UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-32723

CNX GAS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		20-3170639
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)

1000 CONSOL Energy Drive

Canonsburg, PA 15317-6506

(724) 485-4000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was ~~registrant was~~ required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller Reporting Company ¨

(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

The number of shares of the registrant’s common stock outstanding as of ~~October 20,~~latest ~~2009~~possible ~~is 150,984,596 shares~~date.


Class		Shares outstanding as of April 16, 2010
Common stock, $0.01 par value		151,021,770

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements
	Consolidated Statements of Income for the three and nine months ended September 30, 2009 and 2008	3
	Consolidated Statements of Income for the three months ended March 31, 2010 and 2009	1
	Consolidated Balance Sheets at September 30, 2009 and December 31, 2008	4
	Consolidated Balance Sheets at March 31, 2010 and December 31, 2009	2
	Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2009	6
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2010	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008	7
	Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009	5
	Notes to Unaudited Consolidated Financial Statements	86
Item 2.	~~Management’s~~Managements Discussion and Analysis of Financial Condition and Results of Operations	2018
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3729
Item 4.	Controls and Procedures	3830
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	4031
Item 6.	Exhibits	4031

PART I

FINANCIAL INFORMATION

ITEM 1.

CONDENSED FINANCIAL STATEMENTS

CNX GAS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)

For the Three Months EndedSeptember 30,

For the Nine Months EndedSeptember 30,

For the Three Months EndedMarch 31,

2009

2008

2009

2008

2010

2009

Revenue and Other Income:

Outside Sales

~~153~~172,~~959~~981

~~188~~161,~~612~~340

~~465,727~~

~~494,624~~

Related Party Sales

~~825~~1,032

21,~~587~~000

~~2,260~~

~~8,035~~

Royalty Interest Gas Sales

814,~~443~~339

2212,~~902~~632

~~29,741~~

~~61,921~~

Purchased Gas Sales

13,~~471~~016

1,~~674~~465

~~4,102~~

~~6,860~~

Other Income

~~955~~896

1,~~172~~947

~~3,815~~

~~11,929~~

Total Revenue and Other Income

~~165~~192,~~653~~264

~~216~~178,~~947~~384

~~505,645~~

~~583,369~~

Costs and Expenses:

Lifting Costs

14,~~173~~138

2011,~~709~~428

~~39,229~~

~~50,176~~

Gathering and Compression Costs

2327,~~948~~692

2321,~~642~~846

~~69,135~~

~~59,034~~

Royalty Interest Gas Costs

612,~~279~~214

2110,~~055~~601

~~23,350~~

~~59,057~~

Purchased Gas Costs

12,~~103~~308

1,~~664~~530

~~3,023~~

~~6,607~~

Other

6,693

872

15,049

1,679

Exploration and Other Costs

4,220

2,207

General and Administrative

16,~~081~~331

1316,~~342~~250

~~50,697~~

~~41,063~~

Other Corporate Expenses

7,~~206~~954

~~185~~665

~~21,519~~

~~9,638~~

Depreciation, Depletion and Amortization

3032,~~879~~092

1722,~~803~~819

~~78,581~~

~~50,340~~

Interest Expense

1,~~865~~915

21,~~412~~957

~~5,753~~

~~5,567~~

Total Costs and Expenses

~~108~~118,~~227~~864

~~101~~89,~~684~~303

~~306,336~~

~~283,161~~

Earnings Before Income Taxes and Noncontrolling Interest

5773,~~426~~400

~~115~~89,~~263~~081

~~199,309~~

~~300,208~~

Noncontrolling Interest

(~~238~~194

)

(~~312~~263

)

~~(822~~

)

~~(670~~

)

Earnings Before Income Taxes

5773,~~664~~594

~~115~~89,~~575~~344

~~200,131~~

~~300,878~~

Income Taxes

2227,~~194~~967

4834,~~160~~440

~~76,780~~

~~119,287~~

Net Income Attributable to CNX Gas Shareholders

3545,~~470~~627

6754,~~415~~904

~~123,351~~

~~181,591~~

Earnings Per Share:

Basic

0.2330

0.4536

~~0.82~~

~~1.20~~

Dilutive

0.2330

0.4536

~~0.82~~

~~1.20~~

Weighted Average Number of Common Shares Outstanding:

Basic

150,~~977~~990,~~117~~184

150,~~939~~971,~~418~~679

~~150,974,479~~

~~150,956,753~~

Dilutive

151,~~372~~389,~~672~~003

151,~~292~~232,~~158~~901

~~151,304,768~~

~~151,366,746~~

The accompanying notes are an integral part of these consolidated financial statements.

CNX GAS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

	(Unaudited)September 30,2009		December 31,2008
	(Unaudited)March 31,2010		December 31,2009
ASSETS
Current Assets:
Cash and Cash Equivalents	$	~~968~~1,093	$	1,~~926~~124
Accounts and Notes Receivable:
Trade		2746,~~833~~749		6143,~~764~~421
Other Receivables		~~852~~579		~~3,080~~975
Recoverable Income Taxes		—		30,302
Derivatives		124,811		99,265
Derivatives		128,153		150,564
Other		4,544		3,829
Other		1,966		2,222
Total Current Assets		177,776		148,614
Total Current Assets		159,772		249,858
Property, Plant and Equipment:
Property, Plant and Equipment		2,~~351~~480,~~804~~394		2,~~111~~409,~~383~~751
Less—Accumulated Depreciation, Depletion and Amortization		~~404~~466,~~781~~390		~~322~~433,~~470~~201
Total Property, Plant and Equipment—Net		12,~~947~~014,~~023~~004		1,~~788~~976,~~913~~550
Other Assets:
Investment in Affiliates		24,~~604~~074		2524,~~204~~591
Derivatives		—44,200		5518,~~945~~218
Other		53,~~812~~931		53,~~053~~409
Total Other Assets		3072,~~416~~205		8646,~~202~~218
TOTAL ASSETS	$	2,~~137~~263,~~211~~985	$	2,~~124~~171,~~973~~382

The accompanying notes are an integral part of these consolidated financial statements.

CNX GAS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

	(Unaudited)September 30,2009			December 31,2008
	(Unaudited)March 31,2010			December 31,2009
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	4863,~~528~~724		$	~~100~~53,~~565~~516
Accrued Royalties		1314,~~585~~860			2014,~~301~~898
Accrued Severance Taxes		~~659~~952			31,~~672~~037
Related Parties		32,~~290~~725			25,~~234~~171
Short-Term Notes Payable		7349,~~050~~150			7257,~~700~~850
Deferred Income Taxes		4644,~~207~~895			5534,~~000~~871
Accrued Income Taxes		220,~~609~~157			—31,765
Current Portion of Long-Term Debt		8,~~540~~756			8,~~462~~616
Other Current Liabilities		118,~~060~~347			189,~~116~~520
Total Current Liabilities		~~207~~213,~~528~~566			~~281~~217,~~050~~244
Long-Term Debt:
Long-Term Debt		118,~~240~~876			1510,~~386~~062
Capital Lease Obligations		5654,~~566~~733			5955,~~296~~628
Total Long-Term Debt		6763,~~806~~609			7465,~~682~~690
Deferred Credits and Other Liabilities:
Derivatives		1,123			—
Deferred Income Taxes		356,536			334,493
Deferred Income Taxes		347,311			331,338
Gas Well Plugging		8,341			8,312
Gas Well Plugging		8,141			7,401
Postretirement Benefits Other Than Pensions		3,699			3,642
Postretirement Benefits Other Than Pensions		3,000			2,728
Other		31,958			35,101
Other		29,498			42,900
Total Deferred Credits and Other Liabilities		400,534			381,548
Total Deferred Credits and Other Liabilities		389,073			384,367
Total Liabilities		677,709			664,482
Total Liabilities		664,407			740,099
Stockholders’ Equity:
Stockholders’ Equity:
Common Stock, $.01 par value; 200,000,000 Shares Authorized, 151,020,666 Issued and Outstanding at March 31, 2010 and 150,986,918 Issued and Outstanding at December 31, 2009		1,510			1,510
Common Stock, $.01 par value; 200,000,000 Shares Authorized, 150,981,596 Issued and Outstanding at September 30, 2009 and 150,971,636 Issued and Outstanding at December 31, 2008		1,510			1,510
Capital in Excess of Par Value		808,683			806,527
Capital in Excess of Par Value		805,736			789,625
Preferred Stock, 5,000,000 Shares Authorized; None Issued and Outstanding		—			—
Preferred Stock, 5,000,000 Shares Authorized; None Issued and Outstanding		—			—
Retained Earnings		679,044			633,417
Retained Earnings		592,306			468,955
Other Comprehensive Income		101,288			69,816
Other Comprehensive Income		77,406			124,784
Total CNX Gas Shareholders’ Equity		1,590,525			1,511,270
Total CNX Gas Shareholders’ Equity		1,476,958			1,384,874
Noncontrolling Interest		(4,249	)		(4,370	)
Noncontrolling Interest		(4,154	)		—
Total Equity		1,586,276			1,506,900
Total Equity		1,472,804			1,384,874
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,263,985		$	2,171,382
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,137,211		$	2,124,973

The accompanying notes are an integral part of these consolidated financial statements.

CNX GAS CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in ~~thousands~~Thousands)

	CommonStock		Capital inExcess ofPar Value		RetainedEarnings		AccumulatedOtherComprehensiveIncome ~~(Loss)~~			Total CNXGas Stock-holders’Equity	~~Total CNXGas Stock-holders’Equity~~		Non-controllingInterest		~~Non-controllingInterest~~		Total Equity		~~Total Equity~~
Balance—December 31, 2008	$	1,510	$	789,625	$	468,955	$	124,784			$	1,384,874			$	—			$	1,384,874
Balance—December 31, 2009	$	1,510	$	806,527	$	633,417	$	69,816		$	1,511,270		$	(4,370	)		$	1,506,900
(Unaudited)
Net Income Attributable to CNX Gas Shareholders		—		—		~~123~~45,~~351~~627		—			45,627	~~123,351~~		—		—		45,627		~~123,351~~
Gas Cash Flow Hedge (net of $31,186 tax)		—		—		—		(47,363	)			(47,363	)			—				(47,363	)
Gas Cash Flow Hedge (net of $20,128 tax)		—		—		—		31,451			31,451			—				31,451
Actuarially Determined Liabilities Adjustment (Net of $10 tax)		—		—		—		(15	)			(15	)			—				(15	)
Actuarially Determined Liabilities Adjustment (net of $14 tax)		—		—		—		21			21			—				21
Comprehensive Income (Loss)		—		—		123,351		(47,378	)			75,973								75,973
Comprehensive Income		—		—		45,627		31,472			77,099							77,099
Stock Options Exercised		—		~~115~~705		—		—			705	~~115~~		—		—		705		~~115~~
Tax Benefit from Stock-Based Compensation		—		11128		—		—			128	11		—		—		128		11
Amortization of Restricted Stock Unit Grants		—		141,~~533~~200		—		—			1,200	~~14,533~~		—		—		1,200		~~14,533~~
Amortization of Stock Option Grants		—		~~1,452~~123		—		—			123	~~1,452~~		—		—		123		~~1,452~~
Noncontrolling Interest		—		—		—		—			—	—		121		~~(4,154~~	)	121		~~(4,154~~	)
Balance—September 30, 2009	$	1,510	$	805,736	$	592,306	$	77,406			$	1,476,958			$	(4,154	)		$	1,472,804
Balance—March 31, 2010	$	1,510	$	808,683	$	679,044	$	101,288		$	1,590,525		$	(4,249	)		$	1,586,276

The accompanying notes are an integral part of these consolidated financial statements.

CNX GAS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	For the Nine Months EndedSeptember 30,
	For the Three Months EndedMarch 31,
	2009			2008
	2010			2009
Operating Activities:
Net Income Attributable to CNX Gas Shareholders	$	~~123~~45,~~351~~627		$	~~181~~54,~~591~~904
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization		7832,~~581~~092			5022,~~340~~819
Stock-based Compensation		51,~~638~~323			21,~~535~~121
Loss on the Sale of Assets		85			—
(Gain) Loss on the Sale of Assets		(8	)		—
Change in Noncontrolling Interest		(~~822~~194	)		(~~1,670~~263	)
Deferred Income Taxes		3811,~~785~~835			5918,~~908~~536
Equity in Earnings of Affiliates		(650	)		(352	)
Equity in Loss (Earnings) of Affiliates		517			(262	)
Changes in Operating Assets:
Accounts Receivable		36(2,~~159~~932	)		(27,~~925~~130	)
Related Party Receivable		1(2,~~056~~446	)		~~192~~(1,961	)
Other Current Assets		~~256~~(715	)		~~537~~414
Changes in Other Assets		(~~950~~522	)		~~4,243~~469
Changes in Operating Liabilities:
Accounts Payable		~~(30~~1,~~141~~335	)		126,~~823~~967
Income Taxes		32(11,~~482~~608	)		615,~~006~~833
Other Current Liabilities		(161,~~785~~296	)		16(15,~~877~~928	)
Changes in Other Liabilities		(2,~~096~~590	)		1(5,~~580~~294	)
Other		144,~~511~~785			~~234~~1,952
Net Cash Provided by Operating Activities		~~279~~75,~~460~~203			~~306~~126,~~919~~437
Investing Activities:
Capital Expenditures		(~~273~~65,~~019~~314	)		(~~370~~133,~~180~~550	)
Acquisition of Knox Energy		—			(36,000	)
Proceeds From Sale of Assets		8			—
Investment in Equity Affiliates		1,250			1,081
Net Cash Used in Investing Activities		(65,306	)		(133,550	)
Proceeds From Sale of Assets		275			450
Net Cash Used in Investing Activities		(271,494	)		(404,649	)
Financing Activities:
Capital Lease Payments		(~~2,814~~946	)		(~~2,058~~976	)
Variable Interest Entity Debt		(41,~~104~~115	)		11(1,~~984~~092	)
Proceeds from Short-Term Borrowings		350			58,200
(Payments on) Proceeds from Short-Term Borrowings		(8,700	)		7,700
Exercise of Stock Options		~~115~~705			~~488~~1
Noncontrolling Interest Distribution		~~(2,500~~—	)		—(200	)
Tax Benefit from Stock-Based Compensation		29128			~~184~~—
Net Cash (Used in) Provided by Financing Activities		(89,~~924~~928	)		685,~~798~~433
Net Decrease in Cash and Cash Equivalents		(~~958~~31	)		(281,~~932~~680	)
Cash and Cash Equivalents at Beginning of Period		1,~~926~~124			321,~~048~~926
Cash and Cash Equivalents at End of Period	$	~~968~~1,093		$	~~3,116~~246

The accompanying notes are an integral part of these consolidated financial statements.

CNX GAS CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Note 1—Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting ~~principles~~ principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~September~~ March 3031, ~~2009~~ 2010 are not necessarily indicative of the results that may be expected for future periods.

The balance sheet at at December 31, ~~2008~~2009 has been derived from the audited consolidated financial statements at that date but does not include all the notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and related notes for the year ended December 31, ~~2008~~2009 included in CNX Gas’ Form 10-K.

AsCertain ~~required~~amounts by the Noncontrolling Interest Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification, effective January 1, 2009, CNX Gas modified the reporting of noncontrolling interests in ~~the Consolidated Financial Statements. Additionally, certain reclassifications of~~ prior ~~period~~periods ~~data~~ have been ~~made~~reclassified to conform towith the ~~three~~report ~~and~~classifications ~~nine~~of the three months ended ~~September~~ March 3031, ~~2009~~2010, ~~classifications~~with ~~required~~no byeffect ~~the Noncontrolling~~on ~~Interest~~previously ~~Topic~~reported ofnet ~~the~~income ~~FASB~~attributable ~~Accounting~~to ~~Standards~~CNX ~~Codification~~Gas shareholders or stockholders’ equity.

~~Certain~~Basic ~~other~~earnings ~~amounts~~per inshare ~~prior~~are ~~periods~~computed ~~have~~by ~~been reclassified~~dividing tonet ~~conform~~income ~~with~~by the ~~report~~weighted ~~classifications~~average ofshares outstanding during the ~~three~~reporting ~~and~~period. Dilutive ~~nine~~earnings ~~months~~per ~~ended~~share ~~September 30,~~are ~~2009,~~computed ~~with~~similarly noto ~~effect~~basic onearnings ~~previously~~per ~~reported~~share ~~net~~except ~~income~~that ~~attributable~~the weighted average shares outstanding are increased to ~~CNX~~include ~~Gas~~additional ~~shareholders~~shares orfrom ~~stockholders’~~the ~~equity.~~effect ~~These~~of ~~include~~dilutive potential common shares outstanding during the ~~reflecting~~period. The number of additional shares is calculated by assuming that restricted stock~~-based~~ ~~compensation~~units ~~expense~~were converted and ~~short-term~~outstanding ~~incentive~~stock ~~compensation~~options ~~expense~~were asexercised ~~Other~~and ~~Corporate~~the ~~Expense~~proceeds infrom ~~order~~such toactivity ~~align~~were ~~with~~used ~~the~~to ~~reporting~~acquire shares of common stock at the ~~majority~~average market ~~shareholder,~~price ~~CONSOL~~during ~~Energy~~the reporting period. ~~These~~The ~~items~~table ~~were~~below ~~previously~~sets ~~presented~~forth asthe ~~General~~ outstanding options and ~~Administrative~~unvested ~~expenses.~~restricted stock units that have been excluded from the computation of diluted earnings per share because their effect would be anti-dilutive:

Basic earnings per share are computed by dividing net income by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from the effect of dilutive potential common shares outstanding during the period as required by the Stock Compensation Topic of the FASB Accounting Standards Codification. The number of additional shares is calculated by assuming that restricted stock units were converted and outstanding stock options were exercised and the proceeds from such activity were used to acquire shares of common stock at the average market price during the reporting period. Options to purchase 2,000 shares and 20,175 shares of common stock were outstanding for the three months ended September 30, 2009 and 2008, respectively, but were not included in the computation of dilutive earnings per share because the effect would be antidilutive. Options to purchase 14,750 shares and 6,425 shares of common stock were outstanding for the nine months ended September 30, 2009 and 2008, respectively, but were not included in the computation of dilutive earnings per share because the effect would be antidilutive. Unvested restricted stock units of 815 were outstanding for the nine months ended September 30, 2009, but were not included in the computation of dilutive earnings per share because the effect would be antidilutive. No unvested restricted stock units were outstanding for the three months ended September 30, 2009 that were not included in the computation of dilutive earnings per share. Additionally, no unvested restricted stock units were outstanding for the three and nine months ended September 30, 2008 that were not included in the computation of dilutive earnings per share. Options exercised during the three months ended September 30, 2009 and 2008 were 5,575 shares and 781 shares, respectively. The weighted average exercise price per share of the options exercised during the three months ended September 30, 2009 and 2008 were $18.24 and $16.00, respectively. Options


	For the Three Months Ended March 31,
	2010	2009
Anti-Dilutive Options	2,000	460,216
Anti-Dilutive Restricted Stock Units	—	294

	2,000	460,510

8Options exercised during the three months ended March 31, 2010 and 2009 were 33,748 shares and 75 shares, respectively. The weighted average exercise price per share of the options exercised during the three months ended March 31, 2010 and 2009 were $20.92 and $16.00, respectively.

exercised during the nine months ended September 30, 2009 and 2008 were 6,450 shares and 18,079 shares, respectively. The weighted average exercise price per share of the options exercised during the nine months ended September 30, 2009 and 2008 were $17.94 and $16.16, respectively.

The computations for basic and dilutive earnings per share from continuing operations are as follows:

	For the Three Months EndedSeptember 30,				For the Nine Months EndedSeptember 30,
	For the Three Months EndedMarch 31,
	2009		2008		2009		2008
	2010		2009
Net Income Attributable to CNX Gas Shareholders	$	3545,~~470~~627	$	6754,~~415~~904	$	~~123,351~~	$	~~181,591~~
Weighted Average Number of Common Shared Outstanding:
Average Shares of common stock outstanding:
Basic		150,~~977~~990,~~117~~184		150,~~939~~971,~~418~~679		~~150,974,479~~		~~150,956,753~~
Effect of share based compensation		395,555		352,740		330,289		409,993
Effect of stock-based compensation awards		398,819		261,222
Dilutive		151,~~372~~389,~~672~~003		151,~~292~~232,~~158~~901		~~151,304,768~~		~~151,366,746~~
Earnings per share:
Basic	$	0.2330	$	0.4536	$	~~0.82~~	$	~~1.20~~
Diluted	$	0.23	$	0.45	$	0.82	$	1.20
Dilutive	$	0.30	$	0.36

WeNote ~~have~~2—Pension ~~evaluated~~and ~~all~~Other ~~subsequent~~Postretirement ~~events through October 28, 2009, the date the~~Benefits: ~~financial statements were issued. No material recognized or non-recognized subsequent events were identified.~~

Note 2—Significant Acquisitions and Dispositions:

In August 2009, CNX Gas completed the lease assignment of the Company’s previous corporate headquarters. Total expense related to this transaction for the three and nine months ended September 30, 2009 was $676 and $1,500, respectively, which was recognized in Other Corporate Expense.

In July 2009, CNX Gas leased approximately 40,000 acres having Marcellus Shale potential in two separate transactions. The transactions included leasing 20,000 acres from NiSource Energy Ventures, LLC, a subsidiary of Columbia Energy Group, for a cash payment of $8,275 and 20,000 acres from its majority owner, CONSOL Energy, for a cash payment of $9,966. The purchase price for both transactions was principally allocated to proved and unproved properties and is included in Capital Expenditures in the Consolidated Statements of Cash Flows.

In July 2008, CNX Gas completed the acquisition of several leases and gas wells from KIS Oil & Gas Inc. for a cash payment of $19,324. The purchase price was principally allocated to proved properties, wells and equipment and gathering assets and is included in Capital Expenditures in the Consolidated Statements of Cash Flows. The sales agreement called for the transfer of approximately 5,600 leased acres and 30 oil and gas wells. This acquisition enhanced our acreage position in Northern Appalachia. The pro forma results for this acquisition were not significant to CNX Gas’ financial results.

In June 2008, CNX Gas completed the acquisition of the remaining 50% interest in Knox Energy, LLC and Coalfield Pipeline not already owned, for a cash payment of $36,000, which was principally allocated to proved properties, wells and equipment and gathering assets. Knox Energy, LLC had been proportionately consolidated into CNX Gas’ financial statements from December 31, 2007 until acquisition date and Coalfield Pipeline was accounted for under the equity method. Prior to December 31, 2007, these companies were reported under the equity method. Knox Energy, LLC is a natural gas production company and Coalfield Pipeline is a natural gas transportation company with operations in Tennessee. The pro forma results for this acquisition were not significant to CNX Gas’ financial results.

Note 3—Pension and Other Postretirement Benefits:

The components of net periodic benefit costs are as follows:

	Pension Benefits						Other Benefits						~~Other Benefits~~
	Three MonthsEndedSeptember 30,						Nine MonthsEndedSeptember 30,						Three MonthsEndedSeptember 30,						Nine MonthsEndedSeptember 30,
	Three MonthsEndedMarch 31,						Three MonthsEndedMarch 31,
	2009			2008			2009			2008			2009			2008			2009			2008
	2010			2009			2010			2009
Service cost	$	7364		$	8179		$	~~219~~35		$	~~242~~38		$	46		$	33		$	~~137~~		$	99
Interest cost		2257			1018			6455			3043			72			45			~~219~~			~~137~~
Expected return on assets		(2533	)		(624	)		~~(75~~—	)		~~(18~~—	)		—			—			—			—
Amortization of prior service (credit)		—			—			—			—			(42	)		(43	)		(129	)		(129	)
Amortization of prior service cost (credit)		66			—			(43	)		(43	)
Amortization of loss		3			—			10			—			31			9			93			27
Amortization of net actuarial loss		—			—			12			5
Benefit costs	$	73154		$	8573		$	~~218~~59		$	~~254~~43		$	~~107~~		$	44		$	~~320~~		$	~~134~~

~~During~~In ~~the nine months ended September 30,~~ 2009, the CNX Gas pension plan was merged into the CONSOL Energy pension plan, resulting in the CNX Gas plan assets being merged with the CONSOL Energy plan assets. The benefits provided do not change. According to the Master Separation Agreement between CNX Gas and CONSOL Energy, the plan will continue to be valued ~~separately~~on a stand-alone basis. For the three ~~nine~~ months ended ~~September~~ March 3031, ~~2009~~2010, there ~~was~~were ~~$660~~no in contributions made by CNX Gas to the pension plan; however, we expect to contribute $150 to the pension plan in 2010.

CNX Gas does not expect to contribute to the other postretirement benefits plan in ~~2009~~2010. We intend to pay benefit claims as they become due. For the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010, $7828 of ~~post~~postemployment ~~employment~~ benefits have been paid.

Note 43—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 CNX Gas’ effective tax rate:

	For the Nine Months EndedSeptember 30,
	For the Three Months Ended March 31,
	2009					2008
	2010					2009
	Amount			Percent		Amount			Percent
Statutory U.S. federal income tax rate	$	7025,~~046~~758		35.0	%	$	~~105~~31,~~307~~270		35.0	%
Net effect of state income taxes		83,~~506~~069		4.32			163,~~278~~806		5.4.3
Effect of Domestic Production Activities Deductions		(2,001	)	(1.0	)		(3,009	)	(1.0	)
Effect of Domestic Production Activities Deduction		(854	)	(1.2	)		(840	)	(0.9	)
Other		~~229~~(6	)	~~0.1~~—			~~711~~204		2.0.1
Income Tax Expense / Effective Rate	$	7627,~~780~~967		38.40	%	$	~~119~~34,~~287~~440		3938.65	%

~~The~~7 ~~effective tax rates for the nine months ended September 30, 2009 and 2008 were calculated using the annual effective rate projection on recurring earnings.~~

The total amounts of unrecognized tax benefits were approximately $5,545 as of September 30, 2009 and 2008. There were no additions to the liability for unrecognized tax benefits during the nine month periods ending September 30, 2009 or 2008.

The unrecognized tax benefits are the result of tax positions for which the ultimate deductibility is certain, but for which there is uncertainty regarding the proper year of the tax deduction. Consequently, if these unrecognized tax benefits were recognized there would be no effect on CNX Gas’ effective tax rate.

~~CNX~~The ~~Gas~~effective isrates ~~included in the consolidated federal tax return of CONSOL Energy Inc. Income taxes~~ for ~~financial statement purposes are calculated as if CNX Gas files a tax return on a separate company basis. With few exceptions,~~ the ~~Company~~three ismonths noended ~~longer subject to U.S. federal~~March 31, ~~state~~2010 and ~~local,~~2009 orwere ~~non-U.S. income tax examinations by tax~~calculated ~~authorities~~using ~~for years before 2004. The Internal Revenue Service has issued its audit report relating to~~ the ~~examination~~annual ofeffective ~~CONSOL~~rate ~~Energy’s~~projection ~~2004~~on ~~and~~recurring ~~2005 U~~earnings.S. income tax returns. The audit report does not recommend changes relating to tax positions taken by CNX Gas as part of its inclusion in the consolidated tax returns filed by CONSOL Energy for the two-year period.

~~CNX~~The ~~Gas~~total ~~recognizes~~amounts ~~interest~~of ~~accrued related to~~ unrecognized tax benefits inas ~~Interest Expense. As~~ of ~~September~~ March 3031, 2010 and 2009 were approximately $8,821 and ~~2008~~$5,545, ~~CNX~~respectively. ~~Gas~~There ~~reported~~were anno ~~accrued~~additions ~~interest~~to the liability ~~related~~for tounrecognized ~~uncertain~~ tax ~~positions~~benefits ofduring ~~$870~~the ~~and~~three ~~$427~~months ended March 31, ~~respectively~~ 2010 and 2009. The ~~accrued~~unrecognized ~~interest~~tax ~~liability~~benefits are the result of tax positions for ~~these~~which ~~periods~~the ~~includes~~ultimate ~~$354~~deductibility ~~and~~is ~~$245~~certain, ofbut ~~interest~~for ~~expense~~which ~~that~~there is ~~reflected~~uncertainty inregarding the ~~Company’s~~proper ~~Consolidated~~year ~~Statement~~ of ~~Income~~the ~~for~~tax ~~the~~deduction. ~~nine~~Consequently, ~~months~~if ~~ended~~these ~~September 30,~~unrecognized ~~2009~~tax ~~and~~benefits ~~2008,~~were recognized there would be no effect on ~~respectively~~CNX Gas’ effective rate.

CNX Gas ~~recognizes~~is ~~penalties~~included ~~accrued~~in ~~related~~the toconsolidated ~~unrecognized~~federal tax ~~benefits~~return inof ~~its~~CONSOL ~~income~~Energy ~~tax expense~~Inc. AsIncome oftaxes ~~September 30,~~for ~~2009~~financial ~~and~~statement ~~2008~~purposes are calculated as if CNX Gas files a tax return on a separate company basis. With few exceptions, the Company ~~had~~is no ~~accrued~~longer ~~penalties~~subject ~~relating~~ to ~~its~~U.S. ~~uncertain~~federal, state and local, or non-U.S. income tax ~~positions~~examinations by tax authorities for years before 2005.

~~Note~~CNX Gas recognizes interest accrued related to unrecognized tax benefits in Interest ~~5—Property~~Expense. As of March 31, ~~Plant~~2010 and ~~Equipment:~~2009, CNX Gas reported an accrued interest liability related to uncertain tax positions of $1,072 and $635, respectively. The accrued interest liability for these periods includes $101 and $119 of interest expense that is reflected in the Company’s Consolidated Statements of Income for the three months ended March 31, 2010 and 2009, respectively.

	September 30,2009			December 31,2008
Leasehold Improvements	$	1,352		$	1,352
Proved Properties		150,064			121,605
Unproved Properties		251,822			220,848
Wells and Related Equipment		244,931			222,685
Intangible Drilling		901,270			793,456
Gathering Assets		790,554			740,396
Asset Retirement Obligations		4,059			3,739
Capitalized Internal Software		7,752			7,302
Total Property, Plant and Equipment		2,351,804			2,111,383
Accumulated Depreciation, Depletion and Amortization		(404,781	)		(322,470	)
Property, Plant and Equipment, net	$	1,947,023		$	1,788,913

CNX Gas recognizes penalties accrued related to unrecognized tax benefits in its income tax expense. As of March 31, 2010 and 2009, the Company had no accrued penalties relating to its uncertain income tax positions.

Note 64—~~Credit~~Property, ~~Facility:~~Plant and Equipment:

CNX Gas has a five-year $200,000 unsecured credit agreement which extends through October 2010. The agreement gives CNX Gas the ability to request an increase in the aggregate outstanding principal amount up to $300,000, including borrowings and letters of credit. The $200,000 credit agreement for CNX Gas is unsecured; however, it does contain a negative pledge provision providing CNX Gas assets cannot be used to secure any other obligations. Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Covenants in the facility limit our ability to dispose of assets, make investments, purchase or redeem CNX Gas stock and merge with another corporation. The facility includes a maximum leverage ratio covenant of not more than 3.0 to 1.0, measured quarterly. The leverage ratio was 0.4 to 1.0 at September 30, 2009. The facility also includes a minimum interest coverage ratio of no less than 3.0 to 1.0 measured quarterly. The interest coverage ratio was 66.8 to 1.0 at September 30, 2009.


	March 31, 2010			December 31, 2009
Intangible Drilling	$	943,661		$	913,231
Gathering Assets		819,660			804,212
Wells and Related Equipment		260,789			253,833
Unproved Properties		233,570			271,553
Proved Properties		207,741			152,010
Capitalized Internal Software		8,317			8,130
Gas Well Plugging		4,104			4,082
Advance Royalties		2,552			2,700

Total Property, Plant and Equipment		2,480,394			2,409,751
Accumulated Depreciation, Depletion and Amortization		(466,390	)		(433,201	)

Property and Equipment, net	$	2,014,004		$	1,976,550

AtNote ~~September 30,~~5—Credit ~~2009,~~Facility: the CNX Gas credit agreement had outstanding borrowings of $73,050 and outstanding letters of credit of $14,933, leaving $112,017 of capacity available for borrowings and the issuance of letters of credit. The facility bore a weighted average interest rate of 1.47% for the nine months ended September 30, 2009.

11CNX Gas has a five-year $200,000 unsecured credit agreement which extends through October 2010. The agreement gives CNX Gas the ability to request an increase in the aggregate outstanding principal amount up to $300,000, including borrowings and letters of credit. The $200,000 credit agreement for CNX Gas is unsecured; however, it does contain a negative pledge provision providing that CNX Gas assets cannot be used to secure any other obligations. Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Covenants in the facility limit our ability to dispose of assets, make investments, purchase or redeem CNX Gas stock and merge with another corporation. The facility includes a maximum leverage ratio covenant of not more than 3.00 to 1.00, measured quarterly. The leverage ratio was 0.35 to 1.00 at March 31, 2010. The facility also includes a minimum interest coverage ratio of no less than 3.00 to 1.00 measured quarterly. The interest coverage ratio was 67.05 to 1.00 at March 31, 2010.

At March 31, 2010, the CNX Gas credit agreement had outstanding borrowings of $49,150 and $14,913 of letters of credit outstanding, leaving $135,937 of capacity available for borrowings and the issuance of letters of credit. The facility bore a weighted average interest rate of 1.41% as of March 31, 2010.

CNX Gas and subsidiaries have executed a Supplemental Indenture and are guarantors of CONSOL Energy’s 7.875% notes due March 1, 2012 in the principal amount of $250,000. In addition, if CNX Gas were to grant liens to a lender as part of a future borrowing, the indenture governing CONSOL Energy’s 7.875% notes would require CNX Gas to ratably secure the notes.

Note 76—Commitments and Contingent Liabilities:

CNX Gas is subject to various pending and threatened lawsuits and claims arising in the ordinary course of its business. Certain of the more significant of these lawsuits and claims are described below. Our current estimates related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations and cash flows of CNX Gas. However, it is reasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims may be material to the financial position, results of operations or cash flows of CNX Gas.

On February 14, 2007, GeoMet, Inc. and certain of its affiliates filed a lawsuit against CONSOL Energy and certain of its affiliates, including CNX Gas Company LLC, in the Circuit Court for the County of Tazewell, Virginia. The lawsuit alleges, among other things, that the defendants have violated the Virginia Antitrust Act in their dealings with GeoMet in southwest Virginia. The complaint, as amended, seeks injunctive relief, compensatory damages of $385,600 and treble damages. CNX Gas continues to believe this lawsuit to be without merit and intends to vigorously defend it. In WeApril ~~cannot~~2010, CNX ~~predict~~Gas ~~the~~and ~~ultimate~~GeoMet ~~outcome~~entered ofinto ~~this litigation;~~an ~~however,~~agreement itinvolving isthe ~~reasonably~~exchange ~~possible~~of ~~that~~less ~~the~~than ~~ultimate~~800 ~~liabilities~~acres of coalbed methane rights in ~~the~~Virginia ~~future~~and ~~with~~the ~~respect~~grant toby ~~these~~Consolidation ~~lawsuits~~Coal ~~and~~Company ~~claims~~to ~~may~~GeoMet beof ~~material~~consent to stimulate the ~~financial~~coal ~~position,~~seam ~~results~~on certain of ~~operations,~~GeoMet’s drilling orunits ~~cash~~in ~~flows~~Virginia. This litigation was settled as part of that transaction. CNX Gas did not pay any amount to GeoMet in connection with the settlement of this litigation.

On January 7, 2009, CNX Gas received a civil investigative demand for information and documents from the Attorney General of the Commonwealth of Virginia regarding the company’s exploration, production, transportation and sale of coalbed methane gas in Virginia. According to the request, the Attorney General is investigating whether the company may have violated the Virginia Antitrust Act. The request for information does not constitute the commencement of legal proceedings and does not make any specific allegations against the company. CNX Gas does not believe that it has violated the Virginia Antitrust Act and the company is cooperating with the Attorney General’s investigation.

The Company is a party to a case filed in 2007 captioned Earl Kennedy (and others) v. CNX Gas and CONSOL Energy in the Court of Common Pleas of Greene County, Pennsylvania. The lawsuit alleges that CNX Gas and CONSOL Energy trespassed and converted gas and other minerals allegedly belonging to the plaintiffs in connection with wells drilled by CNX Gas. The complaint, as amended, seeks injunctive relief, including having CNX Gas be removed from the property, and compensatory damages of $20,000. The suit also sought to overturn existing law as to the ownership of coalbed methane in Pennsylvania, but that claim was dismissed by the court; the plaintiffs are seeking to appeal that dismissal. CNX Gas believes this lawsuit to be without merit and intends to vigorously defend it. We cannot predict the ultimate outcome of this litigation; however, it is reasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims may be material to the financial position, results of operations, or cash flows of CNX Gas.

In April 2005, Buchanan County, Virginia (through its Board of Supervisors and Commissioner of Revenue) filed a lawsuit against CNX Gas Company LLC in the Circuit Court of the County of Buchanan for the year 2002; the county has since filed and served three substantially similar cases for years 2003, 2004 and 2005. These cases have been consolidated. The complaint alleges that CNX Gas’ calculation of the license tax on the basis of the wellhead value (sales price less post production costs) rather than the sales price is improper. For the period from 1999 through mid 2002, CNX Gas paid the tax on the basis of the sales price, but we have filed a claim for a refund for these years. Since 2002, we have continued to pay Buchanan County taxes based on our method of calculating the taxes. We believe that this litigation will settle on terms that will not have a material adverse impact on the financial position or the results of operations of CNX Gas.

129

In basis ~~2004,~~of ~~Yukon~~the ~~Pocahontas~~wellhead ~~Coal~~value ~~Company~~(sales ~~and~~price ~~others~~less ~~filed~~post aproduction ~~complaint against Consolidation Coal Company (“CCC”~~costs), arather ~~subsidiary~~than ~~of CONSOL Energy in~~ the ~~Circuit~~sales ~~Court~~price ofis ~~Buchanan~~improper. ~~County,~~For ~~Virginia, seeking damages and injunctive relief in connection with~~ the ~~deposit~~period ~~of untreated water~~ from ~~mining~~1999 ~~activities~~through atmid ~~CCC’s~~2002, ~~Buchanan Mine~~CNX ~~into~~Gas ~~nearby~~paid ~~void~~the ~~spaces~~tax inon the ~~mine~~basis of ~~one~~the sales ~~of CONSOL Energy’s other subsidiaries~~price, ~~Island~~but ~~Creek~~we ~~Coal Company (“ICCC”). CCC believes that it had, and continues to~~ have, ~~the~~filed ~~right~~a toclaim ~~store~~for ~~water~~a inrefund for these ~~void areas~~years. ~~On September 21,~~Since ~~2006~~2002, ~~the~~we ~~plaintiffs~~have ~~filed~~continued anto ~~amended~~pay ~~complaint in the Circuit Court of~~ Buchanan County, ~~Virginia~~taxes ~~which,~~based ~~among~~on ~~other~~our ~~things,~~method ~~added~~of ~~CONSOL~~calculating ~~Energy,~~the ~~ICCC~~taxes. ~~and~~This ~~CNX~~matter ~~Gas~~was ~~Company~~settled ~~LLC~~on asFebruary 2, ~~additional defendants~~2010. ~~The~~Under ~~amended~~the ~~complaint~~terms of the ~~alleges~~settlement, among other things, ~~that~~ CNX Gas, asagreed ~~lessee and operator under certain coalbed methane gas leases from plaintiffs, had a duty~~ to ~~prevent~~pay ~~CCC~~an ~~from~~amount ~~depositing water into the mine voids and failed~~ to doBuchanan ~~so. The proposed amended complaint seeks $150~~County,~~000~~ ~~in damages from~~ the ~~additional~~present ~~defendants,~~value ~~plus~~of ~~costs,~~which ~~interest~~was ~~and~~previously ~~attorneys’~~accrued ~~fees.~~for ~~CNX Gas denies that it has any liability in~~ this matter, and ~~intends~~Buchanan toCounty ~~vigorously~~agreed ~~defend~~to ~~this~~certain ~~action.~~deductions Wefor ~~cannot~~post-production ~~predict~~costs in the ~~ultimate~~calculation ~~outcome~~ of ~~this~~ ~~litigation; however, it is reasonably possible that~~ the ~~ultimate~~license ~~liabilities~~tax infor ~~the~~periods ~~future~~after ~~with~~January 1, ~~respect~~2010, towhich ~~these~~will ~~lawsuits~~reduce ~~and~~our ~~claims~~costs ~~may~~in ~~be material to~~ the ~~financial position, results of operations or cash flows of CNX Gas~~future.

AtIn ~~September 30~~2004, ~~2009,~~Yukon ~~CNX~~Pocahontas Coal ~~Gas~~Company ~~has~~and ~~provided~~others ~~financial~~filed ~~guarantees~~a ~~and~~complaint ~~letters~~against Consolidation Coal Company (“CCC”), a subsidiary of ~~credit~~CONSOL toEnergy ~~certain~~in ~~third~~the ~~parties~~Circuit asCourt ~~described~~of byBuchanan ~~major category~~County, Virginia, seeking damages and injunctive relief in connection with the ~~following~~deposit ~~table.~~of untreated ~~These~~water ~~amounts~~from ~~represent~~mining activities at CCC’s Buchanan Mine into nearby void spaces in the ~~maximum~~mine ~~potential~~of ~~total~~one of ~~future~~CONSOL ~~payments~~Energy’s other subsidiaries, Island Creek Coal Company (“ICCC”). CCC believes that weit ~~could~~had, beand ~~required~~continues to ~~make~~have, the ~~under~~right to store water in these ~~instruments~~void areas. ~~These~~On ~~amounts~~September 21, ~~have~~2006, ~~not~~the ~~been~~plaintiffs ~~reduced~~filed ~~for~~an ~~potential~~amended ~~recoveries~~complaint ~~under~~in ~~recourse~~the orCircuit Court of Buchanan County, Virginia which, among other things, added CONSOL Energy, ICCC and CNX Gas Company LLC as ~~collateralization~~additional ~~provisions~~defendants. ~~Generally~~The amended complaint alleges, ~~recoveries~~among other things, that CNX Gas, as lessee and operator under ~~reclamation~~certain ~~bonds~~coalbed ~~would~~methane begas ~~limited~~leases from plaintiffs, had a duty to ~~the~~prevent ~~extent~~CCC offrom depositing water into the ~~work~~mine ~~performed~~voids atand ~~the~~failed to ~~time~~do ofso. The proposed amended complaint seeks $150,000 in damages from the ~~default~~additional defendants, plus costs, interest and attorneys’ fees. NoThe ~~amounts~~trial ~~related~~court togranted ~~these~~partial ~~financial~~summary ~~guarantees~~judgment ~~and~~to ~~letters~~the ofplaintiffs, ~~credit~~holding ~~are~~that ~~recorded~~CCC asdid not have the ~~liabilities~~right to store water in the ~~financial~~void ~~statements~~areas. The defendants, including CNX Gas ~~management~~are ~~believes~~filing ~~that~~motions ~~these~~for ~~guarantees~~reconsideration ~~will~~of ~~expire~~that ~~without~~ruling. ~~being~~Trial ~~funded~~is scheduled for June 1, 2010. CNX Gas denies that it has any liability in this matter and ~~therefore~~intends to vigorously defend this action. We cannot predict the ~~commitments~~ultimate ~~will~~outcome ~~not~~of ~~have~~this alitigation; ~~material~~however, ~~adverse~~it ~~effect~~is onreasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims may be material to the financial position, ~~condition~~results of operations, or cash flows of CNX Gas.

	AmountsCommitted		LessThan1 Year		1-3Years		3-5Years		Beyond5 years
Letters of Credit:
Gas	$	14,933	$	14,933	$	—	$	—	$	—
Total Letters of Credit	$	14,933	$	14,933	$	—	$	—	$	—
Surety Bonds:
Environmental	$	1,538	$	1,473	$	65	$	—	$	—
Other		2,896		2,822		74		—		—
Total Surety Bonds	$	4,434	$	4,295	$	139	$	—		—
Other:
Guarantees	$	280,012	$	30,012	$	250,000	$		$	—
Total Guarantees	$	280,012	$	30,012	$	250,000	$	—		—
Total Commitments	$	299,379	$	49,240	$	250,139	$	—	$	—

CNX Gas has been named as a defendant in four putative class actions brought by alleged shareholders of CNX Gas challenging the proposed tender offer by CONSOL Energy to acquire all of the shares of CNX Gas common stock that CONSOL Energy does not already own. The cases are: Schurr v. CNX Gas and others (No. 2010-2333), filed in the Court of Common Pleas of Washington County, Pennsylvania on March 29, 2010; Gaines v. CNX Gas and others (No. 5378), filed March 30, 2010 in the Delaware Court of Chancery; Polen v. CNX Gas and others (No. 2010-2626), filed in the Court of Common Pleas of Washington County, Pennsylvania on April 12, 2010; and Hurwitz v. CNX Gas and others (No. 5405), filed in the Delaware Court of Chancery on April 13, 2010. The suits also name CONSOL Energy and certain officers and directors of CONSOL Energy and CNX Gas as defendants. All four actions generally allege that CNX Gas has breached and/or has aided and abetted in the breach of fiduciary duties purportedly owed to CNX Gas’s public shareholders. Among other things, the actions seek a permanent injunction against or rescission of the proposed tender offer, damages, and attorneys’ fees and expenses. CNX Gas believes that these actions are without merit and intends to defend them vigorously. We cannot predict the ultimate outcome of this litigation; however, if damages were awarded to plaintiffs, the result may be material to the financial position, results of operations or cash flows of CNX Gas.

At March 31, 2010, CNX Gas has provided the following financial guarantees, unconditional purchase obligations and letters of credit to certain third parties, as described by major category in the following table. These amounts represent the maximum potential total of future payments that we could be required to make under these instruments. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities on the financial statements. CNX Gas management believes that these guarantees will expire without being funded, and therefore, the commitments will not have a material adverse effect on financial condition.


	Amounts Committed		Less Than 1 Year		1-3 Years		3-5 Years		Beyond 5 years
Letters of Credit:
Gas	$	14,913	$	14,913	$	—	$	—	$	—

Total Letters of Credit	$	14,913	$	14,913	$	—	$	—	$	—
Surety Bonds:
Environmental	$	1,375	$	1,350	$	25	$	—	$	—
Other		3,081		3,042		39		—		—

Total Surety Bonds	$	4,456	$	4,392	$	64	$	—	$	—
Other:
Guarantees	$	299,985	$	27,448	$	272,537	$	—		—

Total Guarantees	$	299,985	$	27,448	$	272,537	$	—	$	—

Total Commitments	$	319,354	$	46,753	$	272,601	$	—	$	—

Financial guarantees have primarily been provided to support various performance bonds related to land usage, pipeline usage and restorative issues. Other contingent liabilities have been extended to support insurance policies, legal matters and other items necessary in the normal course of business. CNX Gas has also provided financial guarantees for the purchase and delivery of gas to various counterparties. CNX Gas and subsidiaries have executed a Supplemental Indenture and are guarantors of CONSOL Energy’s 7.875% notes due March 1, 2012 in the principal amount of $250,000. In addition, if CNX Gas were to grant liens to a lender as part of a future borrowing, the indenture governing CONSOL Energy’s 7.875% notes would require CNX Gas to ratably secure the notes.

CONSOL Energy has also provided certain parental guarantees related to activity associated with CNX Gas. CNX Gas ~~anticipates that these parental guarantees will be transferred from CONSOL Energy to CNX Gas over time. CNX Gas~~ management believes these parental guarantees will also expire without being funded, and therefore the commitments will not have a material adverse effect on our financial condition.

13CNX Gas enters into unconditional purchase obligations to procure major firm transportation, gas drilling services and land purchase obligations. These purchase obligations are not recorded on the Consolidated Balance Sheet. The following is a summary of our purchase obligations at March 31, 2010:


Obligations Due	Amount
Less than 1 year	$	42,566
1-3 years		74,863
3-5 years		62,240
More than 5 years		333,337

Total Purchase Obligations	$	513,006

Firm transportation expense related these purchase obligations was $6,695 and $4,586 for the three months ended March 31, 2010 and 2009 respectively. Expenses related to gas drilling purchase obligations were $605 and $0 for the three months ended March 31, 2010 and 2009 respectively. There were no expenses related to land purchase obligations for the periods presented.

Note 7—Derivative Instruments:

CNX Gas enters into financial derivative instruments to manage our exposure to commodity price volatility. We measure each derivative instrument at fair value and record it on the balance sheet as either an asset or liability. Changes in the fair value of the derivatives are recorded currently in earnings unless special hedge accounting criteria are met. For derivatives designated as fair value hedges, the changes in fair value of both the

~~CNX~~ derivative ~~Gas~~instrument ~~enters~~and ~~into~~the ~~long-term~~hedged ~~unconditional~~item ~~purchase~~are ~~obligations~~recorded toin ~~procure~~earnings. ~~major~~For ~~firm~~derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported ~~transportation~~in Other Comprehensive Income or Loss and ~~gas~~reclassified ~~drilling~~into ~~services~~earnings in the same period or periods which the forecasted transaction affects earnings. The ~~purchase~~ineffective ~~obligations~~portions of hedges are ~~not~~recognized ~~recorded~~in onearnings in the ~~Consolidated~~current ~~Balance Sheet~~year. ~~The~~CNX ~~following~~Gas currently isutilizes aonly ~~summary~~cash offlow ~~our~~hedges ~~purchase~~that ~~obligations~~are atconsidered ~~September 30,~~highly ~~2009~~effective.

Obligations Due	Amount
Less than 1 year	$	30,850
1-3 years		55,364
3-5 years		50,079
More than 5 years		308,633
Total Purchase Obligations	$	444,926

CNX Gas formally assesses both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in the fair values or the cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, CNX Gas will discontinue hedge accounting prospectively.

Note 8—Derivatives:

CNX Gas enters into financial derivative instruments to manage our exposure to natural gas price volatility. Our derivatives are accounted for under the Derivatives and Hedging Topic of the Financial Accounting Standards Board Accounting Standards Codification. We measure each derivative instrument at fair value and record it on the balance sheet as either an asset or liability. Changes in the fair value of the derivatives are recorded currently in earnings unless special hedge accounting criteria are met. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported in Other Comprehensive Income or Loss and reclassified into earnings in the same period or periods which the forecasted transaction affects earnings. The ineffective portions of hedges are recognized in earnings in the current year. CNX Gas currently utilizes only cash flow hedges that are considered highly effective.

CNX Gas formally assesses, both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in the fair values or the cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, CNX Gas will discontinue hedge accounting prospectively.

CNX Gas is exposed to credit risk in the event of nonperformance by counterparties. The creditworthiness of counterparties is subject to continuing review. All of the counterparties to CNX Gas’ natural gas derivative instruments also participate in CNX Gas’ revolving credit facility. The Company has not experienced any issues of non-performance by derivative counterparties.

CNX Gas has entered into forward contracts for natural gas to manage the price risk associated with the forecasted revenues offrom ~~this~~those ~~commodity~~commodities. The objective of these hedges is to reduce the variability of the cash flows associated with the forecasted revenues from the underlying ~~commodity~~commodities.

As of ~~September~~March 3031, ~~2009~~2010, the total notional amount of the Company’s outstanding natural gas forward contracts was 9173.01 ~~Bcf~~billion cubic feet. These forward contracts are forecasted to settle through December 31, 2012. ~~Assuming~~and nomeet ~~change~~the incriteria ~~price~~for orcash ~~new~~flow ~~transactions~~hedge ~~during~~accounting. During the next twelve months, $7775,~~836~~816 of unrealized gain is expected to be reclassified from ~~other~~Other ~~comprehensive~~Comprehensive ~~income~~Income ~~and~~ into earnings. No gains or losses have been reclassified into earnings as a result of the discontinuance of cash flow hedges.

14The fair value of CNX Gas derivative instruments at March 31, 2010 is as follows:


	Derivatives As of March 31, 2010
	Balance Sheet Location	Fair Value
Derivative designated as hedging instruments
Natural Gas Price Swaps	Current Assets-Derivatives	$	124,811
Natural Gas Price Swaps	Other Assets-Derivatives		44,200

Total derivatives designated as hedging instruments		$	169,011

The effect of derivative instruments on the Consolidated Statement of Income for the three months ended March 31, 2010 is as follows:


Derivative in Cash Flow Hedging Relationship	Amount of Gain Recognized in OCI on Derivative 2010	Location of Gain Reclassified from Accumulated OCI into Income	Amount of Gain Reclassified from Accumulated OCI into Income 2010	Location of (Loss) Recognized in Income on Derivative	Amount of (Loss) Recognized in Income on Derivative 2010
Natural Gas Price Swaps	$74,708	Outside Sales	$43,399	Outside Sales	$(142)

Total	$74,708		$43,399		$(142)

The fair value of CNX Gas’ derivative instruments asat ~~of September~~December 3031, 2009 is as follows:

	Asset and (Liability) Derivatives As ofSeptember 30, 2009
	Derivatives As of December 31, 2009
	Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Derivative designated as hedging instruments
Natural Gas Price Swaps	Current Assets-Derivatives	$	~~128~~99,~~153~~265
Natural Gas Price Swaps	Other ~~Liabilities~~Assets-Derivatives		(118,~~123)~~218
Total derivatives designated as hedging instruments		$	~~127~~117,~~030~~483

The effect of derivative instruments on the Consolidated ~~consolidated~~Statement ~~statement~~ of ~~income~~Income for the three months ended ~~September~~March 3031, 2009 is as follows:

Derivatives Cash Flow HedgingRelationship	Amount of Gain (Loss)Recognized in OCI onDerivative 2009	Location of Gain (Loss)Reclassified from Accumulated OCIinto Income	Amount of Gain(Loss) Reclassified from Accumulated OCI into Income 2009	Location of Gain (Loss)Recognized in Income onDerivative	Amount of Gain (Loss)Recognized in Income onDerivative 2009
Derivative inCash FlowHedgingRelationship	Amount ofGainRecognizedin OCI onDerivative 2009	Location ofGainReclassified fromAccumulated OCIinto Income	Amount ofGainReclassified fromAccumulated OCIinto Income 2009	Location of(Loss)Recognizedin Income onDerivative	Amount of(Loss)Recognizedin Income onDerivative 2009
Natural Gas Price Swaps	$~~(27~~78,~~907)~~948	Outside Sales	$6850,~~804~~618	Outside Sales	$(63375)
Total	$~~(27~~78,~~907)~~948		$6850,~~804~~618		$(63375)

~~The~~Note ~~effect~~8—Comprehensive ~~of derivative instruments on the consolidated statement of income for the nine months ended September 30, 2009 is as follows~~Income:

Derivatives CashFlow HedgingRelationship	Amount of Gain (Loss)Recognized in OCI onDerivative 2009	Location of Gain (Loss)Reclassified fromAccumulated OCIinto Income	Amount of Gain(Loss) Reclassifiedfrom AccumulatedOCI into Income2009	Location of Gain (Loss)Recognized in Income onDerivative	Amount of Gain (Loss)Recognized in Income onDerivative 2009
Natural Gas Price Swaps	$(137,247)	Outside Sales	$185,542	Outside Sales	$(932)
Total	$(137,247)		$185,542		$(932)

Total comprehensive income, net of tax, for the three months ended March 31, 2010 is as follows:

Note 9—Comprehensive Income:


	Change in Fair Value of Cash Flow Hedges			Adjustments for Actuarially Determined Liabilities			Accumulated Other Comprehensive Income
Balance at December 31, 2009	$	71,378		$	(1,562	)	$	69,816
Net increase in value of cash flow hedges		74,850			—			74,850
Reclassification from other comprehensive income to earnings		(43,399	)		—			(43,399	)
Current period adjustment		—			21			21

Balance at March 31, 2010	$	102,829		$	(1,541	)	$	101,288

~~Total~~Note ~~comprehensive~~9—Fair ~~income,~~Values ~~net~~ of ~~tax,~~Financial ~~for the nine months ended September 30, 2009 is as follows~~Instruments:

	Change inFair Value ofCash FlowHedges			Adjustmentsfor ActuariallyDeterminedLiabilities			AccumulatedOtherComprehensiveIncome
Balance at December 31, 2008	$	124,510		$	274		$	124,784
Net increase in value of cash flow hedges		137,247			—			137,247
Reclassification from other comprehensive income to earnings		(184,610	)		—			(184,610	)
Current period adjustment		—			(15	)		(15	)
Balance at September 30, 2009	$	77,147		$	259		$	77,406

CNX Gas elected not to measure any additional financial assets or liabilities at fair value, other than those which were recorded at fair value prior to the adoption of Fair Value of Financial Assets and Financial Liabilities.

Note 10—Fair Value of Financial Instruments:

The financial instruments measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements at September 30, 2009
	Fair Value Measurements at March 31, 2010
Description	Quoted Prices in ActiveMarkets for ~~IdenticalInstruments~~IdenticalLiabilities (Level 1)		SignificantOtherObservableInputs (Level 2)		SignificantUnobservableInputs(Level 3)
Gas Cash Flow Hedges	$	—	$	~~127~~169,~~030~~011	$	—

~~The~~13 Fair Value Disclosure Topic of the Financial Accounting Standards Board Accounting Standards Codification requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which the fair value option was not elected. The following methods and assumptions were used to estimate the fair value of those financial instruments:

CashTable and cash equivalents: The carrying amount reported in the balance sheets for cash and cash equivalents approximates its fair value due to the short maturity of these instruments. Contents

The following methods and assumptions were used to estimate the fair value of financial instruments, of which the fair value option was not elected:

Cash and cash equivalents: The carrying amount reported in the balance sheets for cash and cash equivalents approximates its fair value due to the short-term maturity of these instruments.

Short-term notes payable: The carrying amount reported in the balance sheets for short-term notes payable approximates its fair value due to the short-term maturity of these instruments.

Long-term debt: The fair values of long-term debt are estimated using discounted cash flow analyses, based on ~~CNX Gas’~~ current ~~incremental~~ ~~borrowing~~market rates for ~~similar~~instruments ~~types~~with ofsimilar ~~borrowing~~cash ~~arrangements~~flows.

The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:

September 30, 2009

December 31, 2008

March 31, 2010

December 31, 2009

CarryingAmount

FairValue

CarryingAmount

FairValue

Cash and cash equivalents

~~968~~1,093

1,~~926~~124

Short-term notes payable

(7349,~~050~~150

)

(7349,~~050~~150

)

(7257,~~700~~850

)

(7257,~~700~~850

)

Long-term debt

(1513,~~779~~550

)

(1412,~~347~~181

)

(1914,~~883~~665

)

(1614,~~549~~664

)

Note 1110—Variable Interest Entities:

CNX Gas has a business relationship with a contractor to perform CNX Gas’ well drilling requirements primarily in Northern Appalachia. CNX Gas is the primary customer of the contractor. In addition, as of ~~September~~March 3031, ~~2009~~2010, CNX has guaranteed the outstanding principal balance of a loan agreement between the contractor and Huntington National Bank ~~amended August 27, 2009~~. The contractor has been determined to be a variable interest entity as CNX Gas is the primary beneficiary. Under the Consolidation Topic of the Financial Accounting Standards Board Accounting Standards Codification, CNX Gas has consolidated ~~the~~ the contractor into the Consolidated Financial Statements. At ~~September~~March 3031, ~~2009~~2010, the contractor has a carrying value of property, plant and equipment of $1412,~~308~~089 and total assets of $1514,~~769~~232, with related debt of $1513,~~779~~550 and total liabilities of $1614,~~716~~137.

Note 1211—Segment Information:

The principal activity of CNX Gas is to produce natural gas for sale primarily to gas wholesalers. CNX Gas has three reportable segments: Central Appalachia, Northern Appalachia and Other. Each of these reportable segments includes a number of operating segments. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2009 and 2008~~2010, the Central Appalachia segment includes the following operating segments: Virginia Operations, Cardinal States Gathering and Knox Energy. For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2009~~2010, ~~and~~the ~~2008~~Northern Appalachia segment includes the following operating segments: Mountaineer, Nittany and Marcellus. The Other segment includes other operating segments that fall outside the reported geographic areas and various other activities assigned to operations but not allocated to an individual operating segment. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses.

1614

~~Northern~~Reportable ~~Appalachia~~ segment ~~includes~~results for the ~~following~~three ~~operating~~months ~~segments:~~ended ~~Mountaineer~~March 31, ~~Nittany~~2010 ~~and~~are: Marcellus. The Other segment includes other operating segments that fall outside the reported geographic areas and various other activities assigned to operations but not allocated to an individual operating segment. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses.

Reportable segment results for the three months ended September 30, 2009 are:


	Central Appalachia		Northern Appalachia			Other			Total Gas		Corporate			Consolidated
Sales—outside	$	143,347	$	29,292		$	342		$	172,981	$	—		$	172,981
Sales—related parties		884		148			—			1,032		—			1,032
Sales—royalty interest gas		13,395		943			1			14,339		—			14,339
Sales—purchased gas		2,005		1,011			—			3,016		—			3,016
Other revenue		1,351		10			41			1,402		(506	)		896

Total Revenue and Other Income	$	160,982	$	31,404		$	384		$	192,770	$	(506	)	$	192,264

Earnings Before Income Taxes	$	87,141	$	(3,204	)	$	(227	)	$	83,710	$	(10,116	)	$	73,594

Segment assets	$	1,436,251	$	726,114		$	76,231		$	2,238,596	$	25,389		$	2,263,985

Depreciation, depletion and amortization	$	16,904	$	14,866		$	322		$	32,092	$	—		$	32,092

Capital expenditures	$	26,178	$	37,312		$	1,824		$	65,314	$	—		$	65,314

	CentralAppalachia		NorthernAppalachia			Other			Total Gas		Corporate			Consolidated
Sales—outside	$	132,588	$	21,013		$	358		$	153,959	$	—		$	153,959
Sales—related parties		733		92			—			825		—			825
Sales—royalty interest gas		8,638		(197	)		2			8,443		—			8,443
Sales—purchased gas		964		507			—			1,471		—			1,471
Other revenue		805		2			31			838		117			955
Total Revenue and Other Income	$	143,728	$	21,417		$	391		$	165,536	$	117		$	165,653
Earnings Before Income Taxes	$	80,744	$	(13,958	)	$	(317	)	$	66,469	$	(8,805	)	$	57,664
Segment assets	$	1,356,792	$	681,302		$	73,292		$	2,111,386	$	25,825		$	2,137,211
Depreciation, depletion and amortization	$	15,243	$	15,335		$	301		$	30,879	$	—		$	30,879
Capital expenditures	$	23,598	$	33,546		$	2,112		$	59,256	$	—		$	59,256

Reportable segment results for the three months ended March 31, 2009 are:

Reportable segment results for the three months ended September 30, 2008 are:


	Central Appalachia		Northern Appalachia		Other			Total Gas		Corporate			Consolidated
Sales—outside	$	138,418	$	22,661	$	261		$	161,340	$	—		$	161,340
Sales—related parties		991		9		—			1,000		—			1,000
Sales—royalty interest gas		11,454		1,178		—			12,632		—			12,632
Sales—purchased gas		1,102		363		—			1,465		—			1,465
Other revenue		1,593		—		81			1,674		273			1,947

Total Revenue and Other Income	$	153,558	$	24,211	$	342		$	178,111	$	273		$	178,384

Earnings Before Income Taxes	$	90,916	$	941	$	(177	)	$	91,680	$	(2,336	)	$	89,344

Segment assets	$	1,465,923	$	637,256	$	73,895		$	2,177,074	$	39,862		$	2,216,936

Depreciation, depletion and amortization	$	15,328	$	7,119	$	372		$	22,819	$	—		$	22,819

Capital expenditures	$	58,895	$	72,300	$	2,355		$	133,550	$	—		$	133,550

	CentralAppalachia		NorthernAppalachia		Other		Total Gas		Corporate			Consolidated
Sales—outside	$	154,647	$	32,413	$	1,552	$	188,612	$	—		$	188,612
Sales—related parties		2,582		5		—		2,587		—			2,587
Sales—royalty interest gas		22,072		830		—		22,902		—			22,902
Sales—purchased gas		1,616		58		—		1,674		—			1,674
Other revenue		211		36		581		828		344			1,172
Total Revenue and Other Income	$	181,128	$	33,342	$	2,133	$	216,603	$	344		$	216,947
Earnings Before Income Taxes	$	104,370	$	12,848	$	1,014	$	118,232	$	(2,657	)	$	115,575
Segment assets	$	1,297,829	$	452,907	$	75,989	$	1,826,725	$	28,172		$	1,854,897
Depreciation, depletion and amortization	$	13,787	$	3,132	$	884	$	17,803	$	—		$	17,803
Capital expenditures	$	64,736	$	104,816	$	822	$	170,374	$	—		$	170,374

~~Reportable~~Reconciliation ~~segment~~of ~~results~~Segment ~~for~~Information ~~the~~to ~~nine~~Consolidated ~~months ended September 30, 2009 are~~Amounts:

	CentralAppalachia		NorthernAppalachia			Other			Total Gas		Corporate			Consolidated
Sales—outside	$	400,629	$	64,172		$	926		$	465,727	$	—		$	465,727
Sales—related parties		2,134		126			—			2,260		—			2,260
Sales—royalty interest gas		28,330		1,409			2			29,741		—			29,741
Sales—purchased gas		2,844		1,258			—			4,102		—			4,102
Other revenue		3,019		4			82			3,105		710			3,815
Total Revenue and Other Income	$	436,956	$	66,969		$	1,010		$	504,935	$	710		$	505,645
Earnings Before Income Taxes	$	247,790	$	(20,113	)	$	(1,158	)	$	226,519	$	(26,388	)	$	200,131
Segment assets	$	1,356,792	$	681,302		$	73,292		$	2,111,386	$	25,825		$	2,137,211
Depreciation, depletion and amortization	$	46,646	$	30,918		$	1,017		$	78,581	$	—		$	78,581
Capital expenditures	$	122,959	$	144,662		$	5,398		$	273,019	$	—		$	273,019

Reportable segment results for the nine months ended September 30, 2008 are:

	CentralAppalachia		NorthernAppalachia		Other		Total Gas		Corporate			Consolidated
Sales—outside	$	415,372	$	77,541	$	1,711	$	494,624	$	—		$	494,624
Sales—related parties		8,010		25		—		8,035		—			8,035
Sales—royalty interest gas		61,904		17		—		61,921		—			61,921
Sales—purchased gas		6,802		58		—		6,860		—			6,860
Other revenue		9,704		80		1,669		11,453		476			11,929
Total Revenue and Other Income	$	501,792	$	77,721	$	3,380	$	582,893	$	476		$	583,369
Earnings Before Income Taxes (A)	$	281,791	$	32,295	$	1,521	$	315,607	$	(14,729	)	$	300,878
Segment assets	$	1,297,829	$	452,907	$	75,989	$	1,826,725	$	28,172		$	1,854,897
Depreciation, depletion and amortization	$	41,546	$	7,899	$	895	$	50,340	$	—		$	50,340
Capital expenditures	$	185,195	$	216,778	$	4,207	$	406,180	$	—		$	406,180

(A) Includes equity in earnings (loss) of unconsolidated affiliates of $223 for Central Appalachia.

Reconciliation of Segment Information to Consolidated Amounts

Earnings Before Income Taxes:

	For the Three MonthsEnded September 30,						For the Nine MonthsEnded September 30,
	For the Three MonthsEnded March 31,
	2009			2008			2009		2008
	2010			2009
Segment earnings before income taxes for total reportable business segments	$	6683,~~469~~710		$	~~118~~91,~~232~~680		~~226,519~~		$	~~315,607~~
Equity in earnings of Buchanan Generation		93			236		650			129
Equity in earnings (loss) of Buchanan Generation		(517	)		262
Incentive compensation		(34,~~274~~028	)		(2,~~550~~719	)	~~(10,651~~	)		~~(6,053~~	)
Compensation from restricted stock unit grants, stock option expense and performance share unit expense		(2,896	)		2,495		(8,343	)		(2,911	)
Compensation from restricted stock unit grants, stock option expense and performance share unit expense (A)		(3,456	)		2,465
Bank fees		(211	)		(~~129~~174	)	~~(596~~	)		~~(674~~	)
Interest income (expense), net		(1,~~841~~904	)		(21,~~709~~946	)	~~(5,693~~	)		~~(5,220~~	)
Operating lease cease-use		(664	)		—		(1,500	)		—
Corporate severance		—			(224	)
Corporate severance		—			—		(255	)		—
Earnings before income taxes	$	73,594		$	89,344
Earnings before income taxes	$	57,676		$	115,575		200,131		$	300,878

(A)	Includes amounts allocated from CONSOL Energy.

Total Assets:

	September 30,
	March 31,
	2009		2008
	2010		2009
Segment assets for total reportable business segments	$	2,~~111~~238,~~386~~596	$	12,~~826~~177,~~725~~074
Items excluded from segment assets:
Cash and other investments		1,~~098~~223		~~3,167~~356
Salary pension asset		123		—
Recoverable income taxes		—		14,040
Investment in Buchanan Generation		24,604		25,005
Salary pension asset		92		—
Total Consolidated Assets	$	2,137,211	$	1,854,897
Investment in Buchanan Generation		24,074		25,466
Total Consolidated Assets	$	2,263,985	$	2,216,936

Note 1312—Recent Accounting Pronouncements:

In ~~June~~January ~~2009~~2010, the ~~FASB~~Financial ~~issued~~Accounting ~~accounting~~Standards ~~guidance~~Board ~~regarding~~issued ~~the~~an ~~accounting~~Update ~~for transfers of financial assets that is designed~~ to ~~improve~~ the ~~relevance,~~ ~~representational~~Fair ~~faithfulness,~~Value Measurement and ~~comparability~~Disclosure ofTopic ~~the information that a reporting entity provides in its financial statements about a transfer~~ of ~~financial assets;~~ the ~~effects of a transfer on its financial position, financial~~FASB ~~performance,~~Accounting ~~and~~Standards ~~cash~~Codification ~~flows;~~which ~~and~~is aintended ~~transferor’s continuing involvement, if any, in transferred financial assets. The guidance enhances the information provided~~ to ~~financial statement users to~~ provide ~~greater~~additional ~~transparency~~application ~~about~~guidance ~~transfers of financial assets~~ and aenhance ~~transferor’s~~disclosures ~~continuing~~regarding ~~involvement,~~fair ifvalue ~~any, with transferred financial assets~~measurements. ~~The~~This ~~guidance~~Update ~~requires~~also ~~enhanced~~provides ~~disclosures~~amendments ~~about the risks~~ that arequire ~~transferor~~new ~~continues~~disclosures toregarding betransfers ~~exposed~~between levels ~~to because~~ of ~~its~~fair ~~continuing~~value ~~involvement in transferred financial assets~~measurements. This guidance isdid ~~effective for an entity’s first annual reporting period after November 15, 2009. Management does~~ not ~~believe that this will~~ have ana material impact on CNX Gas.

19In June 2009, the FASB issued authoritative guidance on the consolidation of variable interest entities, which is effective for CNX Gas beginning July 1, 2010. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe adoption of this new guidance will not have a material impact on CNX Gas’ financial statements.

Note 13—Subsequent Events:

On April 28, 2010, CONSOL Energy, our majority owner, commenced a tender offer to acquire all of the shares of CNX Gas common stock that it does not currently own at a cash price of $38.25 per share. CONSOL Energy currently owns approximately 83.3% of the approximately 151 million shares of CNX Gas common

stock outstanding. CONSOL Energy’s offer is subject to a number of conditions, including the condition, which cannot be waived, that there is tendered into the offer at least a majority of the outstanding CNX Gas shares not currently held by CONSOL Energy. Following the purchase by CONSOL Energy of shares of CNX Gas in the offer, CONSOL Energy intends to merge CNX Gas into a wholly owned subsidiary of CONSOL Energy, with CNX Gas surviving the merger as a wholly owned subsidiary of CONSOL Energy. As a result of the merger, each outstanding CNX Gas share will be converted into the right to receive $38.25. CONSOL Energy anticipates financing the acquisition of CNX Gas shares by means of internally generated funds, borrowings under its credit facilities and/or proceeds from its recently closed offering of common stock. Previously, on March 21, 2010, CONSOL Energy announced that it had entered into an agreement with T. Rowe Price Associates, Inc., on behalf of its investment advisory clients owning approximately 9.5 million shares of CNX Gas common stock, or approximately 37% of the shares of CNX Gas that CONSOL Energy does not currently own. Under the agreement, CONSOL Energy agreed, subject to certain conditions, to commence this tender offer and T. Rowe Price agreed to tender these shares of CNX Gas common stock subject to the rights of certain clients with respect to those shares which are discretionary account shares.

We have evaluated all subsequent events through the date the financial statements were issued. No additional material recognized or non-recognized subsequent events were identified.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. This Current Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Forward- Looking Statements.”

Unless the context otherwise requires, “we,” “us,” “our,” “the company” and “CNX Gas” mean CNX Gas Corporation and its consolidated subsidiaries.

Operations and Outlook

Net income attributable to CNX Gas Shareholders for the quarter ended ~~September~~March 3031, ~~2009~~2010 was $3545.56 million, or $0.2330 per diluted share. ~~This~~Net ~~compares~~income attributable to CNX Gas Shareholder was $6754.49 million, or $0.4536 per diluted share, for the quarter ended ~~September~~March 3031, ~~2008~~2009.

Production was 24.80 billion cubic feet (Bcf), or ~~269~~267 million cubic feet (MMcf) per day, for the quarter ended ~~September~~March 3031, ~~2009~~2010. This was ~~another quarterly production record, and 26~~9% higher than the 1922.70 Bcf, or ~~214~~245 MMcf per day, for the year-ago quarter., Itbut ~~was~~slightly ~~also~~lower ~~10% higher~~ than the 2225.51 Bcf produced in the fourth quarter ~~ended~~of ~~June 30,~~2009. The daily production rate of 267 MMcf was down 6 MMcf from the 2009 fourth quarter, as unusually heavy snow fall slowed the pace of drilling.

During the ~~third~~first quarter ~~2009~~, CNX Gas employees ~~worked~~continued ~~without~~to work without incurring a lost time accident. ~~This~~As ~~raises~~of March 31, 2010, the cumulative time worked by employees without a lost time incident towas ~~over 3~~4.92 million hours.

~~CNX~~Total ~~Gas~~production ~~continues~~in toCentral ~~monitor~~Appalachia, ~~and~~which ~~evaluate~~includes ~~capital~~Virginia ~~spending~~coalbed tomethane ~~ensure adequate liquidity~~ and toChattanooga ~~preserve~~Shale, ~~options~~was ~~for possible external investment~~18.5 ~~With~~Bcf ~~regard~~in tothe ~~capital~~quarter ended March 31, ~~CNX~~2010. ~~Gas~~This ~~intends~~was to1.3 ~~spend~~Bcf ~~largely~~higher ~~within~~than ~~its~~the ~~net~~17.2 ~~cash~~Bcf ~~from~~produced ~~operating~~in ~~activities for~~ the ~~fourth~~ quarter ofended March 31, 2009.

~~Total~~CNX ~~production~~Gas drilled in30 ~~Central~~vertical ~~Appalachia,~~frac ~~which~~wells ~~includes~~in its Virginia Coalbed Methane ~~(CBM)~~Operations ~~and~~during ~~Chattanooga Shale, was 18.7 Bcf in~~ the quarter. ~~ended~~The ~~September 30,~~company ~~2009.~~expects ~~This~~to ~~was~~drill ~~2.2~~175 ~~Bcf~~wells ~~higher~~in ~~than~~Virginia ~~the 16.5~~in ~~Bcf~~2010 ~~produced~~with ina ~~the~~drilling ~~quarter~~budget ~~ended~~of ~~September 30,~~$50 ~~2008~~million.

CNX Gas drilled 4513 ~~vertical~~horizontal ~~frac~~ wells in ~~its~~the ~~Virginia~~Chattanooga ~~CBM Operations~~Shale during the ~~third~~ quarter. ~~2009~~For 2010, ~~bringing~~CNX ~~the~~Gas ~~year-~~expects to~~-date~~ ~~total~~drill to25 ~~163.~~Chattanooga ~~CNX~~Shale wells ~~Gas~~for ~~expects~~about $28 million, and three-to-five ~~drill~~Huron ~~175~~Shale wells infor ~~Virginia~~about in$8-12 ~~2009~~million.

~~CNX~~Total ~~Gas~~production ~~continues~~in toNorthern Appalachia, bewhich ~~encouraged~~includes byMountaineer ~~its~~coalbed ~~early~~methane, ~~Chattanooga~~Nittany ~~Shale~~coalbed ~~results. The company has been pursuing a delineation program across its position~~methane, ~~which~~and ~~now~~Marcellus ~~stands at 268~~Shale,~~000~~ ~~mostly~~was ~~contiguous acres~~5.5 ~~One well,~~Bcf ~~which~~in ~~came~~the ~~online~~quarter onended ~~October~~March 2131, ~~2008,~~2010. ~~has~~This ~~produced~~was ~~over~~0.7 ~~140~~Bcf ~~MMcf,~~more ~~and~~than isthe ~~now~~4.8 ~~producing~~Bcf atproduced ain ~~daily~~the ~~rate~~quarter ofended ~~861 Mcf~~March 31, ~~plus~~2009. aOf this ~~few~~Northern ~~barrels~~Appalachian ofproduction, ~~oil~~1.4 ABcf ~~four-stage~~was ~~nitrogen~~from ~~foam~~the ~~frac~~Marcellus ~~was~~Shale ~~employed~~in onthe ~~this~~just-ended ~~well.~~quarter, ~~CNX~~versus ~~Gas~~less ~~continues~~than to0.1 ~~acquire~~Bcf ~~acreage~~ in the ~~Chattanooga~~same ~~Shale~~quarter last year.

~~Total~~Upcoming ~~production~~drilling in ~~Northern~~the ~~Appalachia, which includes Mountaineer CBM, Nittany CBM, and~~ Marcellus Shale, ~~was~~is ~~6.0~~expected ~~Bcf~~to inbe ~~the~~predominantly ~~quarter~~horizontal ~~ended~~and ~~September 30,~~on ~~2009.~~multiple-well ~~This was 2.9 Bcf more~~pads, orwith ~~almost~~laterals ~~double~~from 3, ~~the~~ 000-3,500 feet.1 ~~Bcf~~For ~~produced~~2010, in the ~~quarter~~company ~~ended~~expects ~~September 30,~~to ~~2008.~~drill Ofapproximately ~~this~~two ~~Northern~~dozen ~~Appalachian~~horizontal ~~production~~wells, ~~1.5~~with ~~Bcf~~a ~~was~~drilling ~~from~~budget ~~the~~of ~~Marcellus Shale,~~about ~~versus~~$110 ~~zero in the same quarter last year~~million.

~~In the Marcellus Shale,~~ CNX Gas ~~drilled,~~successfully ~~completed,~~increased ~~and~~its ~~brought~~acreage ~~three~~with ~~more horizontal~~Marcellus ~~wells~~Shale ~~online,~~potential ~~raising~~by ~~the~~10,000 ~~total~~in ~~to eleven during~~ the quarter ~~ended September 30~~, ~~2009.~~to ~~The~~a ~~peak~~total ~~daily~~of ~~production from these wells was 3.0 MMcf and 2.5 MMcf~~260, ~~with the latest well not yet reaching peak production~~000. ~~The~~Of ~~horizontal wells~~this, ~~drilled~~approximately ~~during~~180,000 ~~the~~acres ~~most~~is ~~recent~~considered ~~quarter~~to ~~averaged~~be ~~less~~Tier ~~than $3~~1.5 ~~million per well.~~

20No coalbed methane wells were drilled in Northern Appalachia during the quarter. For 2010, CNX Gas expects to drill 5 horizontal coalbed methane wells in Mountaineer and some ancillary wells for about $17 million.

At the close of the winter heating season, natural gas in storage fields was at 1,638 billion cubic feet. This was 160 billion cubic feet above the five-year average, but 16 billion cubic feet below last year’s level. Gas prices have weakened to about the $4.00 per million cubic feet level, as rising rig counts have caused concern that rising production could more than offset rising demand from an economic recovery. CNX Gas will add a second horizontal rig to its Marcellus Shale drilling program on June 1, 2010.

The ~~latest~~U.S. ~~horizontal~~Congress ~~Marcellus~~is ~~well~~considering ~~drilled~~climate ischange ~~located~~legislation intended to restrict greenhouse gas emissions and, separately, the Environmental Protection Agency could propose regulations in ~~northern~~that ~~Greene~~regard. Most ~~County~~of the coalbed methane we produce would otherwise be vented into the atmosphere in connection with coal mining activities, so our ~~Pennsylvania~~business significantly contributes to the reduction of greenhouse gas emissions and we may entitled to offset credits for those reductions under any such legislation or regulations. ItPursuant isto the ~~first~~master ~~horizontal~~cooperation ~~Marcellus~~and ~~Shale~~safety ~~well~~agreement ~~that~~between CONSOL Energy and CNX Gas, ~~has~~we ~~drilled~~receive ~~outside~~50% ownership of ~~its~~any ~~original~~greenhouse ~~Greene~~gas ~~Hill~~reduction ~~area,~~benefits inof ~~central~~our ~~Greene~~production ~~County~~activities. ItIf, ishowever, ~~also~~any ~~the~~legislation ~~first~~or inregulations athat ~~set~~are ofultimately ~~six~~adopted ~~wells~~with respect to begreenhouse ~~drilled~~gas onemissions ado ~~single~~not ~~pad.~~exempt coalbed ~~This~~methane ~~well~~from ~~is currently~~their ~~awaiting~~coverage, ~~hydraulic~~we ~~fracturing~~could have to curtail production, pay higher taxes or incur costs to purchase allowances that permit us to continue our operations.

~~The~~CONSOL ~~United~~Energy ~~States~~continues ~~economy~~to ~~may~~beneficially ~~have~~own ~~bottomed~~approximately ~~in the third quarter~~83.3% ~~Due~~of toour ~~the significant~~outstanding ~~fiscal~~common ~~spending and relaxed monetary policy~~stock, aas ~~modest~~such ~~U.S.~~CNX ~~recovery~~Gas’ ~~appears~~financial statements ~~likely~~are inconsolidated ~~2010.~~into ~~Depending~~CONSOL onEnergy’s ~~the~~financial ~~pace and sustainability of the recovery, we believe tremendous opportunities exist for our natural gas business~~statements.

~~The~~On ~~U.S.~~April 28, ~~natural~~2010, ~~gas~~CONSOL ~~market~~Energy, ~~has~~our majority ~~shown~~owner, ~~signs~~commenced a tender offer to acquire all of ~~stability.~~the ~~Total~~shares ~~rig~~of ~~count~~CNX ~~appears~~Gas tocommon ~~have~~stock ~~bottomed~~that it does not currently own at ~~approximately~~a ~~700~~cash ~~rigs~~price of $38.25 ~~The expectations~~per share. CONSOL Energy’s offer is subject to a number of ~~lower~~conditions, ~~natural~~including ~~gas~~the condition, ~~production~~which cannot be waived, ~~coupled~~that ~~with~~there ~~expectations~~is tendered into the offer at least a majority of ~~increased~~the ~~demand~~outstanding ~~due~~CNX toGas anshares ~~improving~~not ~~economy~~currently ~~and~~held aby ~~return~~CONSOL toEnergy. ~~normal~~Previously, ~~weather~~on ~~patterns~~March 21, ~~has~~2010, ~~led~~CONSOL toEnergy announced that it had entered into an ~~improvement~~agreement inwith ~~pricing~~T. ~~With~~Rowe Price Associates, Inc., on behalf of its ~~low~~investment ~~costs~~advisory ~~and~~clients ~~rising~~owning ~~production~~approximately ~~volumes~~9.5 million shares of CNX Gas common stock, or approximately 37% of the shares of CNX Gas that CONSOL Energy does not currently own. Under the agreement, CONSOL Energy agreed, subject to certain conditions, to commence this tender offer and T. Rowe Price agreed to tender these shares of CNX Gas ~~should~~common ~~benefit~~stock ~~from~~subject ~~improved~~to ~~pricing~~the rights of certain clients with respect to those shares which are discretionary account shares.

CONSOL Energy continues to beneficially own approximately 83.3% of our outstanding common stock, and as such, CNX Gas’ financial statements are consolidated into CONSOL Energy’s financial statements.

On March 31, 2009, CONSOL Energy privately placed 23,093 of restricted stock units with certain directors and an officer of CONSOL Energy, in exchange for their surrender to CNX Gas of 24,047 CNX Gas restricted stock units. Each surrendered CNX Gas restricted stock unit was exchanged for approximately 0.96 of a CONSOL Energy restricted stock unit.

Results of Operations

Three Months Ended ~~September~~March 3031, ~~2009~~2010 compared with Three Months Ended ~~September~~March 3031, ~~2008~~ 2009

(Amounts reported in millions)

Net Income

Net income attributable to CNX Gas Shareholders changed primarily due to the following items:

	2009Period		2008Period		DollarVariance			PercentageChange
	2010Period		2009Period		DollarVariance			PercentageChange
Revenue and Other Income:
Outside Sales	$	~~154~~173	$	~~189~~161	$	~~(35~~12	)	~~(18~~7.5	)%
Related Party Sales		1		21		(1—	)	~~(50.0~~—	)%
Royalty Interest Gas Sales		814		2313		~~(15~~1	)	~~(65~~7.27	)%
Purchased Gas Sales		13		21		(12	)	~~(50~~200.0	)%
Other Income		1		12		—(1	)	—(50.0	)%
Total Revenue and Other Income		~~165~~192		~~217~~178		~~(52~~14	)	~~(24~~7.09	)%
Costs and Expenses:
Lifting Costs		14		2111		(73	)	~~(33~~27.3	)%
Gathering and Compression Costs		2428		2422		—6		—27.3	%
Royalty Interest Gas Costs		6		21		(15	)	(71.4	)%
Gas Royalty Interest Costs		12		11		1		9.1	%
Purchased Gas Costs		12		21		(1	)	~~(50~~100.0	)%
Other		7		1		6		600.0	%
Exploration and Other Costs		4		2		2		100.0	%
General and Administrative		16		1316		3—		~~23.1~~—	%
Other Corporate Expenses		78		—1		7		~~100~~700.0	%
Depreciation, Depletion and Amortization		3132		1823		139		7239.21	%
Interest Expense		2		2		—		—
Total Costs and Expenses		~~108~~118		~~102~~89		629		532.96	%
Earnings Before Income Taxes		5774		~~115~~89		(5815	)	(5016.49	)%
Income Tax Expense		2228		4834		(266	)	(5417.26	)%
Net Income Attributable to CNX Gas Shareholders	$	3546	$	6755	$	(329	)	(4716.84	)%

2119

Lower net income attributable to CNX Gas Shareholders was primarily due to lower sales prices, higher unit costs, higher depreciation charges, and higher corporate expenses, offset, in part, by higher sales volumes ~~and lower unit costs~~. See below for additional details.

Revenue and Other Income

Revenue and other income ~~decreased~~increased due to the following items:

	2009Period		2008Period		DollarVariance			PercentageChange
	2010Period		2009Period		DollarVariance			PercentageChange
Revenue and Other Income:
Outside Sales	$	~~154~~173	$	~~189~~161	$	~~(35~~12	)	~~(18~~7.5	)%
Related Party Sales		1		21		(1—	)	~~(50.0~~—	)%
Royalty Interest Gas Sales		814		2313		~~(15~~1	)	~~(65~~7.27	)%
Purchased Gas Sales		13		21		(12	)	~~(50~~200.0	)%
Other Income		1		12		—(1	)	—(50.0	)%
Total Revenue and Other Income	$	~~165~~192	$	~~217~~178	$	~~(52~~14	)	~~(24~~7.09	)%

Outside sales and related party sales, combined, ~~decreased~~increased ~~primarily~~ due primarily to ~~lower average~~higher ~~sales~~volumes ~~prices~~of ~~received~~gas sold, offset, in part, by ~~higher~~lower ~~volumes~~average ofsales ~~gas~~prices ~~sold~~received.

	2009Period		2008Period		Variance			PercentageChange
	2010Period		2009Period		Variance			PercentageChange
Produced Gas Sales Volumes (in billion cubic feet)		24.80		1922.70		52.10		~~25.~~9.1	%
Average Sales Price per thousand cubic feet.	$	6.25	$	9.73	$	(3.48	)	(35.8	)%
Average Sales Price per thousand cubic feet	$	7.24	$	7.37	$	(0.13	)	(1.8	)%

Sales volumes increased as a result of additional wells coming online from our on-going drilling program, offset by approximately 0.6 bcf of production that was deferred due to the loss of power for several days related to a severe winter storm in our Northern Appalachian producing region in the 2010 period. The decrease in average sales price is the result of the general market price ~~decreases~~declines in the period-to-period comparison. The general market price decline was offset, in part, by the various gas swap transactions ~~entered into~~that by CNX Gas has entered. These gas swap transactions qualify as financial cash flow hedges that exist parallel to the underlying physical transactions. These financial hedges represented approximately 13.20 Bcf of our produced gas sales volumes for the three months ended ~~September~~March 3031, ~~2009~~2010 at an average price of $8.6976 per Mcf. In the ~~three~~prior ~~months ended September 30~~year, ~~2008,~~ these financial hedges represented approximately 1210.87 Bcf at an average price of $9.4485 per Mcf.

~~Included~~Royalty ~~in royalty~~ interest gas sales ~~are~~represent the revenues related to the portion of production belonging to royalty interest owners sold by ~~CNX~~ CNX Gas ~~on their behalf~~. The ~~decrease~~changes in market prices, contractual differences among leases, and the mix of average and index prices used in calculating royalties contributed to the period-to-period change.

	2009Period		2008Period		Variance				PercentageChange
	2010Period		2009Period		Variance			PercentageChange
Royalty Interest Gas Sales Volumes (in billion cubic feet)		2.4		2.4		—			—
Gas Royalty Interest Sales Volumes (in billion cubic feet)		2.5		2.2		0.3		13.6	%
Average Sales Price per thousand cubic feet	$	35.4682	$	95.7165	$	(60.2517	)	3.0	~~(64.4~~%	)%

Purchased gas sales volumes represent volumes of gas we sold at market prices that were purchased from third-party producers.

	2009Period		2008Period		Variance				PercentageChange
	2010Period		2009Period		Variance			PercentageChange
Purchased Gas Sales Volumes (in billion cubic feet)		0.4		0.2		0.2			100.0	%
Purchased Sales Volumes (in billion cubic feet)		0.5		0.3		0.2		66.7	%
Average Sales Price per thousand cubic feet	$	35.5376	$	105.2075	$	(60.6701	)	0.2	~~(65.4~~%	)%

2220

Other income includes gathering revenue, equity in earnings of affiliates, interest income and various other miscellaneous transactions. Other income remained consistent at $1 million in the period-to-period comparison.

Costs and Expenses

Costs and Expenses increased due to the following items:

	2009Period		2008Period		DollarVariance			PercentageChange
Costs and Expenses:
Lifting Costs	$	14	$	21	$	(7	)	(33.3	)%
Gathering and Compression Costs		24		24		—		—
Royalty Interest Gas Costs		6		21		(15	)	(71.4	)%
Purchased Gas Costs		1		2		(1	)	(50.0	)%
Other		7		1		6		600.0	%
General and Administrative		16		13		3		23.1	%
Other Corporate Expenses		7		—		7		100.0	%
Depreciation, Depletion and Amortization		31		18		13		72.2	%
Interest Expense		2		2		—		—
Total Costs and Expenses	$	108	$	102	$	6		5.9	%

Lifting costs decreased $7 million in the period-to-period comparison due to lower average unit costs, offset, in part, by higher volumes of gas sold.

	2009Period		2008Period		Variance			PercentageChange
Produced Gas Sales Volumes (in billion cubic feet)		24.8		19.7		5.1		25.9	%
Average Lifting Costs per thousand cubic feet	$	0.57	$	1.06	$	(0.49	)	(46.2	)%

Average lifting costs per unit decreased in the 2009 period as a result of several factors:

• Severance taxes have decreased $0.24 per thousand cubic feet primarily due to lower average sales prices in the 2009 period compared to the 2008 period. Severance taxes also decreased approximately $0.04 per thousand cubic feet related to a revised estimate of a pending litigation settlement.

• Well service costs have also decreased by $0.08 per thousand cubic feet due to lower contract rig hours needed as a result of less pump maintenance being required in the 2009 period.

• Water disposal costs have decreased $0.07 per thousand cubic feet due to lower volumes of water. Lower volumes of water are the result of the slow-down in coalbed methane well drilling activities due to the overall economic environment. Also, water disposal costs are lower in the period-to-period comparison due to lower rates being charged in the current period as a result of successful contract negotiations with these contractors.

• Repairs and maintenance costs have decreased by $0.06 per thousand cubic feet due to lower spending needed in the current period to maintain wells. In addition, road maintenance costs were lower in the period-to-period comparison.

• The cost for chemicals, fuel and lubricants has decreased $0.03 per thousand cubic feet due to the large number of Northern Appalachia coalbed methane well hookups in the 2008 period compared to the 2009 period along with switching pumps to use CNX Gas production for fuel versus purchasing propane to run the pumps.

• Other costs decreased $0.13 per thousand cubic feet primarily due to the impact of additional gas volumes sold during the period. Dollars spent remained consistent in the period-to-period comparison; therefore, additional volumes decreased the per unit cost.

These decreases in average lifting cost per unit were offset, in part, by higher idle rig charges. CNX Gas has incurred approximately $0.12 per thousand cubic feet of costs related to idling various drilling rigs throughout the company. Some of CNX Gas’ drilling contracts require minimum payments be made to the contracting party when drilling rigs are not being used. The CNX Gas drilling program has been slowed down pending a change in the economic environment. These idle rig charges resulted in an increase to costs.

Gathering and compression costs remained consistent in the period-to-period comparison due to higher volumes produced, offset by lower average unit costs during the 2009 period compared to the 2008 period.

	2009Period		2008Period		Variance			PercentageChange
Produced Gas Sales Volumes (in billion cubic feet)		24.8		19.7		5.1		25.9	%
Average Gathering and Compression Costs per thousand cubic feet	$	0.97	$	1.20	$	(0.23	)	(19.2	)%

Average gathering and compression unit costs was lower in the 2009 period due to the following items:

• Gob well collection costs decreased $0.08 per thousand cubic feet primarily due to idling contractor crews for approximately five weeks during the current period. The idling of the crews was related to the Buchanan longwall being idled in the previous periods.

• Compression expenses decreased $0.05 per thousand cubic feet primarily due to a reduction in the number of compressors utilized in the Northern Appalachian production field. Due to the slow-down in the drilling program in Northern Appalachia, rented compressors have been returned to more appropriately design the gathering fields for existing needs.

• Other costs decreased $0.21 per thousand cubic feet primarily due to the additional volumes produced in the period-to-period comparison. The dollars spent on other items remained consistent period-to-period, therefore the additional volumes lowered the average cost per unit sold.

These decreases were offset by the following cost per unit increases:

• Firm transportation costs have increased $0.07 per thousand cubic feet primarily due to acquiring additional capacity in the Northern Appalachian region after the 2008 period.

• Power and fuel costs increased $0.04 per thousand cubic feet primarily due to a power rate increase which occurred after the 2008 period.

Included in royalty interest gas costs are the expenses related to the portion of production belonging to royalty interest owners sold by CNX Gas on their behalf. The decrease in market prices, contractual differences among leases and the mix of average and index prices used in calculating royalties contributed to the period-to-period change.

	2009Period		2008Period		Variance			PercentageChange
Royalty Interest Gas Sales Volumes (in billion cubic feet)		2.4		2.4		—		—
Average Cost per thousand cubic feet	$	2.57	$	8.93	$	(6.36	)	(71.2	)%

Purchased gas volumes represent volumes of gas purchased from third-party producers that we sell. Purchased gas volumes sold also reflect the impact of pipeline imbalances. The lower average cost per thousand cubic feet is due to overall price decreases and contractual differences among customers in the period-to-period comparison.

	2009Period		2008Period		Variance			PercentageChange
Purchased Gas Cost Volumes (in billion cubic feet)		0.5		0.2		0.3		150.0	%
Average Cost per thousand cubic feet	$	2.45	$	9.23	$	(6.78	)	(73.5	)%

Other costs and expenses increased $6 million due to the following items:

	2009Period		2008Period		DollarVariance		PercentageChange
Dry hole and other costs	$	5	$	—	$	5	100.0	%
Exploration		2		1		1	100.0	%
Total Other Costs and Expenses	$	7	$	1	$	6	600.0	%

Dry hole and other costs were incurred in the 2009 period related to the determination that certain areas where an exploration well was drilled would not be economical to pursue. The costs for the exploration wells, which were previously capitalized, were expensed. Other costs include costs which were previously capitalized related to a lease. The lease was surrendered due to the properties being widely scattered and not adjacent to any of our existing operating units. Also, costs related to particular permits where management has determined that no drilling will take place have been expensed.

Exploration expenses have increased primarily due to delay and land rental charges that have been incurred in order to hold existing leases over the current period.

General and administrative expenses increased $3 million in the period-to-period comparison. The increased general and administrative expense is attributable to the reassignment of certain CNX Gas personnel in the fourth quarter of 2008 from operational roles to general and administrative oversight functions.

Other corporate expenses have increased $7 million due to the following items:

	2009Period		2008Period			DollarVariance		PercentageChange
Stock-based compensation	$	3	$	(2	)	$	5	250.0	%
Short-term incentive compensation		3		2			1	50.0	%
Miscellaneous		1		—			1	100.0	%
Total Other Corporate Expenses	$	7	$	—		$	7	100.0	%

Stock-based compensation expense increased $5 million in the period-to-period comparison. The 2008 period included a reversal of approximately $2 million related to the performance share program reflecting a decrease in the market price of CNX Gas common stock. The performance share program was converted into CONSOL Energy restricted stock units. The 2009 period includes approximately $3 million of allocated expense from CONSOL Energy related to stock-based compensation expense.

The short-term incentive compensation program is designed to increase compensation to eligible employees when CNX Gas reaches predetermined targets for production, unit cost and safety goals. Short-term incentive compensation expense was $1 million higher in the 2009 period due to higher expected payouts than in the previous period.

Miscellaneous other corporate expenses increased $1 million dollars in the period-to-period comparison due to various miscellaneous transactions that occurred throughout both periods, none of which were individually material.

Depreciation, depletion and amortization have increased due to the following items:

	2009Period		2008Period		DollarVariance		PercentageChange
Production		25		13		12	92.3	%
Gathering		6		5		1	20.0	%
Total Depreciation, Depletion, and Amortization	$	31	$	18	$	13	72.2	%

The increase in production related depreciation, depletion and amortization was primarily due to increased volumes produced combined with an increase in the units-of-production rates for the Northern Appalachian region in the period-to-period comparison. These rates increased due to the higher proportion of capital assets placed in service versus the proportion of proved developed reserve additions. These rates are generally calculated using the net book value of assets at the end of the previous year divided by either proved or proved developed reserves. Production asset depreciation also increased due to the recalculation of rates in the 2009 period related to the Marcellus Shale wells and other various assets being placed in service after the 2008 period.

Gathering depreciation, depletion and amortization is recorded using the straight-line method. Gathering depreciation increased $1 million primarily due to assets placed in service after the 2008 period.

Interest expense of $2 million remained consistent in the period-to-period comparison.

Income Taxes

	2009Period			2008Period			Variance			PercentageChange
Earnings Before Income Taxes	$	57		$	115		$	(58	)	(50.4	)%
Income Tax Expense	$	22		$	48		$	(26	)	(54.2	)%
Effective Income Tax Rate		38.5	%		41.7	%		(3.2	)%

CNX Gas’ effective income tax rate decreased in the period-to-period comparison primarily due to changes in the net effect of state taxes. See “Note 4 – Income Taxes” in Item 1 of the Condensed Consolidated Financial Statements of this Form 10-Q for additional details.

Results of Operations

Nine Months Ended September 30, 2009 compared with Nine Months Ended September 30, 2008 (Amounts reported in millions)

Net Income

Net income attributable to CNX Gas Shareholders changed primarily due to the following items:

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		DollarVariance			PercentageChange
Revenue and Other Income:
Outside Sales	$	466	$	495	$	(29	)	(5.9	)%
Related Party Sales		2		8		(6	)	(75.0	)%
Royalty Interest Gas Sales		30		62		(32	)	(51.6	)%
Purchased Gas Sales		4		7		(3	)	(42.9	)%
Other Income		4		11		(7	)	(63.6	)%
Total Revenue and Other Income		506		583		(77	)	(13.2	)%
Costs and Expenses:
Lifting Costs		39		50		(11	)	(22.0	)%
Gathering and Compression Costs		69		59		10		16.9	%
Royalty Interest Gas Costs		23		59		(36	)	(61.0	)%
Purchased Gas Costs		3		7		(4	)	(57.1	)%
Other		15		1		14		1,400.00	%
General and Administrative		51		41		10		24.4	%
Other Corporate Expenses		22		10		12		120.0	%
Depreciation, Depletion and Amortization		78		50		28		56.0	%
Interest Expense		6		6		—		—
Total Costs and Expenses		306		283		23		8.1	%
Earnings Before Income Taxes		200		300		(100	)	(33.3	)%
Income Tax Expense		77		119		(42	)	(35.3	)%
Net Income Attributable to CNX Gas Shareholders	$	123	$	181	$	(58	)	(32.0	)%

Lower net income attributable to CNX Gas Shareholders was primarily due to lower sales prices, offset, in part, by higher sales volumes and lower unit costs. See below for additional details.

Revenue and Other Income

Revenue and other income decreased due to the following items:

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		DollarVariance			PercentageChange
Revenue and Other Income:
Outside Sales	$	466	$	495	$	(29	)	(5.9	)%
Related Party Sales		2		8		(6	)	(75.0	)%
Royalty Interest Gas Sales		30		62		(32	)	(51.6	)%
Purchased Gas Sales		4		7		(3	)	(42.9	)%
Other Income		4		11		(7	)	(63.6	)%
Total Revenue and Other Income	$	506	$	583	$	(77	)	(13.2	)%

Outside sales and related party sales, combined, decreased primarily due to lower average sales prices received, offset, in part, by higher volumes of gas sold.

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		Variance			PercentageChange
Produced Gas Sales Volumes (in billion cubic feet)		69.3		54.3		15.0		27.6	%
Average Sales Price per thousand cubic feet	$	6.75	$	9.25	$	(2.50	)	(27.0	)%

Sales volumes increased as a result of additional wells coming online from our on-going drilling program. These increases in sales volumes were offset, in part, by approximately 1.2 Bcf due to the idling of CONSOL Energy’s Buchanan Mine longwall system during the year-to-date 2009 period. The decrease in average sales price is the result of the general market price decreases in the period-to-period comparison. The general market price decline was offset, in part, by the various gas swap transactions entered into by CNX Gas. These gas swap transactions qualify as financial cash flow hedges that exist parallel to the underlying physical transactions. These financial hedges represented approximately 36.4 Bcf of our produced gas sales volumes for the nine months ended September 30, 2009 at an average price of $9.12 per Mcf. In the nine months ended September 30, 2008, these financial hedges represented approximately 30.6 Bcf at an average price of $9.17 per Mcf.

Included in royalty interest gas sales are the revenues related to the portion of production belonging to royalty interest owners sold by CNX Gas on their behalf. The decrease in market prices, contractual differences among leases, and the mix of average and index prices used in calculating royalties contributed to the period-to-period change.

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		Variance			PercentageChange
Royalty Interest Gas Sales Volumes (in billion cubic feet)		7.3		6.1		1.2		19.7	%
Average Sales Price per thousand cubic feet	$	4.07	$	10.07	$	(6.00	)	(59.6	)%

Purchased gas sales volumes represent volumes of gas we sold at market prices that were purchased from third-party producers.

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		Variance			PercentageChange
Purchased Gas Sales Volumes (in billion cubic feet)		1.0		0.7		0.3		42.9	%
Average Sales Price Per thousand cubic feet	$	4.16	$	9.22	$	(5.06	)	(54.9	)%

Other income consists of the following items:

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		DollarVariance			PercentageChange
	2010Period		2009Period		DollarVariance			PercentageChange
Insurance settlement	$	—	$	8	$	(8	)	(100.0	)%
Timber income	$	1	$	1	$	—		—
Royalty settlement		—		1		(1	)	(100.0	)%
Miscellaneous		—		1		(1	)	(100.0	)%
Timber income		1		1		—		—
Total other income	$	1	$	2	$	(1	)	(50.0	)%
Miscellaneous		3		1		2		200.0	%
Total Other Income	$	4	$	11	$	(7	)	(63.6	)%

In March 2008, CNX Gas received notice from its insurance carrier that $8 million would be paid as final settlement of the insurance claim related to the July 2007 Buchanan Mine event which idled the mine. The $8 million represents business interruption coverage.

The royalty settlement in the year-to-date 2008 period was due to an agreement with third parties related to the underpayment of prior years royalty interest owed to CNX Gas from other third-party producers.

Timber income remained consistent in the period-to-period comparison.

~~Miscellaneous~~Other income ~~increased~~decreased $21 million ~~in the year-to-date period-to-period comparison~~ due to various miscellaneous transactions that occurred ~~throughout both periods~~, none of which were individually material.

Costs and Expenses

Costs and Expenses increased due to the following items:

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		DollarVariance				PercentageChange
	2010Period		2009Period		DollarVariance			PercentageChange
Costs and Expenses:
Lifting Costs	$	3914	$	5011	$	~~(11~~3	)	27.3	~~(22.0~~%	)%
Gathering and Compression Costs		6928		5922		106		27.3	~~16.9~~%	%
Royalty Interest Gas Costs		23		59		(36	)		(61.0	)%
Gas Royalty Interest Costs		12		11		1		9.1	%
Purchased Gas Costs		32		71		(41	)	100.0	~~(57.1~~%	)%
Other		15		1		14			1,400.00	%
Exploration and Other Costs		4		2		2		100.0	%
General and Administrative		5116		4116		10—		—	~~24.4~~	%
Other Corporate Expenses		228		101		127		700.0	~~120.0~~%	%
Depreciation, Depletion and Amortization		7832		5023		289		39.1	~~56.0~~%	%
Interest Expense		62		62		—		—	—
Total Costs and Expenses	$	~~306~~118	$	~~283~~89	$	2329		32.6	~~8.1~~%	%

Lifting costs ~~decreased~~increased $113 million in the ~~year-to-date~~ period-to-period comparison due to ~~lower~~higher ~~average~~ unit costs, ~~offset, in part, by~~ and higher ~~sales~~ volumes sold.

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		Variance				PercentageChange
	2010Period		2009Period		Variance			PercentageChange
Produced Gas Sales Volumes (in billion cubic feet)		6924.30		5422.30		152.0		9.1	~~27.6~~%	%
Average Lifting Costs per thousand cubic feet	$	0.5759	$	0.9252	$	(0.3507	)	13.5	~~(38.0~~%	)%

Average lifting costs per unit ~~decreased~~increased in the ~~year-to-date~~2010 ~~2009~~ period as a result of several factors.:

• Severance taxes, which are included in lifting costs, have ~~decreased~~increased $0.2308 per thousand cubic feet. ~~primarily~~The ~~due~~2009 toperiod ~~the~~included ~~reduction~~an in$0.11 ~~average~~per ~~sales~~thousand ~~prices~~cubic infeet ~~the~~reduction ~~year-~~related to~~-date~~ ~~2009~~a ~~period~~revised estimate of pending litigation. Severance taxes ~~also~~were ~~decreased~~lower ~~$0.06~~in ~~related~~the current period due to athe ~~revised~~reduction ~~estimate~~in ofthe aaverage ~~pending~~sales ~~litigation~~prices ~~settlement~~in the period-to-period comparison.

• ~~Well~~Idle ~~service~~rig costs have ~~also~~increased ~~decreased by~~ $0.0704 per thousand cubic feet due to ~~lower~~one ~~contract~~additional ~~service~~month of idle rig ~~hours~~expense ~~needed~~in asthe a2010 ~~result~~period due to idle charges not beginning until February of ~~less~~2009. ~~pump~~Idle ~~maintenance~~rig ~~being~~expenses ~~required~~have also increased due to higher monthly fees in ~~the~~2010 ~~year-~~compared to~~-date~~ 2009 ~~period~~when the rig was initially idled.

• ~~Other~~Repairs and maintenance costs ~~have~~were ~~decreased~~impaired approximately $0.1402 per thousand cubic feet primarily ~~due~~related to ~~the impact of~~ additional ~~volumes~~road ofmaintenance ~~gas~~required ~~sold~~by ~~during~~ the ~~year-to-date~~severe ~~2009~~winter ~~period.~~storm ~~Dollars spent remained consistent~~ in ~~the~~our ~~year-to-date~~producing ~~period-to-period comparison, therefore additional volumes decreased the unit cost~~regions.

~~These~~21 ~~decreases in costs were offset, in part, by the following item.~~

• CNX Gas has incurred approximately $0.09 per thousand cubic feet of costs related to idling various drilling rigs throughout the company. Some of CNX Gas’ drilling contracts require minimum payments be made to the contracting party when drilling rigs are not being used. The CNX Gas drilling program has been slowed down pending a change in the economic environment. These charges resulted in an increase to costs.

~~The~~These ~~increase~~increases ~~of $10 million~~ in ~~gathering and compression~~ costs ~~was~~were ~~attributable to higher volumes produced during the year-to-date 2009 period compared to the year-to-date 2008 period,~~ offset, in part, by ~~lower~~the ~~average~~following ~~unit~~items: ~~costs.~~

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		Variance			PercentageChange
Produced Gas Sales Volumes (in billion cubic feet)		69.3		54.3		15.0		27.6	%
Average Gathering and Compression Costs per thousand cubic feet	$	1.00	$	1.09	$	(0.09	)	(8.3	)%

•

Water disposal costs decreased $0.04 per thousand cubic feet due to recycling salt water produced from our wells to be used in fracing new wells. Previously, fees were incurred to dispose of the salt water produced from our wells.

~~Average~~• ~~gathering~~Chemical, fuels and ~~compression~~lubricants ~~unit~~ costs ~~were~~have decreased approximately $0.0902 per thousand cubic feet ~~lower in~~due ~~the 2009 year-~~to~~-date~~ ~~period~~less ~~compared~~volumes toof ~~the~~products ~~2008~~being ~~year-to-date period~~consumed. ~~Improvements in the average unit costs were attributable to the following:~~

• ~~Gob~~Other ~~collection~~costs ~~charges~~decreased ~~were~~ $0.0601 per thousand cubic feet ~~lower~~for invarious ~~the~~items ~~year-to-date~~that ~~period-to-period~~occurred ~~comparison.~~throughout ~~Lower~~both ~~gob~~periods, ~~collection~~none ~~charges~~of ~~per~~which ~~unit~~ were ~~primarily~~individually ~~due to the Buchanan longwall being idled throughout the majority of the year-to-date 2009 period~~material.

•The ~~Compression~~increase ~~expenses~~of ~~decreased~~ $~~0.03~~6 ~~per~~million ~~thousand cubic feet primarily due to a reduction~~ in ~~the~~gathering ~~number~~and ofcompression ~~compressors~~was ~~utilized~~attributable into ~~the~~higher ~~Northern~~average ~~Appalachian~~unit ~~production~~costs ~~field.~~and higher ~~Due~~volumes toproduced ~~the~~during ~~slow-down in~~ the ~~drilling~~2010 ~~program~~period incompared ~~Northern Appalachia, rented compressors have been returned~~ to ~~more appropriately design~~ the ~~gathering~~2009 ~~fields for existing needs~~period.

• Repairs and maintenance expenses have decreased $0.03 per thousand cubic feet due to the additional volumes produced in the period-to-period comparison. Dollars spent for repairs and maintenance have remained consistent, therefore additional volumes decreased the unit cost.


	2010 Period		2009 Period		Variance		Percentage Change
Produced Gas Sales Volumes (in billion cubic feet)		24.0		22.0		2.0	9.1	%
Average Gathering Costs per thousand cubic feet	$	1.15	$	0.99	$	0.16	16.2	%

•The ~~Other~~increase in ~~costs~~average ~~have~~gathering ~~decreased~~and ~~$0.11~~compression ~~per~~unit ~~thousand~~costs ~~cubic~~was ~~feet~~attributable ~~primarily due~~ to the ~~impact~~following ofitems: additional volumes of gas sold during the year-to-date 2009 period. Dollars spent remained consistent in the year-to-date period-to-period comparison, therefore additional volumes decreased the unit cost.

~~These~~• ~~decreases~~Power inand ~~unit~~fuel costs ~~were~~increased ~~offset~~$0.08 per thousand cubic feet due to higher rates being charged by the ~~following:~~power producer, additional compressors and an additional processing plant being placed in service during the 2010 period.

• Firm transportation costs have increased $0.0907 per thousand cubic feet ~~primarily~~ due to acquiring additional capacity in the Northern Appalachian region ~~after~~in the ~~year-~~2010 period compared to~~-date~~ ~~2008~~the 2009 period.

• ~~Power~~Other ~~and fuel~~ costs increased $0.0501 per thousand cubic feet ~~due~~for tovarious aitems ~~power~~that ~~rate increase which~~ occurred ~~after~~throughout ~~the~~both ~~year-to-date 2008 period. Also~~periods, ~~the~~none ~~increase~~of ~~was~~which ~~due~~were toindividually additional compressors being placed in service after the year-to-date 2008 period along the existing gathering system in the Central Appalachian production field in order to flow the increasing gas volumes more efficientlymaterial.

~~Included~~Royalty ~~in royalty~~ interest gas costs ~~are~~represent the ~~expenses~~costs related to the portion of production belonging to ~~royalty~~ royalty interest owners sold by CNX Gas ~~on their behalf~~. The ~~decrease~~changes in market prices, contractual differences among leases, and the mix of average and index prices used in calculating royalties contributed to the ~~year-to-date~~ period-to-period change.

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		Variance				PercentageChange
	2010Period		2009Period		Variance			PercentageChange
Royalty Interest Gas Sales Volumes (in billion cubic feet)		7.3		6.1		1.2			19.7	%
Gas Royalty Interest Volumes (in billion cubic feet)		2.5		2.2		0.3		13.6	%
Average Cost per thousand cubic feet	$	34.2095	$	94.6174	$	(60.4121	)	4.4	~~(66.7~~%	)%

Purchased gas volumes represent volumes of gas purchased from third-party producers that we sell. Purchased gas volumes ~~sold~~ also reflect the impact of pipeline imbalances. The ~~lower~~higher average cost per thousand cubic feet is due to overall price ~~decreases~~changes and contractual differences among customers in the ~~year-to-date~~ period-to-period comparison.


	2010 Period		2009 Period		Variance		Percentage Change
Purchased Gas Volumes (in billion cubic feet)		0.4		0.3		0.1	33.3	%
Average Cost per thousand cubic feet	$	6.04	$	4.42	$	1.62	36.7	%

Exploration and Other costs and expenses increased $2 million in the 2010 period due to the following items.


	2010 Period		2009 Period		Dollar Variance		Percentage Change
Dry hole and other costs	$	2	$	1	$	1	100.0	%
Exploration		2		1		1	100.0	%

Total Exploration and Other Costs	$	4	$	2	$	2	100.0	%

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		Variance			PercentageChange
Purchased Gas Cost Volumes (in billion cubic feet)		1.0		0.8		0.2		25.0	%
Average Cost per thousand cubic feet	$	3.09	$	8.69	$	(5.60	)	(64.4	)%

Dry hole and other costs of approximately $2 million in the 2010 period are primarily related to an exploration well which is no longer economical to pursue. The previously capitalized costs were expensed. Dry hole and other costs in the 2009 period represent various capitalized costs such as permitting and miscellaneous costs for well sites that were no longer economic to pursue. The previously capitalized costs were expensed.

~~Other~~Exploration costs ~~and expenses~~ increased $141 million due to ~~the~~various ~~following~~transactions ~~items:~~ that occurred throughout both periods, none of which were individually material.

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		DollarVariance		PercentageChange
Dry hole and other costs	$	10	$	—	$	10	100.0%
Exploration		5		1		4	400.0%
Total Other Costs and Expenses	$	15	$	1	$	14	1,400.00%

General and Administrative expenses of $16 million remained consistent in the period-to-period comparison.

Dry hole and other costs were incurred in the year-to-date 2009 period related to the determination that certain areas where an exploration well was drilled would not be economical to pursue. The costs for the exploration wells, which were previously capitalized, were expensed. Other ~~costs~~Corporate ~~include~~Expenses ~~costs~~have ~~which~~increased ~~were previously capitalized related to a lease. The lease was surrendered~~ due to the ~~properties~~following ~~being~~items: ~~widely scattered and not adjacent to any of our existing operating units. Also, costs related to particular permits where management has determined that no drilling will take place have been expensed.~~

Exploration expense increased primarily due to additional land rental expenses and higher geological and geophysical charges in the year-to-date period-to-period comparison.


	2010 Period		2009 Period			Dollar Variance		Percentage Change
Stock-based compensation	$	3	$	(2	)	$	5	250.0	%
Short-term incentive compensation		4		3			1	33.3	%
Other miscellaneous		1		—			1	100.0	%

Total Other Corporate Expenses	$	8	$	1		$	7	700.0	%

~~General~~Stock-based ~~and~~compensation ~~administrative expenses~~expense has increased $105 million inprimarily ~~the~~due ~~year-~~to~~-date~~ ~~period-to-period comparison. The increased general and administrative expense is attributable to~~ the ~~reassignment~~conversion of ~~certain~~ the CNX Gas ~~personnel~~long-term inincentive ~~the~~compensation ~~fourth~~plan ~~quarter~~to ofCONSOL ~~2008~~Energy ~~from~~restricted ~~operational~~stock ~~roles~~units ~~to general~~in ~~and~~the ~~administrative~~2009 ~~oversight functions~~period. ~~These~~The ~~reassignments~~conversion resulted in a reduction of approximately $74 million of ~~additional general and administrative~~ expense in the ~~period-to-period~~2009 ~~comparison~~period. ~~Additionally,~~The ~~general~~additional ~~and administrative expenses increased~~ $31 million inof ~~the~~expense ~~year-to-date~~is related ~~period-~~to~~-period~~ ~~comparison~~the ~~due~~stock-based tocompensation ~~various~~expenses ~~transactions~~allocated ~~that~~from ~~occurred~~CONSOL ~~throughout~~Energy ~~both~~in ~~periods,~~the ~~none~~2010 ~~of which were individually material~~period.

~~Other~~The ~~corporate~~short-term ~~expenses~~incentive compensation ~~have~~program ~~increased~~is ~~$12~~designed ~~million~~to increase compensation to eligible employees when CNX Gas reaches predetermined targets for production, unit cost and safety goals. Short-term incentive compensation expense is higher in 2010 due to ~~the~~improved performance ~~following~~relative ~~items:~~to targets.

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		DollarVariance		PercentageChange
Stock-based compensation	$	8	$	3	$	5	166.7	%
Short-term incentive compensation		11		6		5	83.3	%
Miscellaneous		3		1		2	200.0	%
Total Other Corporate Expenses	$	22	$	10	$	12	120.0	%

Stock-based compensation expense increased $5 million in the year-to-date period-to-period comparison. The year-to-date 2009 period contains $3 million of fair value adjustments associated with the exchange offer to convert CNX Gas performance share units into CONSOL Energy restricted stock units. The year-to-date 2009 period also includes $5 million expense allocated from CONSOL Energy related to the stock-based compensation expense. These increased current year-to-date expenses were offset by a change in the valuation of the performance share units during the first quarter. In the first quarter of 2009, the performance share units were valued in accordance with CNX Gas’ total shareholder return as compared to a predetermined peer group which resulted in a $3 million dollar reduction of expense.

The short-term incentive compensation program is designed to increase compensation to eligible employees when CNX Gas reaches predetermined targets for production, unit cost and safety goals. Short-term incentive compensation expense is higher in the year-to-date 2009 period due to expected higher payouts than in the previous period.

Miscellaneous other corporate expenses increased $2 million in the year-to-date period-to-period comparison primarily due to cease use expenses incurred related to the relocation of CNX Gas’ corporate office and various other transactions that occurred throughout the year-to-date 2009 period, none of which were individually material.

Depreciation, depletion and amortization have increased due to the following items:

	2009Year-to-DatePeriod		2008Year-to-DatePeriod		DollarVariance		PercentageChange
	2010Period		2009Period		DollarVariance		PercentageChange
Production	$	6226	$	3518	$	278	7744.14	%
Gathering		166		155		1	620.70	%
Total Depreciation, Depletion, and Amortization	$	78	$	50	$	28	56.0	%
Total Depreciation, Depletion and Amortization	$	32	$	23	$	9	39.1	%

The increase in production ~~related~~ depreciation, depletion and amortization was primarily due to ~~increased volumes produced, combined with~~ an increase in the units of production rates ~~for~~combined ~~the~~with ~~Northern~~higher ~~Appalachian~~production ~~region in the year-to-date period-to-period comparison~~volumes. ~~These~~Rates ~~rates~~ increased due to the higher proportion of capital assets placed in service versus the proportion of proved developed reserve additions. These rates are generally calculated using the net book value of assets at the end of the previous year divided by either proved or proved developed reserves. Production asset depreciation also increased due to the recalculation of rates in the 2009 period related to the Marcellus Shale wells and various other assets being placed in service after the 2008 period.

Gathering depreciation, depletion and amortization is recorded using the straight-line method and increased $1 million ~~in 2009~~ due to ~~assets~~additional assets being placed in service after the ~~year-to-date~~2009 ~~2008~~ period.

Interest expense ~~remained~~of ~~consistent at~~ $62 million remained consistent in the ~~year-to-date~~ period-to-period comparison.

Income Taxes

	2009Year-to-DatePeriod			2008Year-to-DatePeriod			Variance			PercentageChange
	2010Period			2009Period			Variance			PercentageChange
Earnings Before Income Taxes	$	~~200~~74		$	~~300~~89		$	(~~100~~15	)	~~(33.3~~$	)%(16.9	)%
Income Tax Expense	$	77		$	119		$	(42	)	(35.3	)%
Tax Expense	$	28		$	34		$	(6	)	$	(17.6	)%
Effective Income Tax Rate		38.40	%		3938.65	%		(10.25	)%

CNX Gas’ effective income tax rate ~~decreased~~increased in the ~~year-to-date~~ period-to-period comparison primarily due to changes in the ~~net~~ effect of ~~state~~the ~~taxes~~manufacturer’s deduction. See “Note 43—Income Taxes” inof ~~Item 1,~~the ~~Condensed~~ Consolidated Financial Statements ~~of this Form 10-Q~~ for additional details.

Liquidity and Capital Resources

CNX Gas has satisfied its working capital requirements and funded its capital expenditures with cash from operations and its $200 million credit facility. Our credit agreement provides for a revolving credit facility with an initial aggregate outstanding principal amount of up to $200 million, ~~(with~~including ~~the~~borrowings ~~ability~~and toletters of credit, which expires in October 2010. CNX Gas can request an additional $100 million increase in the aggregate outstanding principal amount. upThe toagreement ~~$300~~contains ~~million)~~a negative pledge provision, ~~including~~pursuant ~~borrowings~~to which CNX Gas assets cannot be used to secure other obligations. Fees and ~~letters~~interest rate spreads are based on the percentage of ~~credit~~facility utilization, measured quarterly. WeThe ~~use~~facility ~~the~~includes ~~credit~~a minimum interest coverage ratio covenant of no less than 3.00 to 1.00, measured quarterly. The interest coverage ratio was 67.05 to 1.00 at March 31, 2010. The facility ~~for~~also includes a maximum leverage ratio covenant of no more than 3.00 to 1.00, measured quarterly. The leverage ratio covenant was 0.35 to 1.00 at March 31, 2010. Affirmative and negative covenants in the ~~general~~facility ~~corporate~~limit ~~purposes~~our ability to dispose of assets, ~~including~~make ~~transaction~~investments, ~~fees~~purchase or redeem CNX Gas stock, pay dividends and merge with another company. At March 31, 2010, the facility had $49.2 million of borrowings outstanding and $14.9 million of letters of credit, ~~acquisitions~~outstanding, leaving $135.9 million of unused capacity.

32As a result of our status as a majority-owned subsidiary of CONSOL Energy and having entered into a credit agreement with third-party commercial lenders, CNX Gas and its subsidiaries are guarantors of CONSOL Energy’s 7.875% notes due March 1, 2012 in the principal amount of $250 million. In addition, if CNX Gas were to grant liens to a lender as part of a future borrowing, the indenture governing the 7.875% notes requires CNX Gas to ratably secure the notes.

CNX Gas is currently in the process of refinancing the existing credit facility to an initial aggregate outstanding principal amount of up to $500 million, including borrowings and letters of credit, for a term of four years. CNX Gas can request an additional $200 million increase in the aggregate outstanding principal amount. The facility is being expanded to meet the development needs of the company. The obligations under the credit agreement will be secured by a lien on our assets, which would also require CONSOL Energy’s 7.875% notes due March 1, 2012 to be ratably secured. Fees and interest rate spreads would be based on the percentage of facility utilization, measured quarterly. The facility would include a minimum interest coverage ratio covenant of no less than 3.00 to 1.00, measured quarterly. The facility would also include a maximum leverage ratio covenant of no more than 3.50 to 1.00, measured quarterly. Covenants in the facility would limit our ability to dispose of assets, make investments, pay dividends and merge with another company. The amended facility is expected to be completed in the three months ended June 30, 2010. There can be no assurance that CNX Gas will enter into this amended facility.

On April 28, 2010, CONSOL Energy commenced a tender offer to acquire all of the shares of CNX Gas common stock that it does not currently own. If CNX Gas becomes a wholly-owned subsidiary of CONSOL Energy, CNX Gas must be designated a restricted subsidiary under CONSOL Energy’s 2017 and 2020 note indentures. CNX Gas will then have to comply with the covenants in the note indentures, which, among other things, limit the company’s ability to incur debt, make investments, sell assets, pay dividends and merge with another company.

~~capital~~We ~~expenditures~~believe ~~and~~that ~~working~~cash ~~capital.~~generated ~~Our~~from ~~obligations~~operations and borrowings under our credit ~~agreement~~facility ~~are not secured by a lien on our assets, however the agreement does contain a negative pledge provision~~will ~~providing that our assets cannot~~ be ~~used~~sufficient to ~~secure~~meet ~~any~~our ~~other~~working ~~obligation.~~capital ~~Fees and interest rate spreads are based on the percentage of facility utilization~~requirements, ~~measured~~anticipated ~~quarterly.~~capital ~~The~~expenditures ~~facility~~(other ~~includes a minimum interest coverage ratio covenant of no less~~ than ~~3.00~~major ~~to 1.00~~acquisitions), ~~measured~~scheduled ~~quarterly.~~debt ~~The~~payments, ~~interest~~anticipated ~~coverage~~dividend ~~ratio~~payments ~~was~~and ~~66.77~~ to ~~1.00~~provide atrequired ~~September 30,~~letters ~~2009. The facility also includes a maximum leverage ratio covenant~~ of ~~no more than 3~~credit.00 ~~to 1.00~~Nevertheless, ~~measured~~our ~~quarterly.~~ability ~~The leverage ratio~~to ~~was~~satisfy ~~0.40~~our toworking ~~1.00~~capital ~~at September 30~~requirements, ~~2009.~~debt ~~Affirmative~~service ~~and~~obligations, ~~negative~~to ~~covenants~~fund inplanned ~~the~~capital ~~facility~~expenditures ~~limit~~or ~~our~~pay ~~ability~~dividends towill ~~dispose~~depend ofupon ~~assets,~~our ~~make~~future ~~investments,~~operating ~~purchase or redeem CNX Gas stock~~performance, ~~pay~~which ~~dividends~~will ~~and~~be ~~merge~~affected ~~with~~by ~~another~~prevailing ~~corporation.~~economic ~~At September 30,~~conditions ~~2009,~~in the ~~facility~~coal ~~had~~and ~~$73.1~~gas industries ~~million~~and ofother ~~borrowings~~financial ~~outstanding~~ and ~~$14.9~~business ~~million~~factors, ofsome ~~letters~~ of ~~credit~~which ~~outstanding,~~are ~~leaving~~beyond ~~$112.0~~our ~~million of unused capacity~~control.

AsUncertainty ain ~~result~~the offinancial markets ~~our~~brings ~~status~~additional aspotential arisks ~~majority-owned~~to ~~subsidiary~~CNX ofGas. ~~CONSOL~~The ~~Energy~~risks ~~and~~include ~~having~~declines ~~entered~~in ~~into~~our astock ~~credit agreement with third-party commercial lenders~~price, ~~CNX~~less ~~Gas~~availability and ~~its~~higher ~~subsidiaries~~costs ~~are guarantors~~ of ~~CONSOL~~additional ~~Energy’s~~credit, ~~7.875%~~potential ~~notes~~counterparty ~~due March 1~~defaults, ~~2012~~and infurther ~~the~~commercial ~~principal~~bank ~~amount of $250 million~~failures. ~~This~~Financial ~~agreement~~market disruptions ~~requires~~may ~~all~~impact ~~subsidiaries~~our ofability ~~CONSOL~~to ~~Energy~~collect ~~that~~trade ~~incur~~receivables. ~~third-party debt~~The tocreditworthiness ~~also~~of ~~guarantee~~our ~~the~~customers ~~7.875%~~is ~~notes.~~constantly Inmonitored ~~addition,~~by if CNX Gas. ~~were~~We tobelieve ~~grant~~that ~~liens~~our tocurrent agroup ~~lender as part~~ of acustomers ~~future~~is ~~borrowing,~~sound ~~the~~and ~~indenture~~represent ~~governing~~no ~~the~~abnormal ~~7.875%~~business ~~notes requires CNX Gas to ratably secure the notes~~risk.

WeIn ~~believe~~order ~~that~~to ~~cash~~manage ~~generated~~the ~~from~~market ~~operations~~risk ~~and~~exposure ~~borrowings~~of ~~under~~volatile ~~our~~natural ~~credit~~gas ~~facility~~prices ~~will~~in bethe ~~sufficient~~future, toCNX ~~meet~~Gas ~~our~~enters ~~working~~into ~~capital requirements,~~various ~~anticipated~~physical ~~capital~~gas ~~expenditures~~supply transactions ~~(other~~with ~~than~~both ~~major~~gas ~~acquisitions),~~marketers and ~~required~~end ~~financial~~users ~~resources~~for terms varying in length. ~~Nevertheless~~CNX Gas has also entered into various gas swap transactions that qualify as financial cash flow hedges, ~~our~~which ~~ability~~exist parallel to ~~satisfy~~the ~~our~~underlying ~~working~~physical ~~capital~~transactions. ~~requirements~~The fair orvalue ~~fund~~of ~~planned~~these ~~capital~~contracts ~~expenditures~~was ~~will~~an ~~depend~~asset ~~upon~~of ~~our~~approximately ~~future operating~~$169.0 ~~performance~~million at March 31, ~~which~~2010. ~~will~~The beineffective ~~affected~~portion byof ~~prevailing~~these ~~economic~~contracts ~~conditions~~was insignificant to earnings in the ~~gas~~three ~~industry~~months ~~and~~ended ~~other~~March 31, ~~financial~~2010. ~~and~~Hedge ~~business~~counterparties ~~factors,~~consists of ~~some~~commercial ofbanks ~~which~~who ~~are~~participate ~~beyond~~in the revolving credit facility. No issues related to our ~~control~~hedge agreements have been encountered to date.

~~Uncertainty~~CNX inGas ~~the~~frequently ~~financial~~evaluates ~~markets~~potential ~~still persists~~acquisitions. ~~This uncertainty brings additional potential risks to~~ CNX Gas. ~~The~~has ~~risks~~funded ~~include declines~~acquisitions inprimarily ~~our~~with ~~stock~~cash ~~price,~~generated ~~less~~from ~~availability~~operations and proceeds ~~higher~~from ~~costs~~our ofrevolving ~~additional~~ credit, ~~potential counterparty defaults, and further commercial bank failures~~facility. ~~Although~~There ~~the~~can ~~majority of the financial institutions in our bank group appear to~~ be ~~strong, there are some that have been and could be considered take-over candidates. Although we have~~ no ~~indication~~assurance that ~~any~~capital ~~such~~resources, ~~transactions~~including ~~would~~debt ~~impact our current credit facility~~financing, ~~the~~will ~~possibility~~be ~~does~~available ~~exist. Financial market disruptions may impact our ability~~ to ~~collect~~CNX ~~trade~~Gas ~~receivables.~~on Weterms ~~constantly~~which ~~monitor~~we ~~the~~find ~~creditworthiness~~acceptable, ofor ~~our~~at ~~customers~~all. ~~We believe that our current group of customers is sound and represent no abnormal business risk.~~

In order to manage the market risk exposure of volatile natural gas prices in the future, CNX Gas enters into various physical gas supply transactions with both gas marketers and end users for terms varying in length. CNX Gas has also entered into various gas swap transactions that qualify as financial cash flow hedges, which exist parallel to the underlying physical transactions. The fair value of these contracts was a net asset of approximately $127.0 million at September 30, 2009. The ineffective portion of these contracts was insignificant to earnings in the nine months ended September 30, 2009. Hedge counterparties consist of commercial banks who participate in the revolving credit facility. No issues related to our hedge agreements have been encountered to date.

CNX Gas frequently evaluates potential acquisitions. CNX Gas has funded acquisitions primarily with cash generated from operations and proceeds from our revolving credit facility. There can be no assurance that capital resources to fund future acquisitions, including debt financing, will be available to CNX Gas on terms which we find acceptable, or at all.

Cash Flows (in millions)

	September 30,
	Three Months EndedMarch 31,
	2009				2008				Change
	2010			2009			Change
Cash provided by operating activities	$75	~~279~~		126	$	~~307~~	(51	)	$	~~(28~~	)
Cash used in investing activities	$(65	~~(271~~)	)	(134	$)	~~(405~~	)69		$	~~134~~
Cash (used in) provided by financing activities	$(10	(9)	)	5	$	69	(15	)	$	~~(78~~	)

33Cash provided by operating activities decreased primarily due to lower net income, lower sales prices and higher unit costs, offset, in part, by higher production. In addition, there were increases in cash provided by operations due to various other working capital changes related to timing.

Cash used in investing activities decreased primarily due to lower capital expenditures in 2010 compared to 2009 due to the slow-down in the drilling program as a result of severe winter weather and continued low gas prices. Central Appalachia capital decreased $33 million, Northern Appalachia capital decreased $35 million and other capital decreased $1 million.

Cash provided by financing activities decreased primarily due to changes in activity on the revolving credit facility. Approximately $9 million of outstanding borrowings on the revolving credit facility were repaid in the 2010 period. Approximately $8 million of proceeds were received from the facility in the 2009 period. There were various other changes in financing activities in the period-to-period comparison, none of which were individually material.

Cash provided by operating activities decreased primarily due to changes in net income as discussed above. Operating cash flows also decreased due to various other changes in operating assets, operating liabilities, other assets and other liabilities which occurred throughout both periods.

Cash used in investing activities decreased primarily due to the acquisition of Knox Energy for $36 million which occurred in the nine months ended September 30, 2008. Cash used in investing activities also decreased due to reduced capital expenditures of $97 million primarily related to the slow-down in the drilling program. The drilling program was slowed down in order to manage cash flows during the economic downturn.

Cash provided by financing activities decreased $78 million primarily due to changes in borrowings on the revolving credit facility in the period-to-period comparison. CNX Gas received $58 million of net proceeds in the 2008 period compared to receiving no net proceeds in the 2009 period. Debt held by our variable interest entity also contributed to lower cash provided by financing activities. Payments of $4 million were made by the variable interest entity in 2009 compared to $12 million of proceeds received in 2008. There were various other changes in financing activities in the period-to-period comparison, none of which were individually material.

Contractual Commitments

The following is a summary of our significant contractual obligations at ~~September~~March 3031, ~~2009~~2010 (dollars in thousands):.

	Within 1Year		1-3Years		3-5Years		MoreThan 5Years		Total
Short Term Debt Obligations—Revolver	$	7349,~~050~~150	$	—	$	—	$	—	$	7349,~~050~~150
Long Term Debt Obligations		4,~~539~~674		118,~~240~~867		—		—9		1513,~~779~~550
Capital Lease Obligations		8,604		15,516		14,792		52,219		91,131
Interest on LT Debt Obligations		759		145		—		—		904
Operating Lease Obligations		3,665		2,111		1,375		1,416		8,567
Capital Lease Obligations		4,082		7,894		8,457		38,382		58,815
Interest on Capital Lease Obligations		4,476		7,475		6,313		10,146		28,410
Operating Lease Obligations		3,173		1,947		1,346		1,258		7,724
Other Long-term Liabilities:
Gas Firm Transportation Obligation		2829,~~122~~005		5274,~~635~~863		5062,~~079~~240		~~308~~333,~~633~~337		~~439~~499,~~469~~445
Other Liabilities		3,100		4,200		5,000		11,101		23,401
Other Liabilities (a)		2,100		4,600		5,200		8,366		20,266
Gas Well Plugging Liabilities		127		268		865		6,881		8,141
Well Plugging Liabilities (b)		158		261		1,284		6,796		8,499
Post Retirement Benefits Other Than Pension		~~160~~253		~~344~~532		~~326~~470		2,~~330~~697		3,~~160~~952
Purchase Obligations		213,~~728~~561		~~2,729~~—		—		—		513,~~457~~561
Total Contractual Obligations (a)	$	124,095	$	89,043	$	72,437	$	382,580	$	668,155
Total Contractual Obligations (c)	$	111,391	$	106,584	$	85,310	$	400,991	$	704,276

(a) ~~The~~This ~~significant~~item ~~obligation~~includes ~~table~~legal ~~does~~contingencies ~~not~~and ~~include~~other ~~obligations~~liabilities towhose ~~taxing authorities related to the uncertainty surrounding the ultimate settlement of amounts and~~ timing ofcannot ~~these~~be ~~obligations~~precisely determined.

~~Stockholders’~~(b) ~~Equity~~The ultimate settlement and timing cannot be precisely determined in advance.

~~CNX~~(c) ~~Gas~~The ~~had~~significant ~~stockholders’~~obligation ~~equity~~table ofdoes ~~$1,473~~not ~~million~~include atobligations ~~September 30,~~to ~~2009~~taxing ~~and~~authorities ~~$1,385~~related ~~million~~to atthe ~~December 31,~~uncertainty ~~2008.~~surrounding ~~The~~the ~~increase was~~ultimate ~~primarily~~settlement ~~attributable~~of toamounts ~~net income~~ and ~~amortization~~timing of ~~stock-based~~these ~~compensation, offset, in part, by other comprehensive income related to cash flow hedges~~obligations.

Total Equity

CNX Gas had total equity of $1,586 million at March 31, 2010 and $1,507 million at December 31, 2009. The increase was primarily attributable to net income and other comprehensive income related to cash flow hedges.

Off-Balance Sheet Transactions

CNX Gas does not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on CNX Gas’ changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the Notes to the Consolidated Financial Statements. CNX Gas uses a combination of surety bonds, corporate guarantees and letters of credit to secure our financial obligations for employee-related, environmental, deliveries and various other items which are not reflected on the balance sheet at March 31, 2010. Management believes these items will expire without being funded. See Note 6-Commitments and Contingent Liabilities for additional details of the various financial guarantees that have been issued by CNX Gas.

34Recent Accounting Pronouncements:

In January 2010, the Financial Accounting Standards Board issued an Update to the Fair Value Measurement and Disclosure Topic of the FASB Accounting Standards Codification which is intended to provide additional application guidance and enhance disclosures regarding fair value measurements. This Update also provides amendments that require new disclosures regarding transfers between levels of fair value measurements. This guidance did not have a material impact on CNX Gas.

In June 2009, the FASB issued authoritative guidance on the consolidation of variable interest entities, which is effective for CNX Gas beginning July 1, 2010. The new guidance requires revised evaluations of

~~obligations~~whether ~~for~~entities ~~employee-related,~~represent ~~environmental,~~variable ~~deliveries~~interest ~~and~~entities, ~~various~~ongoing ~~other~~assessments ~~items~~of ~~which~~control ~~are~~over ~~not~~such ~~reflected on the balance sheet at September 30~~entities, ~~2009.~~and ~~Management~~additional ~~believes~~disclosures ~~these~~for ~~items~~variable ~~will expire without being funded~~interests. ~~See~~We ~~Note~~believe ~~7-Commitments~~adoption ~~and Contingent Liabilities for additional details~~ of ~~the~~this ~~various~~new guidance ~~financial~~will ~~guarantees~~not ~~that~~ have ~~been~~a ~~issued~~material byimpact on CNX Gas’ financial statements.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board issued accounting guidance regarding the accounting for transfers of financial assets that is designed to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. The guidance enhances the information provided to financial statement users to provide greater transparency about transfers of financial assets and a transferor’s continuing involvement, if any, with transferred financial assets. The guidance requires enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets. This guidance is effective for an entity’s first annual reporting period after November 15, 2009. Management is currently assessing this guidance to determine the impact on CNX Gas.

FORWARD-LOOKING STATEMENTS

We are including the following cautionary statement in this Quarterly Report on Form 10-Q to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf, of us. With the exception of historical matters, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words “believe,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:

•

our business strategy;

•

our financial position, cash flow and liquidity;

• the ~~deteriorating~~continued weakness in global economic conditions, in any of the ~~United~~industries ~~States~~in ~~and~~which ~~globally~~our customers operate, or sustained uncertainty in financial markets;

•

declines in the prices we receive for our gas affecting our operating results and cash flow;

•

uncertainties in estimating our gas reserves and replacing our gas reserves;

•

the replacement of our natural gas reserves;

•

uncertainties in exploring for and producing gas;

• ~~our~~uncertainties ~~inability~~in todevelopment ~~obtain~~projects ~~additional financing necessary~~ in ~~order to fund~~ our ~~operations,~~operating ~~capital~~areas ~~expenditures~~ and ~~to meet our~~ other ~~obligations~~unexplored areas;

•

disruptions to, capacity constraints in or other limitations on the pipeline systems which deliver our gas;

35• the availability of field services, equipment and personnel;

•

a loss of our competitive position because of the competitive nature of the gas industry;

•

acquisitions that we have made or may make in the future including the accuracy of our assessment of the acquired business or property;

•

our ability to remove and dispose of water from the coal seam from which we produce gas;

•

the cost of removing impurities from the gas we produce may outweigh the economic benefit of selling the gas;

•

the effects of government regulation, permitting and other legal requirements;

• the cost of disposing water from our coal bed methane and Marcellus Shale wells;

• the cost of removing impurities from the gas we produce;

• the availability of personnel and equipment, including our inability to retain and attract key personnel;

•

increased costs;

• the ~~effects~~enactment of ~~government~~new ~~regulation,~~or ~~permitting~~additional ~~and~~severance ~~other~~taxes ~~legal~~in ~~requirements~~states where we operate;

•

legal uncertainties regarding the ownership of the coalbed methane estate, and costs associated with perfecting title for gas rights in some of our properties;

• ~~litigation~~our ~~concerning~~relationships ~~real~~and ~~property~~arrangements ~~rights,~~with ~~intellectual~~CONSOL ~~property rights, royalty calculations and other matters~~Energy;

• ~~our~~the ~~relationships~~effects ~~and~~of ~~arrangements~~proposed ~~with~~legislation ~~CONSOL~~to ~~Energy;~~regulate ~~and~~greenhouse gas emissions;

• ~~other~~our ~~factors~~hedging ~~discussed~~activities ~~under~~may ~~“Risk~~prevent ~~Factors”~~us infrom ~~the~~benefiting ~~10-K~~from ~~for~~price ~~the~~increases ~~year~~and ~~ended~~may ~~December~~expose ~~31,~~us ~~2008~~to ~~and~~other ~~in this Form 10-Q.~~risks;

In• ~~reviewing~~litigation ~~any~~concerning ~~agreements~~real ~~incorporated~~property ~~by reference in this Form 10-Q~~rights, ~~please~~intellectual ~~remember~~property they are included to provide you with information regarding the terms of such agreement and are not intended to provide any other factual or disclosure information about the Company. The agreements may contain representations and warranties by the Companyrights, ~~which should~~royalty ~~not~~calculations ~~in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties should those statements prove to be inaccurate. The representations~~ and ~~warranties were made only as of the date of the relevant agreement or such~~ other ~~date~~matters; ~~or dates as may be specified in such agreement~~ and are subject to more recent developments. The agreements may also contain covenants in which the Company agrees to take or agrees to refrain from taking specified actions, which should not in all instances be treated as categorical promises to take or refrain from taking specified actions. Accordingly, these representations and warranties alone may not describe the actual state of affairs as of the date they were made or at any other time nor may the covenants alone describe actions which the Company plans to take or refrain from taking.

36• other factors discussed under “Risk Factors.”

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the risks inherent in ~~our~~ operations, CNX Gas is exposed to financial, market, political and economic risks. The following discussion provides additional detail regarding CNX Gas’ exposure to the risks of changing natural gas prices, interest rates and foreign exchange rates.

CNX Gas is exposed to market price risk in the normal course of selling natural gas production. CNX Gas uses fixed-price contracts, collar-price contracts and derivative commodity instruments that qualify as cash-flow hedges under the ~~Derivative~~Derivatives and Hedging Topic of the Financial Accounting Standards Board Accounting Standards Codification, to minimize exposure to market price volatility in the sale of natural gas. Our risk management policy strictly prohibits the use of derivatives for speculative purposes.

CNX Gas has established risk management policies and procedures to strengthen the internal control environment of the marketing of commodities produced from ~~our~~its asset base. All of the derivative instruments are held for purposes other than trading. They are used primarily to ~~reduce~~mitigate uncertainty and volatility and cover underlying exposures. CNX Gas’ market risk strategy incorporates fundamental risk management tools to assess market price risk and establish a framework in which management can maintain a portfolio of transactions within pre-defined risk parameters.

CNX Gas believes that the use of derivative instruments, along with the risk assessment procedures and internal controls, mitigates ~~CNX Gas’~~ our exposure to material risk. However, the use of derivative instruments without other risk assessment procedures could materially affect CNX Gas’ results of operations depending on interest rates or market prices. Nevertheless, we believe that use of these instruments will not have a material adverse effect on our financial position or liquidity.

For a summary of accounting policies related to derivative instruments, see ~~Note 1 of the notes to the consolidated annual financial~~ statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009.

Sensitivity analyses of the incremental effects on ~~future~~ pre-tax income for the three months ended March 31, 2010 of a hypothetical 10% percent and 25% ~~decrease~~percent change in natural gas prices for open derivative instruments as of ~~September~~March 3031, ~~2009~~2010 are provided in the following table.:

	Incremental decrease in pre-tax income assuminga Hypothetical price decrease of:
	Incremental Decreasein Pre-tax IncomeAssuming aHypothetical Price,Exchange Rate or InterestRate Change of:
	10%		25%
	(In millions)
	(in millions)
Natural Gas (1)	$	54.7	$	136.8
Natural Gas (a)	$	34.7	$	86.8

(1a) CNX Gas remains at risk for possible changes in the market value of these derivative instruments; however, such risk should be offset by price changes in the underlying hedged item. CNX Gas entered into derivative instruments to convert the market prices related to portions of the ~~2009~~2010 through 2012 anticipated sales of natural gas to fixed prices. The sensitivity analyses reflect an inverse relationship between increases in commodity prices and a benefit to earnings. We continually evaluate the portfolio of derivative commodity instruments and adjust the strategy to anticipated market conditions and risks accordingly.

3729

Hedging Volumes

~~Our~~As of March 31, 2010, our hedged volumes asfor ofthe ~~October 28,~~periods ~~2009~~indicated are as follows:

	For the Three Months Ended								Total Year
	Three MonthsEndedMarch 31,		Three MonthsEndedJune 30,		Three MonthsEndedSeptember 30,		Three MonthsEndedDecember 31,		Total Year
	March 31,		June 30,		September 30,		December 31,
2009 Fixed Price Volumes
Hedged Mcf		10,670,103		12,507,732		13,185,567		15,250,000		51,613,402
Weighted Average Hedge Price/Mcf	$	9.85	$	8.96	$	8.69	$	7.90	$	8.76
2010 Fixed Price Volumes
Hedged Mcf		12,989,691		13,603,093		12,659,794		69,~~335~~180,~~051~~412		4548,~~587~~432,~~629~~990
Weighted Average Hedge Price/Mcf	$	8.76	$	8.15	$	7.56	$	6.5551	$	7.9485
2011 Fixed Price Volumes
Hedged Mcf		5,567,010		5,628,866		5,690,722		5,690,722		22,577,320
Weighted Average Hedge Price/Mcf	$	6.84	$	6.84	$	6.84	$	6.84	$	6.84
2012 Fixed Price Volumes
Hedged Mcf		3,752,577		3,752,577		3,793,815		3,793,815		15,092,784
Weighted Average Hedge Price/Mcf	$	6.84	$	6.84	$	6.84	$	6.84	$	6.84

CNX Gas’ interest expense is sensitive to changes in the general level of interest rates in the United States. At ~~September~~March 3031, ~~2009~~ 2010, CNX Gas had $7672 million aggregate principal amount of debt outstanding under fixed-rate instruments and $7349 million aggregate principal amount of debt outstanding under variable-rate instruments. CNX Gas’ primary exposure to market risk is for changes in interest rates ~~related~~relates to ~~the~~our revolving credit facility,. ~~under~~CNX ~~which~~Gas’ ~~there~~facility ~~were~~had ~~$73~~outstanding ~~million~~borrowings of ~~borrowings~~$49 ~~outstanding~~million at ~~September~~March 3031, ~~2009.~~ ~~CNX~~2010 ~~Gas’~~and ~~revolving credit facility~~ bore interest at a weighted average rate of 1.4755% per annum during the ~~nine months~~ year ended ~~September~~March 3031, ~~2009~~2010. Due to the ~~low interest rate and the~~ level of borrowings against this facility and the low weighted average interest rate in the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010, a 100 basis-point increase in the average rate for CNX Gas’ revolving credit facility would not have significantly decreased net income for the period.

All of CNX Gas’ transactions are denominated in U.S. dollars, and, as a result, weit dodoes not have ~~any~~material exposure to currency exchange-rate risks.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

CNX Gas, under the supervision and with the participation of its management, including the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of its “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our principal executive officer and principal financial officer have concluded that CNX Gas’ disclosure controls and procedures are effective as of ~~September~~March 3031, ~~2009~~2010 to ensure that information required to be disclosed by CNX Gas in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the ~~time~~ time periods specified in Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

38Changes in Internal Controls Over Financial Reporting.

Changes in Internal Controls Over Financial Reporting

There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3930

PART II OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

The first through ~~sixth~~seventh paragraphs of “Note 76— Commitments and Contingent Liabilities” in ~~Part~~the I,notes ~~Condensed~~to the Consolidated Financial Statements included in Part I of this Form 10-Q are incorporated herein by reference.

ITEM 6.

EXHIBITS

10.1		CONSOL Energy Inc. Supplemental Retirement Plan, as amended and restated, incorporated by reference to Exhibit 10.1 to Form 8-K filed on September 11, 2009
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Interactive Data File (Form 10-Q for the quarterly period ended ~~September~~March 3031, ~~2009~~2010 furnished in XBRL)

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. In accordance with Rule 406T of Regulation S-T promulgated by the Securities and Exchange Commission, Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

Dated: ~~October~~May 284, ~~2009~~2010


CNX Gas Corporation

By:		/s/ J. BRETT HARVEY
		J. Brett Harvey
		Chairman and Chief Executive Officer (Chief Executive Officer and Director)

By:		/s/ WILLIAM J. LYONS
		William J. Lyons
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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CashTable and cash equivalents: The carrying amount reported in the balance sheets for cash and cash equivalents approximates its fair value due to the short maturity of these instruments. Contents

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