(9) INCOME TAXES

The provision (benefit) for income taxes included the following components:

	2011	2010	2009
	(in thousands)
Current:
Federal	$ 3,378	$ 10,421	$ (65,309)
State	820	1,518	340
	4,198	11,939	(64,969)

Deferred:
Federal	345,922	319,279	48,308
State	60,941	59,982	298
Foreign	2,160	459	0
	409,023	379,720	48,606
Provision (benefit) for income taxes	$ 413,221	$ 391,659	$ (16,363)

The provision for income taxes was an effective rate of 39.3% in 2011, 39.3% in 2010 and 31.5% in 2009. The following reconciles the provision for income taxes included in the consolidated statements of operations with the provision which would result from application of the statutory federal tax rate to pre-tax financial income:

	2011	2010	2009
	(in thousands)

Expected provision (benefit) at federal statutory rate	$ 367,854	$ 348,632	$ (18,205)
Increase (decrease) resulting from:
State income taxes, net of federal income tax effect	40,145	39,975	415
Nondeductible expenses	1,244	660	1,497
Other	3,978	2,392	(70)
Provision (benefit) for income taxes	$ 413,221	$ 391,659	$ (16,363)

The components of the Company's net deferred tax liability as of December 31, 2011 and 2010 were as follows:

	2011	2010
	(in thousands)
Deferred tax liabilities:
Differences between book and tax basis of property	$ 1,916,619	$ 1,411,240
Cash flow hedges	276,063	61,394
Other	15,755	14,122
	2,208,437	1,486,756

Deferred tax assets:
Accrued compensation	30,316	16,279
Alternative minimum tax credit carryforward	73,516	70,138
Stored natural gas	9,053	7,145
Accrued pension costs	3,982	6,227

Asset retirement obligations	13,188	10,848
Net operating loss carryforward	287,830	192,086
Other	9,591	9,652
	427,476	312,375
Net deferred tax liability	$ 1,780,961	$ 1,174,381

The net deferred tax liability at December 31, 2011 was comprised of net long-term deferred income tax liabilities of $1,586.8 million in addition to a net current deferred income tax liability of $194.2 million. The net deferred tax liability at December 31, 2010 was comprised of net long-term deferred income tax liabilities of $1,130.3 million in addition to a net current deferred income tax liability of $44.1 million. In 2011, the Company paid $0.8 million in state income taxes and paid $3.4 million in alternative minimum taxes. In 2010, the Company paid $0.4 million in state income taxes and paid $14.0 million in alternative minimum taxes. The Company's net operating loss carryforward at December 31, 2011 was $878.2 million and has expiration dates of 2027 through 2031. The Company also had an alternative minimum tax credit carryforward of $73.5 million and a statutory depletion carryforward of $13.0 million at December 31, 2011.

Deferred tax assets relating to tax benefits of employee stock option grants have been reduced to reflect exercises in 2011. Some exercises resulted in tax deductions in excess of previously recorded benefits based on the option value at the time of the grant ("windfalls"). Although these additional tax benefits or "windfalls" are reflected in net operating loss carryforwards, pursuant to GAAP, the additional tax benefit associated with the windfall is not recognized until the deduction reduces taxes payable. Accordingly, since the tax benefit does not reduce our current taxes payable in 2011 due to net operating loss carryforwards, these "windfall" tax benefits are not reflected in our net operating losses in deferred tax assets for 2011. Windfalls included in net operating loss carryforwards but not reflected in deferred tax assets for 2011 were $110.3 million. The Company utilized a portion of its net operating loss carryforward in 2010 based on its federal income tax return filing. Therefore, an additional tax return benefit associated with the windfall was recognized in 2011.

As of December 31, 2011, the Company has no unrecognized tax benefits. The income tax years 2008 and 2009 have been audited by the Internal Revenue Service resulting in no changes to the Company's taxes. The income tax years 2009 to 2011 remain open to examination by the major taxing jurisdictions to which the Company is subject, except for the 2009 federal tax return for which the examination is complete.

The Company has an income tax net operating loss carryforward related to its Canadian operations of $11.0 million, and has expiration dates of 2030 through 2031. The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax asset associated with the Canadian net operating loss. Based on this assessment, the Company recorded a valuation allowance of $2.0 million, as of December 31, 2011, to reflect that it is more likely than not that the deferred tax asset will not be recognized. The Company recorded a valuation allowance of $0.5 million in 2010. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are increased.