(11) Income Taxes

The following table sets forth the components of our provision for income taxes.


		Year Ended December 31,
		2013		2012		2011
	(In thousands)
Current:
Federal		$	-	$	-	$	-
State			-		-		-
Total current		$	-	$	-	$	-

Deferred:
Federal		$	(47,723)	$	(28,719)	$	(14,468)
State			(1,964)		(1,181)		(354)
Total deferred		$	(49,687)	$	(29,900)	$	(14,822)

Total:
Federal		$	(47,723)	$	(28,719)	$	(14,468)
State			(1,964)		(1,181)		(354)
Total provision for income taxes.		$	(49,687)	$	(29,900)	$	(14,822)

The following table reconciles the expected statutory federal income tax rate to our effective income tax rate.


	Percentage of Pretax Earnings
	Year Ended December 31,
	2013			2012			2011
Expected statutory federal income tax rate		35.0	%		35.0	%	35.0	%
State taxes		1.4			1.4		2.3
State tax rate changes		-			(2.7)		(1.7)
Statutory depletion		(0.3)			(0.4)		(1.0)
Other		0.7			0.4		1.2
Effective income tax rate		36.8	%		33.7	%	35.8	%

The following table sets forth the tax effects of temporary differences that give rise to significant portions of our deferred tax assets and liabilities.


	December 31,
	2013		2012
	(In thousands)
Deferred tax assets:
Federal and state net operating loss carryforwards	$	62,015	$	62,130
Fair value of commodity derivative instruments		11,578		3,912
Restricted stock awards and options		3,843		2,313
Percentage depletion carryforward		5,003		4,575
Accruals and other		1,130		2,613
Deferred tax asset		83,569		75,543

Deferred tax liabilities:
Property, plant and equipment, principally due to differences in depreciation	$	193,191	$	136,016
Fair value of commodity derivative instruments		182		214
Prepaid assets		1,482		1,778
Accruals and other		2,577		1,907
Deferred tax liabilities		197,432		139,915

Net deferred tax liability		113,863		64,372

Reflected in accompanying balance sheets as:
Current deferred asset		8,949		3,322
Non-current deferred liability		122,812		67,694
Total net deferred tax liability	$	113,863	$	64,372

As a result of our reorganization under Chapter 11 in 2009, the income from the discharge of indebtedness, represented for tax purposes as the excess of the principal and accrued interest on the debt discharged over the fair value of the stock of the reorganized company received in exchange for the discharged obligations, as defined by Internal Revenue Code (the “IRC”) Section 108 (“IRC 108”), reduced our net operating loss carryforwards (“NOLs”) by $97 million (“Tax Attribute Reduction”). Our remaining NOLs as of December 31, 2013 were approximately $167 million.

Ownership changes, as defined in IRC Section 382, limit the amount of NOLs that can be utilized annually to offset future taxable income and reduce our tax liability (“Section 382 Limitation”). In 2009, as part of our Chapter 11 reorganization, we had an ownership change which resulted in a Section 382 Limitation on the amount of NOLs available annually for use. Unused annual limited NOLs (those NOLs in existence immediately after the application of IRC 108) totaled $137 million. The annual limitation is approximately $21 million per year beginning in 2010 and, if unused, can be carried over and aggregated with limited NOLs in future years subject to the ultimate expiration of the NOLs. We have not used any limited NOLs since the reorganization. The amount of limited NOLs available for our 2013 federal tax return is approximately $121 million. We believe that we will be able to utilize all of our federal NOLs prior to their expiration.

At December 31, 2013, we had approximately $167 million of federal NOLs, of which approximately $3.8 million relates to excess tax benefits with respect to share-based compensation that have not been recognized in our consolidated financial statements. Our federal NOLs are available to reduce future federal taxable income subject to the limitations and estimates described above and the application of the tax rules and regulations. The NOLs begin expiring in the years 2025 through 2033.

As of January 1, 2013, our 2009-2012 income tax years remain subject to examination by the Internal Revenue Service. In addition, our 2009-2012 state income/franchise tax years remain subject to examination by the States of Louisiana and Texas. As of the date of these financial statements, our 2013 U.S. federal and state income tax returns have not been filed, although management expects to file such returns in a timely manner during 2014. We have no material uncertain tax positions as of December 31, 2013.