NOTE 13 – INCOME TAXES

Our tax provision for the three and six months ended June 30, 2011 was $151.9 million and $293.9 million, respectively. Our tax provision for the same periods ended June 30, 2010 was $99.3 million and $165.7 million, respectively. The effective tax rate for the first six months of 2011 is approximately 25.5 percent, while the effective tax rate for the first six months of 2010 was 33.2 percent. The difference in the effective rate from the prior year is primarily due to the impact of the tax law change and valuation allowances that occurred in 2010 and the impact of higher pre-tax book income in 2011 over 2010 with similar book to tax differences. Our 2011 expected effective tax rate before discrete items for the full year is approximately 26.4 percent, which reflects benefits from deductions for percentage depletion in excess of cost depletion related to U.S. operations, interest deductions, nontaxable hedging income and benefits derived from operations outside the U.S., which are taxed at rates lower than the U.S. statutory rate of 35 percent.

As of June 30, 2011, our valuation allowance against certain deferred tax assets increased by $11.1 million from December 31, 2010. This increase primarily relates to ordinary losses of certain foreign operations for which future utilization is currently uncertain.

As of June 30, 2011, cumulative undistributed earnings of foreign subsidiaries included in consolidated retained earnings continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practical to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted in the future.

At January 1, 2011, we had $79.8 million of unrecognized tax benefits recorded in Other liabilities on the Statements of Consolidated Financial Position. If the $79.8 million were recognized, $79.1 million would impact the effective tax rate. As of June 30, 2011, it is reasonably possible that unrecognized tax benefits will decrease in the range of $40 million to $50 million within the next 12 months due to expected settlements with the taxing authorities or expiration of the statute of limitations. During the three and six months ended June 30, 2011, we accrued an additional $1.9 million and $2.5 million, respectively, of interest relating to the unrecognized tax benefits. Interest accrued for the same periods ended June 30, 2010 and was $0.7 million and $1.3 million, respectively.

Tax years that remain subject to examination are years 2007 and forward for the United States, 1993 and forward for Canada, and 1994 and forward for Australia.