Note 4 - Income Taxes

Income tax expense for the three and nine months ended September 30, 2012, and 2011, differs from the amounts that would be provided by applying the statutory U.S. federal income tax rate to income (loss) before income taxes as a result of the estimated effect of percentage depletion, the effect of state income taxes, uncertain tax positions, valuation allowances, and other permanent differences. The quarterly rate can also be impacted by the proportion of income earned in the reported periods.

The provision for income taxes consists of the following:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Current portion of income tax benefit (expense):
Federal	$	—		$	(20,699	)	$	—		$	(29,855	)
State	(174		)	(637		)	(435		)	(1,036		)
Deferred portion of income tax benefit (expense)	22,910			(112,010		)	(7,305		)	(164,251		)
Total income tax benefit (expense)	$	22,736		$	(133,346	)	$	(7,740	)	$	(195,142	)
Effective tax rate	37.2		%	36.7		%	37.5		%	36.7		%

On a year-to-date basis, a change in the Company’s effective tax rate between reported periods will generally reflect differences in its estimated highest marginal state tax rate due to changes in the composition of income from Company activities among state tax jurisdictions. Cumulative effects of state rate changes are reflected in the period legislation is enacted.

The Company and its subsidiaries file federal income tax returns and various state income tax returns. With certain exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by these tax authorities for years before 2007. In the first quarter of 2011, the Company received a $5.5 million refund from its 2006 tax year as a result of a net operating loss carryback claim from the 2008 tax year. The Internal Revenue Service continues to review documentation provided by the Company for the 2007 and 2010 tax years as part of an audit initiated in the first quarter of 2012.

In the third quarter of 2011, the Company completed a multi-year research and development tax credit study and recorded a cumulative discrete tax benefit. The Company’s 2011 research and development credit was calculated and recorded as a discrete tax benefit in the third quarter of 2012. As of the filing date of this report, federal tax law allowing for the calculation of credits from research and development activities has not been extended past December 31, 2011.