginia; a portion of this acreage has tight sands potential. For 2013, the company does not plan to drill more than a few wells in this area.

Upper Devonian

The Upper Devonian Shale formation lies above the Marcellus Shale formation in southwestern Pennsylvania and northern West Virginia. The company holds a large number of acres that have Upper Devonian potential, generally these acres have not been disclosed separately, since they are not the primary drilling target as of December 31, 2012.

CONSOL Energy drilled its first exploration well in the Upper Devonian Shale formation in Greene County, Pa. in late 2012. This well is expected to be completed in early 2013

Summary of Properties as of December 31, 2012



			Shallow Oil
	CBM		and Gas		Marcellus		Other Gas
	Segment		Segment		Segment		Segment		Total
Estimated Net Proved Reserves (million cubic feet equivalent)	1,485,464		583,611		1,805,149		119,234		3,993,458
Percent Developed	75	%	100	%	24	%	40	%	54	%
Net Producing Wells (including gob wells)	4,287		8,341		92		99		12,819
Net Proved Developed Acres	248,425		203,747		5,162		8,058		465,392
Net Proved Undeveloped Acres	54,799		—		18,710		10,065		83,574
Net Unproved Acres(1)	2,229,564		444,722		322,927		1,041,302		4,038,515
Total Net Acres(2)	2,532,788		648,469		346,799		1,059,425		4,587,481

_________

(1)

Net acres include acreage attributable to our working interests in the properties. Additional adjustments (either increases or decreases) may be required as we further develop title to and further confirm our rights with respect to our various properties in anticipation of development. We believe that our assumptions and methodology in this regard are reasonable. See Risk Factors in Section 1A. of this Form 10-K.

(2)

Acreage amounts are shown under the target strata CONSOL Energy expects to produce, although the reported acre may include rights to multiple gas seams (CBM, Shallow Oil and Gas, Marcellus, etc.). We have reviewed our drilling plans, our acreage rights and used our best judgment to reflect the acre in the strata we expect to produce. As more information is obtained or circumstances change, the acreage classification may change.

Producing Wells and Acreage

Most of our development wells and proved acreage is located in Virginia, West Virginia and Pennsylvania. Some leases are beyond their primary term, but these leases are extended in accordance with their terms as long as certain drilling commitments or other term commitments are satisfied. The following table sets forth, at December 31, 2012, the number of producing wells, developed acreage and undeveloped acreage:



	Gross	Net(1)
Producing Wells (including gob wells)	14,906	12,819
Proved Developed Acreage	555,160	465,392
Proved Undeveloped Acreage	118,384	83,574
Unproven Acreage	4,930,181	4,038,515
Total Acreage	5,603,725	4,587,481

___________

(1)

Development Wells (Net)

During the years ended December 31, 2012, 2011 and 2010 we drilled 95.5, 254.9 and 317.0 net development wells, respectively. Gob wells and wells drilled by operators other than our primary joint venture partners, Noble Energy and Hess Corporation, are excluded in the net development wells. In 2012 there were 141 gross development wells. There were no dry development wells in 2012 or 2011, there was one dry development well in 2010. As of December 31, 2012, 43.5 net developmental wells are still in process. The following table illustrates the net wells drilled by well classification type: