Navigating Coal Retirements Amid Emissions Regulations and Natural Gas Deliverability Concerns Perspective from a Supplier

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1 Navigating Coal Retirements Amid Emissions Regulations and Natural Gas Deliverability Concerns Perspective from a Supplier Katharine A. Fredriksen Senior Vice President Environmental Strategy and Regulatory Affairs

2 About CONSOL Energy Founded in 1860, began operations in 1864 $5.4 billion in revenue in 2012 Member Fortune 500; S&P 500 Largest underground coal producer in the U.S. Among the largest natural gas producers in Appalachia 11 mining complexes in four states, including the 3 largest underground mines in the world 4.5 billion tons of proven and recoverable coal reserves and 3.5 tcf natural gas reserves Marcellus Shale partnership with Noble Energy; Utica Shale partnership with Hess Corporation Private R&D facility working with U.S. DOE and others on advanced technology for coal and CBM production and utilization Approximately 9,000 employees 2

3 CONSOL Energy 3 Core Values and 2 Priorities Core Values Safety Compliance Continuous Improvement Priorities Production Cost Values are not priorities priorities change while values remain constant 3

4 CONSOL s Unique Perspective Surface Sewickley Coal Seam 900 ft Pittsburgh Coal Seam 1,000 ft Freeport Coal Seam 1,650 ft Upper Devonian Sands - 1,750 5,500 ft Rhinestreet Shale - 7,400 7,800 ft Marcellus Shale 8,000 ft 8,000 ft - 8,000 ft Utica Shale 11,500 ft CONSOL Energy is the only company that operates across all of these different horizons.

5 Environmental Market Demands on our Energy Products CONSOL Energy produces thermal, lovol and hi-vol met coal Our mines are clustered in Northern Appalachia, and most of our customers are also concentrated in the same region in the PJM market. We share a historical relationship with our customers, whose power gen plants are heavily invested in environmental systems to meet tighter standards Our customer base is heavily invested in environmental control systems, and our coal is analyzed continuously to meet their spec demands

6 Environmental Market Demands on our Energy Products CONSOL Energy s strategic entry into the natural gas market grew from the intersection of our Core Value of Safety, the concept of sustainability, and technological advances In 1983 we began degassifying our mines for safety reasons. In 2010 we acquired Dominion Resources and formally entered the shale gas business In 2011 we JV d with Hess and Noble Energy to expand the development of our wet gas assets In the past six years, CONSOL Energy s natural gas division has seen a 200% growth in production

7 Market Opportunities Despite the displacement of market share from coal, gas has unlocked new sources of demand Domestic chemical and fertilizer manufacturing is coming back online CONSOL Energy saw near record coal shipments of coal from our terminal in Baltimore, MD Growing international market, for both met and steam coals CONSOL Energy executed well in a down market to find new market outlets and keep inventories in line with market demand

8 Annual Production Revenue ($MM) $5,430.3 $6,117.2 $5,236.0 $4,621.9 $4,652.4 Net Income ($MM) $388.1 $632.5 $346.8 $539.7 $442.5 EPS (diluted) $1.70 $2.76 $1.60 $2.95 $2.40 OCF ($MM) $728.1 $1,527.6 $1,131.3 $1,060.5 $989.9 EBITDA ($MM) $1,311.6 $1,777.7 $1,221.1 $1,223.9 $1,075.2 EBIT ($MM) $688.8 $1,159.3 $653.5 $786.5 $685.6 CAPEX, excl. Acq. $1,575.2 $1,382.4 $1,154.0 $920.1 $1,061.7 Coal Production (MM tons) Gas Production (Bcf) Realities of a changing market coal remains strong, but gas is rapidly gaining

9 Outlook for 2013 We ve made 2013 capital projections based on this changing market: For coal, between $410-$520MM We do not expect to be investing in new major coal growth projects past 2013, so for 2014 and beyond, we expect annual coal investments to approach maintenance-of-production levels of $5 to $6 per ton For gas, capital is projected between $835- $935MM As the result of this capital investment, we project 2013 gas production to be between Bcfe New for 2013 is our Water Division, which has a set aside for capital of $45-$50MM Capital projections reflect market realities

10 Environmental Challenges Coal and natural gas production are heavily regulated sectors, but are faced with increased public scrutiny and a changing regulatory environment Coal mining was listed as a priority sector for EPA oversight at the start of this Administration Every state in which we operate has passed new gas laws in the past year, and is in the process of promulgating new regulations to implement the law. CONSOL Energy s businesses face increase scrutiny and a changing regulatory landscape

11 Examples of Challenges on the Coal Sector Water quality parameters of concern are changing, with complex and often with emerging technological solutions for treatment Se TDS Conductivity Sulfates The old days of Acid Mine Drainage treatment to precipitate Fe, Mn and raise ph are no longer sufficient

12 Examples of Challenges on the Natural Gas Sector Footprint of impact, air emissions, water management Changing regulatory landscape as state and federal agencies struggle to keep up with or get ahead of the natural gas sector The rules of the road keep evolving but the environmental challenges are not getting easier

13 What does the future hold? We expect that, in addition to the announced 39 GW of coal-fired generation retirements, that there will be an additional reduction of GWs after While coal is not likely to regain its past dominance of the power generation market, it will remain a sizeable and important part of the nation s generation portfolio Natural gas will logically pick up the market share lost to coal With our strong safety performance record and environmental stewardship, CONSOL Energy expects to be providing energy for another 150 years