DERIVATIVE INSTRUMENTS:

CONSOL Energy enters into financial derivative instruments to manage our exposure to commodity price volatility. CONSOL Energy derivatives that meet the criteria for cash flow hedge accounting, reflect changes in their fair values in Other Comprehensive Income.

CONSOL Energy’s derivative instruments that qualified for cash flow hedge accounting are for a total notional amount of production of 215.9 billion cubic feet. On December 31, 2014, CONSOL Energy de-designated all of its cash flow hedges and will account for all existing and future gas commodity hedges on a mark-to-market basis with changes in fair value recorded in current period earnings. In connection with this change, CONSOL Energy froze the balances recorded in Accumulated Other Comprehensive Income at December 31, 2014 and will reclassify balances to earnings as the underlying physical transactions occur, unless it is no longer probable that the physical transaction will occur at which time the related OCI will be immediately recorded in earnings. The gross fair value of CONSOL Energy's derivative instruments that were de-designated from cash flow hedge treatment on December 31, 2014 was an asset of $192,332, of which $123,676 was included in Prepaid Expense and $68,656 which was included in Other Assets on the Consolidated Balance Sheets. CONSOL Energy expects to reclassify $78,051 out of Accumulated Other Comprehensive Income into Natural Gas, NGLs and Oil Sales on the Consolidated Statements of Income during the year ending December 31, 2015.

In November 2014, CONSOL Energy entered into basis only swaps that did not qualify for hedge accounting. The swaps were entered into to decrease the risk related to pricing differences between local markets and NYMEX. At December 31, 2014, the fair values of these swaps, which were for notional amounts of 10.6 billion cubic feet, were $1,064 that was recorded in Prepaid Expenses and $327 that was recorded in Other Current Liabilities in the Consolidated Balance Sheets. The basis only swaps resulted in $737 being recorded in Natural Gas, NGLs and Oil Sales on the Consolidated Statements of Income during the year ending December 31, 2014.

At December 31, 2013 the gross fair values of CONSOL Energy's derivative instruments resulted in assets of $83,661 and liabilities of $18,212. The total assets were comprised of $59,605 that were recorded in Prepaid Expense and $24,056 which were included in Other Assets on the Consolidated Balance Sheets. The total liabilities were comprised of $12,327 which were recorded in Other Accrued Liabilities and $5,885 which were included Other Liabilities on the Consolidated Balance Sheets. For the years ended December 31, 2013 and 2012, no gains were reclassified into earnings as a result of the discontinuance of cash flow hedges.

The effect of derivative instruments in cash flow hedging relationships on the Consolidated Statements of Income and the Consolidated Statements of Stockholders' Equity, net of tax, were as follows:



	Year Ended December 31,
	2014		2013			2012
Natural Gas Price Swaps and Options
Beginning Balance – Accumulated OCI	$	42,493	$	76,761		$	151,780
Gain recognized in Accumulated OCI	$	97,316	$	45,631		$	114,240
Less: Gain reclassified from Accumulated OCI into Outside Sales	$	18,288	$	79,899		$	189,259
Ending Balance – Accumulated OCI	$	121,521	$	42,493		$	76,761
Gain (Loss) recognized in Outside Sales for ineffectiveness	$	4,168	$	(4,645	)	$	579

There were no amounts recognized in earnings related to the amounts excluded from the assessment of hedge effectiveness in 2014, 2013 or 2012.