INCOME TAXES:

Income taxes (benefits) provided on earnings consisted of:



	For The Years Ended December 31,
	2011			2010			2009
Current:
U.S Federal	$	173,912		$	82,031		$	134,231
U.S State	34,555			13,652			41,482
Non-U.S	—			(3,425		)	(1,940		)
	208,467			92,258			173,773
Deferred:
U.S. Federal	(35,487		)	8,463			49,672
U.S. State	(17,524		)	8,566			(2,242		)
	(53,011		)	17,029			47,430
Total Income Taxes	$	155,456		$	109,287		$	221,203

The components of the net deferred tax assets are as follows:



	December 31,
	2011			2010
Deferred Tax Assets:
Postretirement benefits other than pensions	$	1,217,246		$	1,251,641
Salary retirement	103,146			65,309
Mine closing	95,193			144,131
Pneumoconiosis benefits	69,915			71,661
Workers' compensation	65,266			67,025
Net operating loss	57,669			58,428
Alternative minimum tax	54,998			141,758
Mine subsidence	41,453			34,659
Capital lease	24,763			27,918
Reclamation	23,738			31,177
Other	136,211			129,293
Total Deferred Tax Assets	1,889,598			2,023,000
Valuation Allowance**	(41,016		)	(62,668		)
Net Deferred Tax Assets	1,848,582			1,960,332

Deferred Tax Liabilities:
Property, plant and equipment	(1,046,235		)	(1,221,362		)
Gas hedge	(98,539		)	(29,209		)
Advance mining royalties	(31,284		)	(31,574		)
Other	(23,717		)	(19,170		)
Total Deferred Tax Liabilities	(1,199,775		)	(1,301,315		)

Net Deferred Tax Assets	$	648,807		$	659,017

**Valuation allowance of ($41,016) has been allocated to long-term deferred tax assets for 2011. Valuation allowances of ($778) and ($61,890) have been allocated between current and long-term deferred tax assets respectively for 2010.

A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. All available evidence, both positive and negative, must be considered in determining the need for a valuation allowance. At December 31, 2011 and 2010, positive evidence considered included financial and tax earnings generated over the past three years for certain subsidiaries, future income projections based on existing fixed price contracts and forecasted expenses, reversals of financial to tax temporary differences and the implementation of and/or ability to employ various tax planning strategies. Negative evidence included financial and tax losses generated by certain subsidiaries in prior periods and the inability to achieve forecasted results at certain subsidiaries for those periods. CONSOL Energy continues to report, on an after federal tax basis, a deferred tax asset related to state operating losses of $57,669 with a related valuation allowance of $34,980 at December 31, 2011. The deferred tax asset related to state operating losses, on an after federal tax adjusted basis, was $58,428 with a related valuation allowance of $39,744 at December 31, 2010. A review of positive and negative evidence regarding these state operating benefits concluded that a valuation allowance for various CONSOL Energy subsidiaries was warranted. The net operating losses expire at various times between 2012 and 2030.

The deferred tax assets attributable to future deductible temporary differences for certain CONSOL Energy subsidiaries with histories of financial and tax losses was also reviewed for positive and negative evidence regarding the realization of the deferred tax assets. A valuation allowance of $6,036 and $22,924 was recognized at December 31, 2011 and 2010, respectively. Included in the valuation allowance against the future deductible temporary differences at December 31, 2011 and 2010, were $872 and $9,639 of allowances which were recognized through Other Comprehensive Income. These allowances relate to actuarial gains/losses for other postretirement, pension and long-term disability benefits that were recognized through Other Comprehensive Income. Management will continue to assess the potential for realizing deferred tax assets based upon income forecast data and the feasibility of future tax planning strategies and may record adjustments to valuation allowances against deferred tax assets in future periods as appropriate that could materially impact net income.

During 2011, the deferred tax asset relating to alternative minimum tax decreased $86,760. This change was due to: $55,251 estimated utilization relating to 2011 activity, $25,687 utilization relating to the year 2010 accrual to return adjustment, and $5,823 utilization relating to the 2006-2007 audit settlement.

The following is a reconciliation stated as a percentage of pretax income, of the United States statutory federal income tax rate to CONSOL Energy's effective tax rate:



	For the Years Ended December 31,
	2011					2010					2009
	Amount			Percent		Amount			Percent		Amount			Percent
Statutory U.S. federal income tax rate	$	275,784		35.0	%	$	163,770		35.0	%	$	275,921		35.0	%
Excess tax depletion	(91,470		)	(11.6	)	(70,812		)	(15.1	)	(68,787		)	(8.7	)
Effect of domestic production activities	(22,209		)	(2.8	)	(5,633		)	(1.2	)	(12,707		)	(1.6	)
Federal and state tax accrual to tax return reconciliation	2,257			0.3		4,609			1.0		(1,256		)	(0.2	)
IRS and state tax examination settlements	(5,188		)	(0.7	)	—			—		—			—
Net effect of state income taxes	14,197			1.8		12,022			2.6		27,362			3.5
Effect of releasing valuation allowance	(22,618		)	(2.9	)	—			—		—			—
Effect of foreign tax	(1,822		)	(0.2	)	(3,424		)	(0.7	)	(5,502		)	(0.7	)
Other	6,525			0.8		8,755			1.8		6,172			0.8
Income Tax Expense / Effective Rate	$	155,456		19.7	%	$	109,287		23.4	%	$	221,203		28.1	%

A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:



	For the Years Ended
	December 31,
	2011			2010
Balance at beginning of period	$	91,349		$	78,811
Increase in unrecognized tax benefits resulting from tax positions taken during current period	—			15,998
Increase (decrease) in unrecognized tax benefits resulting from tax positions taken during prior periods	—			(260		)
Reduction in unrecognized tax benefits as a result of the lapse of the applicable statute of limitations	(17,362		)	(3,200		)
Reduction of unrecognized tax benefits as a result of a settlement with taxing authorities	(36,401		)	—
Balance at end of period	$	37,586		$	91,349

If these unrecognized tax benefits were recognized, $3,891 and $16,802 respectively would have affected CONSOL Energy's effective income tax rate for the years ended December 31, 2011 and 2010, respectively.

CONSOL Energy and its subsidiaries file income tax returns in the U.S. federal, various states and Canadian 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 the years before 2008. During the year ended December 31, 2009, CONSOL Energy was advised by the Canadian Revenue Agency that its appeal of tax deficiencies paid as a result of the Agency's audit of the Company's Canadian tax returns filed for years 1997 through 2002 had been successfully resolved. The Company received a refund of $4,560 in 2010 as a result of the 2009 audit settlement recorded as a tax refund receivable in 2009.

The IRS completed its audit of CONSOL Energy's income tax returns filed for 2006 and 2007. The Company concluded this examination and remitted payment of the resulting tax deficiencies to federal and state taxing authorities before December 31, 2011. CONSOL paid $6,404 and $4,361 for tax years 2006 and 2007, respectively. The IRS will commence its audit of tax years 2008 and 2009 in 2012. During the next year, the statute of limitations for assessing additional income tax deficiencies will expire for certain tax years in several state tax jurisdictions. The expiration of the statute of limitations for these years is not expected to have a significant impact on CONSOL Energy's total uncertain income tax positions and net income for the twelve-month period.

CONSOL Energy recognizes interest accrued related to unrecognized tax benefits in its interest expense. At December 31, 2011 and 2010, the Company had an accrued liability of $5,373 and $10,774 respectively, for interest related to uncertain tax positions. Interest expense related to unrecognized tax benefits was ($3,096), $2,436 and $2,409 that were recorded in the Company's Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009, respectively. Interest expense was reduced during the year ended December 31, 2011 due to the reversal of various uncertain tax liabilities primarily due to the expiration of statutes. During the year ended December 31, 2011, CONSOL Energy paid $1,633 and $673 of interest related to income tax deficiencies for tax years 2006 and 2007 with the IRS.

CONSOL Energy recognizes penalties accrued related to unrecognized tax benefits in its income tax expense. As of December 31, 2011 and 2010, there were no accrued penalties recognized.