NOTE 15 – INCOME TAXES

The provision for (benefit from) income taxes consisted of the following:

	Year ended December 31,
	2011		2010		2009
Current federal provision (benefit)	$	3,076,000	$	1,021,949	$	(4,866,532	)
Current state provision		191,266		5,549		89,571

Deferred federal provision		854,980		662,817		8,959,098
Deferred state provision		4, 662		12,501		161,831

Income tax expense	$	4,126,908	$	1,702,816	$	4,343,968

The difference between the effective tax rate in income tax expense and the Federal statutory rate of 34% is as follows:

	2011			2010			2009
Income taxes at U.S. statutory rate	$	4,269,455		$	1,492,080		$	3,736,766
State taxes, net of federal benefit		132,136			96,144			230,187
Prior year overpayments		--			(14,566	)		(13,998	)
Permanent and other items		(363,933	)		10,158			25,720
Increase in valuation allowance		89,250			119,000			365,293
Total tax expense	$	4,126,908		$	1,702,816		$	4,343,968

Permanent and other items primarily include non-deductible expenses offset by the manufacturers' deduction under §199 of the Internal Revenue Code.

Tax effects of temporary differences that give rise to significant portions of federal and state deferred tax assets and deferred tax liabilities were as follows:

	December 31,
	2011			2010
Deferred tax liabilities:
Plant, pipeline and equipment	$	(7,654,559	)	$	(5,925,379	)
Contractual based asset		(205,763	)		(290,906	)
Unrealized loss on swap agreements		(136,167	)		(61,503	)
Total deferred tax liabilities	$	(7,996,489	)	$	(6,277,788	)

Deferred tax assets:
Accounts receivable		186,918			162,250
Inventory		91,737			35,437
Mineral interests		365,293			365,293
Unrealized loss on interest rate swap		385,555			379,515
Environmental		119,000			119,000
Post-retirement benefits		355,804			351,911

Investment in AMAK		720,375			631,125
Stock-based compensation		569,096			355,505
Deferred revenue		560,605			-
Gross deferred tax assets		3,354,383			2,400,036
Valuation allowance		(1,204,668	)		(1,115,418	)
Total net deferred tax assets	$	2,149,715		$	1,284,618
Net deferred tax liabilities	$	(5,846,774	)	$	(4,993,170	)

The current and non-current classifications of the deferred tax balances are as follows:

	2011			2010

Current deferred tax asset	$	1,169,124		$	487,513

Non-current deferred tax liability:

Deferred tax assets		2,010,568			1,822,834
Deferred tax liability		(7,821,798	)		(6,188,099	)
Valuation allowance		(1,204,668	)		(1,115,418	)
Non-current deferred tax liability, net		(7,015,898	)		(5,480,683	)

Total deferred liabilities, net	$	(5,846,774	)	$	(4,993,170	)

The Company has provided a valuation allowance in 2011 and 2010 against certain deferred tax assets because of uncertainties regarding their realization. The 2011 increase in the valuation allowance of $89,250 is related to the tax basis in AMAK. The net decrease in the valuation allowance of $1,109,090 in 2010 is the result of the write-off of capital loss carryovers which expired unused.

The Company elected to carry-back the taxable loss for the year ended December 31, 2009 of approximately $13,900,000 to prior years. The Company had recorded $4,726,708 in taxes receivable as of December 31, 2009 related to the carry-back of which approximately $4,510,000 collected and adjusted in 2010. The remaining taxes receivable at December 31, 2010 is $216,461 which was collected in 2011.

The Company had no Saudi Arabian income tax liability in 2011, 2010, or 2009.

The Company files an income tax return in the U.S. federal jurisdiction and Texas. Tax returns for various jurisdictions remain open for examination for the years 2008 through 2010. In late 2010 the IRS opened an examination of the Company's 2009 tax return which was subsequently closed without change.