INCOME TAXES:

The following is a reconciliation, stated in dollars and as a percentage of pretax income, of the U.S. statutory federal income tax rate to CONSOL Energy’s effective tax rate:



	For the Three Months Ended March 31,
	2013					2012
	Amount			Percent		Amount			Percent
Statutory U.S. federal income tax rate	$	(455	)	35.0	%	$	41,502		35.0	%
Impact of excess tax depletion	1,428			(109.9	)	(26,514		)	(22.4	)
Net effect of state income taxes	(179		)	13.7		3,510			3.0
Other	(272		)	21.0		2,883			2.4
Income Tax Expense / Effective Rate	$	522		(40.2	)%	$	21,381		18.0	%

The effective rates for the three months ended March 31, 2013 and 2012 were calculated using the annual effective rate projection on recurring earnings and include tax liabilities related to certain discrete transactions which are described below. The effective tax rate is sensitive to changes in annual profitability and percentage depletion.

During the three months ended March 31, 2012, CONSOL Energy reached an agreement with the Internal Revenue Service Appeals Division on its Extraterritorial Income Exclusion refund claim for tax years 2004-2005. As a result of the agreement, the Company reflected $983 as a discrete reduction to income tax expense. The discrete transaction was reflected in the Other line of the rate reconciliation.

The total amounts of uncertain tax positions at March 31, 2013 and 2012 were $22,770 and $25,570, respectively. If these uncertain tax positions were recognized, approximately $2,071 and $3,891, respectively, would affect CONSOL Energy’s effective tax rate. There were no additions to the liability for unrecognized tax benefits during the three months ended March 31, 2013 and 2012.

CONSOL Energy recognizes interest accrued related to uncertain tax positions in its interest expense. As of March 31, 2013 and 2012, the Company reported an accrued interest liability relating to uncertain tax positions of $5,165 and $5,741, respectively. The accrued interest liability includes interest expense that is reflected in the Company’s Consolidated Statements of Income for the three months ended March 31, 2013 and 2012 of $335 and $368, respectively.

CONSOL Energy recognizes penalties related to uncertain tax positions in its income tax expense. As of March 31, 2013 and 2012, CONSOL Energy had no accrued liability for tax penalties.

CONSOL Energy and its subsidiaries file federal income tax returns with the United States and returns within various states and Canadian jurisdictions. With few exceptions, the Company is no longer subject to United States federal, state, local, or non-U.S. income tax determinations by tax authorities for the years before 2008.