DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2011

DERIVATIVE INSTRUMENTS

NOTE 12. DERIVATIVE INSTRUMENTS

The following disclosures summarize the fair value of derivative instruments not designated as hedging instruments in the condensed consolidated balance sheets and the effect of changes in fair value related to those derivative instruments not designated as hedging instruments on the condensed consolidated statements of income.

Derivative Instruments Not Designated		Fair Value as of
As Hedging Instruments	Balance Sheet Location	June 30, 2011		December 31, 2010
		(In thousands)
Asset Derivatives:
Note Hedge	Other noncurrent assets	$	88,542	$	112,400
Liability Derivatives:
Cash Conversion Option	Long-term debt	$	90,724	$	115,994
Contingent interest features of the Debentures and 3.25% Notes	Other noncurrent liabilities	$	0	$	0

		Amount of Gain or (Loss) Recognized in Income on Derivative
Effect on Income of Derivative Instruments Not Designated As Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	For the  Three Months Ended June 30, 2011			For the Three Months  Ended June 30, 2010			For the Six Months Ended June 30, 2011			For the Six Months Ended June 30, 2010
					(In thousands)
Note Hedge	Non-cash convertible debt related expense	$	(14,620	)	$	(7,045	)	$	(23,857	)	$	(43,941	)
Cash Conversion Option	Non-cash convertible debt related expense		14,758			5,704			25,270			44,523
Contingent interest features of the Debentures and Notes	Non-cash convertible debt related expense		—			—			—			—
Effect on income of derivative instruments not designated as hedging instruments		$	138		$	(1,341	)	$	1,413		$	582

Cash Conversion Option, Note Hedge and Contingent Interest features related to the 3.25% Cash Convertible Senior Notes

The Cash Conversion Option is a derivative instrument which is recorded at fair value quarterly with any change in fair value being recognized in our condensed consolidated statements of income as non-cash convertible debt related expense. The Note Hedge is accounted for as a derivative instrument and as such, is recorded at fair value quarterly with any change in fair value being recognized in our condensed consolidated statements of income as non-cash convertible debt related expense.

We expect the gain or loss associated with changes to the valuation of the Note Hedge to substantially offset the gain or loss associated with changes to the valuation of the Cash Conversion Option. However, they will not be completely offsetting as a result of changes in the credit valuation adjustment related to the Note Hedge. Our most significant credit exposure arises from the Note Hedge. The fair value of the Note Hedge reflects the maximum loss that would be incurred should the Option Counterparties fail to perform according to the terms of the Note Hedge agreement. For specific details related to the Cash Conversion Option, Note Hedge and contingent interest features of the 3.25% Notes, refer to Note 12 of the Notes to Consolidated Financial Statements in our Form 10-K.

Contingent Interest feature of the 1.00% Senior Convertible Debentures

The contingent interest feature in the Debentures is an embedded derivative instrument. The first contingent cash interest payment period would not commence until February 1, 2012, and the fair value for the embedded derivative was zero as of June 30, 2011. For specific criteria related to the contingent interest features of the Debentures, refer to Note 12 of the Notes to Consolidated Financial Statements in our Form 10-K.

Energy Price Risk

Following the expiration of certain long-term energy sales contracts, we may have exposure to market risk, and therefore revenue fluctuations, in energy markets. We may enter into contractual arrangements that will mitigate our exposure to this volatility through a variety of hedging techniques. Our efforts in this regard will involve only mitigation of price volatility for the energy we produce, and will not involve speculative energy trading. Consequently, we have entered into swap agreements with various financial institutions to hedge our exposure to market risk. As of June 30, 2011, the fair value of the energy derivatives of $0.8 million, pre-tax, was recorded as a current liability and as a component of AOCI.