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 30, 2009 was $35.5 million, or $0.23 per diluted share. This compares to $67.4 million, or $0.45 per diluted share, for the quarter ended September 30, 2008.

Production was 24.8 billion cubic feet (Bcf), or 269 million cubic feet (MMcf) per day, for the quarter ended September 30, 2009. This was another quarterly production record, and 26% higher than the 19.7 Bcf, or 214 MMcf per day, for the year-ago quarter. It was also 10% higher than the 22.5 Bcf produced in the quarter ended June 30, 2009.

During the third quarter 2009, CNX Gas employees worked without incurring a lost time accident. This raises the cumulative time worked by employees without a lost time incident to over 3.9 million hours.

CNX Gas continues to monitor and evaluate capital spending to ensure adequate liquidity and to preserve options for possible external investment. With regard to capital, CNX Gas intends to spend largely within its net cash from operating activities for the fourth quarter of 2009.

Total production in Central Appalachia, which includes Virginia Coalbed Methane (CBM) and Chattanooga Shale, was 18.7 Bcf in the quarter ended September 30, 2009. This was 2.2 Bcf higher than the 16.5 Bcf produced in the quarter ended September 30, 2008.

CNX Gas drilled 45 vertical frac wells in its Virginia CBM Operations during the third quarter 2009, bringing the year-to-date total to 163. CNX Gas expects to drill 175 wells in Virginia in 2009.

CNX Gas continues to be encouraged by its early Chattanooga Shale results. The company has been pursuing a delineation program across its position, which now stands at 268,000 mostly contiguous acres. One well, which came online on October 21, 2008, has produced over 140 MMcf, and is now producing at a daily rate of 861 Mcf, plus a few barrels of oil. A four-stage nitrogen foam frac was employed on this well. CNX Gas continues to acquire acreage in the Chattanooga Shale.

Total production in Northern Appalachia, which includes Mountaineer CBM, Nittany CBM, and Marcellus Shale, was 6.0 Bcf in the quarter ended September 30, 2009. This was 2.9 Bcf more, or almost double, the 3.1 Bcf produced in the quarter ended September 30, 2008. Of this Northern Appalachian production, 1.5 Bcf was from the Marcellus Shale, versus zero in the same quarter last year.

In the Marcellus Shale, CNX Gas drilled, completed, and brought three more horizontal wells online, raising the total to eleven during the quarter ended September 30, 2009. The peak daily production from these wells was 3.0 MMcf and
2.5 MMcf, with the latest well not yet reaching peak production. The horizontal wells drilled during the most recent quarter averaged less than $3.5 million per well.

The latest horizontal Marcellus well drilled is located in northern Greene County, Pennsylvania. It is the first horizontal Marcellus Shale well that CNX Gas has drilled outside of its original Greene Hill area, in central Greene County. It is also the first in a set of six wells to be drilled on a single pad. This well is currently awaiting hydraulic fracturing.

The United States economy may have bottomed in the third quarter. Due to the significant fiscal spending and relaxed monetary policy, a modest U.S. recovery appears likely in 2010. Depending on the pace and sustainability of the recovery, we believe tremendous opportunities exist for our natural gas business.

The U.S. natural gas market has shown signs of stability. Total rig count appears to have bottomed at approximately 700 rigs. The expectations of lower natural gas production, coupled with expectations of increased demand due to an improving economy and a return to normal weather patterns, has led to an improvement in pricing. With its low costs and rising production volumes, CNX Gas should benefit from improved pricing.

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 30, 2009 compared with Three 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:



                                                2009         2008        Dollar          Percentage
                                               Period       Period      Variance           Change
Revenue and Other Income:
Outside Sales                                 $    154     $    189     $     (35 )           (18.5 )%
Related Party Sales                                  1            2            (1 )           (50.0 )%
Royalty Interest Gas Sales                           8           23           (15 )           (65.2 )%
Purchased Gas Sales                                  1            2            (1 )           (50.0 )%
Other Income                                         1            1            -                 -

Total Revenue and Other Income                     165          217           (52 )           (24.0 )%
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 %

Earnings Before Income Taxes                        57          115           (58 )           (50.4 )%
Income Tax Expense                                  22           48           (26 )           (54.2 )%

Net Income Attributable to CNX Gas
Shareholders                                  $     35     $     67     $     (32 )           (47.8 )%

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:



                                       2009       2008      Dollar        Percentage
                                      Period     Period    Variance         Change
    Revenue and Other Income:
    Outside Sales                    $    154   $    189   $     (35 )         (18.5 )%
    Related Party Sales                     1          2          (1 )         (50.0 )%
    Royalty Interest Gas Sales              8         23         (15 )         (65.2 )%
    Purchased Gas Sales                     1          2          (1 )         (50.0 )%
    Other Income                            1          1          -               -

    Total Revenue and Other Income   $    165   $    217   $     (52 )         (24.0 )%

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.

                                                2009       2008                       Percentage
                                               Period     Period      Variance          Change
Produced Gas Sales Volumes (in billion
cubic feet)                                       24.8       19.7           5.1             25.9 %
Average Sales Price per thousand cubic
feet.                                          $  6.25    $  9.73    $    (3.48 )          (35.8 )%

Sales volumes increased as a result of additional wells coming online from our on-going drilling program. 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 13.2 Bcf of our produced gas sales volumes for the three months ended September 30, 2009 at an average price of $8.69 per Mcf. In the three months ended September 30, 2008, these financial hedges represented approximately 12.8 Bcf at an average price of $9.44 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.

                                                2009       2008                       Percentage
                                               Period     Period      Variance          Change
Royalty Interest Gas Sales Volumes (in
billion cubic feet)                                2.4        2.4            -                -
Average Sales Price per thousand cubic feet    $  3.46    $  9.71    $    (6.25 )          (64.4 )%

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

                                                2009       2008                       Percentage
                                               Period     Period      Variance          Change
Purchased Gas Sales Volumes (in billion
cubic feet)                                        0.4        0.2           0.2            100.0 %
Average Sales Price per thousand cubic feet    $  3.53    $ 10.20    $    (6.67 )          (65.4 )%

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:



                                                2009         2008        Dollar          Percentage
                                               Period       Period      Variance           Change
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.

                                                2009       2008                       Percentage
                                               Period     Period      Variance          Change
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.

                                                2009       2008                       Percentage
                                               Period     Period      Variance          Change
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.

                                                2009       2008                       Percentage
                                               Period     Period      Variance          Change
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.

                                                2009       2008                       Percentage
                                               Period     Period      Variance          Change
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:

                                         2009      2008      Dollar     Percentage
                                        Period    Period    Variance      Change
       Dry hole and other costs         $     5   $    -    $       5        100.0 %
       Exploration                            2         1           1        100.0 %

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:

                                         2009      2008         Dollar     Percentage
                                        Period    Period       Variance      Change
    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:

                                                     2009        2008         Dollar       Percentage
                                                    Period      Period       Variance        Change
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



                                   2009         2008                         Percentage
                                  Period       Period        Variance          Change
   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:



                                          2009              2008
                                      Year-to-Date      Year-to-Date        Dollar          Percentage
                                         Period            Period          Variance           Change
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 )%
. . .