COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION:

CONSOL Energy is responsible under the Federal Coal Mine Health and Safety Act of 1969, as amended, for medical and disability benefits to employees and their dependents resulting from occurrences of coal workers' pneumoconiosis disease. CONSOL Energy is also responsible under various state statutes for pneumoconiosis benefits. CONSOL Energy primarily provides for these claims through a self-insurance program. The calculation of the actuarial present value of the estimated pneumoconiosis obligation is based on an annual actuarial study by independent actuaries. The calculation is based on assumptions regarding disability incidence, medical costs, indemnity levels, mortality, death benefits, dependents and interest rates. These assumptions are derived from actual company experience and outside sources. Actuarial gains associated with CWP have resulted from numerous legislative changes over many years which have resulted in lower approval rates for filed claims than our assumptions originally reflected. Actuarial gains have also resulted from lower incident rates and lower severity of claims filed than our assumptions originally reflected.

The CWP liability was remeasured as of April 1, 2010 due to new legislation enacted in the Patient Protection and Affordable Care Act (PPACA). In general, the PPACA impacts CONSOL Energy's liability in that future claims will be approved at a higher rate than has occurred in the past. The PPACA made two changes to the Federal Black Lung Benefits Act (FBLBA). First, it provided changes to the legal criteria used to assess and award claims by creating a legal presumption that miners are entitled to benefits if they have worked at least 15 years in underground coal mines, or in similar conditions, and suffer from a totally disabling lung disease. To rebut this presumption, a coal company would have to prove that a miner did not have black lung or that the disease was not caused at his/her work. Second, it changed the law so black lung benefits will continue to be paid to dependent survivors when the miner passes away, regardless of the cause of the miner's death. The impact of the new law increased CONSOL Energy's CWP liability by $45,700. The law change increased expense by $6,658 for the year ended December 31, 2010. In conjunction with the law change, CONSOL Energy conducted an extensive experience study regarding the rate of claim incidence. Based on historical company data and available industry data, with emphasis on recent history, certain assumptions were revised at the remeasurement date. Most notably, the expected number of claims, prior to the law change, was reduced to more appropriately reflect CONSOL Energy's historical experience. The assumption and remeasurement changes resulted in a decrease in the liability of $47,700. The assumption and remeasurement changes reduced expense by $10,576 for the year ended December 31, 2010.

The combined impact of the changes in actuarial assumptions, remeasurement and changes to the FBLBA was a net decrease of $1,232 in liability, net of $768 tax, as well as Accumulated Other Comprehensive Income based on an April 1, 2010 remeasurement date. The combined impact of these changes reduced expense by $3,918 for the year ended December 31, 2010.

CONSOL Energy is also responsible to compensate individuals who sustain employment related physical injuries or some types of occupational diseases and, on some occasions, for costs of their rehabilitation. Workers' compensation laws will also compensate survivors of workers who suffer employment related deaths. Workers' compensation laws are administered by state agencies with each state having its own set of rules and regulations regarding compensation that is owed to an employee that is injured in the course of employment. CONSOL Energy primarily provides for these claims through a self-insurance program. CONSOL Energy recognizes an actuarial present value of the estimated workers' compensation obligation calculated by independent actuaries. The calculation is based on claims filed and an estimate of claims incurred but not yet reported as well as various assumptions. The assumptions include discount rate, future healthcare trend rate, benefit duration and recurrence of injuries. Actuarial gains associated with workers' compensation have resulted from discount rate changes, several years of favorable claims experience, various favorable state legislation changes and overall lower incident rates than our assumptions.



	CWP						Workers' Compensation
	at December 31,						at December 31,
	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at beginning of period	$	184,531		$	194,641		$	174,456		$	179,268
State administrative fees and insurance bond premiums	—			—			7,035			7,816
Service, legal and administrative cost	7,620			8,067			20,015			30,399
Interest cost	9,330			10,789			8,238			9,156
Actuarial gain	(6,783		)	(17,381		)	(2,783		)	(14,553		)
Benefits paid	(11,118		)	(11,585		)	(32,892		)	(37,630		)
Benefit obligation at end of period	$	183,580		$	184,531		$	174,069		$	174,456

Current liabilities	$	(10,027	)	$	(10,915	)	$	(24,837	)	$	(27,754	)
Noncurrent liabilities	(173,553		)	(173,616		)	(149,232		)	(146,702		)
Net obligation recognized	$	(183,580	)	$	(184,531	)	$	(174,069	)	$	(174,456	)

Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial gain	$	(164,374	)	$	(178,772	)	$	(55,233	)	$	(56,358	)
Prior service credit	(395		)	(1,123		)	—			—
Net amount recognized (before tax effect)	$	(164,769	)	$	(179,895	)	$	(55,233	)	$	(56,358	)

The components of the net periodic cost (credit) are as follows:



	CWP									Workers’ Compensation
	For the Years Ended									For the Years Ended
	December 31,									December 31,
	2011			2010			2009			2011			2010			2009
Service cost	$	4,620		$	5,067		$	7,074		$	17,872		$	27,015		$	28,394
Interest cost	9,330			10,789			12,054			8,238			9,156			8,765
Legal and administrative costs	3,000			3,000			2,700			2,143			3,384			3,401
Amortization of prior service cost	(728		)	(728		)	(728		)	—			—			—
Recognized net actuarial gain	(21,182		)	(21,585		)	(19,590		)	(3,907		)	(3,072		)	(4,200		)
State administrative fees and insurance bond premiums	—			—			—			7,035			7,816			6,710
Net periodic cost (credit)	$	(4,960	)	$	(3,457	)	$	1,510		$	31,381		$	44,299		$	43,070

Amounts included in accumulated other comprehensive income, expected to be recognized in 2012 net periodic benefit costs:



				Workers'
	CWP			Compensation
	Benefits			Benefits
Prior Service benefit recognition	$	(395	)	$	—
Actuarial gain recognition	$	(19,338	)	$	(3,944	)

Assumptions:

The weighted-average discount rate used to determine benefit obligations and net periodic (benefit) cost are as follows:



	CWP						Workers' Compensation
	For the Years Ended						For the Years Ended
	December 31,						December 31,
	2011		2010		2009		2011		2010		2009
Benefit obligations	4.46	%	5.21	%	5.84	%	4.40	%	5.13	%	5.55	%
Net Periodic (benefit) costs	5.21	%	5.84	%	6.23	%	5.13	%	5.55	%	5.90	%

Assumed discount rates have a significant effect on the amounts reported for both CWP benefits and Workers' Compensation costs. A one-quarter percentage point change in assumed discount rate would have the following effect on benefit costs:



	0.25 Percentage			0.25 Percentage
	Point Increase			Point Decrease
CWP benefit increase (decrease)	$	634		$	(606	)
Workers' Compensation costs (decrease) increase	$	(686	)	$	721

Cash Flows:

CONSOL Energy does not intend to make contributions to the CWP or Workers' Compensation plans in 2012. We intend to pay benefit claims as they become due.

The following benefit payments, which reflect expected future claims as appropriate, are expected to be paid:



			Workers' Compensation
	CWP		Total		Actuarial		Other
	Benefits		Benefits		Benefits		Benefits
2012	$	10,027	$	31,375	$	24,837	$	6,538
2013	$	10,280	$	31,360	$	24,658	$	6,702
2014	$	10,533	$	31,576	$	24,707	$	6,869
2015	$	10,721	$	31,925	$	24,884	$	7,041
2016	$	10,856	$	32,328	$	25,111	$	7,217
Year 2017-2021	$	54,752	$	169,785	$	130,900	$	38,885