UNITEDTable STATESof SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Contents

~~FORM~~UNITED ~~10-K~~STATES

~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE~~ SECURITIES AND EXCHANGE ~~ACT~~COMMISSION ~~OF 1934~~

~~For the fiscal year ended December 31~~Washington, ~~2009~~D.C. 20549

~~Commission~~FORM ~~file number: 1~~10-~~33171~~K

~~Penn~~ANNUAL ~~Virginia~~REPORT GPPURSUANT ~~Holdings,~~TO ~~L.P.~~SECTION 13 OR 15(d)

~~(Exact~~OF ~~name~~THE ofSECURITIES ~~registrant~~EXCHANGE ACT asOF ~~specified~~1934 ~~in its charter)~~

Delaware		20-5116532
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

For the fiscal year ended December 31, 2010

~~Three~~Commission ~~Radnor~~file ~~Corporate~~number: ~~Center,~~1-33171 ~~Suite 300 100 Matsonford Road Radnor, Pennsylvania 19087~~

~~(Address~~Penn ofVirginia ~~principal~~GP ~~executive~~Holdings, ~~offices)~~L.P.

~~Registrant’s~~(Exact ~~telephone~~name ~~number,~~of ~~including~~registrant ~~area~~as ~~code:~~specified ~~(610~~in its charter) ~~687-8900~~

Securities registered pursuant to Section 12(b) of the Act:


Delaware		20-5116532
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

~~Title~~Five ofRadnor ~~each~~Corporate ~~class~~Center, ~~Name~~Suite of500 ~~exchange on which registered Common Units New York Stock Exchange~~

~~Securities~~100 ~~registered~~Matsonford ~~pursuant to Section 12(g) of the Act: None~~ Road

~~Indicate by check mark if the registrant is a well-known seasoned issuer~~Radnor, asPennsylvania ~~defined~~19087 ~~in Rule 405 of the Securities Act. Yes o No x~~

~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15~~(d)Address of ~~the~~principal ~~Securities~~executive ~~Exchange Act of 1934 (“Exchange Act”~~offices). ~~Yes o No x~~

~~Indicate~~Registrant’s bytelephone ~~check~~number, including ~~mark~~area ~~whether~~code: ~~the registrant~~ (1610) 975-8200 has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 x No o

~~Indicate~~Securities byregistered ~~check mark if disclosure of delinquent filers~~ pursuant to ~~Item~~Section 12(b) ~~405~~ of ~~Regulation S-K is not contained herein, and will not be contained, to~~ the ~~best~~Act: ~~of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o~~

~~Indicate~~Title byof ~~check~~each ~~mark~~class ~~whether~~Name ~~the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions~~ of ~~“large~~exchange ~~accelerated~~on ~~filer,”~~which ~~“accelerated~~registered ~~filer”~~Common ~~and~~Units ~~“smaller~~New ~~reporting~~York ~~company”~~Stock ~~in Rule 12b-2 of the~~ Exchange ~~Act. (Check One)~~

~~Large~~Securities ~~accelerated~~registered ~~filer~~pursuant oto ~~Accelerated~~Section 12(g) ~~filer~~of xthe ~~Non-accelerated~~Act: ~~filer~~None ~~o Smaller reporting company o~~

Indicate by check mark ~~whether~~if the registrant is a ~~shell~~well-known ~~company~~seasoned (issuer, as defined in Rule ~~12b-2~~405 of the ~~Exchange~~Securities Act). Yes o¨ No x

~~The~~Indicate ~~aggregate market value of common units held~~ by ~~non-affiliates~~check ofmark ~~the~~if the registrant ~~was~~is ~~$58,673,162~~not asrequired ofto ~~June~~file ~~30,~~reports ~~2009~~pursuant ~~(the~~to ~~last~~Section 13 ~~business~~or ~~day of its most recently completed second fiscal quarter~~Section 15(d), ~~based on the last sale price~~ of ~~such units as quoted on~~ the ~~New~~Securities ~~York Stock~~ Exchange. ~~For~~Act ~~purposes~~ of ~~making~~1934 ~~this~~(“Exchange calculation only, the registrant has defined affiliates as including the registrant’s general partner, all affiliates of the registrant’s general partner and all directors and executive officers of the registrant’s general partnerAct”). ~~This~~Yes ~~determination~~¨ ofNo ~~affiliate~~x ~~status is not necessarily a conclusive determination for other purposes.~~

AsIndicate ofby ~~February~~check ~~22,~~mark ~~2010~~whether ~~39,074,500~~the ~~common~~registrant ~~units~~(1) has ~~representing~~filed ~~limited~~all ~~partner~~reports required ~~interests~~to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant ~~were~~was ~~outstanding~~required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

~~DOCUMENTS~~Indicate ~~INCORPORATED~~by BYcheck ~~REFERENCE~~mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

~~None~~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)

~~TABLE~~Large OFaccelerated ~~CONTENTS~~filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

~~PENN~~Indicate ~~VIRGINIA~~by GPcheck ~~HOLDINGS,~~mark Lwhether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).P. ~~AND~~Yes ~~SUBSIDIARIES~~¨ No x

~~Table~~The aggregate market value of ~~Contents~~common units held by non-affiliates of the registrant was $618,389,569 as of June 30, 2010 (the last business day of its most recently completed second fiscal quarter), based on the last sale price of such units as quoted on the New York Stock Exchange. For purposes of making this calculation only, the registrant has defined affiliates as including the registrant’s general partner, all affiliates of the registrant’s general partner and all directors and executive officers of the registrant’s general partner. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

~~Page~~As ~~Forward-Looking~~of February 22, ~~Statements~~2011 ii39,074,500 common units representing limited partner interests of the registrant were outstanding.

Item
Part I
1.Business			1
1A.Risk Factors			21
1B.Unresolved Staff Comments			43
2.Properties			44
3.Legal Proceedings			51
4.Reserved.			51
Part II
5.Market for the Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities			52
6.Selected Financial Data			52
7.Management’s Discussion and Analysis of Financial Condition and Results of Operations			54
Overview of Business			54
Liquidity and Capital Resources			57
Contractual Obligations			62
Off-Balance Sheet Arrangements			62
Results of Operations			63
Environmental Matters			73
Critical Accounting Estimates			73
New Accounting Standards			76
7A.Quantitative and Qualitative Disclosures About Market Risk			76
8.Financial Statements and Supplementary Data			79
9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			118
9A.Controls and Procedures			118
9B.Other Information			118
Part III
10.Directors, Executive Officers and Corporate Governance			119
11.Executive Compensation			123
12.Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters			141
13.Certain Relationships and Related Transactions, and Director Independence			142
14.Principal Accounting Fees and Services			144
Part IV
15.Exhibits and Financial Statement Schedules			145

DOCUMENTS INCORPORATED BY REFERENCE

i None

TABLETable OFof CONTENTSContents

~~Forward-Looking~~PENN ~~Statements~~VIRGINIA GP HOLDINGS, L.P. AND SUBSIDIARIES

~~Certain~~Table ~~statements contained herein that are not descriptions~~ of ~~historical~~Contents facts are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to, the following:

• the volatility of commodity prices for natural gas, NGLs and coal;


		Page
Forward-Looking Statements			1

Item

	Part I
1.	Business		2
1A.	Risk Factors		21
1B.	Unresolved Staff Comments		40
2.	Properties		41
3.	Legal Proceedings		46
4.	Reserved		47

	Part II
5.	Market for the Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities		48
6.	Selected Financial Data		50
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		51
	Overview of Business		51
	Liquidity and Capital Resources		55
	Contractual Obligations		58
	Off-Balance Sheet Arrangements		59
	Results of Operations		60
	Environmental Matters		69
	Critical Accounting Estimates		69
	New Accounting Standards		71
7A.	Quantitative and Qualitative Disclosures About Market Risk		72
8.	Financial Statements and Supplementary Data		75
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		106
9A.	Controls and Procedures		106
9B.	Other Information		106

	Part III
10.	Directors, Executive Officers and Corporate Governance		107
11.	Executive Compensation		107
12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters		107
13.	Certain Relationships and Related Transactions, and Director Independence		107
14.	Principal Accounting Fees and Services		107

	Part IV
15.	Exhibits and Financial Statement Schedules		108

•1 ~~PVR’s ability to access external sources of capital;~~

•Table any impairment writedowns of PVR’s assets;Contents

•Forward-Looking ~~the~~Statements ~~relationship between natural gas, NGL and coal prices;~~

•Certain ~~the~~statements ~~projected~~contained ~~demand~~in ~~for~~this ~~and~~Annual ~~supply~~Report on Form 10-K include “forward-looking statements.” All statements that express belief, expectation, estimates or intentions, as well as those that are not statements of ~~natural~~historical ~~gas~~fact, ~~NGLs~~are forward-looking statements. Words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” and ~~coal;~~similar expressions are intended to identify such forward-looking statements. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to, the following:

• ~~competition~~the ~~among~~volatility ~~producers~~of incommodity ~~the~~prices ~~coal~~for ~~industry~~natural ~~generally~~gas, ~~and among~~ natural gas ~~midstream~~liquids, ~~companies~~or NGLs, and coal;

• ~~the~~our ~~extent~~ability to ~~which~~access ~~the~~external ~~amount~~sources ~~and quality~~ of ~~actual production of PVR’s coal differs from estimated recoverable coal reserves~~capital;

• ~~PVR’s~~any ~~ability~~impairment towritedowns ~~generate~~of ~~sufficient~~our ~~cash from its businesses to maintain and pay the quarterly distribution to its general partner and its unitholders~~assets;

• the ~~experience~~relationship ~~and~~between ~~financial condition of PVR’s coal lessees and~~ natural gas ~~midstream customers~~, ~~including~~NGL ~~PVR’s lessees’ ability to satisfy their royalty, environmental, reclamation~~ and ~~other~~coal ~~obligations to PVR and others~~prices;

• ~~operating~~the ~~risks,~~projected ~~including~~demand ~~unanticipated~~for ~~geological problems, incidental to PVR’s coal~~ and ~~natural~~supply ~~resource~~of ~~management or~~ natural gas, ~~midstream~~NGLs ~~business~~and coal;

• ~~PVR’s~~competition ~~ability~~among toproducers ~~acquire~~in ~~new~~the coal ~~reserves~~industry orgenerally ~~natural gas midstream assets~~ and ~~new~~among ~~sources of~~ natural gas ~~supply~~midstream ~~and connections to third-party pipelines on satisfactory terms~~companies;

• ~~PVR’s~~the ~~ability~~extent to ~~retain~~which ~~existing~~the oramount ~~acquire~~and ~~new~~quality ~~natural~~of ~~gas~~actual ~~midstream~~production ~~customers~~of ~~and~~our coal ~~lessees~~differs from estimated recoverable coal reserves;

• ~~the~~our ability ~~of PVR’s lessees~~ to ~~produce~~generate sufficient ~~quantities~~cash offrom ~~coal~~our onbusinesses anto ~~economic~~maintain ~~basis~~and ~~from~~pay ~~PVR’s~~the ~~reserves~~quarterly ~~and~~distribution ~~obtain~~to ~~favorable~~our ~~contracts~~general ~~for~~partner ~~such~~and ~~production~~our unitholders;

• the ~~occurrence~~experience and financial condition of ~~unusual~~our ~~weather~~coal orlessees ~~operating~~and ~~conditions~~natural gas midstream customers, including ~~force~~our ~~majeure~~lessees’ ~~events~~ability to satisfy their royalty, environmental, reclamation and other obligations to us and others;

• ~~delays~~operating inrisks, ~~anticipated~~including ~~start-up~~unanticipated ~~dates~~geological ofproblems, ~~PVR’s~~incidental ~~lessees’~~to ~~mining~~our ~~operations and related~~ coal ~~infrastructure projects~~ and ~~new~~natural ~~processing~~resource ~~plants~~management inor ~~the PVR~~ natural gas midstream ~~segment’s~~ business;

• ~~environmental~~our ~~risks~~ability ~~affecting~~to ~~the~~acquire ~~mining~~new of coal reserves or ~~the~~natural ~~production,~~gas ~~gathering~~midstream assets and ~~processing~~new sources of natural gas supply and connections to third-party pipelines on satisfactory terms;

• ~~the~~our ~~timing~~ability ofto ~~receipt~~retain ofexisting ~~necessary~~or ~~governmental~~acquire ~~permits~~new bynatural ~~PVR~~gas ormidstream ~~its~~customers and coal lessees;

• ~~hedging~~the ~~results~~ability of our lessees to produce sufficient quantities of coal on an economic basis from our reserves and obtain favorable contracts for such production;

• ~~accidents~~the occurrence of unusual weather or operating conditions including force majeure events;

• ~~changes~~delays in ~~governmental~~anticipated ~~regulation~~start-up ordates ~~enforcement~~of ~~practices,~~our ~~especially~~lessees’ ~~with~~mining ~~respect~~operations ~~to environmental, health~~ and ~~safety~~related ~~matters,~~coal ~~including~~infrastructure ~~with~~projects ~~respect~~and tonew ~~emissions~~processing ~~levels~~plants ~~applicable~~in toour ~~coal-burning~~natural ~~power~~gas ~~generators~~midstream business;

• ~~uncertainties~~environmental ~~relating~~risks toaffecting the ~~outcome~~mining of ~~current~~coal ~~and~~reserves ~~future~~or ~~litigation~~the ~~regarding~~production, ~~mine~~gathering ~~permitting~~and processing of natural gas;

• ~~risks~~the ~~and~~timing ~~uncertainties~~of ~~relating~~receipt toof ~~general~~necessary ~~domestic~~governmental ~~and~~permits ~~international~~by ~~economic~~us ~~(including~~or ~~inflation,~~our ~~interest rates and financial and credit markets) and political conditions (including the impact of potential terrorist attacks)~~lessees; ~~and~~

ii • hedging results;

~~TABLE~~• ~~OF CONTENTS~~accidents;

• ~~other~~changes ~~risks~~in ~~set~~governmental ~~forth~~regulation inor ~~Item~~enforcement 1Apractices, ofespecially ~~this~~with ~~Annual~~respect ~~Report~~to onenvironmental, ~~Form~~health ~~10-K~~and ~~for~~safety ~~the~~matters, ~~year~~including ~~ended~~with ~~December~~respect ~~31,~~to ~~2009.~~emissions levels applicable to coal-burning power generators;

~~Additional~~• ~~information~~uncertainties ~~concerning~~relating these and other factors can be found in our press releases and public periodic filings with the Securities and Exchange Commission. Many of the factors that will determine our future results are beyond the ability of management to ~~control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of~~ the ~~date~~outcome ~~hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result~~ of ~~new~~current ~~information,~~and future ~~events~~litigation orregarding ~~otherwise.~~mine permitting;

~~iii~~ • risks and uncertainties relating to general domestic and international economic (including inflation, interest rates and financial and credit markets) and political conditions (including the impact of potential terrorist attacks);

~~TABLE~~• OFour ~~CONTENTS~~ability to complete our previously announced merger; and

~~Part~~• Iother risks set forth in Item 1A of this Annual Report on Form 10-K for the year ended December 31, 2010.

~~Item~~Additional 1information ~~Business~~concerning these and other factors can be found in our press releases and public periodic filings with the Securities and Exchange Commission. Many of the factors that will determine our future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

~~General~~1

PennTable Virginia GP Holdings, L.P. (NYSE: PVG) is a publicly traded Delaware limited partnership formed in June 2006 that currently owns three types of equity interests in Penn Virginia Resource Partners, L.P. (NYSE: PVR), or PVR, a publicly traded Delaware limited partnership that is principally engaged in the management of coal and natural resource properties and the gathering and processing of natural gas. Unless the context requires otherwise, references to the “Partnership,” “we,” “us” or “our” in this Annual Report on Form 10-K refer to Penn Virginia GP Holdings, L.P. and its subsidiaries. Contents

~~Our~~Part ~~Interest~~I ~~in PVR~~

~~Our~~Item 1 ~~only~~Business ~~cash generating assets consist of our interests in PVR, which consist of the following:~~

•General ~~a 2% general partner interest in PVR, which we hold through our 100% ownership interest in Penn Virginia Resource GP, LLC, PVR’s general partner;~~

•Penn ~~all~~Virginia GP Holdings, L.P. (NYSE: PVG) is a publicly traded Delaware limited partnership that currently owns three types of ~~the~~equity interests ~~incentive~~in ~~distribution~~Penn ~~rights~~Virginia Resource Partners, L.P. (NYSE: PVR), or ~~IDRs~~PVR, a publicly traded Delaware limited partnership that is principally engaged in ~~PVR~~the management of coal and natural resource properties and the gathering and processing of natural gas. Unless the context requires otherwise, ~~which~~references to the “Partnership,” “we,” ~~hold~~“us” ~~through~~or “our” ~~100%~~in ~~ownership~~this ~~interest~~Annual inReport ~~PVR’s~~on ~~general~~Form ~~partner;~~10-K refer to Penn Virginia GP Holdings, L.P. and its subsidiaries.

•Our ~~19,587,049~~Interest ~~common units of PVR, representing an approximately 37% limited partner interest~~ in PVR.

~~All~~Our ofonly ~~our~~ cash ~~flows~~generating ~~are~~assets ~~generated~~consist ~~from~~of ~~the~~our ~~cash distributions we receive with respect to the PVR equity~~ interests we own. PVR is required by its partnership agreement to distribute, and it has historically distributed within 45 days of the end of each quarter, all of its cash on hand at the end of each quarter, less cash reserves established by its general partner in ~~its sole discretion to provide for the proper conduct of~~ PVR~~’s business or to provide for future distributions. While we~~, like PVR, are structured as a limited partnership, our capital structure and cash distribution policy differ materially from those of PVR. Most notably, our general partner does not have an economic interest in us and is therefore not entitled to receive any distributions from us and our capital structure does not include IDRs. Accordingly, our distributions are allocated exclusively to our common units, which isconsist ~~our only class~~ of ~~security~~the ~~currently~~following: ~~outstanding.~~

• a 2% general partner interest in PVR, ~~IDRs~~which we hold through our 100% ownership interest in Penn Virginia Resource GP, LLC, PVR’s general partner;

In• ~~accordance~~all ~~with PVR’s partnership agreement, IDRs represent the right to receive an increasing percentage~~ of ~~quarterly distributions of PVR’s available cash from operating surplus after~~ the ~~minimum~~incentive ~~quarterly~~ distribution ~~and~~rights, ~~the~~or ~~target~~IDRs, ~~distribution~~in ~~levels~~PVR, ~~have~~which ~~been~~we ~~achieved. The minimum quarterly distribution is $0.25 ($1.00 on an annualized basis) per unit. We currently~~ hold ~~100% of the IDRs~~ through our 100% ownership ofinterest ~~PVR’s~~in ~~general partner, but may transfer these rights to an affiliate (other than an individual) or to another entity as part of the merger or consolidation of~~ PVR’s general partner; with or into such entity or the transfer of all or substantially all of PVR’s general partner’s assets to another entity without the prior approval of PVR’s unitholders if the transferee agrees to be bound by the provisions of PVR’s partnership agreement. Prior to September 30, 2011, other transfers of the IDRs will require the affirmative vote of holders of a majority of the outstanding PVR common units. On or after September 30, 2011, the IDRs will be freely transferable. The IDRs are payable as follows: and

If• ~~for~~19,638,745 ~~any~~common ~~quarter:~~units of PVR, representing an approximately 37% limited partner interest in PVR.

•All of our cash flows are generated from the cash distributions we receive with respect to the PVR equity interests we own. PVR is required by its partnership agreement to distribute, and it has historically distributed ~~available~~within 45 days of the end of each quarter, all of its cash ~~from~~on ~~operating~~hand ~~surplus~~at tothe end of each quarter, less cash reserves established by its ~~common~~general ~~unitholders~~partner in anits ~~amount~~sole discretion ~~equal~~ to provide for the ~~minimum~~proper ~~quarterly~~conduct of PVR’s business or to provide for future distributions. While we, like PVR, are structured as a limited partnership, our capital structure and cash distribution; policy differ materially from those of PVR. Most notably, our general partner does not have an economic interest in us and is therefore not entitled to receive any distributions from us and our capital structure does not include IDRs. Accordingly, our distributions are allocated exclusively to our common units, which is our only class of security currently outstanding.

• PVR ~~has~~IDRs ~~distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;~~

In accordance with PVR’s partnership agreement, IDRs represent the right to receive an increasing percentage of quarterly distributions of PVR’s available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. The minimum quarterly distribution is $0.25 ($1.00 on an annualized basis) per unit. We currently hold 100% of the IDRs through our ownership of PVR’s general partner, but may transfer these rights to an affiliate (other than an individual) or to another entity as part of the merger or consolidation of PVR’s general partner with or into such entity or the transfer of all or substantially all of PVR’s general partner’s assets to another entity without the prior approval of PVR’s unitholders if the transferee agrees to be bound by the provisions of PVR’s partnership agreement. Prior to September 30, 2011, other transfers of the IDRs will require the affirmative vote of holders of a majority of the outstanding PVR common units. On or after September 30, 2011, the IDRs will be freely transferable. The IDRs are payable as follows:

~~TABLE~~If OFfor ~~CONTENTS~~any quarter:

~~then,~~• PVR ~~will~~has ~~distribute~~distributed ~~any additional~~ available cash from operating surplus ~~for~~to ~~that~~its ~~quarter~~common ~~among the~~ unitholders ~~and~~in ~~us,~~an asamount ~~the~~equal ~~owner~~to ~~of PVR’s general partner, in~~ the ~~following~~minimum ~~manner:~~quarterly distribution; and

• ~~First,~~PVR ~~98%~~has todistributed ~~all~~available ~~unitholders,~~cash ~~and~~from 2%operating tosurplus ~~us,~~on asoutstanding ~~the~~common ~~owner~~units ofin ~~PVR’s~~an ~~general~~amount ~~partner,~~necessary ~~until~~to ~~each~~eliminate ~~unitholder~~any ~~has~~cumulative ~~received~~arrearages ain ~~total~~payment of ~~$0.275~~the ~~per~~minimum ~~unit~~quarterly ~~for that quarter~~distribution;

~~• Second~~then, ~~85%~~PVR towill ~~all~~distribute ~~unitholders,~~any ~~and~~additional ~~15%~~available tocash from operating surplus for that quarter among the unitholders and us, as the owner of PVR’s general partner, ~~until~~in ~~each~~the ~~unitholder~~following ~~has~~manner: ~~received a total of $0.325 per unit for that quarter;~~

• ~~Third~~First, 7598% to all unitholders, and 252% to us, as the owner of PVR’s general partner, until each unitholder has received a total of $0.~~375~~275 per unit for that quarter; ~~and~~

• ~~Thereafter~~Second, 5085% to all unitholders, and 5015% to us, as the owner of PVR’s general partner, until each unitholder has received a total of $0.325 per unit for that quarter;

~~Since~~• ~~2001~~Third, ~~PVR~~75% ~~has~~to ~~increased~~all ~~its~~unitholders, ~~quarterly~~and ~~cash distribution from $0.~~25% ~~($1.00 on an annualized basis) per unit~~ to ~~$0.47 ($1.88 on an annualized basis) per unit~~us, ~~which~~as isthe ~~its~~owner ~~most~~of ~~recently declared distribution. These increased cash distributions by~~ PVR’s ~~have~~general ~~placed us at the maximum target cash distribution level as described above and~~partner, asuntil aeach ~~consequence,~~unitholder ~~since~~has ~~reaching such level, we have~~ received ~~50%~~a oftotal ~~available cash in excess~~ of $0.375 per unit. for that quarter; and

• Thereafter, 50% to all unitholders and 50% to us, as the owner of PVR’s ~~Business~~general partner.

~~PVR~~Since is2001, aPVR ~~publicly~~has ~~traded~~increased ~~Delaware~~its ~~limited~~quarterly ~~partnership~~cash ~~formed~~distribution byfrom ~~Penn~~$0.25 ~~Virginia Corporation~~ (~~NYSE:~~$1.00 ~~PVA),~~on oran ~~Penn~~annualized ~~Virginia,~~basis) inper ~~2001~~unit ~~that~~to is$0.47 ~~principally engaged in the management of coal and natural resource properties and the gathering and processing of natural gas in the United States~~($1.88 ~~Both~~on inan annualized ~~its~~basis) ~~current~~per ~~limited~~unit, ~~partnership~~which ~~form~~is ~~and in~~ its ~~previous~~most ~~corporate~~recently ~~form,~~declared ~~PVR~~distribution. ~~has~~These ~~managed~~increased ~~coal~~cash ~~properties~~distributions ~~since~~by ~~1882.~~ PVR ~~currently~~have ~~conducts~~placed ~~operations~~us inat ~~two~~the ~~business~~maximum ~~segments:~~target ~~(i)~~cash ~~coal~~distribution ~~and~~level ~~natural~~as ~~resource~~described ~~management~~above and, ~~(ii)~~as ~~natural~~a ~~gas~~consequence, ~~midstream.~~since Wereaching ~~consolidate~~such ~~PVR’s results into our financial statements because we control PVR’s general partner. In 2008~~level, we ~~had~~have areceived 250% ~~general~~of ~~partner~~available ~~interest~~cash in ~~PVR~~excess ~~and all~~ of ~~the~~$0.375 ~~IDRs,~~per ~~which we hold through our 100% ownership interest in Penn Virginia Resource GP, LLC, PVR’s general partner, and an approximately 37% limited partner interest in PVR~~unit.

~~Our operating income was $105.9 million in 2009, compared to $113.~~2 million in 2008 and $115.2 million in 2007. In 2009, the PVR coal and natural resource management segment contributed $87.5 million, or 83%, to our operating income, and the PVR natural gas midstream segment contributed $20.8 million, or 19%, to our operating income. These contributions were partially offset by operating expenses from the corporate and other functions, which resulted in $2.4 million of expenses, or 2%.

PVRTable Coalof and Natural Resource Management Segment OverviewContents

~~The~~ PVR’s ~~coal~~Business and natural resource management segment primarily involves the management and leasing of coal properties and the subsequent collection of royalties. PVR also earns revenues from other land management activities, such as selling standing timber, leasing fee-based coal-related infrastructure facilities to certain lessees and end-user industrial plants, collecting oil and gas royalties and from coal transportation, or wheelage, fees.

~~As of December 31, 2009,~~ PVR ~~owned~~is ora ~~controlled~~publicly ~~approximately~~traded ~~829~~Delaware ~~million~~limited ~~tons~~partnership ofthat ~~proven~~is ~~and~~principally ~~probable~~engaged ~~coal reserves~~ in ~~Central and Northern Appalachia,~~ the ~~San~~management ~~Juan~~of ~~Basin~~coal and ~~the~~natural ~~Illinois~~resource ~~Basin.~~properties ~~PVR~~and ~~enters into long-term leases with experienced, third-party mine operators, providing them~~ the ~~right~~gathering toand ~~mine~~processing ~~PVR’s~~of ~~coal~~natural ~~reserves~~gas in ~~exchange~~the ~~for royalty payments~~United States. PVR ~~actively~~currently ~~works~~conducts ~~with~~operations ~~its~~in ~~lessees~~two tobusiness ~~develop~~segments: ~~efficient~~(i) coal ~~methods~~and tonatural ~~exploit~~resource ~~its~~management ~~reserves~~ and to(ii) natural ~~maximize~~gas ~~production from PVR’s properties~~midstream. ~~PVR~~We ~~does~~consolidate ~~not operate any mines. In 2009,~~ PVR’s ~~lessees~~results ~~produced~~into ~~34.3~~our ~~million~~financial ~~tons~~statements ofbecause ~~coal~~we ~~from~~control ~~its properties and paid~~ PVR ~~coal royalties~~’s ~~revenues~~general ~~of $120~~partner.4 ~~million~~In 2010, ~~for~~we anhad ~~average~~a ~~royalty per ton of $3.51. Approximately 82~~2% ofgeneral ~~PVR’s~~partner ~~coal~~interest ~~royalties revenues~~ in ~~2009 were derived from coal mined on~~ PVR’s ~~properties~~and ~~under~~all ~~leases containing royalty rates based on the higher~~ of ~~a fixed base price or a percentage of~~ the ~~gross~~IDRs, ~~sales~~which ~~price.~~we ~~The~~hold ~~balance~~through ofour ~~PVR’s~~100% ~~coal~~ownership ~~royalties~~interest ~~revenues~~in ~~for~~Penn ~~the~~Virginia ~~respective~~Resource ~~periods~~GP, ~~was~~LLC, ~~derived from coal mined on~~ PVR’s ~~properties~~general ~~under~~partner, ~~leases containing fixed royalty rates that escalate annually. See “— PVR’s Contracts — PVR Coal~~ and ~~Natural~~an ~~Resource~~approximately ~~Management~~37% ~~Segment”~~limited ~~for~~partner interest ain ~~description of~~ PVR~~’s coal leases~~.

Our operating income was $121.6 million in 2010, compared to $105.9 million in 2009 and $113.2 million in 2008. In 2010, the PVR coal and natural resource management segment contributed $93.1 million, or 77%, to our operating income, and the PVR natural gas midstream segment contributed $32.8 million, or 27%, to our operating income. These contributions were partially offset by operating expenses from the corporate and other functions, which resulted in $4.3 million of expenses, or 4%.

~~TABLE~~PVR OFCoal ~~CONTENTS~~and Natural Resource Management Segment Overview

The PVR ~~Natural~~coal ~~Gas~~and ~~Midstream~~natural ~~Segment~~resource ~~Overview~~management segment primarily involves the management and leasing of coal properties and the subsequent collection of royalties. PVR also earns revenues from other land management activities, such as selling standing timber, leasing fee-based coal-related infrastructure facilities to certain lessees and end-user industrial plants, collecting oil and gas royalties and from coal transportation, or wheelage, fees.

As of December 31, 2010, PVR’s ~~natural~~owned ~~gas~~or ~~midstream~~controlled ~~segment~~approximately is804 million ~~engaged~~tons of proven and probable coal reserves in ~~providing~~Central ~~natural~~and ~~gas~~Northern ~~processing~~Appalachia, ~~gathering~~the San Juan Basin and ~~other~~the ~~related~~Illinois ~~services~~Basin. AsPVR ofenters ~~December~~into 31long-term leases with experienced, ~~2009~~third-party mine operators, ~~PVR~~providing ~~owned~~them ~~and~~the ~~operated~~right ~~natural~~to ~~gas~~mine ~~midstream~~PVR’s ~~assets~~coal ~~located~~reserves in ~~Oklahoma~~exchange ~~and~~for ~~Texas,~~royalty payments. ~~including~~PVR ~~six~~actively ~~natural~~works ~~gas~~with ~~processing~~its ~~facilities~~lessees ~~having~~to ~~400~~develop ~~MMcfd~~efficient ofmethods ~~total~~to ~~capacity~~exploit its reserves and ~~approximately~~to ~~4,118~~maximize ~~miles~~production offrom ~~natural~~PVR’s ~~gas~~properties. ~~gathering~~PVR ~~pipelines~~does not operate any mines. In 2010, PVR’s ~~natural~~lessees ~~gas~~produced ~~midstream~~34.5 million ~~business~~tons ~~earns~~of coal from its properties and paid PVR coal royalties revenues ~~primarily~~of ~~from~~$130.3 ~~gas~~million, ~~processing~~for ~~contracts~~an ~~with~~average ~~natural~~royalty ~~gas~~per ~~producers~~ton ~~and~~of ~~from~~$3.78. ~~fees~~Approximately ~~charged~~80% ~~for~~of ~~gathering~~PVR’s ~~natural~~coal ~~gas~~royalties ~~volumes~~revenues ~~and~~in ~~providing~~2010 ~~other~~were ~~related~~derived ~~services.~~from Incoal ~~addition,~~mined on PVR’s ~~owns~~properties aunder leases ~~25%~~containing ~~member~~royalty ~~interest~~rates inbased ~~Thunder Creek~~on ~~Gas~~the ~~Services,~~higher ~~LLC,~~of ora ~~Thunder~~fixed ~~Creek,~~base price or a ~~joint~~percentage ~~venture~~of ~~that~~the ~~gathers~~gross ~~and~~sales ~~transports~~price. ~~coalbed~~The ~~methane~~balance inof ~~Wyoming~~PVR’s ~~Powder~~coal ~~River~~royalties ~~Basin.~~revenues ~~PVR~~for ~~also~~the ~~owns~~respective aperiods ~~natural~~was ~~gas~~derived ~~marketing~~from ~~business,~~coal ~~which~~mined ~~aggregates~~on ~~third-party~~PVR’s ~~volumes~~properties under ~~and~~leases ~~sells~~containing ~~those~~fixed ~~volumes~~royalty ~~into~~rates ~~intrastate~~that ~~pipeline~~escalate ~~systems~~annually. See “— PVR’s Contracts — PVR Coal and atNatural ~~market~~Resource ~~hubs~~Management ~~accessed~~Segment” byfor ~~various~~a ~~interstate~~description ~~pipelines~~of PVR’s coal leases.

In ~~2009~~December, ~~system~~2010, ~~throughput~~PVR ~~volumes~~announced ata ~~PVR’s~~definitive agreement to purchase certain mineral rights and associated oil and gas ~~processing~~royalty ~~plants~~interests in Kentucky and ~~gathering~~Tennessee ~~systems,~~for ~~including~~approximately ~~gathering-only~~$97.3 ~~volumes~~million, ~~were~~subject ~~121~~to closing adjustments.3 ~~Bcf~~The mineral rights include approximately 102.0 million tons of coal reserves and resources, orand royalty interests from approximately ~~332~~158 ~~MMcfd~~oil and gas wells. There are currently 14 active producing underground and surface mines on the approximately 126,000 acres of mineral estates being acquired, with 10 principal coal lessees operating the mines. The coal is primarily steam coal that is consumed by major electric utilities and other industrial customers in the southeastern United States. On January 25, 2011 PVR completed the purchase of these assets, which was funded by borrowings under the PVR revolving credit facility (“PVR Revolver”).

~~Business~~PVR ~~Strategy~~Natural Gas Midstream Segment Overview

~~Our~~PVR’s ~~primary~~natural ~~business~~gas ~~strategy~~midstream segment is toengaged ~~increase~~in ~~our~~providing ~~cash~~natural ~~distributions~~gas toprocessing, ~~our~~gathering ~~unitholders~~and other related services. WeAs ~~intend~~of December 31, to2010, ~~monitor~~PVR ~~the~~owned ~~implementation~~and operated natural gas midstream assets located in Oklahoma, Pennsylvania and Texas, including six natural gas processing facilities having 400 MMcfd of total capacity and approximately 4,263 miles of natural gas gathering pipelines. PVR’s ~~business~~natural ~~strategies.~~gas ~~Our~~midstream business ~~strategy~~earns ~~includes~~revenues ~~supporting~~primarily ~~the~~from ~~growth~~gas ofprocessing ~~PVR~~contracts bywith ~~purchasing~~natural ~~PVR~~gas ~~units~~producers orand ~~lending~~from ~~funds~~fees tocharged for gathering natural gas volumes and providing other related services. In addition, PVR toowns ~~provide~~member ~~funding~~interests ~~for~~in ~~acquisitions~~joint orventures ~~for~~that ~~internal~~gather ~~growth~~and ~~projects~~transport natural gas. WePVR ~~may~~owns ~~also~~a ~~provide~~25% member interest in Thunder Creek Gas Services, LLC (“Thunder Creek”), a joint venture that gathers and transports coalbed methane in Wyoming’s Powder River Basin. PVR ~~with~~owns ~~other~~a ~~forms~~50% ofmember ~~credit~~interest ~~support~~in Crosspoint Pipeline, ~~such~~LLC as(“Crosspoint”), ~~guarantees~~a ~~related~~joint venture that gathers residue gas from PVR’s Crossroads Plant and transports it to ~~financing~~market. PVR also owns a ~~project~~natural gas marketing business, which aggregates third-party volumes and sells those volumes into intrastate pipeline systems and at market hubs accessed by various interstate pipelines.

~~PVR’s~~In ~~primary business objective is to create sustainable~~2010, ~~capital-efficient~~system ~~growth~~throughput involumes ~~distributable~~at ~~cash~~PVR’s ~~flow to maximize its cash distributions to its unitholders by expanding its coal property management and natural~~ gas ~~gathering and~~ processing ~~businesses~~plants ~~through both internal growth~~ and ~~acquisitions.~~gathering PVR has successfully grown its business through organic growth projects and acquisitions of coal and natural resource properties and natural gas midstream assets. For a more detailed discussion of PVR’s acquisitionssystems, ~~see~~including ~~Item~~gathering-only 7volumes, ~~“Management’s Discussion and Analysis of Financial Condition and Results of~~were ~~Operations — Acquisitions and Investments~~129.”7 WeBcf, ~~and~~or ~~PVR~~approximately ~~intend~~355 toMMcfd. ~~continue to pursue the following business strategies:~~

•During ~~Continue~~2010 ~~to grow coal reserve holdings through acquisitions and investments in~~ PVR’s ~~existing~~began ~~market~~construction ~~areas.~~of ~~PVR~~gathering ~~expects~~systems ~~to continue to add to its coal reserve holdings~~ in ~~Central~~Wyoming ~~Appalachia~~ and ~~the~~Lycoming Counties ~~Illinois Basin~~ in ~~the~~Pennsylvania. ~~future,~~We ~~but~~have ~~may~~completed ~~consider~~construction ~~the acquisition~~ of ~~reserves~~three ~~outside~~miles of ~~these~~12-inch ~~basins~~gas ifgathering ~~the~~pipelines ~~market~~in ~~and~~Wyoming ~~quality~~County ofand ~~the~~began ~~reserves~~gathering ~~satisfy~~natural ~~its~~gas ~~criteria. PVR has historically operated~~ in ~~Central Appalachia~~June, ~~its~~2010. ~~largest~~Construction ~~area~~and ofdevelopment ~~coal~~to ~~reserves,~~provide ~~but views the Illinois Basin as a growth area~~gathering, ~~both~~compression ~~because~~and ofrelated services ~~its~~in ~~proximity~~Lycoming toCounty ~~power~~continues ~~plants~~ and ~~because PVR expects future environmental regulations will require~~ the ~~scrubbing~~first segment of ~~most coals, and not just~~ the ~~higher~~system ~~sulfur~~began ~~coal~~operations ~~that is typically found~~ in ~~this~~February ~~basin~~2011. ~~PVR~~These ~~will~~gathering ~~consider acquisitions of coal reserves that are long-lived~~ and ~~that are of sufficient size to yield significant production or serve as a platform for complementary acquisitions.~~

•3 Expand in areas that complement PVR’s coal royalty business. Timber and coal infrastructure projects typically involve long-lived, fee-based assets that generally produce predictable cash flows. PVR owns or controls approximately 243,000 acres of forestlands in Appalachia, which primarily produce various hardwoods and PVR owns a number of coal infrastructure facilities. PVR also has an equity interest in a coal handling joint venture, which is expected to provide development opportunities for coal-related infrastructure projects.

•Table Expand PVR’s natural gas midstream operations by adding new production to existing systems and acquiring or building new gathering and processing assets. PVR continually seeks new supplies of natural gas both to offset the natural declines in production from the wells currently connected to its systems and to increase system throughput volumes. New natural gas supplies are obtained for all of PVR’s systems by contracting for production from new wells, connecting new wells drilled on dedicated acreage and by contracting for natural gas that has been released from competitors’Contents

3 transportation infrastructures will capture expected volumes in the Marcellus Shale area. This has been and will continue to be where a significant portion of our growth capital will be spent over the next year.

~~TABLE~~Changes OFin ~~CONTENTS~~Our Management

~~systems.~~In ~~During~~connection ~~2009,~~with ~~PVR~~Penn ~~acquired~~Virginia’s a(Penn 60Virginia ~~MMcfd~~Corporation ~~processing~~NYSE: ~~plant~~PVA) ~~and~~reduction ~~residue~~of ~~pipeline~~its ~~facilities~~limited inpartner ~~western~~interest ~~Oklahoma.~~in ~~Additionally~~us, ~~PVR~~we ~~completed~~implemented acertain 40changes ~~MMcfd processing plant expansion~~ in ~~the Beaver/Spearman complex~~management, oras ~~Panhandle~~described ~~System~~below.

•On ~~Mitigate~~March 8, ~~commodity~~2010, ~~price~~A. ~~exposure~~James inDearlove ~~the~~resigned ~~PVR~~from ~~natural~~his ~~gas~~position ~~midstream~~as ~~segment.~~Chief ~~PVR’s~~Executive ~~natural~~Officer ~~gas midstream operations consist~~ of aPenn ~~mix~~Virginia ofResource ~~fee-based~~GP, ~~and~~LLC, ~~margin-based~~or ~~services that~~PVR GP, ~~together~~PVR’s ~~with~~general ~~its hedging activities~~partner, ~~are~~and ~~expected~~on toMarch 9, ~~generate~~2010, ~~relatively~~he ~~stable~~resigned ~~cash~~from ~~flows.~~his ~~During~~position ~~the~~as ~~quarter~~President ~~ended~~and ~~December~~Chief ~~31,~~Executive ~~2009~~Officer ~~approximately 19%~~ of ~~the~~PVG ~~system~~GP, ~~throughput~~LLC, ~~volumes in the PVR natural gas midstream segment were gathered~~ or ~~processed~~PVG ~~under~~GP, ~~fee-based~~our general ~~contracts~~partner. On ~~Under~~March 8, ~~fee-based contracts~~2010, ~~PVR~~the isboard ~~not~~of ~~exposed~~directors ~~directly to commodity price risk. The remainder~~ of PVR’s ~~system~~GP appointed ~~throughput~~William ~~volumes were gathered or processed under gas purchase/keep-whole arrangements and percentage-of-proceeds arrangements that are subject to commodity price risk~~H. ~~However~~Shea, ~~PVR~~Jr. ~~expects~~ to ~~manage~~the ~~its~~position ~~exposure~~of toChief ~~commodity~~Executive ~~price~~Officer ~~risk~~of ~~by entering into hedging transactions. Based upon~~ PVR’s ~~current volumes~~GP, itand ~~has~~on ~~entered~~March 9, ~~into~~2010 ~~hedging~~the ~~agreements~~board ~~covering~~of ~~approximately~~directors ~~58% and 37%~~ of ~~its~~PVG ~~commodity-sensitive~~GP ~~volumes~~appointed ~~in 2010 and 2011~~Mr. Shea ~~PVR generally targets hedging 50~~ to ~~60%~~the positions of ~~its~~President ~~commodity-sensitive~~and ~~volumes~~Chief ~~covering~~Executive aOfficer ~~two-year~~of ~~period~~PVG GP.

On March 23, 2010, Frank A. Pici resigned from his position as Vice President and Chief Financial Officer of PVR’s ~~Contracts~~GP, and his position as Vice President and Chief Financial Officer of PVG GP. On March 23, 2010, the board of directors of PVR GP appointed Robert B. Wallace to the position of Executive Vice President and Chief Financial Officer of PVR GP, and the board of directors of PVG GP appointed Mr. Wallace to the position of Executive Vice President and Chief Financial Officer of PVG GP.

On March 31, 2010, A. James Dearlove, Frank A. Pici and Nancy M. Snyder each resigned from their positions as directors on the board of directors of PVR ~~Coal~~GP. On March 31, 2010, Mr. Shea was appointed as a director on the board of directors of PVR GP and ~~Natural~~on ~~Resource~~the ~~Management~~board ~~Segment~~of directors of PVG GP.

~~PVR~~On ~~earns~~June 7, 2010, ~~most~~Frank ofA. ~~its~~Pici ~~coal~~and ~~royalties~~Nancy ~~revenues~~M. ~~under~~Snyder ~~long-term~~each ~~leases~~resigned ~~that~~from ~~generally~~their ~~require~~positions ~~its~~as ~~lessees~~directors ~~to make royalty payments to it based~~ on the ~~higher~~board of adirectors ~~percentage~~ of ~~the~~PVG ~~gross~~GP. ~~sales~~On ~~price~~June 7, or2010, ~~a fixed price per ton of coal they sell~~Ms. Snyder ~~The~~also ~~balance~~resigned offrom ~~PVR’s~~her ~~coal~~position ~~royalties~~as ~~revenues~~Vice isPresident, ~~earned~~Chief ~~under~~Administrative ~~long-term~~Officer, General ~~leases~~Counsel ~~that~~and ~~require~~Assistant ~~the~~Secretary ~~lessees~~of toeach ~~make~~of ~~royalty payments to~~ PVR ~~based~~GP onand ~~fixed~~PVG ~~royalty rates that escalate annually~~GP. AOn ~~typical~~June 29, ~~lease~~2010 ~~either~~the ~~expires~~board ~~upon~~of ~~exhaustion~~directors of ~~the~~PVR ~~leased~~GP ~~reserves~~appointed orBruce ~~has~~D. aDavis, ~~five~~Jr. toas ~~ten-year~~Executive ~~base~~Vice ~~term~~President, ~~with~~General ~~the~~Counsel ~~lessee~~and ~~having~~Secretary anof ~~option~~PVR toGP ~~extend~~and the ~~lease~~board ~~for at least five years after the expiration~~ of ~~the base term.~~ ~~Substantially~~directors ~~all~~ of ~~PVR’s~~PVG ~~leases~~GP ~~require~~appointed ~~the lessee to pay minimum rental payments to PVR in monthly or annual installments, even if no mining activities are ongoing~~Mr. Davis ~~These~~as ~~minimum~~Executive ~~rentals~~Vice ~~are recoupable~~President, ~~usually~~General ~~over~~Counsel aand ~~period~~Secretary ~~from one to three years from the time~~ of ~~payment,~~PVG ~~against the production royalties owed to PVR once coal production commences~~GP.

~~Substantially~~Proposed all of PVR’s leases impose obligations on the lessees to diligently mine the leased coal using modern mining techniques, indemnify PVR for any damages it incurs in connection with the lessee’s mining operations, including any damages PVR may incur due to the lessee’s failure to fulfill reclamation or other environmental obligations, conduct mining operations in compliance with all applicable laws, obtain its written consent prior to assigning the lease and maintain commercially reasonable amounts of general liability and other insurance. Substantially all of the leases grant PVR the right to review all lessee mining plansMerger and maps, enter the leased premises to examine mine workings and conduct audits of lessees’ compliance with lease terms. In the event of a default by a lessee, substantially all of the leases give PVR the right to terminate the lease and take possession of the leased premises.

InOn ~~addition~~September 21, ~~PVR~~2010, ~~earns~~we ~~revenues~~announced ~~under~~that ~~coal~~we ~~services~~entered ~~contracts,~~into ~~timber~~an ~~contracts~~Agreement and ~~oil~~Plan ~~and~~of ~~gas~~Merger ~~leases.~~(the ~~PVR’s~~“Merger Agreement”) ~~coal~~by ~~services~~and ~~contracts~~among ~~generally~~PVR, ~~provide~~PVR ~~that~~GP, ~~the~~PVG ~~users~~GP ofand PVR’s ~~coal~~Radnor, ~~services~~LLC ~~pay~~(“Merger ~~PVR~~Sub”), a ~~fixed~~wholly ~~fee~~owned ~~per~~subsidiary ~~ton~~ of ~~coal~~PVR, ~~processed~~pursuant atto ~~its~~which ~~facilities.~~we ~~All~~and ofPVG ~~PVR’s~~GP, ~~coal~~our ~~services~~general ~~contracts~~partner, ~~are~~will be merged into Merger Sub, with ~~lessees~~Merger ofSub ~~PVR’s~~as ~~coal~~the ~~reserves~~surviving entity ~~and~~(the ~~these~~“Merger”). ~~contracts~~Merger ~~generally~~Sub ~~have~~will ~~terms~~subsequently ~~that~~be ~~run~~merged ~~concurrently~~into PVRGP, with PVR GP being the ~~related~~surviving ~~coal~~entity. ~~lease~~In the transaction, our unitholders will receive consideration of 0.98 common units in PVR’s ~~timber~~for ~~contracts~~each ~~generally~~common ~~provide~~unit ~~that~~in ~~the~~PVG, representing ~~timber~~aggregate ~~companies~~consideration ~~pay~~of approximately 38.3 million common units in PVR. aPursuant ~~fixed~~to ~~price~~the ~~per~~Merger ~~thousand~~Agreement ~~board~~and ~~feet~~the Fourth Amended and Restated Agreement of ~~timber~~Limited ~~harvested~~Partnership ~~from~~of PVR, the incentive distribution rights held by PVR’s ~~property~~general partner will be extinguished, the 2.0% general partner interest in PVR ~~receives~~held ~~royalties~~by ~~under~~PVR’s ~~its~~general ~~oil~~partner ~~and~~will ~~gas leases~~be ~~based~~converted oninto a ~~percentage~~noneconomic ofinterest ~~the~~and ~~revenues~~approximately ~~the~~19.6 million ~~producers~~common ~~receive~~units ~~for~~in ~~the~~PVR ~~oil~~owned ~~and~~by ~~gas~~PVG ~~they~~will ~~sell~~be cancelled.

The terms of the Merger Agreement were unanimously approved by our conflicts committee, comprised of independent directors, of the board of directors of our general partner, by the board of directors of our general partner, by the PVG conflicts committee, comprised of independent directors, of the board of directors of PVR’s ~~Natural~~general ~~Gas~~partner, ~~Midstream~~and ~~Segment~~by the board of directors of PVR’s general partner (in each case with the chief executive officer of each general partner recusing himself from the board of directors approvals).

~~PVR’s~~Pursuant ~~natural~~to ~~gas~~the ~~midstream~~Merger ~~business~~Agreement, ~~generates~~we ~~revenues~~agreed ~~primarily~~to ~~from~~support ~~gas~~the ~~purchase~~Merger ~~and~~by, ~~processing~~among ~~contracts~~other ~~with~~things, ~~natural~~voting ~~gas~~our ~~producers~~PVR ~~and~~common ~~from~~units ~~fees~~in ~~charged~~favor ~~for~~of ~~gathering~~the Merger ~~natural~~and ~~gas~~against ~~volumes~~any ~~and~~transaction ~~providing~~that, among other ~~related~~things, ~~services.~~would ~~During~~materially ~~the~~delay ~~year~~or ~~ended~~prevent ~~December~~the ~~31,~~consummation ~~2009,~~of ~~PVR’s~~the ~~natural~~Merger. ~~gas~~The ~~midstream~~agreement ~~business~~to ~~generated~~support aautomatically ~~majority~~terminates ofif ~~its~~the ~~gross~~conflicts ~~margin~~committee ~~from~~of ~~two~~the ~~types~~board of ~~contractual~~directors ~~arrangements~~or ~~under~~the ~~which~~board ~~its~~of directors ~~margin~~of isour ~~exposed~~general topartner ~~increases~~changes ~~and~~its ~~decreases~~recommendation into ~~the~~our ~~price~~unitholders ofwith ~~natural~~respect ~~gas~~to ~~and~~the ~~NGLs:~~Merger ~~(i)~~or ~~gas~~the ~~purchase/keep-whole~~conflicts ~~and~~committee ~~(ii)~~of ~~percentage-~~the board of~~-proceeds.~~ ~~For~~directors or the ~~fourth~~board ~~quarter~~of directors of ~~2009,~~PVR’s ~~approximately~~general ~~28%~~partner ofchanges its recommendation to PVR’s ~~system~~unitholders ~~throughput~~with respect to the Merger.

4After the Merger, the board of directors of PVR’s general partner, PVR GP, is expected to consist of nine members, six of whom are expected to be the existing members of the PVR board and three of whom are expected to be the three existing members of the conflicts committee of the board of directors of our general partner.

~~TABLE~~The OFMerger ~~CONTENTS~~Agreement is subject to customary closing conditions including, among other things, (i) approval by the affirmative vote of the holders of a majority of our common units outstanding and entitled to vote at a meeting of the holders of our common units, (ii) approval by the affirmative vote of the holders of a majority of PVR’s common units outstanding and entitled to vote at a meeting of the holders of PVR’s common units, (iii) receipt of applicable regulatory

~~volumes~~4 were gathered or processed under gas purchase/keep-whole contracts, 53% were gathered or processed under percentage-of-proceeds contracts and 19% were gathered or processed under fee-based gathering contracts. A majority of the gas purchase/keep-whole and percentage-of-proceeds contracts include fee-based components such as gathering and compression charges.

InTable 2009, 21%, 15% and 10% of the PVR natural gas midstream segment’s revenues and 17%, 11% and 8% of our total consolidated revenues resulted from three of PVR’s natural gas midstream customers, Conoco, Inc., Tenaska Marketing Ventures and ONEOK Energy Marketing. Contents

~~Gas Purchase/Keep-Whole Arrangements. Under gas purchase/keep-whole arrangements~~ approvals, ~~PVR generally purchases natural gas at the wellhead at either~~ (iiv) ~~a percentage discount to a specified index price, (ii) a specified index price less a fixed amount or (iii) a combination of (i) and (ii). PVR then gathers~~ the ~~natural~~effectiveness ~~gas to one~~ of ~~its~~a ~~plants~~registration ~~where~~statement iton isForm ~~processed~~S-4 towith ~~extract~~respect ~~the entrained NGLs, which are then sold~~ to ~~third parties at market prices. PVR resells~~ the ~~remaining~~issuance ~~natural gas to third parties at an index price which typically corresponds to the specified purchase index. Because the extraction~~ of ~~the~~our ~~NGLs~~common ~~from~~units ~~the~~in ~~natural~~connection ~~gas during~~with ~~processing reduces~~ the ~~BTU content of the natural gas~~Merger, ~~PVR~~(v) receipt ~~retains a reduced volume~~ of ~~gas~~certain ~~to sell after processing. Accordingly~~tax opinions, ~~under~~(vi) approval ~~these~~for ~~arrangements,~~listing PVR’s ~~revenues~~common ~~and~~units ~~gross margins increase as the price of NGLs increases relative~~ to ~~the~~be ~~price~~issued ~~of natural gas, and its revenues and gross margins decrease as the price of natural gas increases relative to the price of NGLs. PVR has generally been able to mitigate its exposure~~ in ~~the~~connection ~~latter~~with ~~case by requiring~~ the ~~payment~~Merger ~~under~~on ~~many of its gas purchase/keep-whole arrangements of minimum processing charges which ensure that PVR receives a minimum amount of processing revenues. The gross margins that PVR realizes under~~ the ~~arrangements~~New ~~described~~York inStock ~~clauses~~Exchange ~~(i)~~ and (~~iii~~vii) the ~~above~~execution ~~also decrease in periods~~ of ~~low~~PVR’s ~~natural~~Fourth ~~gas~~Amended ~~prices~~and ~~because~~Restated ~~these~~Agreement ~~gross margins are based on a percentage~~ of ~~the~~Limited ~~index price~~Partnership.

~~Percentage-of-Proceeds~~We ~~Arrangements. Under~~will ~~percentage-of-proceeds~~be ~~arrangements,~~considered ~~PVR~~the ~~generally~~surviving ~~gathers~~consolidated ~~and~~entity ~~processes~~for ~~natural~~accounting ~~gas~~purposes, onwhile ~~behalf~~PVR ofwill ~~producers,~~be ~~sells~~ the ~~resulting~~surviving ~~residue~~consolidated entity ~~gas~~for ~~and~~legal ~~NGL volumes at market prices~~ and ~~remits~~reporting topurposes. ~~producers~~The anMerger ~~agreed-upon~~will ~~percentage~~be ofaccounted ~~the~~for ~~proceeds~~as ~~of those sales based on either~~ an ~~index~~equity ~~price or the price actually received for the gas and NGLs~~transaction. ~~Under these types of arrangements~~Therefore, ~~PVR’s~~the ~~revenues~~changes ~~and~~in ~~gross~~our ~~margins~~ownership ~~increase~~interest as ~~natural~~a ~~gas~~result ~~prices~~of ~~and~~the ~~NGL~~Merger ~~prices~~will ~~increase,~~not ~~and~~result ~~its~~in ~~revenues~~gain ~~and~~or ~~gross~~loss ~~margins decrease as natural gas prices and NGL prices decrease~~recognition.

~~Fee-Based~~On ~~Arrangements. Under~~February 16, ~~fee-based arrangements~~2011, PVR ~~receives~~held ~~fees~~a ~~for~~special ~~gathering,~~meeting ~~compressing~~to ~~and/or~~consider ~~processing~~the ~~natural~~vote ~~gas.~~upon ~~The~~the ~~revenues~~approval ~~PVR~~and ~~earns~~adoption ~~from~~of ~~these~~the ~~arrangements~~Merger ~~are~~and ~~directly~~the ~~dependent~~other transactions oncontemplated by the ~~volume~~Merger ofAgreement. ~~natural~~At ~~gas~~the ~~that~~special ~~flows~~meeting, ~~through~~two ~~its~~matters ~~systems~~were voted on and ~~are~~approved ~~independent~~by a majority of ~~commodity~~the ~~prices~~PVR’s unitholders. ToThe ~~the~~first ~~extent~~matter avoted ~~sustained~~upon ~~decline~~was inthe ~~commodity~~approval ~~prices~~of ~~results~~the inMerger aAgreement ~~decline~~and inthe ~~volumes,~~transactions contemplated ~~however~~thereby. 67.52% or 35,308,687 of the PVR’s ~~revenues~~units ~~from~~outstanding ~~these~~and ~~arrangements~~entitled ~~would~~to bevote, ~~reduced~~voted ~~due~~in tofavor of this matter. The second matter voted upon was the ~~related~~approval ~~reduction~~of inthe ~~drilling~~Fourth Amended and ~~development~~Restated Partnership Agreement. 67.54% or 35,322,534 of ~~new~~the ~~supply~~PVR’s units outstanding and entitled to vote, voted in favor of this matter.

InOn ~~many cases~~February 16, 2011, ~~PVR~~we ~~provides~~announced ~~services~~that ~~under~~we ~~contracts~~had ~~that~~adjourned ~~contain~~the aspecial ~~combination~~meeting of ~~more~~PVG ~~than~~unitholders ~~one~~originally ofscheduled ~~the~~for ~~arrangements~~February 16, ~~described~~2011 ~~above~~until March 9, 2011. ~~The~~Prior ~~terms~~to the adjournment of ~~PVR’s~~the ~~contracts~~PVG ~~vary~~special ~~based~~meeting, on20,688,419 ~~gas~~units, ~~quality~~or ~~conditions~~52.94% of the PVG units outstanding and entitled to vote, voted in favor of the ~~competitive~~proposal ~~environment~~to atadjourn the special meeting to a later date to allow further time ~~the~~to ~~contracts~~solicit ~~were~~additional ~~signed~~proxies ~~and~~from ~~customer~~PVG ~~requirements~~unitholders. ~~The~~At ~~contract~~the ~~mix~~commencement ~~and~~of the PVG special meeting, ~~accordingly~~the proxies received from unitholders totaled 25,353,727 million ~~exposure~~units, or 64.88% of all PVG units outstanding and entitled to ~~natural~~vote. ~~gas~~Of the total PVG units outstanding and ~~NGL~~entitled ~~prices~~to vote, ~~may~~proxies ~~change~~representing as39.77% aof ~~result~~the ofPVG ~~changes~~units were in ~~producer~~favor of ~~preferences,~~the ~~expansion~~merger inproposal. ~~regions~~The ~~where~~approval ~~some~~of ~~types~~the Merger Agreement and related transactions requires the affirmative vote of ~~contracts~~holders ~~are~~of ~~more~~a ~~common~~majority of all units outstanding and ~~other~~entitled ~~market~~to ~~factors~~vote. The reconvened PVG special meeting will be held at The Villanova University Conference Center, 601 County Line Road, Radnor, Pennsylvania 19087 on March 9, 2011 at 10:00 AM local time.

~~Natural~~Business ~~Gas~~Strategy Marketing Contracts. PVR is also engaged in natural gas marketing by aggregating third-party volumes and selling those volumes into interstate and intrastate pipeline systems such as Enogex and Panhandle Eastern Pipeline and at market hubs accessed by various interstate pipelines. Connect Energy Services, LLC, or Connect Energy, PVR’s wholly owned subsidiary, has earned fees from Penn Virginia Oil & Gas, L.P., or PVOG LP, a wholly owned subsidiary of Penn Virginia, since September 1, 2006, for marketing a portion of PVOG LP’s natural gas production. Revenues from this business do not generate qualifying income for a publicly traded limited partnership, but PVR does not expect it to have an impact on its tax status, as it does not represent a significant percentage of PVR’s operating income. For the years ended December 31, 2009 and 2008, PVR’s natural gas marketing activities generated $1.8 million and $5.8 million in net revenues.

5Our primary business strategy is to increase our cash distributions to our unitholders. We intend to monitor the implementation of PVR’s business strategies. Our business strategy includes supporting the growth of PVR by purchasing PVR units or lending funds to PVR to provide funding for acquisitions or for internal growth projects. We may also provide PVR with other forms of credit support, such as guarantees related to financing a project.

~~TABLE~~PVR’s OFprimary ~~CONTENTS~~business objective is to create sustainable, capital-efficient growth in distributable cash flow to maximize its cash distributions to its unitholders by expanding its coal property management and natural gas gathering and processing businesses through both internal growth and acquisitions. PVR has successfully grown its business through organic growth projects and acquisitions of coal and natural resource properties and natural gas midstream assets. For a more detailed discussion of PVR’s acquisitions, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Acquisitions and Investments.” We and PVR intend to continue to pursue the following business strategies:

~~PVR~~• ~~Natural~~Continue ~~Gas~~to ~~Midstream~~grow ~~Segment~~coal ~~Commodity~~reserve ~~Derivatives~~holdings through acquisitions and investments in PVR’s existing market areas . PVR ~~utilizes~~continually ~~collar~~seeks ~~derivative~~new ~~contracts~~reserves toof ~~hedge~~coal ~~against~~both to offset the ~~variability~~depletion infrom ~~its~~production ~~frac~~and ~~spread~~to increase future production. PVR’s ~~frac~~expects ~~spread~~to iscontinue to add to its coal reserve holdings in Central Appalachia and the ~~spread~~Illinois ~~between~~Basin in the ~~purchase~~future, ~~price~~but ~~for~~may consider the ~~natural~~acquisition ~~gas~~of ~~PVR~~reserves ~~purchases~~outside ~~from~~of ~~producers~~these ~~and~~basins if the ~~sale~~market ~~price~~and ~~for~~quality ~~NGLs~~of ~~that~~the ~~PVR~~reserves ~~sells~~satisfy ~~after~~its ~~processing~~criteria. PVR ~~hedges~~has ~~against~~historically ~~the~~operated ~~variability~~ in Central Appalachia, its ~~frac~~largest ~~spread~~area byof ~~entering~~coal ~~into~~reserves, ~~costless~~but ~~collar~~views ~~and~~the ~~swap~~Illinois ~~derivative~~Basin ~~contracts~~as toa ~~sell~~growth ~~NGLs~~area, ~~forward~~both atbecause aof ~~predetermined~~its ~~commodity~~proximity ~~price~~to power plants and tobecause ~~purchase~~PVR anexpects ~~equivalent~~future ~~volume~~environmental regulations will require the scrubbing of ~~natural~~most ~~gas~~coals, ~~forward~~and onnot anjust ~~MMBtu~~the ~~basis~~higher sulfur coal that is typically found in this basin. ~~While~~PVR ~~the~~will ~~use~~consider acquisitions of ~~derivative~~coal ~~instruments~~reserves ~~limits~~that ~~the~~are ~~risk~~long-lived ~~of adverse~~and ~~price~~that ~~movements,~~are ~~such~~of ~~use~~sufficient ~~may~~size ~~also~~to ~~limit~~yield ~~future~~significant ~~revenues~~production or ~~cost~~serve ~~savings~~as ~~from~~a ~~favorable~~platform ~~price~~for ~~movements.~~complementary acquisitions.

~~See~~• ~~Note~~Expand 8in toareas ~~the~~that ~~Consolidated~~complement ~~Financial~~PVR’s ~~Statements~~coal ~~for~~royalty abusiness. ~~further~~Timber ~~description~~and coal infrastructure projects typically involve long-lived assets that generally produce predictable cash flows. PVR owns or controls approximately 243,000 acres of forestlands in Appalachia, which primarily produce various hardwoods and PVR’s ~~derivatives~~owns ~~program~~a number of coal infrastructure facilities. PVR also has an equity interest in a coal handling joint venture, which is expected to provide development opportunities for coal-related infrastructure projects.

~~Partnership~~• ~~Structure~~Expand PVR’s natural gas midstream operations by adding new production to existing systems and acquiring or building new gathering and processing assets. PVR continually seeks new supplies of natural gas both to offset the natural declines in production from the wells currently connected to its systems and to increase system throughput volumes. New natural gas supplies are obtained for all of PVR’s systems by contracting for production from new wells, connecting new wells drilled on dedicated acreage and by contracting for natural gas that has been released from competitors’systems.

~~Penn~~5 Virginia, a publicly held energy company, has been engaged in the coal royalty business since 1882 and is also engaged in the exploration, development and production of natural gas and oil. Penn Virginia formed PVR in July 2001 to own and operate substantially all of the assets of and assume the liabilities relating to Penn Virginia’s coal land management business. PVR completed its initial public offering in October 2001. We were formed by Penn Virginia in June 2006 as a Delaware limited partnership to hold the 2% general partner interest, the IDRs and a significant limited partner interest in PVR. We completed our initial public offering, or our IPO, in December 2006.

PVR’sTable operations are conducted through, and its operating assets are owned by, its subsidiaries. PVR owns its subsidiaries through a wholly owned subsidiary, PVR Finco LLC, which is the sole member of the operating company for the coal and natural resource management segment, Penn Virginia Operating Co., LLC, or PVR Coal, and the operating company for the natural gas midstream segment, PVR Midstream LLC, or PVR Midstream. The following diagram depicts our and our affiliates’ simplified organizational and ownership structure as of December 31, 2009: Contents

~~Relationship~~• Mitigate commodity price exposure in the PVR natural gas midstream segment . PVR’s natural gas midstream operations consist of a mix of fee-based and margin-based services that, together with ~~Penn~~its ~~Virginia~~hedging ~~Corporation~~activities, are expected to generate relatively stable cash flows. During the quarter ended December 31, 2010 approximately 22% of the system throughput volumes in the PVR natural gas midstream segment were gathered or processed under fee-based contracts. Under fee-based contracts, PVR is not exposed directly to commodity price risk. The remainder of PVR’s system throughput volumes were gathered or processed under gas purchase/keep-whole arrangements and percentage-of-proceeds arrangements that are subject to commodity price risk. However, PVR expects to manage its exposure to commodity price risk by entering into hedging transactions. Based upon PVR’s current volumes, it has entered into hedging agreements covering approximately 55% and 32% of its commodity-sensitive volumes in 2011 and 2012. Historically, PVR has generally targeted hedging 50% to 60% of its commodity-sensitive volumes covering a two-year period.

Our partnership agreement provides that our general partner is restricted from engaging in any business activities other than those incidental to its ownership of interests in us. Under an omnibus agreement between Penn Virginia, PVR ~~and PVR~~’s ~~general~~Contracts ~~partner, to which we became subject after our IPO, Penn Virginia and~~

6PVR Coal and Natural Resource Management Segment

~~TABLE~~PVR OFearns ~~CONTENTS~~most of its coal royalties revenues under long-term leases that generally require its lessees to make royalty payments to it based on the higher of a percentage of the gross sales price or a fixed price per ton of coal they sell. The balance of PVR’s coal royalties revenues is earned under long-term leases that require the lessees to make royalty payments to PVR based on fixed royalty rates that escalate annually. A typical lease either expires upon exhaustion of the leased reserves or has a five to ten-year base term, with the lessee having an option to extend the lease for at least five years after the expiration of the base term. Substantially all of PVR’s leases require the lessee to pay minimum rental payments to PVR in monthly or annual installments, even if no mining activities are ongoing. These minimum rentals are recoupable, usually over a period from one to three years from the time of payment, against the production royalties owed to PVR once coal production commences.

~~its~~Substantially ~~affiliates~~all of PVR’s leases impose obligations on the lessees to diligently mine the leased coal using modern mining techniques, indemnify PVR for any damages it incurs in connection with the lessee’s mining operations, including usany damages PVR may incur due to the lessee’s failure to fulfill reclamation or other environmental obligations, conduct ~~are~~mining ~~restricted~~operations in ~~their~~compliance ~~ability~~with all applicable laws, obtain its written consent prior to ~~engage~~assigning inthe ~~any~~lease ~~coal-related~~and ~~business~~maintain commercially reasonable amounts of general liability and other insurance. ~~See~~Substantially ~~Item~~all 13of the leases grant PVR the right to review all lessee mining plans and maps, ~~“Certain~~enter ~~Relationships~~the leased premises to examine mine workings and ~~Related~~conduct ~~Transactions~~audits of lessees’ compliance with lease terms. In the event of a default by a lessee, substantially all of the leases give PVR the right to terminate the lease and ~~Director~~take ~~Independence — Transactions~~possession ~~with~~of ~~Related~~the ~~Persons~~leased premises.”

~~Partnership~~In ~~Distributions~~addition, PVR earns revenues under coal services contracts, timber contracts and oil and gas leases. PVR’s coal services contracts generally provide that the users of PVR’s coal services pay PVR a fixed fee per ton of coal processed at its facilities. All of PVR’s coal services contracts are with lessees of PVR’s coal reserves and these contracts generally have terms that run concurrently with the related coal lease. PVR’s timber contracts generally provide that the timber companies pay PVR a fixed price per thousand board feet of timber harvested from PVR’s property. PVR receives royalties under its oil and gas leases based on a percentage of the revenues the producers receive for the oil and gas they sell.

~~Cash~~PVR ~~Distributions~~Natural Gas Midstream Segment

~~Our~~PVR’s ~~only~~natural ~~cash~~gas ~~generating~~midstream ~~assets~~business ~~consist~~generates ofrevenues ~~our~~primarily ~~interests~~from ingas ~~PVR.~~purchase Weand ~~paid~~processing ~~cash~~contracts ~~distributions~~with ofnatural ~~$1.52~~gas ~~per~~producers ~~common~~and ~~unit~~from ~~during~~fees charged for gathering natural gas volumes and providing other related services. During the year ended December 31, ~~2009.~~2010, InPVR’s ~~the~~natural ~~first~~gas ~~quarter~~midstream business generated a majority of ~~2010,~~its wegross ~~paid~~margin afrom ~~cash~~two ~~distribution~~types of ~~$0.38~~contractual ~~($1.52~~arrangements onunder anwhich ~~annualized~~its ~~basis)~~margin ~~per~~is ~~common~~exposed ~~unit~~to increases ~~with~~and ~~respect~~decreases toin the price of natural gas and NGLs: (i) gas purchase/keep-whole and (ii) percentage-of-proceeds. For the fourth quarter of ~~2009.~~2010, ~~This~~approximately ~~distribution~~16% ~~was~~of ~~unchanged~~PVR’s ~~from~~system ~~the~~throughput ~~previous~~volumes ~~distribution~~were ~~paid~~gathered onor ~~November~~processed under 18gas purchase/keep-whole contracts, ~~2009.~~62% ~~For~~were ~~the~~gathered ~~remainder~~or processed under percentage-of-proceeds ~~2010,~~contracts weand ~~expect~~22% towere ~~pay~~gathered ~~cash~~or ~~distributions~~processed ofunder atfee-based ~~least~~gathering $0contracts.38 ~~($1.52~~A onmajority anof ~~annualized~~the ~~basis)~~gas ~~per~~purchase/keep-whole ~~common~~and percentage-of-proceeds ~~unit~~contracts include fee-based components such as gathering and compression charges.

In 2010, 17%, 14%, 11% and 10% of the PVR ~~Cash~~natural ~~Distributions~~gas midstream segment’s revenues and 14%, 11%, 9% and 8% of our total consolidated revenues resulted from four of PVR’s natural gas midstream customers, Conoco Phillips Company, Tenaska Marketing Ventures, Targa Liquids Marketing and Trade and Williams NGL Marketing, LLC.

InGas ~~conjunction~~Purchase/Keep-Whole ~~with~~Arrangements Under ~~our~~gas purchase/keep-whole ~~IPO~~arrangements, ~~Penn~~PVR ~~Virginia~~generally ~~contributed~~buys ~~its~~natural ~~general~~gas ~~partner~~from ~~interest,~~producers ~~including~~based ~~its~~upon ~~IDRs,~~an ~~and~~index ~~most~~price ofand ~~its~~then ~~limited~~sells ~~partner~~the ~~interest~~NGLs inand ~~PVR to us in exchange for~~ the ~~general~~remaining ~~partner~~residue ~~interest~~gas ~~and~~to athird ~~limited~~parties ~~partner~~at ~~interest~~market ~~in us~~prices. WeBecause ~~received~~the ~~total~~extraction ~~distributions from PVR~~ of ~~$63.0~~the ~~million,~~NGLs ~~$57.5~~from ~~million and $45.6 million for~~ the ~~periods~~natural gas ~~presented,~~during ~~allocated~~processing ~~among~~reduces ~~our limited partner interest, general partner interest and IDRs in PVR as shown in~~ the ~~following~~volume ~~table:~~of natural

	Year Ended December 31,
	2009		2008		2007
Limited partner units	$	36,824	$	35,648	$	32,515
General partner interest (2%)		1,988		1,820		1,562
IDRs		24,140		20,049		11,551
Total cash distributions paid	$	62,952	$	57,517	$	45,628

PVRTable paid cash distributions of $1.88 per common unit during the year ended December 31, 2009. In the first quarter of 2010, PVR paid a cash distribution of $0.47 ($1.88 on an annualized basis) per common unit with respect to the fourth quarter of 2009. This distribution was unchanged from the previous distribution paid on November 13, 2009. For the remainder of 2010, PVR expects to pay quarterly cash distributions of at least $0.47 ($1.88 on an annualized basis) per common unit. Contents

~~Limited~~ gas ~~Call~~available ~~Right~~for sale, profitability is dependent on the value of those NGLs being higher than the value of the volume of gas reduction or “shrink.” Under these arrangements, revenues and gross margins decrease when the price of natural gas increases relative to the price of NGLs. Accordingly, a change in the relationship between the price of natural gas and the price of NGLs could have a material adverse effect on PVR’s business, results of operations or financial condition.

IfPercentage-of-Proceeds atArrangements Under percentage-of-proceeds ~~any~~arrangements, ~~time~~PVR ~~our~~generally ~~general~~gathers ~~partner~~ and ~~its~~processes ~~affiliates~~natural ~~own~~gas ~~more~~on ~~than~~behalf ~~90%~~ of ~~our outstanding common units~~producers, ~~our~~sells ~~general partner has~~ the ~~right,~~resulting ~~which~~residue itgas ~~may~~and ~~assign~~NGL involumes ~~whole~~at ormarket inprices ~~part~~and remits to ~~any~~producers ofan ~~its~~agreed-upon ~~affiliates~~percentage ~~or us, but not the obligation, to acquire all~~ of the ~~remaining~~proceeds ~~common units held by unaffiliated persons as~~ of athose sales ~~record~~based ~~date to be selected by our general partner,~~ on ateither ~~least~~an ~~ten~~index ~~but not more than 60 days’ notice, at a~~ price ~~equal~~or to the ~~greater~~price ofactually ~~(i)~~received for the ~~average~~gas ofand ~~the~~NGLs. ~~daily~~Under ~~closing~~these ~~prices~~types of ~~the~~arrangements, ~~common~~PVR’s ~~units~~revenues ~~over~~and ~~the~~gross 20margins ~~trading~~increase ~~days~~as ~~preceding~~natural ~~the~~gas ~~date~~prices ~~three~~and ~~days~~NGL ~~before~~prices ~~notice~~increase, ofand ~~exercise~~its ofrevenues ~~the call right is first mailed~~ and ~~(ii) the~~gross ~~highest~~margins ~~price~~decrease ~~paid~~as bynatural ~~our~~gas ~~general~~prices ~~partner~~and orNGL ~~any~~prices ~~of its affiliates for common units during the 90-day period preceding the date such notice is first mailed~~decrease.

AsFee-Based aArrangements Under ~~result~~fee-based arrangements, ofPVR ~~this~~receives ~~right~~fees offor ~~our~~gathering, ~~general~~compressing ~~partner,~~and/or aprocessing ~~holder~~natural ofgas. ~~common~~The ~~units~~revenues ~~may~~PVR ~~have~~earns ~~his~~from orthese ~~her~~arrangements ~~common~~are ~~units~~directly ~~purchased~~dependent aton anthe ~~undesirable~~volume ~~time~~of ornatural ~~price.~~gas ~~The~~that ~~tax~~flows ~~consequences~~through toits asystems ~~unitholder~~and are independent of commodity prices. To the ~~exercise~~extent ofa ~~this~~sustained ~~call~~decline ~~right~~in ~~are~~commodity ~~the~~prices ~~same~~results asin a ~~sale~~decline byin ~~that~~volumes, ~~unitholder~~however, ofPVR’s ~~his~~revenues orfrom ~~her~~these ~~units~~arrangements inwould be reduced due to the ~~market.~~related reduction in drilling and development of new supply.

AsIn many cases, PVR provides services under contracts that contain a combination of ~~February~~more ~~22,~~than ~~2010~~one of the arrangements described above. The terms of PVR’s contracts vary based on gas quality conditions, ~~Penn~~the ~~Virginia~~competitive environment at the time the contracts were signed and ~~its~~customer ~~affiliates~~requirements. ~~owned~~The 20contract mix and,~~077~~ accordingly,~~429~~ ~~common~~exposure ~~units~~to natural gas and NGL prices, ~~representing~~may ~~approximately~~change ~~51%~~as a result of ~~our~~changes ~~outstanding~~in producer preferences, expansion in regions where some types of contracts are more common ~~units~~and other market factors.

~~Certain~~Natural ~~Conflicts~~Gas Marketing Contracts PVR is also engaged in natural gas marketing by aggregating third-party volumes and selling those volumes into interstate and intrastate pipeline systems such as Enogex and Panhandle Eastern Pipeline and at market hubs accessed by various interstate pipelines. Revenues from this business do not generate qualifying income for a publicly traded limited partnership, but PVR does not expect it to have an impact on its tax status, as it does not represent a significant percentage of ~~Interest~~PVR’s operating income. For the years ended December 31, 2010 , PVR’s natural gas marketing activities generated $2.8 million, $1.8 million and $5.8 million in net revenues.

~~Conflicts~~PVR ofNatural ~~interest~~Gas ~~exist~~Midstream ~~and~~Segment ~~may~~Commodity ~~arise~~Derivatives PVR inutilizes derivative contracts to hedge against the ~~future~~variability asin aits ~~result~~frac ofspread. PVR’s frac spread is the ~~relationships~~spread ~~among~~between ~~Penn~~the ~~Virginia,~~purchase price for the natural gas PVR purchases from producers and ~~their~~the ~~respective~~sale ~~general~~price ~~partners~~for ~~and~~NGLs ~~affiliates,~~that onPVR sells after processing. PVR hedges against the ~~one~~variability ~~hand,~~in its frac spread by entering into costless collar and usswap derivative contracts to sell NGLs forward at a predetermined commodity price and ~~our~~to ~~unitholders,~~purchase an equivalent volume of natural gas forward on ~~the~~an ~~other~~MMBtu ~~hand~~basis. ~~Like~~While the ~~PVR,~~use ~~our~~of ~~general~~derivative ~~partner~~instruments islimits ~~controlled~~the byrisk ~~Penn~~of ~~Virginia.~~adverse ~~Accordingly~~price movements, ~~Penn~~such ~~Virginia~~use ~~has~~may ~~the~~also limit future revenues or cost savings from favorable price movements.

7See Note 8 to the Consolidated Financial Statements for a further description of PVR’s derivatives program.

~~TABLE~~Partnership OFStructure ~~CONTENTS~~

~~ability~~PVR tocompleted ~~elect,~~its ~~remove~~initial ~~and~~public ~~replace~~offering ~~the~~in October ~~directors~~2001. ~~and~~PVR’s ~~officers~~operations ofare ~~our~~conducted ~~general~~through, ~~partner~~ and ~~the~~its ~~directors~~operating ~~and~~assets ~~officers~~are ofowned ~~the~~by, ~~general~~its ~~partner~~subsidiaries. of PVR. ~~The~~owns ~~directors~~its ~~and~~subsidiaries ~~officers~~through ofa ~~our~~wholly ~~general~~owned ~~partner~~subsidiary, ~~have~~PVR ~~fiduciary~~Finco ~~duties~~LLC, towhich ~~manage~~is ~~our~~the ~~general~~sole ~~partner~~member inof athe ~~manner~~operating ~~beneficial~~company tofor ~~its~~the coal ~~owner~~and natural resource management segment, Penn Virginia Operating Co., AtLLC, ~~the~~or ~~same~~PVR ~~time~~Coal, ~~our~~and ~~general~~the ~~partner~~operating ~~has~~company afor ~~fiduciary~~the ~~duty~~natural togas ~~manage~~midstream ussegment, inPVR aMidstream ~~manner~~LLC, ~~beneficial~~or toPVR usMidstream. The following diagram depicts our and our affiliates’ ~~unitholders.~~simplified organizational and ownership structure as of December 31, 2010:

~~Certain~~7 of the executive officers and non-independent directors of our general partner also serve as executive officers and directors of Penn Virginia or the general partner of PVR. Consequently, these directors and officers may encounter situations in which their fiduciary obligations to Penn Virginia or PVR, on the one hand, and us, on the other hand, are in conflict.

LimitsTable onof Fiduciary ResponsibilitiesContents

LOGO

~~Our~~Relationship ~~partnership~~with ~~agreement~~PVR limits the liability and reduces the fiduciary duties owed by our general partner to our unitholders. Our partnership agreement also restricts the remedies available to our unitholders for actions that might otherwise constitute breaches of our general partner’s fiduciary duty.

Our partnership agreement ~~contains~~provides ~~provisions~~ that ~~waive or consent to conduct by~~ our general partner ~~and~~is ~~its~~restricted ~~affiliates~~from ~~that~~engaging ~~might~~in ~~otherwise~~any ~~raise~~business ~~issues~~activities ~~about~~other ~~compliance~~than ~~with~~those ~~fiduciary~~incidental ~~duties~~to orits ~~applicable~~ownership ~~law~~of interests in us. ~~For~~In ~~example~~addition, ~~our~~under ~~partnership~~a non-compete agreement ~~provides~~between ~~that~~us, ~~when~~ our general partner, isand ~~acting~~PVR inand its ~~capacity as our~~ general partner, aswe ~~opposed~~must tooffer inthe ~~its~~right ~~individual~~of ~~capacity,~~first itrefusal ~~must~~to ~~act~~PVR inon ~~“good~~any ~~faith”~~potential ~~and~~acquisition ~~will~~of ~~not~~assets berelating ~~subject~~ to any ~~other~~coal ~~standard~~or ~~under~~natural ~~applicable~~gas ~~law~~businesses. We Inare ~~addition,~~not ~~when~~otherwise prohibited ~~our~~from ~~general~~engaging ~~partner is acting~~ in ~~its~~activities ~~individual~~that ~~capacity,~~directly ascompete ~~opposed~~with ~~to in its capacity as our general partner~~PVR, iteven ~~may~~if ~~act~~we ~~without~~would ~~any~~have ~~fiduciary obligation~~a toconflict usof orinterest ~~the~~with ~~unitholders~~PVR ~~whatsoever.~~with ~~These~~respect ~~standards reduce the obligations~~ to ~~which~~such ~~our~~business ~~general partner would otherwise be held~~opportunity.

In order to become a limited partner of our partnership, a common unitholder is required to agree to be bound by the provisions in our partnership agreement, including the provisions discussed above. This is in accordance with the policy of the Delaware Revised Uniform Limited Partnership ~~Act~~Distributions favoring the principle of freedom of contract and the enforceability of partnership agreements. The failure of a limited partner or assignee to sign a partnership agreement does not render the partnership agreement unenforceable against that person.

InCash ~~addition~~Distributions to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the general partner or its officers and directors acted in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with the knowledge that such conduct was unlawful.

Our ~~partnership~~only ~~agreement~~cash ~~generally~~generating ~~provides~~assets ~~that~~consist ~~affiliated transactions and resolutions~~ of ~~conflicts~~our ofinterests ~~interest~~in ~~not~~PVR. ~~involving~~We apaid ~~vote~~cash distributions of ~~unitholders~~$1.55 ~~and~~per ~~that~~common ~~are~~unit ~~not~~during ~~approved by~~ the ~~conflicts~~year ended ~~committee~~December 31, of2010. In the ~~board~~first ofquarter ~~directors~~ of ~~our general partner must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or “fair and reasonable” to us~~2011, ~~taking~~we ~~into~~paid ~~account~~a ~~the~~cash ~~totality~~distribution of ~~the~~$0.39 ~~relationships between the parties involved~~ (~~including~~$1.56 ~~other~~on ~~transactions~~an ~~that may be particularly favorable or advantageous to us).~~

If8 our general partner does not seek approval from the conflicts committee and its board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good faith and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which our general partner would otherwise be held.

WeTable are required by our partnership agreement to indemnify our general partner and its officers, directors, managers and certain other specified persons, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our general partner or these other persons. We must provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining Contents

8 annualized basis) per common unit with respect to the fourth quarter of 2010. This distribution was unchanged from the previous distribution paid on November 19, 2010.

~~TABLE~~PVR OFCash ~~CONTENTS~~Distributions

~~that~~In ~~these~~conjunction ~~persons~~with ~~acted~~our inIPO, ~~bad~~Penn ~~faith~~Virginia orcontributed ~~engaged~~its ingeneral ~~fraud~~partner orinterest, ~~willful~~including ~~misconduct.~~its WeIDRs, ~~must~~and ~~also~~most ~~provide~~of ~~this~~its ~~indemnification~~limited ~~for~~partner ~~criminal~~interest ~~proceedings~~in ~~unless~~PVR ~~our~~to us in exchange for the general partner orinterest and ~~these~~a ~~other~~limited ~~persons~~partner ~~acted~~interest ~~with~~in ~~knowledge~~us. ~~that~~We ~~their~~received ~~conduct~~total ~~was~~distributions ~~unlawful~~from PVR of $63.1 ~~Thus~~million, $63.0 million and $57.5 million for the periods presented, allocated among our ~~general~~limited partner ~~could~~interest, begeneral ~~indemnified~~partner ~~for~~interest ~~its~~and ~~negligent~~IDRs ~~acts~~in ifPVR itas shown ~~met~~in the ~~requirements~~following ~~set~~table: ~~forth above.~~

Competition


	Year Ended December 31,
	2010		2009		2008
Limited partner units	$	36,872	$	36,824	$	35,648
General partner interest (2%)		1,999		1,988		1,820
IDRs		24,267		24,140		20,049

Total cash distributions paid	$	63,138	$	62,952	$	57,517

PVR ~~Coal~~paid ~~and~~cash ~~Natural~~distributions ~~Resource~~of ~~Management~~$1.88 ~~Segment~~per common unit during the year ended December 31, 2010. In the first quarter of 2011, PVR paid a cash distribution of $0.47 ($1.88 on an annualized basis) per common unit with respect to the fourth quarter of 2010. This distribution was unchanged from the previous distribution paid on November 12, 2010.

~~The~~Limited ~~coal~~Call ~~industry~~Right is intensely competitive primarily as a result of the existence of numerous producers. PVR’s lessees compete with both large and small coal producers in various regions of the United States for domestic sales. The industry has undergone significant consolidation which has led to some of the competitors of PVR’s lessees having significantly larger financial and operating resources than most of PVR’s lessees. PVR’s lessees compete on the basis of coal price at the mine, coal quality (including sulfur content), transportation cost from the mine to the customer and the reliability of supply. Continued demand for PVR’s coal and the prices that PVR’s lessees obtain are also affected by demand for electricity, demand for metallurgical coal, access to transportation, environmental and government regulations, technological developments and the availability and price of alternative fuel supplies, including nuclear, natural gas, oil and hydroelectric power. Demand for PVR’s low sulfur coal and the prices PVR’s lessees will be able to obtain for it will also be affected by the price and availability of high sulfur coal, which can be marketed in tandem with emissions allowances which permit the high sulfur coal to meet federal Clean Air Act, or CAA, requirements.

~~PVR~~If ~~Natural~~at ~~Gas~~any ~~Midstream~~time ~~Segment~~our general partner and its affiliates own more than 90% of our outstanding common units, our general partner has the right, which it may assign in whole or in part to any of its affiliates or us, but not the obligation, to acquire all of the remaining common units held by unaffiliated persons as of a record date to be selected by our general partner, on at least ten but not more than 60 days’ notice, at a price equal to the greater of (i) the average of the daily closing prices of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (ii) the highest price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed.

~~PVR~~As a ~~experiences~~result ~~competition~~of inthis ~~all~~right of ~~its~~our ~~natural~~general ~~gas~~partner, ~~midstream~~a ~~markets.~~holder ~~PVR’s~~of ~~competitors~~common ~~include~~units ~~major~~may ~~integrated~~have ~~oil~~his ~~companies,~~or ~~interstate~~her ~~and~~common ~~intrastate~~units ~~pipelines~~purchased ~~and~~at ~~companies~~an ~~that~~undesirable ~~gather,~~time ~~compress,~~or ~~process,~~price. ~~transport~~The ~~and~~tax ~~market~~consequences ~~natural~~to ~~gas.~~a ~~Many~~unitholder of ~~PVR’s~~the ~~competitors~~exercise ~~have~~of ~~greater~~this ~~financial~~call ~~resources~~right ~~and~~are ~~access~~the tosame ~~larger~~as ~~natural~~a ~~gas~~sale ~~supplies~~by that ~~than~~unitholder ~~PVR~~of ~~does~~his or her units in the market.

~~The~~Certain ~~ability~~Conflicts to offer natural gas producers competitive gathering and processing arrangements and subsequent reliable service is fundamental to obtaining and keeping gas supplies for PVR’s gathering systems. The primary concerns of ~~the~~Interest ~~producer are:~~

•Conflicts of interest exist and may arise in the ~~pressure~~future ~~maintained~~as a result of the relationships among PVR and its general partner and affiliates, on the ~~system~~one athand, and us and our unitholders, on the ~~point~~other hand. The directors and officers of ~~receipt;~~our general partner have fiduciary duties to manage our general partner in a manner beneficial to its owner. At the same time, our general partner has a fiduciary duty to manage us in a manner beneficial to us and our unitholders.

•All ~~the~~of ~~relative~~our ~~volumes~~general partner’s executive officers are also officers of ~~gas~~PVR’s ~~consumed~~general aspartner ~~fuel~~and one of our general partner’s directors is also a director of PVR’s general partner. Consequently, this director and ~~lost;~~all of the officers may encounter situations in which their fiduciary obligations to PVR, on the one hand, and us, on the other hand, are in conflict.

•Limits ~~the~~on ~~gathering/processing~~Fiduciary Responsibilities ~~fees charged;~~

•Our partnership agreement limits the ~~timeliness~~liability and reduces the fiduciary duties owed by our general partner to our unitholders. Our partnership agreement also restricts the remedies available to our unitholders for actions that might otherwise constitute breaches of ~~well~~our ~~connects;~~general partner’s fiduciary duty.

•Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement provides that when our general partner is acting in its capacity as our general partner, as opposed to in its individual capacity, it must act in “good faith” and will not be subject to any other standard under applicable law. In addition, when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or the ~~customer~~unitholders ~~service~~whatsoever. ~~orientation~~These ofstandards reduce the ~~gatherer/processor;~~obligations ~~and~~to which our general partner would otherwise be held.

•In ~~the~~order ~~reliability~~to become a limited partner of our partnership, a common unitholder is required to agree to be bound by the ~~field~~provisions ~~services~~in ~~provided~~our partnership agreement, including the provisions discussed above. This is in accordance with the policy of the Delaware Revised Uniform Limited Partnership Act favoring the principle of freedom of contract and the

~~Government~~9 ~~Regulation and Environmental Matters~~

TheTable operations of PVR’s coal and natural resource management business and natural gas midstream business are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations are conducted. Contents

~~PVR~~ enforceability ~~Coal~~of ~~and~~partnership ~~Natural~~agreements. ~~Resource~~The ~~Management~~failure ~~Segment~~of a limited partner or assignee to sign a partnership agreement does not render the partnership agreement unenforceable against that person.

~~General~~In ~~Regulation~~addition ~~Applicable~~ to ~~Coal~~the ~~Lessees. PVR’s~~other ~~lessees~~more ~~are~~specific ~~obligated~~provisions tolimiting ~~conduct~~the ~~mining~~obligations ~~operations~~of inour ~~compliance~~general ~~with~~partner, ~~all~~our ~~applicable~~partnership ~~federal,~~agreement further ~~state~~provides ~~and~~that ~~local~~our ~~laws~~general partner and ~~regulations.~~its ~~These~~officers ~~laws~~ and ~~regulations~~directors ~~include~~will ~~matters~~not ~~involving~~be ~~the~~liable ~~discharge~~for ofmonetary ~~materials~~damages ~~into~~to ~~the environment~~us, ~~employee~~our ~~health~~limited ~~and~~partners ~~safety,~~or ~~mine~~assignees ~~permits~~for ~~and~~errors ~~other~~of ~~licensing~~judgment ~~requirements,~~or ~~reclamation~~for ~~and~~any ~~restoration~~acts ofor ~~mining~~omissions ~~properties~~unless ~~after~~there ~~mining~~has isbeen ~~completed,~~a ~~management~~final ofand non-appealable ~~materials~~judgment ~~generated~~ by ~~mining~~a ~~operations,~~court ~~surface~~of ~~subsidence~~competent ~~from~~jurisdiction ~~underground~~determining ~~mining,~~that ~~water~~the ~~pollution,~~general ~~legislatively~~partner ~~mandated~~or ~~benefits~~its ~~for~~officers ~~current~~ and ~~retired~~directors ~~coal~~acted ~~miners,~~in ~~air~~bad ~~quality standards,~~faith ~~protection~~or ofengaged ~~wetlands,~~in ~~plant~~fraud ~~and~~or ~~wildlife~~willful ~~protection~~misconduct, ~~limitations~~or onin ~~land~~the ~~use,~~case ~~storage~~ of ~~petroleum~~a ~~products~~criminal ~~and~~matter, ~~substances~~acted ~~which~~with ~~are~~the knowledge ~~regarded~~that assuch ~~hazardous~~conduct ~~under~~was ~~applicable~~unlawful. ~~laws and management of~~

9Our partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not involving a vote of unitholders and that are not approved by the conflicts committee of the board of directors of our general partner must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or “fair and reasonable” to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us).

~~TABLE~~If OFour ~~CONTENTS~~general partner does not seek approval from the conflicts committee and its board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good faith and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which our general partner would otherwise be held.

~~electrical~~We ~~equipment~~are ~~containing~~required ~~polychlorinated~~by ~~biphenyls,~~our orpartnership ~~PCBs.~~agreement ~~These~~to ~~extensive~~indemnify our general partner and ~~comprehensive~~its ~~regulatory~~officers, ~~requirements~~directors, ~~are~~managers ~~closely~~and ~~enforced~~certain other specified persons, ~~PVR’s~~to ~~lessees~~the ~~regularly~~fullest ~~have~~extent ~~on-site~~permitted ~~inspections~~by law, against liabilities, costs and ~~violations~~expenses ~~during~~incurred ~~mining~~by ~~operations~~our ~~are~~general ~~not~~partner ~~unusual~~or inthese ~~the~~other ~~industry,~~persons. ~~notwithstanding~~We ~~compliance~~must ~~efforts~~provide bythis ~~PVR’s~~indemnification ~~lessees.~~unless ~~However,~~there ~~none~~has been a final and non-appealable judgment by a court of ~~the~~competent ~~violations~~jurisdiction todetermining ~~date,~~that these persons acted in bad faith or ~~the~~engaged ~~monetary~~in ~~penalties~~fraud ~~assessed,~~or ~~have~~willful ~~been~~misconduct. ~~material~~We tomust ~~us,~~also ~~PVR~~provide ~~or,~~this toindemnification for criminal proceedings unless our ~~knowledge,~~general topartner ~~PVR’s~~or ~~lessees.~~these ~~Although~~other ~~many~~persons ~~new~~acted ~~safety~~with ~~requirements~~knowledge ~~have~~that ~~been~~their ~~instituted~~conduct ~~recently~~was unlawful. Thus, our ~~PVR~~general ~~does~~partner ~~not~~could ~~currently~~be ~~expect~~indemnified ~~that~~for ~~future~~its ~~compliance~~negligent ~~will~~acts ~~have~~if ait ~~material~~met ~~adverse~~the ~~effect~~requirements onset ~~PVR~~forth above.

~~While~~Competition it is not possible to quantify the costs of compliance by PVR’s lessees with all applicable federal, state and local laws and regulations, those costs have been and are expected to continue to be significant. The lessees post performance bonds pursuant to federal and state mining laws and regulations for the estimated costs of reclamation and mine closing, including the cost of treating mine water discharge when necessary. We do not accrue for such costs because PVR’s lessees are contractually liable for all costs relating to their mining operations, including the costs of reclamation and mine closure. However, PVR does require some smaller lessees to deposit into escrow certain funds for reclamation and mine closure costs or post performance bonds for these costs. Although we believe that the lessees typically accrue adequate amounts for these costs, their future operating results would be adversely affected if they later determined these accruals to be insufficient. Compliance with these laws and regulations has substantially increased the cost of coal mining for all domestic coal producers.

In addition, the utility industry, which is the most significant end-user of coal, is subject to extensive regulation regarding the environmental impact of its power generation activities which could affect demand for coal mined by PVR’s ~~lessees.~~Coal ~~The possibility exists that new legislation or regulations may be adopted which have a significant impact on the mining operations of PVR’s lessees or their customers’ ability to use coal~~ and ~~may~~Natural ~~require~~Resource ~~PVR,~~Management ~~its~~Segment ~~lessees or their customers to change operations significantly or incur substantial costs.~~

~~Air Emissions.~~ The ~~CAA~~coal ~~and~~industry ~~corresponding~~is ~~state~~intensely ~~and~~competitive ~~local~~primarily ~~laws~~as ~~and~~a ~~regulations~~result ~~affect~~of ~~all~~the ~~aspects~~existence of numerous producers. PVR’s ~~business,~~lessees compete with both ~~directly~~large and ~~indirectly.~~small ~~The~~coal ~~CAA~~producers ~~directly~~in ~~impacts~~various ~~PVR’s~~regions ~~lessees’~~of ~~coal~~the United ~~mining~~States ~~and~~for ~~processing~~domestic ~~operations~~sales. byThe ~~imposing~~industry ~~permitting~~has ~~requirements~~undergone ~~and,~~significant inconsolidation ~~some~~which ~~cases,~~has ~~requirements~~led to ~~install~~some ~~certain~~of ~~emissions~~the ~~control~~competitors ~~equipment,~~of onPVR’s ~~sources~~lessees ~~that~~having ~~emit~~significantly ~~various~~larger ~~hazardous~~financial and ~~non-hazardous~~operating ~~air~~resources ~~pollutants.~~than ~~The~~most ~~CAA~~of ~~also~~PVR’s ~~indirectly~~lessees. PVR’s ~~affects~~lessees ~~coal~~compete ~~mining~~on ~~operations~~the bybasis ~~extensively~~of ~~regulating~~coal ~~the~~price ~~air~~at ~~emissions~~the ofmine, coal~~-fired~~ ~~electric~~quality ~~power~~(including ~~generating~~sulfur ~~plants.~~content), ~~There~~transportation ~~have~~cost ~~been~~from athe ~~series~~mine ofto ~~recent~~the ~~federal~~customer ~~rulemakings~~and ~~that~~the ~~are focused~~reliability onof ~~emissions~~supply. ~~from~~Continued demand for PVR’s coal~~-fired~~ ~~electric~~and ~~generating~~the ~~facilities.~~prices ~~Installation~~that PVR’s oflessees ~~additional~~obtain ~~emissions~~are ~~control~~also ~~technology~~affected ~~and~~by ~~additional~~demand ~~measures~~for ~~required~~electricity, ~~under~~demand ~~Environmental~~for ~~Protection~~metallurgical ~~Agency~~coal, oraccess ~~EPA~~to transportation, ~~laws~~environmental and government regulations, ~~will~~technological ~~make~~developments itand ~~more~~the ~~costly~~availability ~~to build~~ and ~~operate~~price ~~coal-fired~~of ~~power~~alternative ~~plants~~fuel supplies, ~~and~~including nuclear, ~~depending~~natural ongas, ~~the~~oil ~~requirements~~and ofhydroelectric ~~individual~~power. ~~state~~Demand ~~implementation~~for ~~plans,~~PVR’s ~~could~~low ~~make~~sulfur coal aand ~~less~~the ~~attractive~~prices ~~fuel~~PVR’s ~~alternative~~lessees inwill ~~the~~be ~~planning~~able ~~and~~to ~~building~~obtain offor ~~power~~it ~~plants~~will inalso ~~the~~be ~~future.~~affected ~~Any~~by ~~reduction~~the inprice ~~coal’s~~and ~~share~~availability of ~~power~~high ~~generating~~sulfur ~~capacity~~coal, which ~~could~~can ~~negatively~~be ~~impact~~marketed ~~PVR’s~~in ~~lessees’~~tandem ~~ability~~with toemissions ~~sell~~allowances ~~coal,~~ which ~~could~~permit ~~have~~the ahigh ~~material~~sulfur ~~effect~~coal onto ~~PVR’s~~meet ~~coal~~federal ~~royalties~~Clean ~~revenues~~Air Act, or CAA, requirements.

~~The~~PVR ~~EPA’s~~Natural ~~Acid~~Gas ~~Rain~~Midstream ~~Program,~~Segment provided in Title IV of the CAA, regulates emissions of sulfur dioxide from electric generating facilities. Sulfur dioxide is a by-product of coal combustion. Affected facilities purchase or are otherwise allocated sulfur dioxide emissions allowances, which must be surrendered annually in an amount equal to a facility’s sulfur dioxide emissions in that year. Affected facilities may sell or trade excess allowances to other facilities that require additional allowances to offset their sulfur dioxide emissions. In addition to purchasing or trading for additional sulfur dioxide allowances, affected power facilities can satisfy the requirements of the EPA’s Acid Rain Program by switching to lower sulfur fuels, installing pollution control devices such as flue gas desulfurization systems, or “scrubbers,” or by reducing electricity generating levels.

~~The~~PVR ~~EPA~~experiences ~~has~~competition ~~promulgated rules, referred to as the “NOx SIP Call,” that require coal-fired power plants and other large stationary sources~~ in all 21of ~~eastern~~its ~~states~~natural ~~and~~gas ~~Washington~~midstream Dmarkets.C. toPVR’s ~~make~~competitors ~~substantial~~include ~~reductions~~major inintegrated ~~nitrogen~~oil ~~oxide~~companies, ~~emissions~~interstate inand anintrastate ~~effort~~pipelines toand ~~reduce~~companies ~~the~~that ~~impacts of ozone transport between states. Additionally~~gather, ~~in March 2005~~compress, ~~the EPA issued the final Clean Air Interstate Rule~~process, ortransport ~~CAIR, which would have permanently capped nitrogen oxide~~ and ~~sulfur~~market ~~dioxide~~natural ~~emissions~~gas. inMany 28of ~~eastern~~PVR’s competitors ~~states~~have ~~and~~greater ~~Washington,~~financial ~~D.C.~~resources ~~beginning in 2009~~ and ~~2010.~~access ~~CAIR required those states~~ to ~~achieve~~larger ~~the~~natural ~~required~~gas ~~emission~~supplies ~~reductions~~than byPVR ~~requiring~~does. ~~power plants to either participate in an EPA-administered “cap-and-trade” program that caps emission in two phases,~~

10The ability to offer natural gas producers competitive gathering and processing arrangements and subsequent reliable service is fundamental to obtaining and keeping gas supplies for PVR’s gathering systems. The primary concerns of the producer are:

~~TABLE~~• OFthe ~~CONTENTS~~pressure maintained on the system at the point of receipt;

or• ~~by meeting an individual state emissions budget through measures established by~~ the ~~state.~~relative ~~The~~volumes ~~stringency~~ of ~~the~~gas ~~caps~~consumed ~~under CAIR may have required many coal-fired sources to install additional pollution control equipment, such~~ as ~~wet~~fuel ~~scrubbers,~~and to comply. This increased sulfur emission removal capability required by CAIR could have resulted in decreased demand for lower sulfur coal, which may have potentially driven down prices for lower sulfur coal. On July 11, 2008, the D.C. Circuit Court of Appeals vacated CAIR in its entirety. The EPA subsequently filed a petition for rehearing or, in the alternative, for a remand of the case without vacatur. On December 23, 2008, the Court issued an opinion to remand without vacating CAIR. Therefore, CAIR will remain in effect while the EPA conducts rulemaking to modify CAIR to comply with the Court’s July 2008 opinion. The Court declined to impose a schedule by which the EPA must complete the rulemaking, but reminded the EPA that the Court does “...not intend to grant an indefinite stay of the effectiveness of this Court’s decision.” The EPA is considering its options on how to proceed. lost;

In• ~~March 2005,~~ the ~~EPA~~gathering/processing ~~finalized~~fees the Clean Air Mercury Rule, or CAMR, which was to establish a two-part, nationwide cap on mercury emissions from coal-fired power plants beginning in 2010. It was the subject of extensive controversy and litigation and, in February 2008, the U.S. Circuit Court of Appeals for the District of Columbia vacated CAMR. The EPA appealed the decision to the U.S. Supreme Court in October 2008, but withdrew its petition for certiorari on February 6, 2009. However, a utility group continues to seek certiorari, challenging the court of appeals decision to overturn CAMR. In the meantime, the EPA plans to develop standards consistent with the court of appeal’s ruling, intending to propose air toxics standards for coal- and oil-fired electric generating units by March 10, 2011, and finalize a rule by November 16, 2011. In conjunction with these efforts, on December 24, 2009, the EPA approved an Information Collection Request (ICR) requiring all U.S. power plants with coal-or oil-fired electric generating units to submit emissions information for use in developing air toxics emissions standards. In addition, various states have promulgated or are considering more stringent emission limits on mercury emissions from coal-fired electric generating units. charged;

~~The~~• EPA has adopted new, more stringent national air quality standards for ozone and fine particulate matter. As a result, some states will be required to amend their existing state implementation plans to attain and maintain compliance with the ~~new~~timeliness ~~air~~of ~~quality~~well standards. In March 2007, the EPA published final rules addressing how states would implement plans to bring regions designated as non-attainment for fine particulate matter into compliance with the new air quality standard. Under the EPA’s final rule, states had until April 2008 to submit their implementation plans to the EPA for approval. Because coal mining operations and coal-fired electric generating facilities emit particulate matter, PVR’s lessees’ mining operations and their customers could be affected when the new standards are implemented by the applicable states. connects;

~~Likewise,~~• the ~~EPA’s~~customer ~~regional~~service ~~haze~~orientation program to improve visibility in national parks and wilderness areas required affected states to develop implementation plans by December 2007 that, among other things, identify facilities that will have to reduce emissions and comply with stricter emission limitations. This program may restrict construction of ~~new~~the ~~coal-fired~~gatherer/processor; power plants where emissions are projected to reduce visibility in protected areas. In addition, this program may require certain existing coal-fired power plants to install emissions control equipment to reduce haze-causing emissions such as sulfur dioxide, nitrogen oxide and ~~particulate matter.~~

~~The~~• ~~U.S. Department of Justice, on behalf of~~ the ~~EPA,~~reliability ~~has filed lawsuits against a number~~ of ~~coal-fired electric generating facilities alleging violations of~~ the ~~new~~field ~~source~~services ~~review provisions of the CAA~~provided. The EPA has alleged that certain modifications have been made to these facilities without first obtaining permits required under the new source review program. Several of these lawsuits have settled, but others remain pending. On April 2, 2007, the U.S. Supreme Court ruled in one such case, Environmental Defense v. Duke Energy Corp. The Court held that the EPA is not required to use an “hourly rate test” in determining whether a modification to a coal burning utility requires a permit under the new source review program, thus allowing the EPA to apply a test based on average annual emissions. The use of an annual emissions test could subject more coal-fired utility modification projects to the permitting requirements of the CAA New Source Review Program, such as those that allow plants to run for more hours in a given year. However, Duke is expected to continue to contest remaining issues in the case, and so litigation in this and other pending cases will likely continue. Depending on the ultimate resolution of these cases, demand for PVR’s coal could be affected, which could have an adverse effect on PVR’s coal royalties revenues.

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TABLETable OFof CONTENTSContents

~~Carbon~~Government ~~Dioxide~~Regulation Emissions. The Kyoto Protocol to the United Nations Framework Convention on Climate Change calls for developed nations to reduce their emissions of greenhouse gases to 5% below 1990 levels by 2012. Carbon dioxide, which is a major byproduct of the combustion of coal and ~~other~~Environmental ~~fossil~~Matters fuels, is subject to the Kyoto Protocol. The Kyoto Protocol went into effect on February 16, 2005 for those nations that ratified the treaty. In 2002, the United States withdrew its support for the Kyoto Protocol, and the United States is not participating in this treaty. Since the Kyoto Protocol became effective, there has been increasing international pressure on the United States to adopt mandatory restrictions on carbon dioxide emissions. In addition, on April 2, 2007 the U.S. Supreme Court held in Massachusetts v. EPA that unless the EPA affirmatively concludes that greenhouse gases are not causing climate change, the EPA must regulate greenhouse gas emissions from new automobiles under the CAA. The Court remanded the matter to the EPA for further consideration. This litigation did not directly concern the EPA’s authority to regulate greenhouse gas emissions from stationary sources, such as coal mining operations or coal-fired power plants. However, the Court’s decision is likely to influence another lawsuit currently pending in the U.S. Court of Appeals for the District of Columbia Circuit, involving a challenge to the EPA’s decision not to regulate carbon dioxide from power plants and other stationary sources under a CAA new source performance standard rule, which specifies emissions limits for new facilities. The court remanded that question to the EPA for further consideration in light of the ruling in Massachusetts v. EPA. On July 11, 2008, the EPA released an advanced notice of proposed rulemaking to regulate greenhouse gases under the CAA in response to the ruling in Massachusetts v. EPA. The notice did not contain a definitive proposal of what a greenhouse gas regulatory program would look like, but it presented the EPA’s analyses and policy alternatives for consideration. The EPA stated that promulgating a program under the CAA would take years to issue. In 2009, EPA took further steps toward greenhouse gas regulation under the CAA, issuing a final rule declaring that six greenhouse gases, including carbon dioxide and methane, “endanger both the public health and the public welfare of current and future generations.” The issuance of this “endangerment finding” allows the EPA to begin regulating greenhouse gas emissions under existing provisions of CAA. In late September and early October of 2009, in anticipation of the issuance of the endangerment finding, the EPA officially proposed two sets of rules regarding possible future regulation of greenhouse gas emissions under the CAA, one that would regulate greenhouse gas emissions from motor vehicles and the other greenhouse gas emissions from large stationary sources such as power plants or industrial facilities. Any decision in this case or any regulatory action by the EPA limiting greenhouse gas emissions from power plants could impact the demand for PVR’s coal, which could have an adverse effect on PVR’s coal royalties revenues.

The ~~permitting~~operations of aPVR’s ~~number of proposed new~~ coal~~-fired~~ ~~power~~and ~~plants~~natural ~~has~~resource ~~also~~management ~~recently~~business ~~been~~and ~~contested~~natural ~~by environmental organizations for concerns related to greenhouse~~ gas ~~emissions~~midstream ~~from~~business ~~new~~are ~~plants.~~subject ~~For instance, in October 2007, state regulators in Kansas became the first~~ to environmental ~~deny~~laws anand ~~air~~regulations ~~emissions~~adopted ~~construction~~by ~~permit~~various ~~for~~governmental ~~a new coal-fired power plant based on the plant’s projected emissions of carbon dioxide. State regulatory~~ authorities in ~~Florida and North Carolina have also rejected~~ the ~~construction~~jurisdictions ofin ~~new~~which ~~coal-fired power plants based on the uncertainty surrounding the potential costs associated with greenhouse gas emissions from~~ these ~~plants under~~operations ~~future~~are ~~laws limiting the emission of carbon dioxide~~conducted.

InPVR ~~addition,~~Coal permits for several new coal-fired power plants without limits imposed on their greenhouse gas emissions have been appealed by environmental organizations to the EPA’s Environmental Appeals Board, or EAB, and ~~other~~Natural ~~judicial~~Resource ~~forums~~Management ~~under~~Segment the CAA. For example, in June 2008, a Georgia court voided a CAA permit and halted the construction of a coal-fired power plant for failure to address carbon dioxide emissions. Likewise, in November 2008, in another case, In re Deseret Power Electric Cooperative, the EAB remanded the permitting decision back to the Region to reopen the record and reconsider whether carbon dioxide is a pollutant subject to regulation under the CAA with instructions to consider its nationwide implications. In December 2008, the EPA Administrator issued an interpretive rule determining that the phrase in the CAA “not subject to regulation” does not include pollutants for which only monitoring and reporting is required. Because carbon dioxide is such a pollutant, this interpretive rule has the effect of precluding any consideration of carbon dioxide emissions in connection with federal permitting under the CAA. Environmental groups filed a Petition for Reconsideration of the interpretive rule. On February 17, 2009, the EPA stated that it would grant the Petition for Reconsideration and allow public comment, but it declined to stay the effectiveness of the interpretive rule at that time.

12General Regulation Applicable to Coal Lessees PVR’s lessees are obligated to conduct mining operations in compliance with all applicable federal, state and local laws and regulations. These laws and regulations include matters involving the discharge of materials into the environment, employee health and safety, mine permits and other licensing requirements, reclamation and restoration of mining properties after mining is completed, management of materials generated by mining operations, surface subsidence from underground mining, water pollution, legislatively mandated benefits for current and retired coal miners, air quality standards, protection of wetlands, plant and wildlife protection, limitations on land use, storage of petroleum products and substances which are regarded as hazardous under applicable laws and management of electrical equipment containing polychlorinated biphenyls, or PCBs. These extensive and comprehensive regulatory requirements are closely enforced, PVR’s lessees regularly have on-site inspections and violations during mining operations are not unusual in the industry, notwithstanding compliance efforts by PVR’s lessees. However, none of the violations to date, or the monetary penalties assessed, have been material to us or, to PVR’s knowledge, to PVR’s lessees. Although many new safety requirements have been instituted recently, we do not currently expect that future compliance will have a material adverse effect on us.

~~TABLE~~While OFit ~~CONTENTS~~is not possible to quantify the costs of compliance by PVR’s lessees with all applicable federal, state and local laws and regulations, those costs have been and are expected to continue to be significant. The lessees post performance bonds pursuant to federal and state mining laws and regulations for the estimated costs of reclamation and mine closing, including the cost of treating mine water discharge when necessary. We do not accrue for such costs because PVR’s lessees are contractually liable for all costs relating to their mining operations, including the costs of reclamation and mine closure. However, we do require some smaller lessees to deposit into escrow certain funds for reclamation and mine closure costs or post performance bonds for these costs. Although we believe that the lessees typically accrue adequate amounts for these costs, their future operating results would be adversely affected if they later determined these accruals to be insufficient. Compliance with these laws and regulations has substantially increased the cost of coal mining for all domestic coal producers.

AIn ~~number~~addition, ~~of states have also either passed legislation or announced initiatives focused on decreasing or stabilizing carbon dioxide emissions associated with~~ the ~~combustion of fossil fuels~~utility industry, ~~and~~which ~~many~~is ofthe ~~these~~most ~~measures~~significant ~~have focused on emissions from coal~~end-~~fired~~user ~~electric~~of ~~generating facilities. For example~~coal, ~~ten~~is ~~northeastern~~subject ~~and mid-Atlantic states have agreed~~ to ~~implement~~extensive aregulation ~~regional~~regarding ~~cap-and-trade program, referred to as~~ the ~~Regional~~environmental ~~Greenhouse~~impact ~~Gas~~of ~~Initiative,~~its ~~or RGGI, to stabilize carbon dioxide emissions from regional~~ power ~~plants~~generation ~~beginning~~activities inwhich ~~2009.~~could ~~This~~affect ~~initiative~~demand ~~aims~~for tocoal ~~reduce~~mined ~~emissions~~by ofPVR’s ~~carbon dioxide to levels roughly corresponding to average annual emissions between 2000 and 2004~~lessees. The ~~members~~possibility ofexists that ~~RGGI~~new ~~agreed~~legislation toor ~~seek~~regulations, ~~to establish in statute and/~~or ~~regulation~~new ainterpretations ~~carbon dioxide trading program and have each state’s component~~ of ~~the~~existing ~~regional~~laws ~~program~~or ~~effective no later than December 31~~regulations, ~~2008.~~may ~~Auctions~~be ~~for~~adopted ~~carbon~~which ~~dioxide allowances under the program began in September 2008. Following the RGGI model, seven Western states and four Canadian provinces~~ have ~~also formed~~ a ~~regional~~significant ~~greenhouse~~impact ~~gas~~on ~~reduction initiative known as~~ the ~~Western~~mining ~~Regional~~operations ~~Climate Action Initiative, which calls for an overall reduction~~ of ~~regional~~PVR’s ~~greenhouse~~lessees ~~gas~~or ~~emissions~~their ~~from~~customers’ ~~major~~ability ~~industrial~~to ~~and~~use ~~commercial~~coal ~~sources, including fossil-fuel fired power plants, in participating states through trading of emissions credits beginning in 2012. Similarly, in 2007, six Midwestern states~~ and ~~one~~may ~~Canadian province signed the Midwestern Greenhouse Gas Reduction Accord to develop and implement steps to reduce greenhouse gas emissions, including developing a market-based,~~require ~~multi-sector cap. Some states have passed laws individually. For example~~us, ~~in 2006, the governor of California signed Assembly Bill 32 into law, requiring the California Air Resources Board to develop regulations and market mechanisms to reduce California~~PVR’s ~~greenhouse~~lessees ~~gas~~or ~~emissions~~their bycustomers ~~25% by 2020 with mandatory caps beginning in 2012 for significant sources. In 2007, New Jersey passed a greenhouse gas reduction that would be economy wide, requiring emissions~~ to ~~drop~~change tooperations ~~1990~~significantly ~~levels~~or byincur ~~2020~~substantial ~~and that emissions be capped at 80% of 2006 levels by 2050~~costs.

AtAir Emissions The ~~the~~ federal ~~level,~~Clean ~~legislation~~Air ~~was~~Act ~~introduced~~(“CAA”) inand ~~Congress~~corresponding instate ~~2007,~~and ~~2008~~local laws and ~~2009~~regulations toaffect ~~reduce~~all ~~greenhouse~~aspects ~~gas~~of ~~emissions~~coal inmining ~~the~~operations, ~~United~~both ~~States~~directly and indirectly. ~~Such~~The orCAA ~~similar~~directly ~~federal~~impacts ~~legislation,~~PVR’s ~~which~~lessees’ ~~generally~~coal mining ~~seeks~~and toprocessing ~~place~~operations anby ~~economy-wide~~imposing ~~cap~~permitting onrequirements ~~emissions~~and, ofin ~~greenhouse~~some ~~gases~~cases, ~~and~~requirements ~~would~~to ~~require~~install ~~most~~certain emissions control equipment, on sources ofthat ~~greenhouse~~emit ~~gas~~various ~~emissions~~hazardous toand ~~obtain~~non-hazardous ~~greenhouse~~air ~~gas~~pollutants. ~~emission~~The ~~“allowances”~~CAA ~~corresponding~~also toindirectly affects ~~their~~coal ~~annual~~mining ~~emissions~~operations ofby ~~greenhouse~~extensively ~~gases,~~regulating ~~could~~the beair ~~taken~~emissions upof incoal-fired ~~2010~~electric orpower ~~later~~generating ~~years~~plants. ItThere ishave ~~possible~~been ~~that~~a ~~future~~series of recent federal ~~and~~rulemakings ~~state~~that ~~initiatives~~are tofocused ~~control~~on ~~and~~emissions ~~put~~from acoal-fired ~~price~~electric ongenerating facilities. ~~carbon~~Installation ~~dioxide~~of additional emissions, orcontrol ~~otherwise~~technology ~~regulate~~and ~~greenhouse~~additional ~~gas~~measures ~~emissions,~~required ~~could~~under ~~result~~Environmental ~~in increased~~Protection ~~costs~~Agency, ~~associated~~or ~~with~~EPA, ~~coal~~laws ~~consumption,~~and ~~such~~regulations aswill ~~costs~~make it more costly to ~~install~~build ~~additional~~and ~~controls~~operate tocoal-fired ~~reduce~~power ~~carbon~~plants ~~dioxide~~and, depending ~~emissions~~on orthe ~~costs~~requirements toof ~~purchase~~individual ~~emissions~~state ~~reduction~~implementation ~~credits~~plans to(“SIPs”), ~~comply~~could ~~with~~make ~~future~~coal ~~emissions~~a ~~trading~~less ~~programs.~~attractive ~~Such~~fuel ~~increased~~alternative ~~costs~~in ~~for~~the ~~coal~~planning ~~consumption~~and ~~could~~building ~~result~~of power plants in ~~some~~the ~~customers~~future. ~~switching~~Any toreduction ~~alternative~~in ~~sources~~coal’s share of ~~fuel,~~power generating ~~which~~capacity could negatively impact PVR’s lessees’ ~~coal~~ability ~~sales~~to sell coal, ~~and~~which ~~thereby~~could have ana ~~adverse~~material effect on PVR’s coal royalties revenues.

~~Surface Mining Control and Reclamation Act of 1977.~~ The ~~Surface~~EPA’s ~~Mining~~Acid ~~Control~~Rain ~~and Reclamation Act of 1977~~Program, orprovided ~~SMCRA,~~in ~~and~~Title ~~similar~~IV ~~state~~of ~~statutes~~the ~~establish minimum national operational~~CAA, ~~reclamation~~regulates ~~and~~emissions ~~closure standards for all aspects~~ of ~~surface~~sulfur ~~mining,~~dioxide asfrom ~~well~~electric asgenerating ~~most~~facilities. ~~aspects~~Affected offacilities ~~deep~~purchase ~~mining.~~or ~~SMCRA~~are ~~requires~~otherwise ~~that~~allocated ~~comprehensive~~sulfur dioxide ~~environmental~~emissions ~~protection~~allowances, ~~and~~which ~~reclamation~~must ~~standards~~ be ~~met~~surrendered ~~during~~annually ~~the~~in ~~course~~an ofamount ~~and~~equal ~~following completion of mining activities. SMCRA also imposes on mine operators the responsibility of restoring the land~~ to ~~its original state and compensating the landowner for types of damages occurring as~~ a ~~result~~facility’s ofsulfur ~~mining operations,~~dioxide ~~and~~emissions ~~requires~~in ~~mine~~that ~~operators to post performance bonds to ensure compliance with any reclamation obligations~~year. ~~Moreover,~~Affected ~~regulatory~~facilities ~~authorities~~ may ~~attempt~~sell toor ~~assign~~trade ~~the~~excess ~~liabilities~~allowances ~~of PVR’s coal lessees~~ to ~~another~~other ~~entity~~facilities ~~such as PVR if any of its lessees are not financially capable of fulfilling those obligations on the theory~~ that ~~PVR~~require ~~“owned”~~additional allowances ~~or “controlled” the mine operator in such a way for liability~~ to ~~attach.~~offset Totheir ~~our~~sulfur ~~knowledge,~~dioxide ~~no such claims have been asserted against PVR to date~~emissions. In ~~conjunction~~addition ~~with mining the property, PVR’s coal lessees are contractually obligated under the terms of their leases~~ to ~~comply~~purchasing ~~with~~or ~~all~~trading ~~state~~for ~~and~~additional ~~local~~sulfur ~~laws,~~dioxide ~~including SMCRA~~allowances, ~~with~~affected ~~obligations~~power ~~including~~facilities ~~the~~can ~~reclamation~~satisfy ~~and restoration of~~ the ~~mined~~requirements ~~areas by grading, shaping and reseeding the soil. Upon completion~~ of the ~~mining,~~EPA’s ~~reclamation~~Acid ~~generally~~Rain isProgram ~~completed~~ by ~~seeding~~switching ~~with~~to ~~grasses or planting trees for use as pasture or timberland, as specified in the~~lower ~~approved~~sulfur ~~reclamation plan. Additionally~~fuels, ~~the~~installing ~~Abandoned~~pollution ~~Mine~~control ~~Lands~~devices ~~Program,~~such ~~which~~as isflue ~~part~~gas ofdesulfurization ~~SMCRA~~systems, ~~imposes~~or ~~a tax on all current mining operations~~“scrubbers,” ~~the~~or ~~proceeds~~by ofreducing ~~which~~electricity ~~are~~generating ~~used to restore mines closed before 1977~~levels. The maximum tax is 31.5 cents per ton on surface-mined coal and 13.5 cents per ton on underground-mined coal. This tax was set to expire on June 30, 2006, but the program was extended until September 30, 2021.

13The EPA has promulgated rules, referred to as the “NOx SIP Call,” that require coal-fired power plants and other large stationary sources in 21 eastern states and Washington, D.C. to make substantial reductions in nitrogen oxide emissions in an effort to reduce the impacts of ozone transport between states. Additionally, in March 2005, the EPA issued the final

~~TABLE~~11 ~~OF CONTENTS~~

FederalTable and state laws require bonds to secure PVR’s lessees’ obligations to reclaim lands used for mining and to satisfy other miscellaneous obligations. These bonds are typically renewable on a yearly basis. It has become increasingly difficult for mining companies to secure new surety bonds without the posting of partial collateral. In addition, surety bond costs have increased while the market terms of surety bonds have generally become less favorable. It is possible that surety bonds issuers may refuse to renew bonds or may demand additional collateral upon those renewals. Any failure to maintain, or inability to acquire, surety bonds that are required by state and federal laws would have a material adverse effect on PVR’s lessees’ ability to produce coal, which could affect PVR’s coal royalties revenues. Contents

~~Hazardous~~ Clean ~~Materials~~Air ~~and~~Interstate ~~Wastes. The~~Rule, ~~Federal~~or ~~Comprehensive Environmental Response~~CAIR, ~~Compensation~~which ~~and~~would ~~Liability~~have ~~Act,~~permanently orcapped ~~CERCLA,~~nitrogen oroxide ~~the~~and ~~Superfund~~sulfur ~~law,~~dioxide ~~and~~emissions ~~analogous~~in ~~state~~28 ~~laws,~~eastern ~~impose~~states ~~liability~~and Washington, ~~without~~D.C. ~~regard~~In to2008, ~~fault~~the orD.C. ~~the~~Circuit ~~legality~~Court of Appeals ~~the~~after ~~original~~initially ~~conduct~~vacating CAIR, onissued ~~certain~~an ~~classes~~opinion ofto ~~persons~~remand ~~that~~without ~~are~~vacating ~~considered~~CAIR. toTherefore, ~~have~~CAIR ~~contributed~~has toremained ~~the~~in ~~release~~effect ofwhile athe ~~“hazardous~~EPA ~~substance”~~conducts ~~into~~rulemaking ~~the~~to ~~environment.~~modify ~~These~~CAIR ~~persons~~to ~~include~~comply with the ~~owner~~Court’s orJuly ~~operator~~2008 opinion. In lieu of ~~the~~CAIR, ~~site~~in July ~~where~~2010, the ~~release~~EPA ~~occurred~~proposed ~~and~~the ~~companies~~Transport ~~that~~Rule ~~disposed~~which orsets ~~arranged~~a ~~for~~pollution ~~the~~limit ~~disposal~~on ofnitrogen ~~the~~oxide ~~hazardous~~and ~~substances~~sulfur ~~found~~dioxide atemissions ~~the~~in ~~site.~~31 ~~Persons~~states ~~who~~and ~~are~~the orDistrict ~~were~~of ~~responsible~~Columbia. ~~for~~The ~~releases~~public ~~of hazardous~~comment ~~substances~~period ~~under~~has ~~CERCLA~~ended ~~may~~and bethe ~~subject~~EPA expects to ~~joint~~issue ~~and~~a ~~several~~final ~~liability~~rule ~~for~~in Spring 2011. Under the ~~costs~~Transport ofRule, ~~cleaning~~some upcoal-fired ~~the~~power ~~hazardous~~plants ~~substances~~might ~~that~~be ~~have~~required ~~been~~to ~~released~~install ~~into~~additional ~~the~~pollution ~~environment~~control ~~and~~equipment ~~for~~which ~~damages~~could lead to ~~natural~~decreased ~~resources~~demand for low-sulfur coal.

~~Some~~In ~~products~~March ~~used~~2005, bythe ~~coal~~EPA ~~companies~~finalized inthe ~~operations~~Clean ~~generate~~Air ~~waste~~Mercury ~~containing~~Rule, ~~hazardous~~or ~~substances.~~CAMR, ~~PVR~~which ~~could~~was ~~become~~to ~~liable~~establish ~~under~~a ~~federal~~two-part, ~~and~~nationwide ~~state~~cap ~~Superfund~~on ~~and~~mercury emissions ~~waste~~from ~~management~~coal-fired ~~statutes~~power ifplants ~~its~~beginning ~~lessees~~in ~~are~~2010. ~~unable~~It towas ~~pay~~the ~~environmental~~subject ~~cleanup~~of ~~costs.~~extensive ~~CERCLA~~controversy ~~authorizes~~and ~~the~~litigation ~~EPA~~ and, in ~~some~~February ~~cases~~2008, ~~third~~the ~~parties,~~U.S. Circuit Court of Appeals for the District of Columbia vacated CAMR. The EPA appealed the decision to the ~~take~~U.S. ~~actions~~Supreme Court in ~~response~~October to2008, ~~threats~~but towithdrew ~~the~~its ~~public~~petition ~~health~~for orcertiorari ~~the~~on ~~environment~~February 6, ~~and~~2009. However, a utility group continues to seek ~~recovery~~certiorari, ~~from~~challenging the ~~responsible~~court ~~classes~~ of ~~persons~~appeals ofdecision to overturn CAMR. In the ~~costs~~meantime, ~~they~~the ~~incurred~~EPA plans into ~~connection~~develop standards consistent with ~~such~~the ~~response.~~court Itof isappeal’s ~~not~~ruling, ~~uncommon~~intending ~~for~~to ~~neighboring~~propose ~~landowners~~air ~~and~~toxics ~~other~~standards ~~third~~for ~~parties~~coal- toand ~~file~~oil-fired ~~claims~~electric ~~for~~generating ~~personal~~units ~~injury~~by ~~and~~March 10, ~~property~~2011, ~~damage~~and ~~allegedly~~finalize ~~caused~~a rule by November 16, 2011. In ~~hazardous~~conjunction ~~substances~~with orthese ~~other~~efforts, ~~wastes~~on ~~released~~December 24, ~~into~~2009, the ~~environment.~~EPA ~~The~~approved ~~Resource~~an ~~Conservation~~Information ~~and~~Collection ~~Recovery~~Request ~~Act,~~(ICR) orrequiring ~~RCRA,~~all ~~and~~U.S. ~~corresponding~~power ~~state~~plants ~~laws~~with ~~and~~coal ~~regulations~~or ~~exclude~~oil-fired ~~many~~electric ~~mining~~generating ~~wastes~~units ~~from~~to ~~the~~submit ~~regulatory~~emissions ~~definition~~information offor ~~hazardous~~use ~~wastes~~in developing air toxics emissions standards. ~~Currently~~Moreover, ~~the~~on ~~management~~April 29, ~~and~~2010, ~~disposal~~EPA ofproposed ~~coal~~new ~~combustion~~Maximum ~~by-products~~Achievable ~~are~~Control ~~also~~Technology ~~not~~for ~~regulated~~several atclasses ~~the~~of ~~federal~~boilers ~~level~~ and ~~not~~process ~~uniformly~~heaters, atincluding ~~the~~large ~~state~~coal-fired ~~level.~~boilers Ifand ~~rules~~process ~~are~~heaters, ~~adopted~~which would torequire ~~regulate~~significant ~~the~~reductions ~~management~~in ~~and~~the ~~disposal~~emission of ~~these~~particulate ~~by-products~~matter, ~~they~~carbon ~~could~~monoxide, ~~add~~hydrogen ~~additional~~chloride, ~~costs~~dioxins toand ~~the~~mercury. ~~use~~In ofaddition, ~~coal~~various asstates ahave ~~fuel~~promulgated ~~and~~or ~~may~~proposed ~~encourage~~more ~~power~~stringent ~~plant~~emission ~~operators~~limits toon ~~switch~~mercury toemissions afrom coal-fired ~~different~~electric ~~fuel~~generating units.

~~Clean~~The ~~Water~~EPA ~~Act. PVR’s~~has ~~coal~~adopted ~~lessees’~~new, ~~operations~~more ~~are~~stringent ~~regulated~~national ~~under~~air ~~the~~quality ~~Clean~~standards ~~Water~~for ~~Act,~~ozone orand fine ~~the~~particulate ~~CWA,~~matter. ~~with~~As ~~respect~~a ~~to discharges of pollutants~~result, ~~including~~some ~~dredged~~states orwill ~~fill~~be ~~material~~required ~~into~~to ~~waters~~amend oftheir ~~the~~SIPs ~~United~~to ~~States.~~attain ~~Individual~~and ormaintain ~~general~~compliance ~~permits~~with ~~under~~the ~~Section~~new ~~404~~air ofquality ~~the~~standards. ~~CWA~~In ~~are~~March ~~required~~2007, tothe ~~conduct~~EPA ~~dredge~~published orfinal ~~fill~~rules ~~activities~~addressing inhow ~~jurisdictional~~states ~~waters~~would ofimplement ~~the~~plans ~~United~~to bring ~~States.~~regions ~~Surface~~designated ~~coal~~as ~~mining~~non-attainment ~~operators~~for ~~obtain~~fine ~~these~~particulate ~~permits~~matter tointo ~~authorize~~compliance ~~such~~with ~~activities as~~ the ~~creation~~new ofair ~~slurry~~quality ~~ponds, stream impoundments and valley fills~~standard. ~~Uncertainty~~Under ~~over~~the ~~what~~revised ~~legally~~ozone ~~constitutes~~National aAmbient ~~navigable~~Air ~~water~~Quality ofStandards ~~the~~(“NAAQS”), ~~United~~significant ~~States~~additional ~~within~~emissions ~~the CWA’s~~control ~~regulatory~~expenditures ~~scope~~ may ~~adversely~~be ~~impact~~required ~~the~~at ~~ability of PVR’s~~ coal-fired ~~lessees~~power toplants. ~~secure~~Attainment ~~the~~dates ~~necessary permits~~ for ~~their~~the ~~mining~~new ~~activities.~~standards ~~Some~~range ~~surface~~between ~~mining~~2013 ~~activities require a CWA Section 404 “dredge~~ and ~~fill”~~2030, ~~permit~~depending ~~under~~on the ~~CWA~~severity ~~for~~of ~~valley fills and~~ the ~~associated sediment control ponds~~non-attainment. OnIn ~~June~~July 52009, ~~2007, in response to~~ the U.S. ~~Supreme~~ Court’s ~~divided~~of ~~opinion~~Appeals infor ~~Rapanos v. United States,~~ the ~~EPA~~District ~~and~~of ~~the~~Columbia vacated ~~U.S.~~part ~~Army Corps~~ of ~~Engineers,~~a orrule implementing the ~~Corps,~~ozone ~~issued~~NAAQs ~~joint guidance to EPA regions~~ and ~~Corps~~remanded ~~districts~~certain ~~interpreting~~other ~~the~~aspects ~~geographic extent~~ of ~~regulatory jurisdiction under Section 404 of~~ the ~~CWA.~~rule ~~Specifically,~~to the ~~guidance~~EPA ~~places~~for ~~jurisdictional~~further ~~water~~consideration. ~~bodies~~Notwithstanding ~~into two groups: waters where~~ the ~~agencies~~decision, ~~will~~we ~~assert~~expect ~~regulatory~~that ~~jurisdiction~~additional ~~“categorically”~~emissions ~~and~~control ~~waters~~requirements ~~where~~may ~~the~~be ~~agencies~~imposed ~~will assert jurisdiction~~ on anew ~~case-by-case basis following a “significant nexus analysis.” It remains to be seen how this guidance will affect the permitting process~~and ~~for~~expanded ~~obtaining~~coal-fired ~~additional~~power ~~permits~~plants ~~for valley fills~~ and ~~sediment~~industrial ~~ponds~~boilers ~~although it is likely to add uncertainty and delays~~ in the ~~issuance~~years ~~of new permits~~ahead. ~~Some~~Because ~~valley~~coal ~~fill surface~~ mining ~~activities~~operations ~~have~~and ~~the~~coal-fired ~~potential~~electric togenerating ~~impact~~facilities ~~headwater~~emit ~~streams~~particulate ~~that are not relatively permanent~~matter, ~~which~~PVR’s ~~could~~lessees’ ~~therefore~~mining ~~trigger~~operations aand ~~detailed~~their ~~“significant~~customers ~~nexus~~could ~~analysis” to determine whether a Section 404 permit would~~ be affected ~~required.~~when ~~Such analyses could require~~ the ~~extensive~~new ~~collection~~standards ofare ~~additional~~implemented ~~field~~by ~~data and could lead to delays in~~ the ~~issuance~~applicable ~~of CWA Section 404 permits for valley fill surface mining operations~~states.

~~Recent~~Likewise, ~~federal~~the ~~district~~EPA’s ~~court~~regional ~~decisions~~haze program to improve visibility in ~~West~~national ~~Virginia,~~parks and ~~related~~wilderness ~~litigation~~areas ~~filed~~required inaffected ~~federal~~states ~~district~~to ~~court~~develop inSIPs ~~Kentucky~~by December 2007 that, ~~have~~among ~~created~~other ~~additional~~things, ~~uncertainty~~identify ~~regarding~~facilities ~~the~~that ~~future~~will ~~ability~~have to ~~obtain~~reduce ~~certain~~emissions ~~general~~and ~~permits~~comply ~~authorizing~~with ~~the~~stricter emission limitations. This program may restrict construction of ~~valley~~new ~~fills~~coal-fired ~~for~~power ~~the~~plants ~~disposal~~where ofemissions ~~overburden~~are ~~from~~projected ~~mining~~to ~~operations~~reduce visibility in protected areas. ~~The~~In ~~Corps~~addition, isthis ~~authorized~~program bymay ~~Section~~require ~~404~~certain ofexisting ~~the~~coal-fired ~~CWA~~power plants to ~~issue~~install ~~“nationwide”~~emissions ~~permits~~control equipment to reduce haze-causing emissions such as sulfur dioxide, nitrogen oxide and particulate matter. Demand for ~~specific~~PVR’s ~~categories~~steam ofcoal ~~dredging~~could be affected when these standards are implemented by the applicable states.

14On June 3, 2010, EPA issued a final rule setting forth a more stringent primary NAAQS applicable to sulfur dioxide. The rule also modifies the monitoring increment for the sulfur dioxide standard, establishing a 1-hour standard, and expands the sulfur dioxide monitoring network. Attainment designations will be made pursuant to the modified standards by June 2012. States with non-attainment areas will have until 2014 to submit SIP revisions which must meet the modified standard by August 1, 2017; for all other areas, states will be required to submit “maintenance” SIPs by 2013. EPA also plans to address the secondary sulfur dioxide standard, which is currently under review. As a result, coal-fired power plants, which are the largest end users of PVR’s coal, may be required to install additional emissions control equipment or take other steps to lower sulfur emissions.

~~TABLE~~The OFU.S. ~~CONTENTS~~Department of Justice, on behalf of the EPA, has filed lawsuits against a number of coal-fired electric generating facilities alleging violations of the new source review provisions of the CAA. The EPA has alleged that certain modifications have been made to these facilities without first obtaining permits required under the new source review program. Several of these lawsuits have settled, but others remain pending. Depending on the ultimate resolution of these cases, demand for PVR’s coal could be affected, which could have an adverse effect on PVR’s coal royalties revenues.

~~and~~Climate ~~filling~~Change In ~~activities~~2005, ~~that~~the ~~are~~Kyoto ~~similar~~Protocol ~~in nature and that are determined~~ to ~~have minimal adverse environmental effects. Nationwide Permit 21 authorizes~~ the ~~disposal~~1992 ~~of dredged or fill material from surface coal mining activities into the waters of the~~ United ~~States.~~Nations AFramework ~~July~~Convention ~~2004~~on Climate ~~decision~~Change, bywhich ~~the~~establishes ~~Southern~~a ~~District~~binding ofset ~~West Virginia in Ohio Valley Environmental Coalition v. Bulen enjoined the Huntington District~~ of ~~the~~emission ~~Corps~~targets ~~from issuing further permits pursuant to Nationwide Permit 21. While the decision was vacated by the Fourth Circuit Court of Appeals in November 2005, it has been remanded to the District Court~~ for ~~the~~greenhouse ~~Southern District of West Virginia for further proceedings. Moreover~~gases, awent ~~similar~~into ~~lawsuit~~effect ~~has been filed in the U.S. District Court~~ for ~~the~~those ~~Eastern~~nations ~~District of Kentucky~~ that ~~seeks~~ratified ~~to enjoin the issuance of permits pursuant to Nationwide Permit 21 by the Louisville District of the Corps~~it.

In12 the event similar lawsuits prove to be successful in adjoining jurisdictions, PVR’s lessees may be required to apply for individual discharge permits pursuant to Section 404 of the CWA in areas where they would have otherwise utilized Nationwide Permit 21. Such a change could result in delays in PVR’s lessees obtaining the required mining permits to conduct their operations, which could in turn have an adverse effect on PVR’s coal royalties revenues.

IndividualTable CWA Section 404 permits for valley fills associated with surface mining activities are also subject to certain legal challenges and uncertainty. On September 22, 2005, in the case Ohio Valley Environmental Coalition (“OVEC”) v. United States Army Corps of Engineers, environmental group plaintiffs filed suit in the U.S. District Court for the Southern District of West Virginia challenging the Corps’ decision to issue individual CWA Section 404 permits for certain mining projects. Alex Energy, Inc., or Alex Energy, a lessee of PVR that operates the Republic No. 2 Mine in Kanawha County, West Virginia, intervened as a defendant in this litigation when the plaintiffs’ amended their complaint to add the December 22, 2005 individual CWA Section 404 permit for the Republic No. 2 Mine, or the Republic No. 2 Permit. On March 23, 2007, the district court rescinded several challenged CWA Section 404 permits, including the Republic No. 2 Permit, and remanded the permit applications to the Corps for further proceedings. In addition, the district court enjoined the permit holders, including Alex Energy, from all activities authorized under the rescinded permits. As part of the OVEC litigation, the environmental groups have also challenged the CWA Section 404 permit issued to Alex Energy for the Republic No. 1 Mine, also located in Kanawha County, West Virginia. Contents

The ~~Corps,~~United ~~Alex~~States ~~Energy,~~is ~~other~~not ~~impacted~~participating ~~mining~~in ~~companies~~this ~~and mining associations appealed the March 23, 2007 ruling to the U~~treaty.S. ~~Court of Appeals for the Fourth Circuit. On February 13~~However, ~~2009,~~ the ~~Fourth~~United ~~Circuit~~States ~~reversed~~is ~~and~~actively ~~vacated~~participating ~~the~~in ~~District~~international ~~Court’s~~discussions ~~March~~that ~~23,~~are ~~2007~~currently ~~opinion~~underway ~~and~~to ~~order~~develop ~~that~~a ~~had~~treaty ~~rescinded~~to replace the ~~challenged~~Kyoto ~~permits~~Protocol ~~and~~after ~~vacated~~its ~~the~~expiration, ~~District~~with ~~Court’s~~a ~~injunction~~goal of ~~activity~~reaching ~~under~~a ~~those~~consensus ~~permits~~on ~~and reversed~~ a ~~related~~replacement ~~order~~treaty. byAny ~~the~~replacement ~~District~~treaty ~~Court~~or ~~that~~other ~~would~~international ~~have~~arrangement ~~required~~requiring ~~yet~~ additional ~~permits~~reductions ~~under the CWA. One of the three judges dissented~~ in ~~part~~greenhouse ~~from~~gas ~~this~~emissions ~~decision~~could ~~and would~~ have ~~upheld~~a ~~the~~global ~~decision~~impact ~~rescinding the permits and enjoining~~on ~~future activity but agreed with~~ the ~~other~~demand ~~two~~for ~~judges on the other parts of the decision~~coal. ~~This decision may be subject to further appellate review including by the Fourth Circuit itself. We are unable to predict the outcome of any further appellate review that may be obtained.~~

InFuture ~~December~~regulation ~~2007,~~of ~~plaintiff~~greenhouse ~~environmental~~gases ~~groups~~in ~~brought~~the aUnited ~~similar~~States ~~suit~~could ~~against~~occur ~~the~~pursuant ~~issuance~~to offuture aU.S. ~~CWA~~treaty commitments, ~~Section~~new ~~404~~domestic ~~permit~~legislation ~~for~~that amay ~~surface~~impose ~~coal~~a ~~mine~~carbon inemissions ~~the~~tax ~~U.S.~~or ~~District~~establish ~~Court~~a ~~for~~cap-and-trade ~~the~~program ~~Eastern~~or ~~District~~regulation ofby ~~Kentucky,~~the ~~alleging identical violations~~EPA. The ~~Corps~~Obama Administration has ~~voluntarily~~indicated ~~suspended~~ its ~~consideration~~support offor ~~the~~a ~~permit~~mandatory ~~application~~cap inand ~~that~~trade ~~case~~program ~~for~~to ~~agency~~reduce ~~re-evaluation.~~greenhouse gas ~~While~~emissions and the ~~final~~U.S. ~~outcome~~Congress ofis ~~these~~considering ~~cases~~various ~~remains~~proposals ~~uncertain,~~to ifreduce ~~lawsuits~~greenhouse ~~challenging~~gas ~~the~~emissions, ~~use~~mandate ofelectricity ~~valley~~suppliers ~~fills~~to ~~ultimately~~use ~~limits~~renewable orenergy ~~prohibits~~sources ~~the~~to ~~mining~~generate ~~methods~~a orcertain ~~operations~~percentage of ~~PVR’s lessees~~power, itand ~~could~~require ~~have~~energy anefficiency ~~adverse~~measures. Passage ~~effect~~of onsuch ~~PVR’s~~comprehensive ~~coal~~climate ~~royalties~~change ~~revenues.~~and Inenergy ~~addition,~~legislation itcould isimpact ~~possible~~the ~~that similar~~demand ~~litigation~~for ~~affecting~~coal. ~~recently~~Any ~~issued,~~reduction ~~pending~~in orthe ~~future~~amount ~~individual~~of orcoal ~~general~~consumed ~~CWA~~by ~~Section~~North ~~404~~American ~~permits~~electric ~~relevant~~power togenerators ~~the~~could ~~mining~~reduce ~~and~~the ~~related~~price ~~operations~~ of coal that PVR’s lessees mine ~~could~~and ~~adversely~~sell, ~~impact~~thereby reducing PVR’s ~~coal~~ royalties revenues.

InEven ~~December~~in ~~2008~~the absence of new federal legislation, greenhouse gas emissions have begun to be regulated by the ~~Department~~EPA ofpursuant ~~Interior~~to ~~published~~the CAA. In response to the ~~Excess~~April 2, ~~Spoil~~2007 U.S. Supreme Court ruling in Massachusetts, ~~Coal~~et ~~Mine~~al. ~~Waste~~v. ~~and~~EPA ~~Buffers~~that ~~for~~the ~~Perennial~~EPA ~~and~~has ~~Intermittent~~authority ~~Streams~~to ~~rule~~regulate greenhouse gas emissions under ~~SMCRA~~the inCAA ~~part~~the EPA tohas ~~clarify~~taken ~~when~~several ~~valley~~steps ~~fills~~towards ~~are~~implementing ~~permitted~~regulations regarding the emission of greenhouse gases. ~~The~~In ~~rule~~2009, ~~would~~EPA ~~require~~issued a ~~100-foot~~final ~~buffer~~rule ~~around~~declaring ~~all~~that ~~waters~~six greenhouse gases, including ~~streams,~~carbon ~~lakes~~dioxide and methane, ~~ponds~~“endanger both the public health and ~~wetlands~~the public welfare of current and future generations” , allowing the EPA to begin regulating greenhouse gas emissions under existing provisions of CAA. ~~However~~In May 2010, the EPA issued a final “tailoring rule” ~~would~~that ~~exempt~~phases ~~certain~~in various ~~activities~~greenhouse-gas-related permitting requirements beginning in January 2011. Until June 30, ~~such~~2011, asonly ~~permanent~~sources ~~spoil~~currently ~~fills~~subject ~~and~~to ~~coal~~CAA ~~waste~~prevention ~~disposal~~of ~~facilities~~significant deterioration or operating permit programs will be subject to greenhouse gas permitting requirements. Beginning July 1, 2011, these permitting programs will extend to newly built sources emitting more than 100,000 tons of greenhouse gases per year and ~~allow~~modified ~~mining~~facilities ~~that~~increasing ~~changes~~their aemissions ~~waterway~~by at least 75,000 tons of greenhouse gases per year. EPA’s ~~flow~~rule clarifies that “smaller sources,” ~~providing~~those ~~the~~with ~~mining~~emissions ~~company~~of ~~repairs~~less ~~damage~~than ~~later~~50,000 tons of greenhouse gases per year, will not be regulated until at least April 30, 2016, and may in fact be permanently excluded from the permitting requirements. ~~Companies~~In ~~could~~December ~~also~~2010, ~~receive~~the aEPA ~~permit~~issued its plan to ~~dispose~~update ofpollution ~~waste~~standards ~~within~~for ~~the~~fossil ~~buffer~~fuel ~~zone~~power ifplants ~~they~~and ~~explain~~petroleum ~~why~~refineries. anUnder ~~alternative~~that isagreement, EPA intends to propose standards for power ~~not~~plants ~~reasonably~~in ~~possible~~July or2011 isand ~~not~~for ~~necessary~~refineries toin ~~meet~~December ~~environmental~~2011 ~~requirements.~~and ~~Environmental~~will ~~groups~~issue ~~have~~final standards in May 2012 and November 2012, respectively.

15The permitting of a number of proposed new coal-fired power plants has also been contested by environmental organizations for concerns related to greenhouse gas emissions from new plants. For instance, in October 2007, state regulators in Kansas became the first to deny an air emissions construction permit for a new coal-fired power plant based on the plant’s projected emissions of carbon dioxide. Other state regulatory authorities have also rejected the construction of new coal-fired power plants based on the uncertainty surrounding the potential costs associated with greenhouse gas emissions from these plants under future laws limiting the emission of carbon dioxide.

~~TABLE~~In OFaddition, ~~CONTENTS~~permits for several new coal-fired power plants without limits imposed on their greenhouse gas emissions have been appealed by environmental organizations to the EPA’s Environmental Appeals Board, or EAB, and other judicial forums under the CAA. For example, in June 2008, a Georgia court voided a CAA permit and halted the construction of a coal-fired power plant for failure to address carbon dioxide emissions. Also, a federal appeals court has allowed a lawsuit pursuing federal common law claims to proceed against certain utilities on the basis that they may have created a public nuisance due to their emissions of carbon dioxide, while a second federal appeals court dismissed a similar case on procedural grounds. The U.S. Supreme Court has agreed to hear the appeal of the lower court’s decision.

~~brought~~A ~~lawsuits~~number ~~challenging~~of ~~the~~states ~~rule.~~have Italso iseither ~~unclear~~passed ~~what~~legislation ~~impact~~or announced initiatives focused on decreasing or stabilizing carbon dioxide emissions associated with the ~~rule~~combustion ~~will~~of fossil fuels, and many of these measures have focused on emissions from coal-fired electric generating facilities. For example, ten northeastern and mid-Atlantic states have agreed to implement a regional cap-and-trade program, referred to as the ~~previously~~Regional ~~discussed~~Greenhouse ~~lawsuits~~Gas ~~related~~Initiative, or RGGI, to ~~valley~~stabilize ~~fills~~carbon dioxide emissions from regional power plants beginning in 2009. The members of RGGI have established in statute and/or ~~any~~regulation ~~mining~~a ~~operations~~carbon dioxide ~~undertaken~~trading byprogram. ~~PVR~~Auctions for carbon dioxide allowances under the program began in September 2008. Following the RGGI model, seven Western states and four Canadian provinces have also formed a regional greenhouse gas reduction initiative known as the Western Regional Climate Action Initiative, which calls for an overall reduction of regional greenhouse gas emissions from major industrial and commercial sources, including fossil-fuel fired power plants, in participating states through trading of emissions credits beginning in 2012. Similarly, in 2007, six Midwestern states and one Canadian province signed the Midwestern Greenhouse Gas Reduction Accord to develop and implement steps to reduce greenhouse gas emissions, including developing a market-based, multi-sector cap. Some states have passed laws individually. For example, in 2006, the governor of California signed Assembly Bill 32 into law, requiring the California Air Resources Board to develop regulations and market mechanisms to reduce California’s ~~lessees~~greenhouse gas emissions by 25% by 2020 with mandatory caps beginning in ~~the~~2012 ~~future~~for significant sources. In

~~Total~~13 Maximum Daily Load, or TMDL, regulations under the CWA establish a process to calculate the maximum amount of a pollutant that a water body can receive and still meet state water quality standards and to allocate pollutant loads among the point- and non-point pollutant sources discharging into that water body. This process applies to those waters that states have designated as impaired (not meeting present water quality standards). Industrial dischargers, including coal mines, discharging to such waters will be required to meet new TMDL allocations for these stream segments. The adoption of new TMDL-related allocations for streams to which PVR’s lessees’ coal mining operations discharge could require more costly water treatment and could adversely affect PVR’s lessees’ coal production.

TheTable CWAof also requires states to develop anti-degradation policies to ensure non-impaired water bodies in the state do not fall below applicable water quality standards. These and other regulatory developments may restrict PVR’s lessees’ ability to develop new mines or could require PVR’s lessees to modify existing operations, which could have an adverse effect on PVR’s coal business. Contents

~~The Safe Drinking Water Act~~ 2007, orNew ~~the~~Jersey ~~SDWA,~~passed ~~and~~a ~~its~~greenhouse ~~state~~gas ~~equivalents~~reduction ~~affect~~that ~~coal~~would ~~mining~~be ~~operations~~economy ~~by imposing requirements on the underground injection of fine coal slurries~~wide, ~~fly ash and flue gas scrubber sludge, and by~~ requiring ~~permits~~emissions to ~~conduct~~drop ~~such underground injection activities. In addition~~ to ~~establishing~~1990 ~~the~~levels ~~underground~~by ~~injection~~2020 ~~control program, the SDWA also imposes regulatory requirements on owners~~ and ~~operators~~that ofemissions ~~“public~~be ~~water~~capped ~~systems.”~~at ~~This~~80% ~~regulatory program could impact PVR’s lessees’ reclamation operations where subsidence or other mining-related problems require the provision~~ of ~~drinking~~2006 ~~water~~levels toby ~~affected adjacent homeowners~~2050.

~~Endangered~~It ~~Species~~is ~~Act. The~~possible ~~Endangered~~that ~~Species~~future ~~Act~~international, federal and ~~counterpart~~ state ~~legislation~~initiatives ~~protect~~to ~~species~~control ~~threatened~~carbon ~~with~~dioxide ~~possible~~emissions ~~extinction.~~could ~~Protection~~result ofin increased ~~threatened~~costs ~~and~~associated ~~endangered~~with ~~species~~coal ~~may~~consumption, ~~have~~such ~~the~~as ~~effect~~costs ofto ~~prohibiting~~install oradditional ~~delaying~~controls ~~PVR’s~~to ~~lessees~~reduce ~~from~~carbon ~~obtaining~~dioxide ~~mining~~emissions ~~permits~~or ~~and~~costs ~~may~~to ~~include~~purchase ~~restrictions~~emissions onreduction ~~timber~~credits ~~harvesting,~~to ~~road~~comply ~~building~~with ~~and~~future ~~other~~emissions ~~mining~~trading orprograms. ~~agricultural~~Such ~~activities~~increased incosts for ~~areas~~coal ~~containing~~consumption ~~the~~could ~~affected~~result ~~species~~in orsome ~~their habitats. A number~~ of ~~species indigenous to areas where~~ PVR’s ~~properties~~lessees’ ~~are~~customers ~~located~~switching ~~are protected under the Endangered Species Act. Based on the species that have been identified~~ to ~~date~~alternative ~~and the~~sources ~~current application~~ of ~~applicable laws and regulations~~fuel, ~~however,~~or weotherwise ~~do not believe there are any species protected under the Endangered Species Act that would materially and~~ adversely affect PVR’s ~~lessees~~lessee’s ~~ability~~operations toand ~~mine~~demand ~~coal~~for ~~from~~ PVR’s ~~properties~~coal, inwhich ~~accordance~~could ~~with~~have ~~current~~a ~~mining~~material adverse ~~plans~~effect on PVR’s royalties revenues.

~~Mine~~Surface ~~Health~~Mining Control and ~~Safety~~Reclamation ~~Laws.~~ Act The ~~operations~~Surface Mining Control and Reclamation Act of ~~PVR’s~~1977, ~~coal~~or ~~lessees~~SMCRA, ~~are~~and ~~subject~~similar tostate ~~stringent~~statutes ~~health~~establish minimum national operational, reclamation and ~~safety~~closure standards ~~that~~for ~~have~~all ~~been~~aspects ~~imposed~~of bysurface ~~federal~~mining, ~~legislation~~as ~~since~~well ~~the~~as ~~adoption~~most aspects of deep mining. SMCRA requires that comprehensive environmental protection and reclamation standards be met during the ~~Mine~~course ~~Health~~of and ~~Safety~~following ~~Act~~completion of ~~1969~~mining activities. ~~The~~SMCRA ~~Mine~~also ~~Health~~imposes ~~and~~on ~~Safety~~mine ~~Act~~operators ofthe ~~1969~~responsibility ~~resulted~~of inrestoring ~~increased~~the ~~operating~~land ~~costs.~~to ~~The~~its ~~Mine~~original ~~Safety~~state and ~~Health~~compensating ~~Act~~the landowner for types of ~~1977~~damages occurring as a result of mining operations, ~~which~~and ~~significantly~~requires ~~expanded~~mine operators to post performance bonds to ensure compliance with any reclamation obligations. Moreover, regulatory authorities may attempt to assign the liabilities ~~enforcement~~of PVR’s coal lessees to another entity such as us if any of ~~health~~PVR’s ~~and~~lessees ~~safety~~are ~~standards~~not financially capable of fulfilling those obligations on the ~~Mine~~theory ~~Health~~that ~~and~~we ~~Safety~~“owned” ~~Act~~or of“controlled” ~~1969~~the mine operator in such a way for liability to attach. To PVR’s knowledge, ~~imposes~~no ~~comprehensive~~such ~~health~~claims ~~and~~have ~~safety~~been ~~standards~~asserted onagainst ~~all~~us ~~mining~~to ~~operations~~date. In ~~addition~~conjunction with mining the property, asPVR’s ~~part~~coal oflessees are contractually obligated under the ~~Mine~~terms ~~Health~~of their leases to comply with all state and ~~Safety~~local ~~Acts~~laws, ofincluding ~~1969~~SMCRA, with obligations including the reclamation and ~~1977~~restoration of the mined areas by grading, shaping and reseeding the ~~Black~~soil. ~~Lung~~Upon ~~Acts~~completion of the mining, reclamation generally is completed by seeding with ~~require~~grasses ~~payments~~or planting trees for use as pasture or timberland, as specified in the approved reclamation plan. Additionally, the Abandoned Mine Lands Program, which is part of ~~benefits~~SMCRA, byimposes ~~all~~a ~~businesses~~tax ~~conducting~~on all current mining operations, the proceeds of which are used to restore mines closed before 1977. The maximum tax is 31.5 cents per ton on surface-mined coal ~~miners~~and ~~with~~13.5 ~~black~~cents ~~lung~~per orton ~~pneumoconiosis~~on underground-mined coal. In addition, states from time to time have increased and may continue to ~~some~~increase ~~beneficiaries~~their fees and taxes to fund reclamation of ~~miners~~orphaned ~~who~~mine ~~have~~sites ~~died~~and ~~from~~abandoned ~~this~~mine ~~disease~~drainage control on a statewide basis.

~~Recent~~Federal ~~mining~~and state ~~accidents~~laws inrequire ~~West~~bonds ~~Virginia~~to ~~and~~secure ~~Kentucky~~PVR’s ~~have~~lessees’ ~~received~~obligations ~~national~~to ~~attention~~reclaim ~~and~~lands ~~instigated~~used ~~responses~~for atmining ~~the state~~ and ~~national~~to ~~level~~satisfy ~~that~~other ~~are~~miscellaneous ~~likely~~obligations. toThese ~~result~~bonds inare ~~increased~~typically ~~scrutiny~~renewable ofon ~~current~~a ~~safety~~yearly ~~practices~~basis. ~~and~~It ~~procedures~~has atbecome ~~all~~increasingly ~~mining~~difficult ~~operations, particularly underground~~ for mining ~~operations.~~companies Into ~~January~~secure ~~2006,~~new ~~West~~surety ~~Virginia~~bonds ~~passed~~without athe ~~law~~posting ~~imposing~~of ~~stringent~~partial ~~new~~collateral. ~~mine~~In ~~safety~~addition, ~~and~~surety ~~accident~~bond ~~reporting~~costs ~~requirements~~have ~~and~~ increased ~~civil~~while ~~and~~the ~~criminal~~market ~~penalties~~terms ~~for violations~~ of ~~mine~~surety ~~safety~~bonds ~~laws.~~have Ongenerally ~~March~~become 7,less ~~2006,~~favorable. ~~New~~It ~~Mexico~~is ~~Governor~~possible ~~Bill~~that ~~Richardson~~surety ~~signed~~bonds issuers ~~into~~may ~~law~~refuse anto ~~expanded~~renew ~~miner~~bonds ~~safety~~or ~~program~~may ~~including~~demand ~~more stringent requirements for accident reporting and the installation of~~ additional ~~mine~~collateral ~~safety~~upon ~~equipment~~those ~~at underground mines~~renewals. ~~Similarly,~~Any onfailure ~~April~~to 27maintain, ~~2006,~~or ~~Kentucky~~inability ~~Governor~~to ~~Ernie~~acquire, ~~Fletcher~~surety ~~signed~~bonds ~~mine safety legislation~~ that ~~includes~~are ~~requirements~~required ~~for~~by ~~increased~~state ~~inspections of underground mines~~ and ~~additional~~federal ~~mine~~laws ~~safety~~would ~~equipment~~have ~~and~~a ~~authorizes~~material ~~the~~adverse ~~assessment~~effect ofon ~~penalties~~PVR’s lessees’ ofability up to $5produce coal,~~000~~ ~~per~~which ~~incident~~could ~~for~~affect ~~violations~~PVR’s ofcoal ~~mine~~royalties ~~ventilation or roof control requirements~~revenues.

16Hazardous Materials and Wastes The Federal Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, or the Superfund law, and analogous state laws, impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that are considered to have contributed to the release of a “hazardous substance” into the environment. These persons include the owner or operator of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources.

~~TABLE~~Some OFproducts ~~CONTENTS~~used by coal companies in operations generate waste containing hazardous substances. We could become liable under federal and state Superfund and waste management statutes if PVR’s lessees are unable to pay environmental cleanup costs. CERCLA authorizes the EPA and, in some cases, third parties, to take actions in response to threats to the public health or the environment and to seek recovery from the responsible classes of persons of the costs they incurred in connection with such response. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other wastes released into the environment. The Resource Conservation and Recovery Act, or RCRA, and corresponding state laws and regulations exclude many mining wastes from the regulatory definition of hazardous wastes. Currently, the management and disposal of coal combustion by-products are also not regulated at the federal level and not uniformly at the state level. If rules are adopted to regulate the management and disposal of these by-products, they could add additional costs to the use of coal as a fuel and may encourage power plant operators to switch to a different fuel.

OnClean ~~June~~Water ~~15, 2006, the President signed the “Miner~~ Act,” ~~which~~PVR’s ~~was~~coal ~~new~~lessees’ ~~mining~~operations ~~safety~~are ~~legislation~~regulated ~~that~~under ~~mandates~~the ~~improvements~~Clean inWater ~~mine safety practices~~Act, ~~increases~~or ~~civil~~the ~~and criminal penalties for non-compliance~~CWA, ~~requires~~with respect ~~the~~to ~~creation~~discharges of ~~additional~~pollutants ~~mine rescue teams~~ and ~~expands~~also ~~the~~require ~~scope~~dredge ~~of federal oversight, inspection~~ and ~~enforcement~~fill ~~activities.~~permits ~~Pursuant~~under toSection 404 ~~the~~for ~~Miner Act,~~ the ~~Mine~~construction ~~Safety~~of ~~Health~~slurry ~~Administration~~ponds, orstream ~~MSHA~~impoundments, ~~has~~sediment ~~promulgated~~control ~~new~~ponds ~~emergency rules on mine safety~~ and ~~revised~~valley ~~MSHA’s~~fills. ~~civil~~The ~~penalty~~EPA ~~assessment~~issues ~~regulations,~~permits ~~which~~for ~~resulted~~the indischarge anof pollutants ~~across-the-board~~into ~~increase~~navigable inwaters ~~penalties~~while ~~from~~ the ~~existing~~Army ~~regulations.~~Corps ~~These~~of ~~requirements~~Engineers, ~~may add~~or ~~significant~~Army ~~costs to PVR’s lessees’ operations~~Corps, ~~particularly~~issues ~~for~~dredge ~~underground mines,~~ and ~~could~~fill ~~affect~~permits ~~the~~under ~~financial~~Section 404 ~~performance~~ of ~~PVR’s~~the ~~lessees’ operations~~CWA.

~~Implementing~~14 ~~and complying with these new laws and regulations could adversely affect PVR’s lessees’ coal production and could therefore have an adverse effect on PVR’s coal royalties revenues.~~

MiningTable Permits and Approvals. Numerous governmental permits or approvals are required for mining operations. In connection with obtaining these permits and approvals, PVR’s coal lessees may be required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that any proposed production of coal may have upon the environment. The requirements imposed by any of these authorities may be costly and time consuming and may delay commencement or continuation of mining operations. Contents

~~Under~~ Although ~~some~~the ~~circumstances,~~CWA ~~substantial~~has ~~fines~~long ~~and~~authorized ~~penalties,~~EPA ~~including~~to ~~revocation~~review of404 ~~mining~~ permits, ~~may~~issued beby ~~imposed under~~ the ~~laws~~Army ~~described above. Monetary sanctions and~~Corps, inEPA ~~severe~~has ~~circumstances,~~only ~~criminal~~recently ~~sanctions~~begun ~~may~~reviewing be404 ~~imposed~~permits ~~for~~issued ~~failure~~by tothe ~~comply~~Army ~~with~~Corps ~~these~~for ~~laws.~~coal ~~Regulations also provide that a~~ mining ~~permit~~in ~~can~~Appalachia. Currently, besignificant ~~refused~~uncertainty orexists ~~revoked~~regarding if the ~~permit~~obtaining ~~applicant~~of orpermits ~~permittee~~under ~~owns~~the orCWA ~~controls,~~for ~~directly~~coal ~~or indirectly through other entities,~~ mining operations ~~which have outstanding environmental violations. Although, like other coal companies, PVR’s lessees’ have been cited for violations~~ in ~~the~~Appalachia ~~ordinary~~due ~~course of business,~~ to ~~our~~various ~~knowledge, none~~initiatives oflaunched ~~them~~by ~~have~~EPA ~~had~~regarding ~~one of their permits suspended or revoked because of any violation, and the penalties assessed for~~ these ~~violations have not been material~~permits.

InFor ~~order~~instance, toeven ~~obtain~~though ~~mining~~the ~~permits~~State ~~and~~of ~~approvals~~West ~~from~~Virginia ~~state~~has ~~regulatory~~been ~~authorities,~~delegated ~~mine~~the ~~operators,~~authority ~~including~~to ~~PVR’s~~issue ~~lessees,~~permits ~~must~~for ~~submit~~coal amines ~~reclamation~~in ~~plan~~that ~~for restoring~~state, ~~upon~~ the EPA ~~completion~~is oftaking ~~mining~~a ~~operations,~~more ~~the~~active ~~mined~~role ~~property~~in to its ~~prior~~review ~~condition,~~of ~~productive~~NPDES ~~use or other permitted condition. Typically, PVR’s lessees submit the necessary~~ permit applications ~~between~~for 12coal ~~and 24 months before they plan to begin~~ mining aoperations ~~new~~in ~~area~~Appalachia. InEPA ~~PVR’s~~has ~~experience,~~stated ~~permits~~that ~~generally~~it ~~are~~plans ~~approved~~to ~~within~~review 12all ~~months~~applications ~~after~~for aNPDES ~~completed application is submitted~~permits. ~~In the past~~Indeed, ~~PVR’s~~interim ~~lessees~~final ~~have~~guidance ~~generally~~issued ~~obtained~~by ~~their~~the ~~mining~~EPA ~~permits without~~on ~~significant~~April 1, ~~delay.~~2010, ~~PVR’s~~encourages ~~lessees~~EPA ~~have~~Regions ~~obtained~~3, or4 ~~applied~~and ~~for~~5 ~~permits~~ to ~~mine~~(1) object ato ~~majority of~~ the ~~reserves~~issuance ~~that~~of ~~are~~state ~~currently~~program ~~planned~~NPDES topermits bewhere ~~mined over~~ the ~~next~~Region ~~five~~does ~~years.~~not ~~PVR’s~~believe ~~lessees~~that ~~are also in~~ the ~~planning~~proposed ~~phase~~permit ~~for~~satisfies ~~obtaining permits for~~ the ~~additional~~requirements ~~reserves~~of ~~planned to be mined over~~ the ~~following five years. However~~CWA, ~~there~~and ~~are~~(2) exercise noa ~~assurances~~greater degree ~~that~~of ~~they~~oversight ~~will~~with ~~not~~regard ~~experience~~to ~~difficulty~~state inissued ~~obtaining~~general ~~mining~~Section 404 permits ~~in the future~~. ~~See “— PVR Coal and Natural Resource Management Segment — Clean Water Act.”~~

~~OSHA.~~In ~~PVR’s~~addition, ~~lessees~~the ~~and~~April 1, ~~PVR~~2010, interim final guidance also addresses the Regions’s ~~own~~involvement ~~business~~in ~~are~~Section 404 ~~subject~~permitting todecisions. ~~the~~This ~~Occupational~~guidance ~~Safety~~follows ~~and~~up ~~Health~~on ~~Act~~the June 11, or2009 ~~OSHA~~Enhanced Coordination Process Memoranda for the issuance of 404 permits whereby EPA undertook a new level of review of 404 permits than it had previously undertaken. Ultimately, ~~and~~EPA ~~comparable~~identified ~~state~~79 ~~laws~~coal-related applications for 404 permits that ~~regulate~~would ~~the~~need ~~protection~~to ofgo through that process. EPA’s actions in issuing the ~~health~~Enhanced Coordination Process Memoranda and ~~safety~~the guidance are being challenged in a lawsuit pending before the United States District Court for the District of ~~workers~~Columbia in a case captioned National Mining Assoc. v. U.S. Environmental Protection Agency. In ~~addition~~a ruling issued on January 18, 2011, the ~~OSHA~~District ~~hazard~~Court ~~communication~~held ~~standard~~that ~~requires~~these ~~that~~measures ~~information~~“are belegislative ~~maintained~~rules ~~about~~that ~~hazardous~~were ~~materials~~adopted ~~used~~in orviolation ~~produced~~of inthe ~~PVR~~APA’s ~~operations~~notice and ~~that~~comment ~~this~~requirements.” ~~information~~The becourt ~~provided~~would not grant the motion for a preliminary injunction to ~~employees,~~enjoin ~~state~~further ~~and~~use ~~local~~of ~~government~~these ~~authorities~~measures ~~and~~but ~~citizens~~also refused to dismiss the Complaint as the EPA had sought.

Not only is EPA reviewing new permits before they are issued, EPA has recently exercised its “veto” power on January 14, 2011 to withdraw or restrict the use of previously issued permits in connection with the Spruce No. 1 Surface Mine in West Virginia, which is one of the largest surface mining operations ever authorized in Appalachia. This action is the first time that such power was exercised with regard to a previously permitted coal mining project. More frequent use of the EPA’s Section 404 “veto” power as well as the increased risk of application of this power to previously permitted projects could create uncertainly with regard to PVR’s ~~Natural~~lessees’ ~~Gas~~continued ~~Midstream~~use ~~Segment~~of their current permits, as well as impose additional time and cost burdens on future operations, potentially adversely affecting PVR’s coal royalties revenues.

~~General~~These ~~Regulation. PVR’s~~initiatives ~~natural~~have ~~gas~~extended ~~gathering~~the ~~facilities~~time ~~generally~~required ~~are~~to ~~exempt~~obtain ~~from~~permits ~~the~~for ~~Federal~~coal ~~Energy~~mining ~~Regulatory~~and ~~Commission’s,~~we oranticipate further delays in obtaining permits and that the ~~FERC~~costs associated with obtaining and complying with those permits will increase substantially. In addition, ~~jurisdiction~~uncertainty ~~under~~over ~~the~~what ~~Natural~~legally ~~Gas~~constitutes ~~Act~~a navigable water of ~~1938,~~the orUnited States within the CWA’s ~~NGA,~~regulatory ~~but~~scope ~~FERC~~may ~~regulation~~adversely ~~nevertheless~~impact ~~could~~the ~~significantly~~ability ~~affect~~of PVR’s ~~gathering~~coal ~~business~~lessees ~~and~~to secure the ~~market~~necessary permits for ~~its~~their ~~services~~mining activities. InIt ~~recent~~is ~~years,~~possible ~~the~~that ~~FERC~~some ~~has~~of ~~pursued~~PVR’s ~~pro-competitive~~lessees’ ~~policies~~projects inmay ~~its~~not ~~regulation~~be ofable ~~interstate~~to ~~natural~~obtain ~~gas~~these permits ~~pipelines~~because ~~into~~of the manner in which ~~PVR’s~~these ~~gathering~~rules ~~pipelines~~are ~~deliver.~~being ~~However,~~interpreted weand ~~cannot~~applied. ~~assure~~It ~~you~~is also possible that ~~the~~PVR’s ~~FERC~~lessees ~~will~~may ~~continue~~be ~~this~~unable ~~approach~~to asobtain itor ~~considers~~may ~~matters~~experience ~~such~~delays asin ~~pipeline~~securing, ~~rates~~utilizing ~~and~~or ~~rules~~renewing ~~and~~additional Section 404 ~~policies~~individual ~~that~~permits ~~may~~for ~~affect~~surface ~~rights~~mining ofoperations ~~access~~due to ~~natural~~agency ~~gas~~or ~~transportation~~court ~~capacity~~decisions stemming from the above developments.

~~For~~PVR’s ~~example,~~lessess ~~the~~may ~~FERC~~no ~~will~~longer ~~assert~~seek ~~jurisdiction~~general ~~over~~permits anunder ~~affiliated~~Nationwide ~~gatherer~~Permit ~~that~~21 ~~acts~~(“NWP to21”) ~~benefit~~adopted ~~its~~by ~~pipeline~~the ~~affiliate~~Army Corps under its authority in aSection 404 ~~manner~~of ~~that~~the isCWA ~~contrary~~because toon June 17, 2010, the ~~FERC~~Army Corps suspended the use of NWP 21 in the Appalachian states where PVR’s ~~policies~~lessees ~~concerning~~operate, ~~jurisdictional~~but ~~services~~NWP ~~adopted~~21 ~~pursuant~~authorizations toalready ~~the~~granted ~~NGA~~remain in effect. InWhile ~~addition~~the suspension is in effect, ~~natural~~PVR’s ~~gas~~lessees ~~gathering~~must ~~may~~seek ~~receive~~404 ~~greater~~permits ~~regulatory~~on ~~scrutiny~~an atindividual ~~both~~basis subject to the ~~state~~EPA measures discussed above with the uncertainties and delays attendant to that process for now.

17In December 2008, the Department of Interior published the Excess Spoil, Coal Mine Waste and Buffers for Perennial and Intermittent Streams rule under SMCRA in part to clarify when valley fills are permitted. The rule would require a 100-foot buffer around all waters, including streams, lakes, ponds and wetlands. However, the rule would exempt certain activities, such as permanent spoil fills and coal waste disposal facilities, and allow mining that changes a waterway’s flow, providing the mining company repairs damage later. Companies could also receive a permit to dispose of waste within the buffer zone if they explain why an alternative is not reasonably possible or is not necessary to meet environmental requirements. Environmental groups brought lawsuits challenging the rule and in a March 2010 settlement with litigation parties, the OSM agreed to use best efforts to sign a proposed rule by February 28, 2011 and a final rule by June 29, 2012. In addition, Congress has proposed, and may in the future propose, legislation to restrict the placement of mining material in streams.

~~TABLE~~Total OFMaximum ~~CONTENTS~~Daily Load, or TMDL, regulations under the CWA establish a process to calculate the maximum amount of a pollutant that a water body can receive and still meet state water quality standards and to allocate pollutant loads among the point- and non-point pollutant sources discharging into that water body. This process applies to those waters that states have designated as impaired (not meeting present water quality standards). Industrial dischargers, including coal mines, discharging to such waters will be required to meet new TMDL allocations for these stream

~~federal~~15 levels now that the FERC has taken a less stringent approach to regulation of the gathering activities of interstate pipeline transmission companies and a number of such companies have transferred gathering facilities to unregulated affiliates. PVR’s gathering operations could be adversely affected should they be subject in the future to the application of state or federal regulation of rates and services. PVR’s gathering operations also may be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on PVR’s natural gas midstream operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.

InTable Texas, PVR’s gathering facilities are subject to regulation by the Texas Railroad Commission, which has the authority to ensure that rates, terms and conditions of gas utilities, including certain gathering facilities, are just and reasonable and not discriminatory. PVR’s operations in Oklahoma are regulated by the Oklahoma Corporation Commission, which prohibits PVR from charging any unduly discriminatory fees for its gathering services. We cannot predict whether PVR’s gathering rates will be found to be unjust, unreasonable or unduly discriminatory. Contents

~~PVR is subject to ratable take and common purchaser statutes in Texas and Oklahoma~~ segments. ~~Ratable~~The ~~take~~adoption ~~statutes~~of ~~generally~~new ~~require~~TMDL-related ~~gatherers~~allocations ~~to take, without undue discrimination, natural gas production that may be tendered to the gatherer~~ for ~~handling.~~streams ~~Similarly, common purchaser statutes generally require gatherers~~ to ~~purchase~~which ~~without undue discrimination as to source of supply or producer. These statutes have the effect of restricting~~ PVR’s ~~right~~lessees’ ascoal anmining ~~owner~~operations ofdischarge ~~gathering~~could ~~facilities~~require tomore ~~decide~~costly ~~with~~water ~~whom~~treatment ~~it contracts to purchase or transport natural gas. Federal law leaves any economic regulation of natural gas gathering to the states,~~ and ~~Texas~~could ~~and~~adversely ~~Oklahoma~~affect ~~have~~PVR’s ~~adopted~~lessees’ ~~complaint-based~~coal ~~regulation that generally allows natural gas producers and shippers to file complaints with state regulators in an effort to resolve grievances relating to natural gas gathering rates and access~~production. ~~We cannot assure you that federal and state authorities will retain their current regulatory policies in the future.~~

~~Texas~~The ~~and~~CWA ~~Oklahoma~~also ~~administer~~requires ~~federal~~states ~~pipeline~~to ~~safety~~develop ~~standards~~anti-degradation ~~under~~policies ~~the~~to ~~Natural~~ensure non-impaired ~~Gas~~water ~~Pipeline~~bodies ~~Safety~~in ~~Act of 1968, or~~ the ~~NGPSA,~~state ~~which~~do ~~requires~~not ~~certain~~fall ~~natural~~below ~~gas~~applicable ~~pipelines~~water toquality ~~comply with safety~~ standards. inThese ~~constructing~~ and ~~operating~~other ~~the~~regulatory ~~pipelines,~~developments ~~and~~may ~~subjects~~restrict ~~pipelines to regular inspections.~~ PVR’s ~~also~~lessees’ ~~operates~~ability ~~a NGL pipeline that is subject~~ to ~~regulation~~develop bynew ~~the~~mines ~~U.S.~~or ~~Department~~could ofrequire ~~Transportation~~PVR’s ~~under~~lessees ~~the Hazardous Liquids Pipeline Safety Act of 1979, as amended, and comparable state statutes with respect~~ to ~~design,~~modify existing ~~installation~~operations, ~~testing,~~which ~~construction,~~could ~~operation, replacement and management of pipeline facilities. In response to recent pipeline accidents, Congress and the U.S. Department of Transportation~~ have ~~instituted~~an ~~heightened~~adverse ~~pipeline~~effect ~~safety~~on ~~requirements. Certain of~~ PVR’s ~~gathering~~coal ~~facilities are exempt from these federal pipeline safety requirements under the rural gathering exemption~~business. ~~We cannot assure you that the rural gathering exemption will be retained in its current form in the future.~~

~~Failure~~The Safe Drinking Water Act, or the SDWA, and its state equivalents affect coal mining operations by imposing requirements on the underground injection of fine coal slurries, fly ash and flue gas scrubber sludge, and by requiring permits to ~~comply~~conduct ~~with~~such ~~applicable~~underground ~~regulations~~injection activities. ~~under~~In addition to establishing the ~~NGA~~underground injection control program, the ~~NGPSA~~SDWA also imposes regulatory requirements on owners and ~~certain~~operators ~~state~~of ~~laws~~“public ~~can~~water ~~result~~systems.” inThis regulatory program could impact PVR’s lessees’ reclamation operations where subsidence or other mining-related problems require the ~~imposition~~provision of ~~administrative,~~drinking ~~civil~~water ~~and~~to ~~criminal~~affected ~~remedies~~adjacent homeowners.

~~Air~~Endangered ~~Emissions.~~Species ~~PVR’s~~Act ~~natural~~The ~~gas~~Endangered ~~midstream~~Species ~~operations~~Act ~~are subject to the CAA~~ and ~~comparable~~counterpart state ~~laws~~legislation ~~and~~protect ~~regulations.~~species ~~See~~threatened “—with ~~PVR~~possible ~~Coal and Natural Resource Management Segment — Air Emissions~~extinction.” ~~These~~Protection ~~laws~~of threatened and ~~regulations~~endangered ~~govern~~species ~~emissions~~may ofhave ~~pollutants into~~ the effect ~~air~~of ~~resulting~~prohibiting ~~from~~or ~~the~~delaying ~~activities of~~ PVR’s ~~processing~~lessees ~~plants~~from ~~and~~obtaining ~~compressor~~mining ~~stations~~permits and ~~also~~may ~~impose~~include ~~procedural~~restrictions ~~requirements~~ on ~~how~~timber ~~PVR~~harvesting, ~~conducts~~road ~~its~~building ~~natural gas midstream operations. Such laws~~ and ~~regulations~~other ~~may~~mining ~~include~~or ~~requirements~~agricultural ~~that~~activities ~~PVR~~in ~~obtain~~areas ~~pre-approval~~containing ~~for~~ the ~~construction~~affected orspecies ~~modification of certain projects~~ or ~~facilities expected to~~their ~~produce~~habitats. ~~air~~A ~~emissions,~~number ~~strictly~~of ~~comply~~species ~~with~~indigenous ~~the~~to ~~emissions~~areas ~~and~~where ~~operational limitations of air emissions permits~~ PVR’s isproperties ~~required~~are tolocated ~~obtain~~are orprotected ~~utilize~~under ~~specific~~the ~~equipment~~Endangered orSpecies ~~technologies to control emissions~~Act. ~~PVR’s~~Based ~~failure~~on tothe ~~comply~~species ~~with~~that ~~these~~have ~~requirements~~been ~~could~~identified ~~subject it~~ to ~~monetary~~date ~~penalties,~~and ~~injunctions,~~the ~~conditions~~current orapplication ~~restrictions~~of onapplicable ~~operations,~~laws and regulations, ~~potentially~~however, ~~criminal~~we ~~enforcement~~do ~~actions.~~not ~~PVR~~believe ~~will~~there beare ~~required~~any tospecies ~~incur~~protected ~~certain~~under ~~capital~~the ~~expenditures~~Endangered inSpecies ~~the~~Act ~~future~~that ~~for~~would ~~air~~materially ~~pollution~~and ~~control~~adversely ~~equipment~~affect inPVR’s ~~connection~~lessees’ ~~with~~ability ~~obtaining~~to ~~and~~mine ~~maintaining~~coal ~~operating~~from ~~permits~~PVR’s ~~and~~properties ~~approvals~~in ~~for~~accordance ~~air~~with ~~emissions~~current mining plans.

18Mine Health and Safety Laws The operations of PVR’s coal lessees are subject to stringent health and safety standards that have been imposed by federal legislation since the adoption of the Mine Health and Safety Act of 1969. The Mine Health and Safety Act of 1969 resulted in increased operating costs. The Mine Safety and Health Act of 1977, which significantly expanded the enforcement of health and safety standards of the Mine Health and Safety Act of 1969, imposes comprehensive health and safety standards on all mining operations. In addition, as part of the Mine Health and Safety Acts of 1969 and 1977, the Black Lung Acts require payments of benefits by all businesses conducting current mining operations to coal miners with black lung or pneumoconiosis and to some beneficiaries of miners who have died from this disease.

~~TABLE~~Mining OFaccidents ~~CONTENTS~~in the last several years in West Virginia, Utah, and Kentucky have received national attention and instigated responses at the state and national level that are likely to result in increased scrutiny of current safety practices and procedures at all mining operations, particularly underground mining operations. More stringent mine safety laws and regulations promulgated by these states and the federal government have included increased sanctions for non-compliance. Other states have proposed or passed similar bills, resolutions or regulations addressing mine safety practices. Moreover, workplace accidents, such as the April 5, 2010, Upper Big Branch Mine incident, are likely to result in more stringent enforcement and possibly the passage of new laws and regulations.

~~Hazardous~~In ~~Materials~~2006, the Mine Improvement and ~~Wastes. PVR’s~~New ~~natural~~Emergency ~~gas~~Response ~~midstream~~Act ~~operations~~(“Miner ~~could~~Act”) ~~incur~~was ~~liability~~enacted ~~under~~which ~~CERCLA~~was new mining safety legislation that mandates improvements in mine safety practices, increases civil and ~~comparable~~criminal ~~state~~penalties ~~laws~~for ~~resulting~~non-compliance, ~~from~~requires the ~~disposal~~creation orof ~~other~~additional ~~release~~mine ofrescue ~~hazardous~~teams ~~substances~~and orexpands ~~wastes~~the ~~originating~~scope ~~from~~of ~~properties~~federal ~~PVR~~oversight, ~~owns~~inspection orand ~~operates~~enforcement activities. Pursuant to the Miner Act, ~~regardless~~the ofMine ~~whether~~Safety ~~such~~Health ~~disposal~~Administration, or ~~release~~MSHA, ~~occurred~~has ~~during~~promulgated ornew ~~prior~~emergency torules ~~PVR~~on mine safety and revised MSHA’s ~~acquisition~~civil ofpenalty ~~such~~assessment ~~properties~~regulations, which resulted in an across-the-board increase in penalties from the existing regulations. ~~See~~Since “—passage ~~PVR~~of ~~Coal~~the Miner Act, enforcement scrutiny has also increased, including more inspection hours at mine sites, increased numbers of inspections and ~~Natural~~increased ~~Resource~~issuance ~~Management~~of ~~Segment — Hazardous~~the ~~Materials~~number and ~~Wastes~~the severity of enforcement actions and related penalties.” ~~Although~~Various ~~petroleum,~~states ~~including~~also ~~natural~~have ~~gas~~enacted ~~and~~their ~~NGLs~~own ~~are~~new ~~generally~~laws ~~excluded~~and ~~from~~regulations ~~CERCLA’s~~addressing ~~definition~~many of ~~“hazardous substance,”~~these ~~PVR’s~~same ~~natural~~subjects. ~~gas~~The ~~midstream~~Dodd ~~operations~~Frank doBill ~~generate~~that ~~wastes~~was enacted by Congress in ~~the~~2010 ~~course~~now requires mining companies including coal companies to include various safety statistics regarding citations, penalties, notices of ~~ordinary~~violation ~~operations~~and pending legal actions in periodic reports that ~~may~~are ~~fall~~required ~~within~~by the ~~definition~~securities oflaws. aThese ~~CERCLA~~disclosures ~~“hazardous~~may ~~substance,”~~lead orto bethe ~~subject~~enactment toof ~~regulation~~yet further ~~under~~legislation ~~state~~regarding ~~laws~~mine safety.

~~PVR’s~~Mining ~~natural~~Permits ~~gas~~and ~~midstream~~Approvals Numerous ~~operations~~governmental ~~generate~~permits ~~wastes,~~or approvals ~~including some hazardous wastes, which~~ are ~~subject~~required tofor ~~RCRA~~mining ~~and comparable state laws~~operations. ~~However,~~In ~~RCRA~~connection ~~currently~~with ~~exempts~~obtaining ~~many~~these ~~natural~~permits ~~gas gathering~~ and ~~field processing wastes from classification as hazardous waste. Specifically~~approvals, ~~RCRA~~PVR’s ~~excludes~~coal ~~from~~lessees ~~the~~may ~~definition~~be ofrequired ~~hazardous~~to ~~waste~~prepare ~~produced waters~~ and ~~other~~present ~~wastes~~to ~~associated with the exploration~~federal, ~~development~~state or ~~production~~local ofauthorities ~~crude~~data ~~oil,~~pertaining ~~natural~~to ~~gas~~the effect or ~~geothermal~~impact that ~~energy.~~any ~~Unrecovered~~proposed ~~petroleum~~production ~~product~~of ~~wastes,~~coal ~~however,~~ may ~~still~~have beupon ~~regulated~~the ~~under RCRA as solid waste~~environment. ~~Moreover,~~The ~~ordinary~~requirements ~~industrial~~imposed ~~wastes~~by ~~such~~any asof ~~paint~~these ~~wastes,~~authorities ~~waste solvents, laboratory wastes and waste compressor oils~~ may be ~~regulated~~costly asand ~~hazardous~~time ~~waste.~~consuming ~~The transportation of natural gas~~ and ~~NGLs in pipelines~~ may ~~also~~delay ~~generate~~commencement ~~some~~or ~~hazardous~~continuation ~~wastes.~~of ~~Although~~mining ~~PVR believes that it is unlikely that the RCRA exemption will be repealed in the near future, repeal would increase costs for waste disposal and environmental remediation at PVR’s facilities~~operations.

~~PVR~~Under ~~currently~~some ~~owns or leases numerous properties that for many years have been used for the measurement~~circumstances, ~~gathering,~~substantial ~~field~~fines ~~compression~~ and ~~processing~~penalties, ofincluding ~~natural~~revocation ~~gas and NGLs. Although PVR believes that the operators~~ of ~~such~~mining ~~properties used operating and disposal practices that were standard in the industry at the time~~permits, ~~hydrocarbons or wastes~~ may ~~have~~be ~~been~~imposed ~~disposed of or released on or~~ under ~~such~~the ~~properties~~laws described ~~or on or under other locations where such wastes have been taken for disposal~~above. ~~These~~Monetary ~~properties~~sanctions and, ~~the~~in ~~substances~~severe ~~disposed~~circumstances, orcriminal ~~released~~sanctions ~~on them~~ may be ~~subject~~imposed tofor ~~CERCLA,~~failure ~~RCRA~~to ~~and~~comply ~~analogous~~with ~~state~~these laws. ~~Under~~Regulations ~~such~~also ~~laws,~~provide ~~PVR~~that ~~could~~a bemining ~~required~~permit tocan ~~remove or~~be ~~remediate~~refused ~~previously disposed wastes (including waste disposed of~~ or ~~released~~revoked byif prior owners or operators) or property contamination (including groundwater contamination, whether from prior owners or operators or other historic activities or spills) or to perform remedial plugging or pit closure operations to prevent future contamination. PVR has ongoing remediation projects underway at several sites, but it does not believe that the ~~costs associated with such cleanups will have a material adverse impact on PVR’s operations or revenues.~~ permit

~~Water~~16 Discharges. PVR’s natural gas midstream operations are subject to the CWA. See “— PVR Coal and Natural Resource Management Segment — Clean Water Act.” Any unpermitted release of pollutants, including NGLs or condensates, from PVR’s systems or facilities could result in fines or penalties as well as significant remedial obligations.

OSHA. PVR’sTable naturalof gas midstream operations are subject to OSHA. See “— PVR Coal and Natural Resource Management Segment — OSHA.” Contents

~~Employees~~ applicant or permittee owns or controls, directly or indirectly through other entities, mining operations which have outstanding environmental violations. Although, like other coal companies, PVR’s lessees have been cited for violations in the ordinary course of business, to PVR’s knowledge, none of them have had one of their permits suspended or revoked because of any violation, and ~~Labor~~the ~~Relations~~penalties assessed for these violations have not been material.

~~Neither~~PVR’s welessees ~~nor~~have ~~PVR~~obtained ~~have~~or ~~any~~applied ~~employees.~~for Topermits ~~carry~~to ~~out~~mine ~~PVR’s~~a ~~operations,~~majority ~~our~~of ~~affiliates~~the ~~employed~~reserves ~~167~~that ~~employees~~are currently ~~who~~planned ~~directly~~to ~~supported~~be mined over the next five years. PVR’s ~~operations~~lessees atare ~~December~~also ~~31,~~in ~~2009.~~the ~~Our~~planning ~~general~~phase ~~partner~~for ~~considers~~obtaining ~~current~~permits ~~employee~~for ~~relations~~the additional reserves planned to be ~~favorable~~mined over the following five years. However, there are no assurances that they will not experience difficulty in obtaining mining permits in the future. See “— Coal and Natural Resource Management Segment — Clean Water Act.”

~~Available~~OSHA PVR’s ~~Information~~lessees and PVR’s own business are subject to the Occupational Safety and Health Act, or OSHA, and comparable state laws that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in PVR’s operations and that this information be provided to employees, state and local government authorities and citizens.

~~Our~~PVR ~~internet~~Natural ~~address~~Gas isMidstream ~~http://www.pvgpholdings.com.~~Segment We make available free of charge on or through our website our Corporate Governance Principles, Code of Business Conduct and Ethics, Executive and Financial Officer Code of Ethics and Audit Committee Charter, and we will provide copies of such documents to any unitholder who so requests. We also make available free of charge on or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. All references in this Annual Report on Form 10-K to the “NYSE” refer to the New York Stock Exchange, and all references to the “SEC” refer to the Securities and Exchange Commission.

19General Regulation PVR’s natural gas gathering facilities generally are exempt from the Federal Energy Regulatory Commission’s, or the FERC, jurisdiction under the Natural Gas Act of 1938, or the NGA, but FERC regulation nevertheless could significantly affect PVR’s gathering business and the market for PVR’s services. In recent years, the FERC has pursued pro-competitive policies in its regulation of interstate natural gas pipelines into which PVR’s gathering pipelines deliver. However, we cannot assure you that the FERC will continue this approach as it considers matters such as pipeline rates and rules and policies that may affect rights of access to natural gas transportation capacity.

~~TABLE~~For OFexample, the ~~CONTENTS~~FERC will assert jurisdiction over an affiliated gatherer that acts to benefit its pipeline affiliate in a manner that is contrary to the FERC’s policies concerning jurisdictional services adopted pursuant to the NGA. In addition, natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels now that the FERC has taken a less stringent approach to regulation of the gathering activities of interstate pipeline transmission companies and a number of such companies have transferred gathering facilities to unregulated affiliates. PVR’s gathering operations could be adversely affected should they be subject in the future to the application of state or federal regulation of rates and services. PVR’s gathering operations also may be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on PVR’s natural gas midstream operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.

~~Common~~In ~~Abbreviations~~Texas, PVR’s gathering facilities are subject to regulation by the Texas Railroad Commission, which has the authority to ensure that rates, terms and ~~Definitions~~conditions of gas utilities, including certain gathering facilities, are just and reasonable and not discriminatory. PVR’s operations in Oklahoma are regulated by the Oklahoma Corporation Commission, which prohibits us from charging any unduly discriminatory fees for PVR’s gathering services. We cannot predict whether PVR’s gathering rates will be found to be unjust, unreasonable or unduly discriminatory.

~~The~~PVR ~~following~~is ~~are~~subject ~~abbreviations~~to ~~and~~ratable ~~definitions~~take ~~commonly~~and ~~used~~common purchaser statutes in Texas and Oklahoma. Ratable take statutes generally require gatherers to take, without undue discrimination, natural gas production that may be tendered to the ~~coal~~gatherer for handling. Similarly, common purchaser statutes generally require gatherers to purchase without undue discrimination as to source of supply or producer. These statutes have the effect of restricting PVR’s right as an owner of gathering facilities to decide with whom we contract to purchase or transport natural gas. Federal law leaves any economic regulation of natural gas gathering to the states, and ~~oil~~Texas and ~~gas~~Oklahoma ~~industries~~have adopted complaint-based regulation that ~~are~~generally ~~used~~allows natural gas producers and shippers to file complaints with state regulators in ~~this~~an ~~Annual~~effort ~~Report~~to onresolve ~~Form~~grievances ~~10-K~~relating to natural gas gathering rates and access. We cannot assure you that federal and state authorities will retain their current regulatory policies in the future.

Bbl		a standard barrel of 42 U.S. gallons liquid volume
Bcf		one billion cubic feet
Bcfe		one billion cubic feet equivalent with one barrel of oil or condensate converted to six thousand cubic feet of natural gas based on the estimated relative energy content
BTU		British thermal unit
MBbl		one thousand barrels
Mbf		one thousand board feet
Mcf		one thousand cubic feet
Mcfe		one thousand cubic feet equivalent
MMBbl		one million barrels
MMbf		one million board feet
MMBtu		one million British thermal units
MMcf		one million cubic feet
MMcfd		one million cubic feet per day
MMcfe		one million cubic feet equivalent
NGL		natural gas liquid
NYMEX		New York Mercantile Exchange
Probable coal reserves		those reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are more widely spaced or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation
Proved oil and gas reserves		those estimated quantities of crude oil, condensate and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known oil and gas reservoirs under existing economic and operating conditions at the end of the respective years
Proven coal reserves		those reserves for which: (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (ii) grade and/or quality are computed from the results of detailed sampling; and (iii) the sites for inspection, sampling and measurement are spaced so closely, and the geologic character is so well defined, that the size, shape, depth and mineral content of reserves are well-established

Texas and Oklahoma administer federal pipeline safety standards under the Natural Gas Pipeline Safety Act of 1968, or the NGPSA, which requires certain natural gas pipelines to comply with safety standards in constructing and operating the pipelines, and subjects pipelines to regular inspections. We also operate a NGL pipeline that is subject to regulation by the U.S. Department of Transportation under the Hazardous Liquids Pipeline Safety Act of 1979, as amended, and comparable state statutes with respect to design, installation, testing, construction, operation, replacement and management of pipeline facilities. In response to recent pipeline accidents, Congress and the U.S. Department of Transportation have instituted heightened pipeline safety requirements. Certain of PVR’s gathering facilities are exempt from these federal pipeline safety requirements under the rural gathering exemption. We cannot assure you that the rural

2017

TABLETable OFof CONTENTSContents

~~Item~~ gathering 1Aexemption ~~Risk~~will ~~Factors~~be retained in its current form in the future. Failure to comply with applicable regulations under the NGA, the NGPSA and certain state laws can result in the imposition of administrative, civil and criminal remedies.

~~Our~~Air ~~business~~Emissions PVR’s ~~and~~natural gas midstream operations are subject to athe ~~number~~CAA ofand ~~risks~~comparable state laws and ~~uncertainties~~regulations. asSee ~~described~~“— ~~below~~Coal and Natural Resource Management Segment — Air Emissions.” ~~However,~~These laws and regulations govern emissions of pollutants into the ~~risks~~air resulting from the activities of PVR’s processing plants and ~~uncertainties~~compressor ~~described~~stations ~~below~~and ~~are~~also ~~not~~impose ~~the~~procedural ~~only~~requirements ~~ones~~on how we ~~face~~conduct PVR’s natural gas midstream operations. ~~Additional~~Such ~~risks~~laws and ~~uncertainties~~regulations may include requirements that we ~~are~~obtain pre-approval ~~unaware~~for the construction or modification of, certain projects or ~~that~~facilities weexpected ~~may~~to ~~currently~~produce ~~deem~~air ~~immaterial~~emissions, ~~may~~strictly ~~become~~comply ~~important~~with ~~factors~~the ~~that~~emissions ~~harm~~and ~~our~~operational ~~business,~~limitations ~~financial~~of ~~condition~~air emissions permits we are required to obtain or ~~results~~utilize specific ofequipment ~~operations~~or technologies to control emissions. IfPVR’s ~~any~~failure ofto ~~the~~comply ~~following~~with ~~risks~~these ~~actually~~requirements ~~occur,~~could ~~our~~subject ~~business~~us to monetary penalties, ~~financial~~injunctions, ~~condition~~conditions or ~~results~~restrictions ofon operations, ~~could~~and ~~suffer~~potentially criminal enforcement actions. PVR will be required to incur certain capital expenditures in the future for air pollution control equipment in connection with obtaining and maintaining operating permits and approvals for air emissions.

~~Risks~~Hazardous ~~Inherent~~Materials inand anWastes PVR’s ~~Investment~~natural gas midstream operations could incur liability under CERCLA and comparable state laws resulting from the disposal or other release of hazardous substances or wastes originating from properties we own or operate, regardless of whether such disposal or release occurred during or prior to PVR’s acquisition of such properties. See “— Coal and Natural Resource Management Segment — Hazardous Materials and Wastes.” Although petroleum, including natural gas and NGLs are generally excluded from CERCLA’s definition of “hazardous substance,” PVR’s natural gas midstream operations do generate wastes in Usthe course of ordinary operations that may fall within the definition of a CERCLA “hazardous substance,” or be subject to regulation under state laws.

~~Our~~PVR’s ~~cash~~natural ~~flow~~gas ismidstream ~~entirely~~operations ~~dependent~~generate onwastes, including some hazardous wastes, which are subject to RCRA and comparable state laws. However, RCRA currently exempts many natural gas gathering and field processing wastes from classification as hazardous waste. Specifically, RCRA excludes from the ~~ability~~definition of hazardous waste produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal energy. Unrecovered petroleum product wastes, however, may still be regulated under RCRA as solid waste. Moreover, ordinary industrial wastes such as paint wastes, waste solvents, laboratory wastes and waste compressor oils may be regulated as hazardous waste. The transportation of natural gas and NGLs in pipelines may also generate some hazardous wastes. Although PVR tobelieves ~~make~~that it ~~cash~~is ~~distributions~~unlikely tothat usthe RCRA exemption will be repealed in the near future, repeal would increase costs for waste disposal and environmental remediation at PVR’s facilities.

~~Our~~PVR ~~earnings~~currently ~~and~~owns ~~cash~~or ~~flow~~leases ~~consist~~numerous ~~exclusively~~properties that for many years have been used for the measurement, gathering, field compression and processing of ~~cash~~natural ~~distributions~~gas ~~from~~and ~~PVR~~NGLs. ~~Consequently,~~Although aPVR ~~significant~~believes ~~decline~~that the operators of such properties used operating and disposal practices that were standard in ~~PVR’s~~the ~~earnings~~industry orat ~~cash~~the ~~distributions~~time, ~~would~~hydrocarbons or wastes may have abeen ~~negative~~disposed ~~impact~~of or released on usor under such properties or on or under other locations where such wastes have been taken for disposal. ~~The~~These ~~amount~~properties ofand ~~cash~~the ~~that~~substances ~~PVR~~disposed ~~will~~or released on them may be ~~able~~subject to ~~distribute~~CERCLA, toRCRA ~~its~~and ~~partners,~~analogous ~~including~~state uslaws. Under such laws, ~~each~~PVR ~~quarter~~could be ~~principally~~required ~~depends~~to ~~upon~~remove ~~the~~or ~~amount~~remediate previously disposed wastes (including waste disposed of ~~cash~~or itreleased ~~can~~by ~~generate~~prior owners or operators) or property contamination (including groundwater contamination, whether from ~~its~~prior ~~coal~~owners ~~and~~or ~~natural~~operators ~~resource~~or ~~management~~other historic ~~and~~activities ~~natural~~or ~~gas~~spills) ~~midstream~~or ~~businesses~~to perform remedial plugging or pit closure operations to prevent future contamination. ~~The~~PVR ~~amount~~has ofongoing ~~cash~~remediation projects underway at several sites, but it does not believe that ~~PVR~~the ~~will~~costs ~~generate~~associated ~~will~~with ~~fluctuate~~such cleanups ~~from~~will ~~quarter~~have toa ~~quarter~~material ~~based~~adverse impact on, ~~among~~PVR’s ~~other~~operations ~~things:~~or revenues.

•Water Discharges PVR’s natural gas midstream operations are subject to the ~~amount~~CWA. See “— Coal and Natural Resource Management Segment — Clean Water Act.” Any unpermitted release of ~~coal~~pollutants, ~~its~~including ~~lessees~~NGLs ~~are~~or ~~able~~condensates, tofrom ~~produce;~~PVR’s systems or facilities could result in fines or penalties as well as significant remedial obligations.

•OSHA PVR’s natural ~~the~~gas ~~price~~midstream atoperations ~~which~~are ~~its~~subject ~~lessees~~to ~~are~~OSHA. ~~able~~See to“— ~~sell~~Coal ~~the~~and ~~coal;~~Natural Resource Management Segment — OSHA.”

•Employees ~~its~~and ~~lessees’~~Labor ~~timely~~Relations ~~receipt of payment from their customers;~~

•Neither ~~its~~we ~~timely~~nor ~~receipt~~PVR ofhave ~~payments~~employees. ~~from~~To ~~its~~carry out ~~lessees;~~PVR’s operations, our affiliates employed 210 employees who directly supported PVR’s operations at December 31, 2010. Our general partner considers current employee relations to be favorable.

•Available ~~the~~Information ~~amount of natural gas transported in its gathering systems;~~

•Our ~~the~~internet ~~amount~~address is http://www.pvgpholdings.com . We make available free of ~~throughput~~charge inon ~~its~~or ~~processing~~through ~~plants;~~our website our Corporate Governance Principles, Code of Business Conduct and Ethics, Executive and Financial Officer Code of Ethics, Compensation and Benefits Committee Charter and Audit Committee Charter, and we will provide copies of such documents to any unitholder who so requests. We also make available free of charge on or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those

•18 ~~the price of and demand for natural gas;~~

•Table the price of and demand for NGLs;Contents

• reports filed or furnished pursuant to Section 13(a) or 15(d) of the ~~relationship~~Exchange ~~between~~Act ~~natural~~as ~~gas~~soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and ~~NGL~~Exchange ~~prices;~~Commission. All references in this Annual Report on Form 10-K to the “NYSE” refer to the New York Stock Exchange, and all references to the “SEC” refer to the Securities and Exchange Commission. The information contained on, or connected to, our website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we file with, or furnish to, the SEC.

•19 ~~the fees it charges and the margins it realizes for its natural gas midstream services; and~~

•Table itsof hedging activities.Contents

InCommon ~~addition,~~Abbreviations ~~the~~and ~~actual~~Definitions ~~amount of cash that PVR will have available for distribution will depend on other factors including:~~

•The following are abbreviations and definitions commonly used in the ~~level~~coal ofand ~~capital~~oil ~~expenditures~~and itgas ~~makes;~~industries that are used in this Annual Report on Form 10-K.

• the cost of acquisitions, if any;


Bbl		a standard barrel of 42 U.S. gallons liquid volume
Bcf		one billion cubic feet
Bcfe		one billion cubic feet equivalent with one barrel of oil or condensate converted to six thousand cubic feet of natural gas based on the estimated relative energy content
BTU		British thermal unit
MBbl		one thousand barrels
Mbf		one thousand board feet
Mcf		one thousand cubic feet
Mcfe		one thousand cubic feet equivalent
MMBbl		one million barrels
MMbf		one million board feet
MMBtu		one million British thermal units
MMcf		one million cubic feet
MMcfd		one million cubic feet per day
MMcfe		one million cubic feet equivalent
NGL		natural gas liquid
NYMEX		New York Mercantile Exchange
Probable coal reserves		those coal reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are more widely spaced or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation
Proven coal reserves		those coal reserves for which: (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (ii) grade and/or quality are computed from the results of detailed sampling; and (iii) the sites for inspection, sampling and measurement are spaced so closely, and the geologic character is so well defined, that the size, shape, depth and mineral content of reserves are well-established
Proved oil and gas reserves		those estimated quantities of crude oil, condensate and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known oil and gas reservoirs under existing economic and operating conditions at the end of the respective years

•20 ~~its debt service requirements;~~

•Table fluctuationsof in its working capital needs;Contents

•Item 1A ~~restrictions~~Risk onFactors ~~distributions contained in its debt agreements;~~

•Our ~~prevailing~~business ~~economic~~and ~~conditions;~~operations are subject to a number of risks and uncertainties as described below. However, the risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we may currently deem immaterial, may become important factors that harm our business, financial condition or results of operations. If any of the following risks actually occur, our business, financial condition, results of operations, as well as any related benefits of owning our securities could be materially and adversely affected.

•Risks ~~the~~Inherent ~~amount~~in ofan ~~cash~~Investment ~~reserves established by its general partner~~ in ~~its~~Us ~~sole discretion for the proper conduct of its business.~~

~~Because~~Our ~~of these factors, PVR may not have sufficient available~~ cash ~~each~~flow ~~quarter~~is toentirely ~~continue~~dependent ~~paying~~on ~~distributions~~the atability ~~their~~of ~~current level or at all. If~~ PVR ~~reduces~~to ~~its~~make ~~per unit distribution, we will have less~~ cash ~~available~~distributions ~~for distribution~~ to ~~our unitholders and would probably be required to reduce our per unit distribution to our unitholders~~us. ~~The amount of cash that PVR has available for distribution depends primarily upon PVR’s cash flow, including cash flow from financial reserves and working capital borrowings, and is not solely a~~

21Our earnings and cash flow consist exclusively of cash distributions from PVR. Consequently, a significant decline in PVR’s earnings or cash distributions would have a negative impact on us. The amount of cash that PVR will be able to distribute to its partners, including us, each quarter principally depends upon the amount of cash it can generate from its coal and natural resource management and natural gas midstream businesses. The amount of cash that PVR will generate will fluctuate from quarter to quarter based on, among other things:

~~TABLE~~• OFthe ~~CONTENTS~~amount of coal its lessees are able to produce;

~~function~~• ofthe ~~profitability,~~price at which ~~will~~its belessees ~~affected~~are byable ~~non-cash~~to ~~items.~~sell Asthe ~~a result, PVR may make cash distributions during periods when it records losses and may not make cash distributions during periods when it records profits.~~ coal;

~~Since~~• ~~PVR’s inception as a publicly traded partnership, it has grown principally by making acquisitions in both of~~ its business segments and, to a lesser extent, by organic growth on its properties. Readily available access to debt and equity capital and credit availability have been and continue to be critical factors in PVRlessees’s ~~ability~~timely toreceipt ~~grow. The current state~~ of ~~the~~payment ~~global~~from ~~economy,~~their and the consequential adverse effect on credit availability, may adversely impact PVR’s access to new capital and credit availability. Depending on the longevity and ultimate severity of this downturn, PVR’s ability to make acquisitions may be significantly adversely affected, as may PVR’s ability to make cash distributions to its unitholders and, in turn, would affect our ability to make cash distributions to our unitholders. customers;

In• ~~addition, the timing and amount, if any, of an increase or decrease in distributions by PVR to~~ its ~~unitholders~~timely ~~will~~receipt ~~not necessarily be comparable to the timing and amount~~ of ~~any~~payments ~~changes in distributions made by us. Our ability to distribute cash received~~ from ~~PVR~~its ~~to our unitholders is limited by a number of factors, including:~~ lessees;

• ~~restrictions~~the onamount ~~distributions~~of ~~contained~~natural ingas ~~any~~transported ~~future~~in ~~debt~~its ~~agreements~~gathering systems;

• ~~our~~the ~~estimated~~amount ~~general~~of ~~and~~throughput ~~administrative~~in ~~expenses~~its asprocessing ~~well as other operating expenses~~plants;

• ~~expenses~~the price of ~~PVR’s~~and ~~general~~demand ~~partner~~for ~~and~~natural ~~PVR~~gas;

• ~~reserves~~its ~~necessary~~timely ~~for~~receipt usof topayments ~~make~~from ~~the~~its ~~necessary~~natural ~~capital~~gas ~~contributions~~and toNGL ~~maintain our 2% general partner interest in PVR, as required by PVR’s partnership agreement upon the issuance of additional partnership securities by PVR~~customers; ~~and~~

• ~~reserves our general partner believes prudent for us to maintain~~ the ~~proper~~price ~~conduct~~ of ~~our~~and ~~business~~demand ~~or to provide~~ for ~~future distributions by us.~~NGLs;

In• addition, prior to making any distributions to our unitholders, we will reimburse our general partner and its affiliates for all direct and indirect expenses incurred by them on our behalf. Our general partner will determine the ~~amount~~relationship ofbetween ~~these~~natural ~~reimbursed~~gas ~~expenses. In addition, our general partner~~ and ~~its~~NGL ~~affiliates may perform other services for us for which we will be charged fees as determined by our general partner. The reimbursement of these expenses~~prices, in addition to the other factors listed above, could adversely affect the amount of distributions we make to our unitholders. The actual amount of cash that is available for distribution to our unitholders will depend on numerous factors, many of which ~~are~~impacts ~~beyond our control or~~ the ~~control~~effectiveness of ~~our~~its ~~general~~hedging ~~partner.~~program; and

~~Our~~• ~~rate of growth may be reduced to~~ the ~~extent~~fees weit ~~purchase~~charges ~~additional~~and ~~units from PVR, which will reduce~~ the ~~percentage~~margins ofit ~~the~~realizes ~~cash~~for weits ~~receive~~natural ~~from~~gas ~~the~~midstream ~~IDRs~~services.

~~Our~~In ~~business~~addition, ~~strategy includes supporting~~ the ~~growth~~actual amount of ~~PVR~~cash bythat ~~purchasing~~ PVR ~~units~~will orhave ~~lending~~available ~~funds to PVR to provide funding~~ for ~~the acquisition of a business or asset or for an internal growth project. To the extent we purchase common units or securities not entitled to a current~~ distribution ~~from PVR, the rate of our distribution growth may be reduced, at least in the short term, as less of our cash distributions~~ will ~~come~~depend ~~from~~on ~~our ownership of PVR IDRs, whose distributions increase at a faster rate than those of our~~ other ~~securities.~~factors including:

~~Our~~• ~~ability~~the tolevel ~~meet~~of ~~our~~capital ~~financial~~expenditures ~~needs~~it ~~may be adversely affected by our cash distribution policy and our lack of operational assets.~~makes;

~~Our~~• cash distribution policy, which is consistent with our partnership agreement, requires us to distribute all of our available cash quarterly. Our only cash generating assets are interests in PVR, and we currently have no independent operations separate from those of PVR. Moreover, as discussed in these risk factors, a reduction in PVR’s distributions will disproportionately affect the ~~amount~~cost of ~~cash distributions we receive. Given that our cash distribution policy is to distribute available cash and not retain it and that our only cash generating assets are interests in PVR~~acquisitions, ~~we may not have enough cash to meet our needs~~ if ~~there is an increase in our operating expenses, general and administrative expenses, working capital requirements or the cash needs of PVR or its subsidiaries that reduces PVR’s distributions.~~ any;

22• its debt service requirements;

~~TABLE~~• OFfluctuations ~~CONTENTS~~in its working capital needs;

~~PVR’s~~• ~~general~~restrictions ~~partner,~~on ~~with our consent but without the consent of our unitholders, may limit or modify the incentive~~ distributions wecontained ~~are~~in ~~entitled~~its todebt ~~receive, which may reduce cash distributions to our unitholders.~~agreements;

We• ~~own~~prevailing ~~PVR’s~~economic ~~general~~conditions; partner, which owns the IDRs in PVR that entitle us to receive increasing percentages, up to a maximum of 50% of any cash distributed by PVR as certain target distribution levels are reached in excess of $0.375 per PVR unit in any quarter. A substantial portion of the cash flow we receive from PVR is provided by these IDRs. Because of the high percentage of PVR’s incremental cash flow that is distributed to the IDRs, certain potential acquisitions might not increase cash available for distribution per PVR unit. In order to facilitate acquisitions by PVR, the board of directors of the general partner of PVR may elect to reduce the IDRs payable to us with our consent, which we may provide without the approval of our unitholders if our general partner determines that such reduction does not adversely affect our limited partners in any material respect. These reductions may be permanent reductions in the IDRs or may be reductions with respect to cash flows from the potential acquisition. If distributions on the IDRs were reduced for the benefit of the PVR units, the total amount of cash distributions we would receive from PVR, and ~~therefore the amount of cash distributions we could pay to our unitholders, would be reduced.~~

A• ~~reduction~~the inamount ~~PVR’s~~of ~~distributions~~cash ~~will~~reserves ~~disproportionately~~established ~~affect~~by ~~the~~its ~~amount~~general ofpartner ~~cash~~in ~~distributions~~its tosole ~~which~~discretion wefor ~~are~~the ~~currently~~proper ~~entitled~~conduct of its business.

~~Our~~Because ~~ownership~~ of ~~the~~these ~~IDRs~~factors, in PVR, ~~through~~may ~~our~~not ~~ownership~~have ofsufficient ~~PVR’s~~available ~~general~~cash ~~partner,~~each ~~the~~quarter ~~holder~~to ofcontinue ~~the~~paying distributions ~~IDRs,~~at ~~entitles~~their uscurrent tolevel ~~receive~~or ~~our~~at ~~pro~~all. ~~rata~~If ~~share~~PVR ofreduces ~~specified~~its ~~percentages~~per ofunit ~~total~~distribution, ~~cash~~we ~~distributions~~will ~~made~~have byless ~~PVR~~cash ~~with~~available ~~respect~~for distribution to ~~any~~our ~~particular~~unitholders ~~quarter~~and ~~only~~would inprobably ~~the~~be ~~event~~required ~~that~~to ~~PVR~~reduce ~~distributes~~our ~~more~~per ~~than~~unit $0distribution to our unitholders.~~275~~ ~~per~~The amount ~~unit~~of ~~for~~cash ~~such~~that ~~quarter.~~PVR Ashas aavailable ~~result,~~for ~~the~~distribution ~~holders~~depends ofprimarily upon PVR’s ~~common~~cash ~~units~~flow, ~~have~~including acash ~~priority~~flow ~~over~~from ~~the~~financial ~~holders~~reserves ofand ~~PVR’s~~working ~~IDRs~~capital toborrowings, ~~the~~and ~~extent~~is not solely a function of ~~cash~~profitability, ~~distributions~~which will be affected by non-cash items. As a result, PVR upmay tomake cash distributions during periods when it records losses and ~~including~~may ~~$0.275~~not ~~per~~make ~~unit~~cash ~~for~~distributions ~~any~~during ~~quarter~~periods when it records profits.

~~Our~~Since ~~IDRs~~PVR’s ~~entitle~~inception usas toa ~~receive~~publicly ~~increasing~~traded ~~percentages~~partnership, upit tohas ~~50%,~~grown ofprincipally ~~all~~by ~~incremental~~making ~~cash~~acquisitions ~~distributions~~in ~~above~~both ~~$0.375~~of ~~per~~its ~~unit~~business ~~distributed~~segments byand, ~~PVR~~to ~~for~~a ~~any~~lesser ~~quarter.~~extent, ~~Because~~by weorganic ~~are~~growth aton ~~the~~its ~~maximum~~properties. Readily ~~target~~available ~~cash~~access ~~distribution~~to ~~level~~debt onand ~~the~~equity ~~IDRs,~~capital ~~future~~and ~~growth~~credit inavailability ~~distributions~~have webeen ~~receive~~and ~~from~~continue ~~PVR~~to ~~will~~be ~~not~~critical ~~result~~factors ~~from an increase~~ in ~~the~~PVR’s ~~target~~ability ~~cash~~to ~~distribution~~grow. ~~level~~The ~~associated~~recent ~~with~~global ~~the~~economic ~~IDRs. Furthermore~~downturn, acoupled ~~decrease~~with in the ~~amount~~global offinancial ~~distributions~~and bycredit ~~PVR~~market disruptions, toand ~~less~~the ~~than~~consequential ~~$0.375~~adverse ~~per~~effect ~~unit~~on ~~per~~credit ~~quarter~~availability, ~~would~~may ~~reduce~~adversely ~~our~~impact ~~percentage~~PVR’s ofaccess ~~the~~to ~~incremental~~new ~~cash~~capital ~~distributions~~and ~~above~~credit $0availability.~~325~~ ~~per~~Depending ~~common~~on ~~unit~~the ~~per~~longevity ~~quarter~~and ~~from~~ultimate ~~50%~~severity toof ~~25%.~~this ~~As a result~~downturn, ~~any~~PVR’s ~~such~~ability ~~reduction~~to ~~in quarterly~~make ~~cash~~acquisitions ~~distributions~~may ~~from~~be ~~PVR~~significantly ~~would~~adversely ~~have~~affected, ~~the~~as ~~effect~~may ofPVR’s ~~disproportionately~~ability ~~reducing~~to ~~the~~make ~~amount~~cash of distributions ~~that~~to weits ~~receive~~unitholders ~~from~~and, ~~PVR~~in ~~based~~turn, onwould affect our ~~ownership~~ability ~~interest~~to inmake ~~the~~cash ~~IDRs as compared to~~ distributions ~~we receive from PVR with respect~~ to our ~~2% general partner and limited partner interest in PVR~~unitholders.

If21 ~~distributions on our common units are not paid with respect to any fiscal quarter our unitholders will not be entitled to receive such payments in the future.~~

OurTable distributionsof to our unitholders will not be cumulative. Consequently, if distributions on our common units are not paid with respect to any fiscal quarter, our unitholders will not be entitled to receive such payments in the future. Contents

In addition, the timing and amount, if any, of an increase or decrease in distributions by PVR to its unitholders will not necessarily be comparable to the timing and amount of any changes in distributions made by us. Our ability to distribute cash ~~distribution~~received ~~policy~~from ~~limits~~PVR to our ~~ability~~unitholders tois ~~grow.~~limited by a number of factors, including:

~~Because~~• werestrictions ~~distribute~~on ~~almost~~distributions ~~all~~contained of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. In fact, our growth is completely dependent upon PVR’s ability to increase its quarterly distribution per unit because currently our only cash-generating assets are our interests in ~~PVR.~~any Iffuture ~~we issue additional units or incur~~ debt to fund acquisitions and growth capital expenditures, the payment of distributions on those additional units or interest on that debt could increase the risk that we will be unable to maintain or increase our per unit distribution level. agreements;

~~Consistent~~• ~~with~~our ~~the~~estimated ~~terms~~general ofand ~~its~~administrative ~~partnership~~expenses ~~agreement,~~as ~~PVR~~well ~~distributes~~as to its partners its available cash each quarter. In determining the amount of cash available for distribution, PVR sets aside cash reserves, which it uses to fund its growth capital expenditures. Additionally, PVR has relied upon external financing sources, including commercial borrowings and other ~~debt~~operating ~~and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent PVR does not have sufficient cash reserves or is unable to finance~~ expenses;

23• expenses of PVR’s general partner and PVR;

~~TABLE~~• OFreserves ~~CONTENTS~~necessary for us to make the necessary capital contributions to maintain our 2% general partner interest in PVR, as required by PVR’s partnership agreement upon the issuance of additional partnership securities by PVR; and

~~growth~~• ~~externally,~~reserves ~~its~~our ~~cash~~general ~~distribution~~partner ~~policy~~believes ~~will~~prudent ~~significantly~~for ~~impair~~us ~~its ability~~ to ~~grow.~~maintain ~~In addition, to~~ the ~~extent~~proper ~~PVR~~conduct ~~issues additional units in connection with any acquisitions or growth capital expenditures, the payment~~ of ~~distributions~~our onbusiness ~~those additional units may increase the risk that PVR will be unable to maintain~~ or ~~increase its per unit distribution level, which in turn may impact the available cash that we have~~ to ~~distribute~~provide tofor ~~our~~future ~~unitholders.~~distributions ~~The~~by incurrence of additional debt to finance its growth strategy would result in increased interest expense to PVR, which in turn may reduce the available cash that we have to distribute to our unitholdersus.

~~While~~In weaddition, orprior ~~PVR~~to ~~may~~making ~~incur~~any ~~debt~~distributions to ~~pay~~our ~~distributions~~unitholders, towe will reimburse our general partner and its ~~unitholders,~~affiliates for all direct and indirect expenses incurred by them on our behalf. Our general partner will determine the ~~agreements~~amount ~~governing~~of ~~such~~these ~~debt~~reimbursed ~~are~~expenses. ~~secured~~In addition, our general partner and ~~they~~its affiliates may ~~restrict~~perform orother ~~limit~~services for us for which we will be charged fees as determined by our general partner. The reimbursement of these expenses, in addition to the other factors listed above, could adversely affect the amount of distributions we ~~can~~make ~~pay~~to our unitholders. The actual amount of cash that is available for distribution to our unitholders will depend on numerous factors, many of which are beyond our control or the control of our general partner.

~~While~~Our werate orof ~~PVR~~growth ~~are~~may ~~permitted~~be byreduced ~~our partnership agreements~~ to ~~incur~~the ~~debt~~extent towe ~~pay~~purchase ~~distributions~~additional tounits ~~our~~from ~~unitholders~~PVR, ~~our~~which ~~or PVR’s payment of principal and interest on such indebtedness~~ will reduce ~~our~~the ~~cash~~percentage ~~available~~of ~~for~~the ~~distribution~~cash ~~to our unitholders. We are not currently a party to any debt agreements, but anticipate that any credit facility~~ we ~~may~~receive ~~enter into will limit our ability to pay distributions to our unitholders during an event of default or if an event of default would result~~ from the ~~distributions~~IDRs. In addition, any future levels of indebtedness may adversely affect our ability to obtain additional financing for future operations or capital needs, limit our ability to pursue acquisitions and other business opportunities or make our results of operations more susceptible to adverse economic or operating conditions.

~~Furthermore,~~Our ~~PVR’s~~business ~~debt~~strategy ~~agreement,~~includes ~~which~~supporting ~~currently~~the ~~consists~~growth ~~solely~~ of ~~its~~PVR ~~revolving~~by ~~credit~~purchasing ~~facility, or~~ PVR ~~Revolver,~~units ~~contains~~or ~~covenants~~lending ~~limiting~~funds ~~its ability~~ to ~~incur~~PVR ~~indebtedness, grant liens, engage in transactions with affiliates and make distributions~~ to ~~us.~~provide ~~The~~funding ~~PVR~~for ~~Revolver~~the acquisition ~~also~~of ~~contains~~a ~~covenants~~business ~~requiring~~or ~~PVR~~asset ~~not~~or tofor ~~exceed~~an ~~certain~~internal ~~specified~~growth ~~financial ratios~~project. ~~PVR~~To isthe ~~prohibited~~extent ~~from~~we ~~making~~purchase ~~any~~common ~~distribution~~units toor ~~its~~securities ~~partners~~not ifentitled ~~such~~to ~~distribution would cause an event of default or otherwise violate~~ a ~~covenant~~current ~~under~~distribution ~~the~~from PVR ~~Revolver. Additionally~~, the ~~PVR~~rate ~~Revolver~~of isour ~~secured~~distribution bygrowth ~~substantially~~may ~~all~~be ~~of PVR’s assets~~reduced, ~~and~~at ifleast ~~PVR~~in isthe ~~unable to~~short ~~satisfy its obligations thereunder~~term, ~~the~~as ~~lenders~~less ~~could seek to foreclose on PVR’s assets. The lenders may also sell substantially all~~ of ~~PVR’s~~our ~~assets~~cash ~~under~~distributions ~~such~~will ~~foreclosure~~come orfrom ~~other~~our ~~realization~~ownership ~~upon those encumbrances without prior approval~~ of PVR’s ~~unitholders~~IDRs, ~~which~~whose ~~would~~distributions ~~adversely~~increase ~~affect~~at ~~the~~a ~~price~~faster ofrate ~~PVR’s~~than ~~and~~those ~~our common units. See Item 7, “Management’s Discussion and Analysis~~ of ~~Financial~~our ~~Condition~~other ~~and Results of Operations — Liquidity and Capital Resources — Long-Term Debt,” for more information about the PVR Revolver~~securities.

Our ~~unitholders~~ability doto ~~not~~meet ~~elect~~ our ~~general~~financial ~~partner~~needs ormay ~~vote~~be onadversely ~~our~~affected ~~general~~by ~~partner’s~~our ~~directors.~~cash ~~The~~distribution ~~owner~~policy ofand our ~~general~~lack ~~partner owns a sufficient number~~ of ~~common~~operational ~~units to allow it to prevent the removal of our general partner~~assets.

~~Unlike~~Our ~~the~~cash ~~holders~~distribution ~~of common stock in a corporation~~policy, ~~our~~which ~~unitholders~~is ~~have~~consistent ~~only~~with ~~limited voting rights on matters affecting~~ our ~~business~~partnership ~~and~~agreement, ~~therefore,~~requires ~~limited~~us ~~ability~~ to ~~influence~~distribute ~~management’s~~all ~~decisions~~of ~~regarding~~ our ~~business~~available cash quarterly. Our ~~unitholders~~only docash ~~not~~generating ~~have~~assets ~~the~~are ~~ability~~interests toin ~~elect~~PVR, ~~our general partner or the directors of our general partner~~ and ~~will~~we currently have no ~~right~~independent tooperations ~~elect~~separate ~~our~~from ~~general~~those ~~partner or the directors~~ of ~~our general partner on an annual or other continuing basis in the future~~PVR. ~~The board of directors of our general partner~~Moreover, ~~including~~as ~~our~~discussed ~~independent~~in ~~directors,~~these isrisk ~~chosen by Penn Virginia~~factors, ~~its~~a ~~sole~~reduction ~~member.~~in ~~Furthermore,~~PVR’s ifdistributions ~~our public unitholders are~~will ~~dissatisfied~~disproportionately ~~with~~affect the ~~performance~~amount of ~~our~~cash ~~general~~distributions ~~partner,~~we ~~they~~receive. ~~will~~Given ~~have~~that ~~little~~our ~~ability~~cash todistribution ~~remove~~policy ~~our~~is ~~general~~to ~~partner.~~distribute ~~Our~~available ~~general~~cash ~~partner~~and ~~may~~ not beretain ~~removed~~it ~~except~~and ~~upon~~that ~~the~~our ~~vote~~only ofcash ~~the~~generating ~~holders~~assets ofare atinterests ~~least~~in ~~two-thirds~~PVR, ofwe ~~the~~may ~~outstanding~~not ~~common~~have ~~units.~~enough cash ~~Because~~to ~~Penn~~meet ~~Virginia~~our ~~owns~~needs ~~more~~if ~~than~~there ~~one-third~~is ofan increase in our ~~outstanding~~operating ~~units~~expenses, ~~our~~ general ~~partner~~and ~~currently~~administrative ~~cannot~~expenses, beworking ~~removed~~capital ~~without~~requirements ~~its~~or ~~consent. As a result of these provisions,~~ the ~~price~~cash atneeds ~~which our common units will trade may be lower because~~ of ~~the~~PVR ~~absence~~ or ~~reduction~~its ofsubsidiaries athat ~~takeover~~reduces ~~premium~~PVR’s ~~in the trading price~~distributions.

~~Our~~PVR’s general partner, ~~may~~with ~~cause~~our usconsent tobut ~~issue additional common units or other equity securities~~ without the ~~approval~~consent of our unitholders, ~~which~~may ~~would~~limit ~~dilute~~or ~~their~~modify ~~ownership interests and may increase~~ the ~~risk~~incentive ~~that~~distributions we ~~will~~are entitled ~~not~~to ~~have~~receive, ~~sufficient~~which ~~available~~may reduce cash distributions to ~~maintain or increase~~ our ~~cash distributions~~unitholders.

~~Our~~We own PVR’s general partner, ~~may~~which owns ~~cause~~the IDRs in PVR that entitle us to ~~issue~~receive anincreasing ~~unlimited~~percentages, ~~number~~up to a maximum of ~~additional~~50% ~~common~~of ~~units~~any orcash ~~other~~distributed ~~equity~~by ~~securities~~PVR as certain target distribution levels are reached in excess of ~~equal~~$0.375 ~~rank~~per ~~with~~PVR unit in any quarter. A substantial portion of the ~~common~~cash ~~units~~flow we receive from PVR is provided by these IDRs. Because of the high percentage of PVR’s incremental cash flow that is distributed to the IDRs, certain potential acquisitions might not increase cash available for distribution per PVR unit. In order to facilitate acquisitions by PVR, the board of directors of the general partner of PVR may elect to reduce the IDRs payable to us with our consent, which we may provide without ~~unitholder~~the approval of our unitholders if our general partner determines that such reduction does not adversely affect our limited partners in any material respect. ~~The~~These ~~issuance~~reductions ofmay ~~additional~~be ~~common~~permanent ~~units~~reductions in the IDRs or ~~other~~may ~~equity~~be ~~securities~~reductions with respect to cash flows from the potential acquisition. If distributions on the IDRs were reduced for the benefit of ~~equal~~the ~~rank~~PVR ~~will~~units, ~~have~~the total amount of cash distributions we would receive from PVR, and therefore the ~~following~~amount ~~effects:~~of cash distributions we could pay to our unitholders, would be reduced.

24A reduction in PVR’s distributions will disproportionately affect the amount of cash distributions to which we are currently entitled.

~~TABLE~~Our OFownership ~~CONTENTS~~of the IDRs in PVR, through our ownership of PVR’s general partner, the holder of the IDRs, entitles us to receive our pro rata share of specified percentages of total cash distributions made by PVR with respect to any particular quarter only in the event that PVR distributes more than $0.275 per unit for such quarter. As a result, the holders of PVR’s common units have a priority over the holders of PVR’s IDRs to the extent of cash distributions by PVR up to and including $0.275 per unit for any quarter.

•22 ~~our unitholders’ proportionate ownership interest in us will decrease;~~

•Table the amount of cash available for distribution on each common unit may decrease;Contents

•Our IDRs entitle us to receive increasing percentages, up to 50%, of all incremental cash distributions above $0.375 per unit distributed by PVR for any quarter. Because we are at the ~~relative~~maximum ~~voting~~target ~~strength~~cash distribution level on the IDRs, future growth in distributions we receive from PVR will not result from an increase in the target cash distribution level associated with the IDRs. Furthermore, a decrease in the amount of ~~each~~distributions ~~previously~~by ~~outstanding~~PVR to less than $0.375 per unit per quarter would reduce our percentage of the incremental cash distributions above $0.325 per common unit ~~may~~per quarter befrom ~~diminished;~~50% to 25%. As a result, any such reduction in quarterly cash distributions from PVR would have the effect of disproportionately reducing the amount of distributions that we receive from PVR based on our ownership interest in the IDRs as compared to distributions we receive from PVR with respect to our 2% general partner and limited partner interest in PVR.

•If distributions ~~the~~on ~~ratio~~our ofcommon ~~taxable~~units ~~income~~are not paid with respect to ~~distributions~~any ~~may~~fiscal ~~increase;~~quarter ~~and~~our unitholders will not be entitled to receive such payments in the future.

•Our ~~the~~distributions ~~market~~to ~~price~~our ofunitholders will not be cumulative. Consequently, if distributions on our common units ~~may~~are ~~decline~~not paid with respect to any fiscal quarter, our unitholders will not be entitled to receive such payments in the future.

~~The~~Our ~~control~~cash ofdistribution ~~our~~policy ~~general~~limits ~~partner~~our ~~may~~ability ~~be transferred~~ to ~~a third party who could replace our current management team, in either case, without unitholder consent~~grow.

~~Our~~Because ~~general~~we ~~partner~~distribute ~~may~~almost ~~transfer~~all ~~its~~of ~~general~~our ~~partner~~available ~~interest~~cash, toour agrowth ~~third~~may ~~party~~not inbe aas ~~merger~~fast oras inbusinesses athat ~~sale~~reinvest oftheir ~~all~~available orcash ~~substantially~~to expand ~~all~~ongoing ofoperations. ~~its~~In ~~assets~~fact, ~~without the consent of~~ our ~~unitholders.~~growth ~~Furthermore,~~is ~~Penn~~completely ~~Virginia,~~dependent ~~the~~upon ~~owner~~PVR’s ofability ~~our~~to ~~general~~increase ~~partner,~~its ~~may~~quarterly ~~transfer~~distribution ~~its~~per ~~ownership~~unit ~~interest~~because incurrently our ~~general~~only ~~partner~~cash-generating toassets aare ~~third~~our ~~party.~~interests ~~The~~in ~~new~~PVR. ~~owner~~If ofwe ~~our~~issue ~~general~~additional ~~partner~~units or ~~would~~incur ~~then~~debt beto infund aacquisitions ~~position~~and togrowth ~~replace~~capital expenditures, the ~~board~~payment of ~~directors~~distributions ~~and~~on ~~officers~~those ofadditional ~~our~~units ~~general~~or ~~partner~~interest ~~and~~on tothat ~~control~~debt could increase the ~~decisions~~risk ~~taken~~that bywe ~~the~~will ~~board~~be ofunable ~~directors~~to ~~and~~maintain ~~officers~~or increase our per unit distribution level.

IfConsistent with the terms of its partnership agreement, PVR’s ~~unitholders~~distributes ~~remove~~to its partners its available cash each quarter. In determining the amount of cash available for distribution, PVR’s ~~general~~sets ~~partner~~aside cash reserves, wewhich ~~would~~it ~~lose~~uses ~~our~~to ~~general~~fund ~~partner~~its ~~interest~~growth ~~and~~capital ~~IDRs~~expenditures. inAdditionally, PVR has relied upon external financing sources, including commercial borrowings and other debt and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent PVR does not have sufficient cash reserves or is unable to finance growth externally, its cash distribution policy will significantly impair its ability to ~~manage~~grow. In addition, to the extent PVR issues additional units in connection with any acquisitions or growth capital expenditures, the payment of distributions on those additional units may increase the risk that PVR will be unable to maintain or increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. The incurrence of additional debt to finance its growth strategy would result in increased interest expense to PVR, which in turn may reduce the available cash that we have to distribute to our unitholders.

WeWhile ~~currently~~we ~~manage~~or PVR ~~through~~may incur ~~Penn~~debt ~~Virginia~~to ~~Resource~~pay ~~GP,~~distributions ~~LLC,~~to ~~PVR’s~~our ~~general partner~~ and ~~our~~its ~~wholly owned subsidiary. PVR’s partnership agreement~~unitholders, ~~however, gives unitholders of PVR~~ the ~~right~~agreements togoverning ~~remove~~such ~~the~~debt ~~general~~are ~~partner~~secured of PVR upon the affirmative vote of holders of two-thirds of PVR’s outstanding units. If Penn Virginia Resource GP, LLC were removed as general partner of PVR, it would receive cash or common units in exchange for its 2% general partner interest and ~~the~~they ~~IDRs~~may ~~and~~restrict ~~would lose its ability to manage PVR. While the common units~~ or ~~cash~~limit ~~we would receive are intended under~~ the ~~terms~~distributions ~~of PVR’s partnership agreement to fully compensate us in the event such an exchange is required, the value of these common units or investments~~ we ~~make~~can ~~with~~pay ~~the cash over time may not be equivalent~~ to ~~the~~our ~~value of the general partner interest and the IDRs had we retained them~~unitholders.

InWhile ~~addition,~~we ifor ~~Penn~~PVR ~~Virginia~~are ~~Resource~~permitted ~~GP,~~by ~~LLC~~our ispartnership ~~removed~~agreements asto ~~general~~incur ~~partner~~debt ofto pay distributions to our unitholders, our or PVR’s payment of principal and interest on such indebtedness will reduce our cash available for distribution to our unitholders. We are not currently a party to any debt agreements, but anticipate that any credit facility we ~~would~~may ~~face~~enter aninto ~~increased~~will ~~risk~~limit our ability to pay distributions to our unitholders during an event of ~~being~~default ~~deemed~~or if an ~~investment~~event ~~company.~~of ~~See~~default “—would Ifresult infrom the distributions. In addition, any future welevels ~~cease~~of indebtedness may adversely affect our ability to ~~manage~~obtain ~~and~~additional ~~control~~financing for ~~PVR,~~future weoperations ~~may~~or becapital ~~deemed~~needs, limit our ability to bepursue anacquisitions ~~investment~~and ~~company~~other ~~under~~business ~~the~~opportunities ~~Investment~~or ~~Company~~make ~~Act~~our results of ~~1940~~operations more susceptible to adverse economic or operating conditions.”

~~Our~~Furthermore, the restrictive covenants in the agreements governing PVR’s indebtedness under its revolving credit facility (“PVR Revolver”), and the indenture governing PVR’s outstanding senior notes (“PVR Senior Notes”) contains covenants limiting its ability to ~~sell~~incur ~~our~~indebtedness, ~~partner~~grant ~~interests~~liens, engage in transactions with affiliates and make distributions to us. These restrictions could limit PVR’s ability to obtain future financings, make needed capital expenditures, withstand a future downturn in its business or the economy in general, conduct operations, or otherwise take advantage of business opportunities that may arise. The PVR Revolver contains covenants requiring PVR to maintain specified financial ratios and satisfy other financial conditions and it may be ~~limited~~unable to meet those ratios and conditions. Any future breach of these covenants and PVR’s failure to meet any of those ratios and conditions could result in a default under the terms of the PVR Revolver, which could result in the acceleration of its debt and other financial obligations. Additionally, the PVR Revolver is secured by ~~securities~~substantially ~~law~~all ~~restrictions~~of PVR’s assets, and ~~liquidity~~if ~~constraints~~PVR is unable to satisfy its obligations thereunder, the lenders could seek to foreclose on PVR’s assets. The lenders may also sell substantially all of PVR’s assets under such foreclosure or other realization upon those encumbrances without prior approval of our unitholders, which would adversely affect the price of PVR’s and our common units. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Long-Term Debt,” for more information about the PVR Revolver.

As23 of December 31, 2009, we owned 19,587,049 common units of PVR, all of which are unregistered and restricted securities within the meaning of Rule 144 under the Securities Act of 1933, or the Securities Act. Unless we were to register these units, we are limited to selling into the market in any three-month period an amount of PVR common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. In addition, we face contractual limitations on our ability to sell our general partner interest and IDRs and the market for such interests is illiquid.

UnitholdersTable may not have limited liability if a court finds that unitholder action constitutes control of our business.Contents

~~Under~~Our ~~Delaware law, our~~ unitholders ~~could~~do benot ~~held~~elect ~~liable for~~ our ~~obligations to the same extent as a~~ general partner if a court determined that the right or the exercise of the right by our unitholders as a group to remove or replace our general partner, to approve some amendments to the partnership agreement or to take other action under our partnership agreement constituted participation in the “control” of our business. ~~Additionally, the limitations on the liability of holders of limited partner interests for the liabilities of a limited partnership have not been clearly established in many jurisdictions.~~

~~Furthermore,~~Unlike ~~Section~~the ~~17-607~~holders of ~~the~~common ~~Delaware~~stock ~~Revised~~in ~~Uniform~~a ~~Limited~~corporation, ~~Partnership~~our ~~Act~~unitholders ~~provides~~have ~~that,~~only ~~under~~limited ~~some~~voting ~~circumstances~~rights on matters affecting our business and, atherefore, ~~unitholder~~limited ~~may~~ability beto ~~liable~~influence management’s decisions regarding our business. Our unitholders do not have the ability to uselect ~~for~~our general partner and will have no right to elect our general partner on an annual or other continuing basis in the ~~amount~~future. ofFurthermore, aif ~~distribution~~our ~~for~~public aunitholders ~~period~~are dissatisfied with the performance of ~~three~~our ~~years~~general ~~from~~partner, they will have little ability to remove our general partner. Our general partner may not be removed except upon the vote ~~date~~of the holders of at least two-thirds of the ~~distribution~~outstanding common units.

25Our general partner may cause us to issue additional common units or other equity securities without the approval of our unitholders, which would dilute their ownership interests and may increase the risk that we will not have sufficient available cash to maintain or increase our cash distributions.

~~TABLE~~Our OFgeneral ~~CONTENTS~~partner may cause us to issue an unlimited number of additional common units or other equity securities of equal rank with the common units, without unitholder approval. The issuance of additional common units or other equity securities of equal rank will have the following effects:

If• inour ~~the~~unitholders’ ~~future~~proportionate weownership ~~cease~~interest toin ~~manage~~us ~~and~~will ~~control PVR, we may be deemed to be an investment company under the Investment Company Act of 1940.~~decrease;

If• ~~we cease to manage and control PVR and are deemed to be an investment company under~~ the ~~Investment~~amount ~~Company Act~~ of ~~1940,~~cash weavailable ~~would~~for ~~either~~distribution ~~have~~on toeach register as an investment company under the Investment Company Act of 1940, obtain exemptive relief from the SEC or modify our organizational structure or our contractual rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially limit our ability to engage in transactions with affiliates, including the purchase and sale of certain securities or other property to or from our affiliates, restrict our ability to borrow funds or engage in other transactions involving leverage and require us to add additional directors who are independent of us and our affiliates, and adversely affect the price of our common ~~units.~~unit may decrease;

~~Our~~• ~~partnership~~the ~~agreement~~relative ~~restricts~~voting ~~the~~strength ~~rights~~ of ~~unitholders~~each ~~owning~~previously ~~20%~~outstanding orcommon ~~more~~unit ofmay ~~our~~be ~~units.~~diminished;

~~Our~~• ~~unitholders’ voting rights are restricted by~~ the ~~provision~~ratio ~~in our partnership agreement generally providing that any units held by a person that owns 20% or more~~ of ~~any~~taxable ~~class~~income of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of the general partner, cannot be voted on any matter. In addition, our partnership agreement contains provisions limiting the ability of our unitholders to ~~call~~distributions meetings or to acquire information about our operations, as well as other provisions limiting our unitholders’ ability to influence the manner or direction of our management. As a result of these provisions, the price at which our common units will trade may beincrease; ~~lower because of the absence or reduction of a takeover premium in the trading price.~~ and

~~PVR~~• ~~may~~the ~~issue~~market ~~additional~~price ~~limited~~of ~~partner~~our ~~interests~~common orunits ~~other equity securities, which~~ may ~~increase the risk that PVR will not have sufficient available cash to maintain or increase its cash distribution level~~decline.

~~PVR~~If ~~has wide latitude to issue additional limited partner interests on~~ the ~~terms~~Merger ~~and~~is ~~conditions~~not ~~established~~consummated, ~~by its general partner. We receive cash distributions from PVR on~~ the ~~general~~control ~~partner interest, IDRs and limited partner interest that we hold. Because a majority~~ of ~~the cash we receive from PVR is attributable to~~ our ~~ownership~~general ~~of the IDRs, payment of distributions on additional PVR limited~~ partner ~~interests~~ may ~~increase the risk that PVR will~~ be ~~unable~~transferred to ~~maintain~~a orthird ~~increase~~party ~~its~~who ~~quarterly~~could ~~cash~~replace ~~distribution~~our ~~per~~current ~~unit~~management team, ~~which~~ in ~~turn~~either ~~may~~case, ~~reduce~~without ~~the~~unitholder ~~amount of incentive distributions we receive and the available cash that we have to distribute to our unitholders~~consent.

If ~~PVR’s~~the Merger is not consummated, our general partner ismay ~~not~~transfer ~~fully~~its ~~reimbursed~~general orpartner ~~indemnified~~interest ~~for~~to ~~obligations~~a ~~and~~third ~~liabilities~~party itin ~~incurs~~a merger or in ~~managing~~a sale of all or substantially all of its assets without the ~~business~~consent ~~and~~of ~~affairs~~our unitholders. The new owner of ~~PVR,~~our ~~its~~general ~~value,~~partner ~~and,~~would ~~therefore,~~then be in a position to replace all of the ~~value~~officers of our ~~common~~general ~~units,~~partners ~~could~~with ~~decline~~individuals it chooses.

~~The~~If ~~general partner of~~ PVR’s ~~may~~unitholders ~~make~~remove ~~expenditures on behalf of~~ PVR’s ~~for which it will seek reimbursement from PVR. Under Delaware partnership law, the~~ general partner, inwe ~~its~~would ~~capacity~~lose asour ~~the~~ general partner ofinterest ~~PVR, has unlimited liability for the obligations of PVR, such as its debts~~ and ~~environmental~~IDRs ~~liabilities,~~in ~~except for those contractual obligations of~~ PVR ~~that are expressly made without recourse to~~ and the ~~general~~ability ~~partner. To the extent its general partner incurs obligations on behalf of PVR, it is entitled~~ to bemanage ~~reimbursed or indemnified by~~ PVR. If PVR is unable or unwilling to reimburse or indemnify its general partner, PVR’s general partner may not be able to satisfy those liabilities or obligations, which would reduce its cash flows to us.

We currently manage PVR through Penn Virginia Resource GP, LLC, PVR’s general partner and our wholly owned subsidiary. PVR’s partnership agreement, however, gives unitholders of PVR the right to remove the general partner of PVR upon the affirmative vote of holders of two-thirds of PVR’s outstanding units. If Penn Virginia Resource ~~sells~~GP, ~~all~~LLC orwere aremoved ~~part~~as general partner of PVR, it would receive cash or common units in exchange for its ~~remaining~~2% general partner ~~interests~~interest inand the IDRs and would lose its ability to manage PVR. While the common units or cash we would receive are intended under the terms of PVR’s partnership agreement to fully compensate us in the event such an exchange is required, ~~our~~the ~~strategic~~value ~~and~~of ~~operational~~these ~~objectives~~common units or investments we make with the cash over time may ~~change~~not be equivalent to the value of the general partner interest and the IDRs had we retained them.

In ~~September 2009~~addition, if Penn Virginia ~~sold~~Resource ~~approximately~~GP, ~~one-third~~LLC ofis ~~its~~removed ~~limited~~as general partner ~~interest~~of ~~in us~~PVR, ~~constituting~~we ~~approximately~~would ~~26%~~face ofan ~~our~~increased ~~common~~risk ~~units.~~of ~~Following~~being ~~such~~deemed ~~sale,~~an ~~Penn~~investment ~~Virginia~~company. ~~owned~~See ~~the~~“— ~~general~~If ~~partner interest~~ in usthe ~~and~~future ~~approximately~~we ~~51%~~cease ofto ~~our~~manage ~~common~~and ~~units.~~control ~~Penn~~PVR, ~~Virginia~~we may ~~sell~~be ~~all~~deemed orto ~~part~~be ofan ~~its~~investment ~~remaining~~company ~~partner~~under ~~interests in us without our consent or~~ the ~~consent~~Investment ofCompany ~~our~~Act ~~unitholders~~of 1940.”

~~Several~~Our ofability ~~the~~to ~~members~~sell of our ~~and~~partner ~~PVR’s~~interests ~~management~~in ~~team,~~PVR ~~including~~may ~~the~~be ~~Chief~~limited ~~Executive~~by ~~Officer~~securities ~~and~~law ~~Chief~~restrictions ~~Financial Officer of our general partner~~ and ~~PVR’s~~liquidity ~~general partner, are also members of Penn Virginia’s~~ constraints.

26As of December 31, 2010, we owned 19,587,049 common units of PVR, all of which are unregistered and restricted securities within the meaning of Rule 144 under the Securities Act of 1933, or the Securities Act. Unless we were to register these units, we are limited to selling into the market in any three-month period an amount of PVR common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. In addition, we face contractual limitations on our ability to sell our general partner interest and IDRs and the market for such interests is illiquid.

~~TABLE~~Unitholders OFmay ~~CONTENTS~~not have limited liability if a court finds that unitholder action constitutes control of our business.

~~management~~Under ~~team.~~Delaware Iflaw, ~~Penn~~our ~~Virginia~~unitholders could ~~sells~~be ~~all~~held orliable afor ~~significant~~our ~~part~~obligations ofto ~~its~~the ~~remaining~~same ~~partner~~extent ~~interests~~as ina ~~us, our~~ general partner ~~and~~if ~~PVR’s~~a ~~general~~court ~~partner~~determined ~~may~~that ~~replace~~the ~~some~~right or ~~all~~the exercise of ~~those~~the ~~officers~~right ~~with~~by ~~new~~our ~~members~~unitholders ofas a ~~management~~group ~~team~~to ~~that~~remove ~~may~~or ~~have~~replace ~~different~~our ~~strategic~~general orpartner, ~~operational~~to ~~objectives~~approve ~~for~~some usamendments to the partnership agreement or ~~PVR.~~to Atake ~~change~~other inaction ~~strategic~~under orour ~~operational~~partnership ~~objectives~~agreement ~~could~~constituted ~~affect~~participation in the “control” of our ~~results~~business. Additionally, the limitations on the liability of ~~operations~~holders ~~and~~of ~~cash~~limited ~~available~~partner interests for ~~distribution~~the liabilities of a limited partnership have not been clearly established in many jurisdictions.

~~Risks~~Furthermore, Section 17-607 ~~Related~~of the Delaware Revised Uniform Limited Partnership Act provides that, under some circumstances, a unitholder may be liable to ~~Conflicts~~us for the amount of ~~Interest~~a distribution for a period of three years from the date of the distribution.

~~PVR’s~~24 ~~general partner owes fiduciary duties to PVR’s unitholders that may conflict with our interests.~~

ConflictsTable of interest exist and may arise in the future as a result of the relationships between us and our affiliates, including PVR’s general partner, on one hand, and PVR and its unitholders, on the other hand. The directors and officers of PVR’s general partner have fiduciary duties to manage PVR in a manner beneficial to us, the owner of PVR’s general partner. At the same time, PVR’s general partner has a fiduciary duty to manage PVR in a manner beneficial to PVR and its unitholders. The board of directors of PVR’s general partner or its conflicts committee will resolve any such conflict and they have broad latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders. For example, conflicts of interest may arise in the following situations: Contents

•If in the ~~terms~~future ~~and~~we ~~conditions~~cease ofto ~~any~~manage ~~contractual~~and ~~agreements~~control ~~between~~PVR, uswe ~~and~~may ~~our~~be ~~affiliates,~~deemed onto ~~the~~be ~~one~~an ~~hand,~~investment ~~and~~company under ~~PVR,~~the onInvestment ~~the~~Company ~~other~~Act ~~hand;~~of 1940.

•If ~~the~~we ~~interpretation~~cease to manage and ~~enforcement~~control PVR and are deemed to be an investment company under the Investment Company Act of 1940, we would either have to register as an investment company under the Investment Company Act of 1940, obtain exemptive relief from the SEC or modify our organizational structure or our contractual rights ~~obligations~~to ~~between~~fall usoutside ~~and~~the definition of an investment company. Registering as an investment company could, among other things, materially limit our ability to engage in transactions with affiliates, onincluding ~~one~~the ~~hand~~purchase and sale of certain securities or other property to or from our affiliates, restrict our ability to borrow funds or engage in other transactions involving leverage and ~~PVR~~require us to add additional directors who are independent of us and our affiliates, onand adversely affect the ~~other~~price ~~hand;~~of our common units.

•Our ~~the~~partnership ~~determination~~agreement ofrestricts the ~~amount~~rights of ~~cash~~unitholders toowning be20% ~~distributed~~or tomore ~~PVR’s partners and the amount~~ of ~~cash~~our ~~to be reserved for the future conduct of PVR’s business;~~units.

•Our unitholders’ voting rights are restricted by the ~~determination~~provision in our partnership agreement generally providing that any units held by a person that owns 20% or more of ~~whether~~any ~~PVR~~class ~~should~~of ~~make~~units ~~acquisitions~~then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of the general partner, cannot be voted on ~~what~~any ~~terms;~~matter. In addition, our partnership agreement contains provisions limiting the ability of our unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting our unitholders’ ability to influence the manner or direction of our management. As a result of these provisions, the price at which our common units will trade may be lower because of the absence or reduction of a takeover premium in the trading price.

~~• the determination of whether~~ PVR ~~should~~may ~~use~~issue ~~cash~~additional onlimited ~~hand,~~partner ~~borrow~~interests or ~~issue~~other equity tosecurities, ~~raise~~which ~~cash~~may toincrease ~~finance~~the ~~acquisitions~~risk orthat ~~expansion~~PVR will ~~capital~~not ~~projects,~~have ~~repay~~sufficient ~~indebtedness,~~available ~~meet~~cash ~~working~~to ~~capital~~maintain ~~needs,~~or ~~pay~~increase ~~distributions~~its orcash ~~otherwise;~~distribution level.

•PVR ~~any~~has ~~decision~~wide latitude to issue additional limited partner interests on the terms and conditions established by its general partner. We receive cash distributions from PVR on the general partner interest, IDRs and limited partner interest that we ~~make~~hold. inBecause a majority of the ~~future~~cash we receive from PVR is attributable to ~~engage~~our inownership ~~business~~of ~~activities~~the ~~independent~~IDRs, payment of distributions on additional PVR; limited partner interests may increase the risk that PVR will be unable to maintain or increase its quarterly cash distribution per unit, which in turn may reduce the amount of incentive distributions we receive and the available cash that we have to distribute to our unitholders.

•If ~~the~~PVR’s ~~allocation~~general ofpartner ~~shared~~is ~~overhead~~not ~~expenses~~fully toreimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of PVR, its value, and, ustherefore, the value of our common units, could decline.

~~Potential~~The ~~conflicts~~general partner of ~~interest~~PVR may ~~arise~~make ~~among~~expenditures ~~our~~on behalf of PVR for which it will seek reimbursement from PVR. Under Delaware partnership law, the general partner, in its ~~affiliates~~capacity ~~and~~as ~~us.~~the ~~Our~~ general partner of PVR, has ~~limited~~unlimited ~~fiduciary~~liability ~~duties~~for tothe usobligations of PVR, such as its debts and ~~our~~environmental ~~unitholders~~liabilities, ~~which~~except ~~may~~for ~~permit~~those contractual obligations of PVR that are expressly made without recourse to the general partner. To the extent its general partner incurs obligations on behalf of PVR, it is entitled to ~~favor~~be reimbursed or indemnified by PVR. If PVR is unable or unwilling to reimburse or indemnify its ~~own~~general ~~interests~~partner, PVR’s general partner may not be able to ~~the~~satisfy ~~detriment~~those ofliabilities usor ~~and~~obligations, ~~our~~which ~~unitholders~~would reduce its cash flows to us.

~~Penn~~Risks ~~Virginia~~Related ~~and~~to ~~its affiliates, own an approximately 51% limited partner interest in us and own and control our general partner.~~ Conflicts of ~~interest~~Interest may arise between our general partner and its affiliates (including Penn Virginia), on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following situations:

•PVR’s ~~Our~~ general partner isowes ~~allowed~~fiduciary duties to ~~take~~PVR’s ~~into~~unitholders ~~account~~that ~~the~~may ~~interests~~conflict ofwith ~~parties other than us, such as Penn Virginia, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to~~ our ~~unitholders~~interests.

•Conflicts ~~Our~~of interest exist and may arise in the future as a result of the relationships between us and our affiliates, including PVR’s general partner, ~~determines~~on ~~whether~~one hand, and PVR and its unitholders, on the other hand. The directors and officers of PVR’s general partner have fiduciary duties to manage PVR in a manner beneficial to us, the owner of PVR’s general partner. At the same time, PVR’s general partner has a fiduciary duty to manage PVR in a manner beneficial to PVR and its unitholders. The board of directors of PVR’s general partner or ~~not~~its weconflicts ~~incur~~committee ~~debt~~will resolve any such conflict and ~~that~~they ~~decision~~have broad latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may ~~affect~~not always be in our best interest or ~~PVR’s~~that ~~credit~~of ~~ratings~~our unitholders. For example, conflicts of interest may arise in the following situations:

• ~~Our~~the ~~general~~terms ~~partner~~and ~~may~~conditions ~~limit~~of ~~its~~any ~~liability~~contractual ~~and~~agreements ~~reduce~~between ~~its~~us ~~fiduciary~~and ~~duties under~~ our ~~partnership agreement~~affiliates, ~~while~~on ~~also restricting~~ the ~~remedies~~one ~~available to our unitholders for actions that~~hand, ~~without these limitations~~ and ~~reductions~~PVR, ~~might~~on ~~constitute~~the ~~breaches of fiduciary duty. As a result of purchasing units, our unitholders consent to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or~~ other ~~duties under applicable state law.~~hand;

27• the interpretation and enforcement of contractual obligations between us and our affiliates, on one hand, and PVR, on the other hand;

~~TABLE~~• OFthe ~~CONTENTS~~determination of the amount of cash to be distributed to PVR’s partners and the amount of cash to be reserved

•25 Our general partner determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available to be distributed to our unitholders.

•Table Our general partner controls the enforcement of obligations owed to us by it and its affiliates.Contents

~~• Our partnership agreement gives our general partner broad discretion in establishing financial reserves~~ for the ~~proper~~future conduct of ~~our~~PVR’s business~~. These reserves also will affect the amount of cash available for distribution.~~;

• ~~Our~~the ~~general~~determination ~~partner~~of ~~determines~~whether ~~which~~PVR ~~costs~~should ~~incurred~~make byacquisitions it and ~~its~~on ~~affiliates~~what ~~are reimbursable by us.~~terms;

• ~~Our~~the ~~partnership~~determination ~~agreement~~of ~~does~~whether ~~not~~PVR ~~restrict~~should ~~our~~use ~~general~~cash ~~partner~~on ~~from~~hand, ~~causing~~borrow ~~us to pay it~~ or ~~its~~issue ~~affiliates~~equity ~~for~~to ~~any~~raise ~~services~~cash ~~rendered on terms that are fair and reasonable~~ to usfinance acquisitions or ~~entering~~expansion ~~into~~capital ~~additional~~projects, ~~contractual~~repay ~~arrangements~~indebtedness, ~~with~~meet ~~any~~working ofcapital ~~these~~needs, ~~entities~~pay ondistributions ~~our~~or ~~behalf.~~otherwise;

• ~~Our~~any ~~general~~decision ~~partner~~we ~~decides~~make ~~whether~~in tothe ~~retain~~future ~~separate~~to ~~counsel,~~engage ~~accountants~~in orbusiness ~~others~~activities toindependent ~~perform~~of ~~services~~PVR; ~~for us.~~and

~~The~~• ~~fiduciary~~the ~~duties~~allocation of ~~our~~shared ~~general~~overhead ~~partner’s~~expenses ~~officers~~to ~~and directors may conflict with those of~~ PVR’s ~~general partner,~~ and ~~our partnership agreement limits the liability and reduces the fiduciary duties of our general partner to~~ us.

~~Our~~Potential ~~general~~conflicts ~~partner’s~~of ~~officers~~interest ~~and~~may ~~directors~~arise ~~have~~among ~~fiduciary duties to manage~~ our ~~business in a manner beneficial to us and our unitholders and the owner of our~~ general partner, ~~Penn~~its ~~Virginia.~~affiliates ~~However, a majority of our general partner’s seven directors~~ and ~~all~~us. ofOur ~~its officers are also directors or officers of PVR’s~~ general partner, ~~which~~ has limited fiduciary duties to ~~manage~~us ~~the business of PVR in a manner beneficial to PVR~~ and ~~its~~our unitholders~~. Consequently~~, ~~these~~which ~~directors and officers~~ may ~~encounter~~permit ~~situations~~it into ~~which~~favor its ~~their~~own ~~fiduciary~~interests ~~obligations~~ to ~~us on~~ the ~~one~~detriment ~~hand, and PVR, on the other hand, are in conflict. The resolution~~ of ~~these conflicts~~us ~~may~~and ~~not always be in~~ our ~~best interest or that of our~~ unitholders.

InConflicts ~~addition,~~of ~~our~~interest ~~partnership~~may ~~agreement~~arise ~~limits~~between ~~the~~our ~~liability~~general partner and ~~reduces~~its ~~the~~affiliates ~~fiduciary~~on ~~duties~~the ofone ~~our~~hand, ~~general~~and ~~partner~~us toand our unitholders., ~~Our~~on ~~partnership agreement also restricts~~ the ~~remedies~~other ~~available~~hand. toAs ~~unitholders for actions that might otherwise constitute~~ a ~~breach~~result of ~~our~~these ~~general partner’s fiduciary duties owed to unitholders. By purchasing our units~~conflicts, our ~~unitholders~~general ~~are~~partner ~~treated~~may asfavor ~~having~~its ~~consented~~own tointerests ~~various~~and ~~actions contemplated in~~ the ~~partnership~~interests ~~agreement and conflicts~~ of ~~interest~~its ~~that~~affiliates ~~might~~over ~~otherwise~~the ~~constitute~~interests ~~a breach~~ of ~~fiduciary~~our orunitholders. These ~~other~~conflicts ~~duties~~include, ~~under~~among ~~applicable~~others, ~~state~~the ~~law.~~following situations:

We• ~~may~~Our ~~face~~general ~~conflicts~~partner ofis ~~interest~~allowed into take into account the ~~allocation~~interests of ~~administrative~~parties ~~time~~other ~~among~~than ~~Penn~~us, ~~Virginia’s~~in ~~business~~resolving conflicts of interest, ~~our~~which ~~business~~has ~~and~~the ~~PVR’s~~effect ~~business~~of limiting its fiduciary duty to our unitholders.

~~Our~~• ~~general partner shares administrative personnel with Penn Virginia and PVR’s general partner to operate Penn Virginia’s business, our business and PVR’s business.~~ Our general partner’s ~~officers,~~determines ~~who~~whether ~~are also the officers of PVR’s general partner and/~~or ~~Penn~~not ~~Virginia,~~we ~~will~~incur ~~have~~debt ~~responsibility for overseeing the allocation of time spent by administrative personnel on our behalf~~ and ~~on behalf of PVR and/or Penn Virginia. These officers face conflicts regarding these time allocations~~ that decision may ~~adversely~~ affect our ~~results~~or ~~of operations, cash flows and financial condition. It is unlikely that these allocations will be the result of arms-length negotiations among Penn Virginia, our general partner and~~ PVR’s ~~general~~credit ~~partner~~ratings.

• Our general partner ~~has~~may alimit ~~call~~its ~~right~~liability and reduce its fiduciary duties under our partnership agreement, while also restricting the remedies available to our unitholders for actions that, ~~may~~without ~~require~~these limitations and reductions, might constitute breaches of fiduciary duty. As a result of purchasing units, our unitholders consent to ~~sell~~some ~~their~~actions ~~common~~and ~~units~~conflicts atof aninterest ~~undesirable~~that ~~time~~might otherwise constitute a breach of fiduciary or ~~price~~other duties under applicable state law.

If• atOur ~~any time more than 90% of our outstanding common units are owned by our~~ general partner ~~and~~determines ~~its affiliates, our general partner will have~~ the ~~right,~~amount ~~which~~and ittiming ~~may assign in whole or in part to any~~ of ~~its~~asset ~~affiliates~~purchases orand ussales, ~~but~~capital ~~not the obligation~~expenditures, ~~to acquire all~~borrowings, ~~but~~issuances ~~not less than all,~~ of ~~the~~additional ~~remaining~~partnership ~~units~~securities ~~held~~and byreserves, ~~unaffiliated~~each ~~persons at a price equal to the greater~~ of ~~(i)~~which ~~the~~can ~~average~~affect of the ~~daily~~amount ~~closing prices~~ of ~~the~~cash ~~common~~that ~~units over the 20 trading days preceding the date three days before notice of exercise of the call right~~ is ~~first~~available ~~mailed~~to and (ii) the highest price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, our unitholders may be ~~required~~distributed to ~~sell~~our ~~their~~ unitholders.

28• Our general partner controls the enforcement of obligations owed to us by it and its affiliates.

~~TABLE~~• OFOur ~~CONTENTS~~partnership agreement gives our general partner broad discretion in establishing financial reserves for the proper conduct of our business. These reserves also will affect the amount of cash available for distribution.

~~common~~• ~~units~~Our atgeneral anpartner ~~undesirable~~determines ~~time~~which orcosts ~~price~~incurred ~~and~~by ~~may~~it ~~not~~and ~~receive~~its ~~any~~affiliates ~~return on their investment. The tax consequences to a unitholder of the exercise of this call right~~ are ~~the~~reimbursable ~~same as a sale~~ by ~~that unitholder of his or her units in the market~~us. ~~Affiliates of our general partner currently own approximately 51% of our outstanding common units.~~

~~Risks~~• ~~Related~~Our partnership agreement does not restrict our general partner from causing us to ~~PVR’s~~pay ~~Coal~~it or its affiliates for any services rendered on terms that are fair and ~~Natural~~reasonable ~~Resource~~to ~~Management~~us ~~Business~~or entering into additional contractual arrangements with any of these entities on our behalf.

If• ~~PVR’s~~Our ~~lessees~~general dopartner ~~not~~decides ~~manage~~whether ~~their~~to ~~operations~~retain ~~well~~separate ~~or experience financial difficulties~~counsel, ~~their~~accountants ~~production~~or ~~volumes~~others ~~and~~to ~~PVR’s~~perform ~~coal~~services ~~royalties~~for ~~revenues could decrease~~us.

~~PVR~~The ~~depends~~fiduciary onduties ~~its~~of ~~lessees~~our togeneral ~~effectively~~partner’s ~~manage~~officers ~~their~~and ~~operations~~directors onmay ~~its~~conflict ~~properties.~~with those of PVR’s ~~lessees~~general ~~make~~partner, ~~their~~and ~~own~~our partnership ~~business~~agreement ~~decisions~~limits ~~with~~the ~~respect~~liability toand ~~their~~reduces ~~operations,~~the ~~including~~fiduciary ~~decisions~~duties ~~relating~~of our general partner to: us.

•Our general partner’s officers and directors have fiduciary duties to manage our business in a manner beneficial to us and our unitholders. However, all of our general partner’s executive officers are also officers of PVR’s general partner and one of our general partner’s directors is also a director of PVR’s general partner, and each has fiduciary duties to manage the ~~method~~business of ~~mining;~~PVR in a manner beneficial to PVR and its unitholders. Consequently, these directors and officers may encounter situations in which their fiduciary obligations to us on the one hand, and PVR, on the other hand, are in conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders.

•In ~~credit~~addition, ~~review~~our partnership agreement limits the liability and reduces the fiduciary duties of ~~their~~our ~~customers;~~general partner to our unitholders. Our partnership agreement also restricts the remedies available to unitholders for actions that might otherwise constitute a breach of our general partner’s fiduciary duties owed to unitholders. By purchasing our units, our unitholders are treated as having consented to various actions contemplated in the partnership agreement and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law.

•Our ~~marketing~~general ofpartner ~~the~~has ~~coal~~a ~~mined;~~call right that may require our unitholders to sell their common units at an undesirable time or price.

•If ~~coal~~at ~~transportation~~any ~~arrangements;~~time more than 90% of our outstanding common units are owned by our general partner and its affiliates, our general partner will have the right, which it may assign in whole or in part to any of its affiliates or us, but not the obligation, to acquire all, but not less than all, of the remaining units held by unaffiliated persons at a price equal to the greater of (i) the average of the daily closing prices of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (ii) the highest price paid by our general partner or any of

•26 ~~negotiations with unions;~~

•Table employeeof hiring and firing;Contents

• its ~~employee~~affiliates ~~wages~~for common units during the 90-day period preceding the date such notice is first mailed. As a result, ~~benefits~~our unitholders may be required to sell their common units at an undesirable time or price and ~~other~~may ~~compensation;~~not receive any return on their investment. The tax consequences to a unitholder of the exercise of this call right are the same as a sale by that unitholder of his or her units in the market.

•Risks ~~permitting;~~Related to PVR’s Coal and Natural Resource Management Business

•If ~~surety~~PVR’s ~~bonding;~~lessees do not manage their operations well or experience financial difficulties, their production volumes and PVR’s coal royalties revenues could decrease.

•PVR ~~mine~~depends ~~closure~~on ~~and~~its ~~reclamation~~lessees to effectively manage their operations on its properties. PVR’s lessees make their own business decisions with respect to their operations, including decisions relating to:

If• ~~PVR’s~~the ~~lessees~~method do not manage their operations well, or if they experience financial difficulties, their production could be reduced, which would result in lower coal royalties revenues to PVR and could have a material adverse effect on PVR’s business, results of ~~operations or financial condition.~~ mining;

~~The~~• ~~coal~~credit ~~mining~~review ~~operations~~ of ~~PVR’s~~their ~~lessees are subject to numerous operational risks that could result in lower coal royalties revenues.~~customers;

~~PVR’s~~• ~~coal~~marketing ~~royalties~~of ~~revenues are largely dependent on~~ the ~~level of production from its~~ coal reserves achieved by its lessees. The level of PVR’s lessees’ production is subject to operating conditions or events that may increase PVR’s lessees’ cost of mining and delay or halt production at particular mines for varying lengths of time and that are beyond their or its control, including: mined;

• ~~the~~coal ~~inability~~transportation ~~to acquire necessary permits~~arrangements;

• ~~changes~~negotiations orwith ~~variations in geologic conditions, such as the thickness of the coal deposits and the amount of rock embedded in or overlying the coal deposit~~unions;

• ~~changes~~employee inhiring ~~governmental~~and ~~regulation of the coal industry~~firing;

• ~~mining~~employee ~~and~~wages, ~~processing~~benefits ~~equipment failures~~ and ~~unexpected~~other ~~maintenance problems~~compensation;

• ~~adverse claims to title or existing defects of title~~permitting;

• ~~interruptions~~surety ~~due to power outages~~bonding; and

• ~~adverse~~mine ~~weather~~closure and ~~natural disasters, such as heavy rains and flooding;~~reclamation.

•If ~~labor-related~~PVR’s ~~interruptions;~~lessees do not manage their operations well, or if they experience financial difficulties, their production could be reduced, which would result in lower coal royalties revenues to PVR and could have a material adverse effect on PVR’s business, results of operations or financial condition.

•The ~~employee~~coal ~~injuries~~mining oroperations of ~~fatalities;~~PVR’s ~~and~~lessees are subject to numerous operational risks that could result in lower coal royalties revenues.

•PVR’s ~~fires~~coal ~~and~~royalties ~~explosions~~revenues are largely dependent on the level of production from its coal reserves achieved by its lessees. The level of PVR’s lessees’ production is subject to operating conditions or events that may increase PVR’s lessees’ cost of mining and delay or halt production at particular mines for varying lengths of time and that are beyond their or its control, including:

~~Any~~• ~~interruptions to~~ the ~~production~~inability ofto ~~coal~~acquire ~~from~~necessary ~~PVR’s reserves could reduce its coal royalties revenues and could have a material adverse effect on PVR’s business, results of operations or financial condition. In~~ permits;

29• changes or variations in geologic conditions, such as the thickness of the coal deposits and the amount of rock embedded in or overlying the coal deposit;

~~TABLE~~• OFchanges ~~CONTENTS~~in governmental regulation of the coal industry;

~~addition,~~• ~~PVR’s~~mining ~~coal~~and ~~royalties~~processing ~~revenues~~equipment ~~are~~failures based upon sales of coal by its lessees to their customers. If PVR’s lessees do not receive payments for delivered coal on a timely basis from their customers, their cash flow would be adversely affected, which could cause PVR’s cash flow to be adversely affected and ~~could~~unexpected ~~have~~maintenance ~~a material adverse effect on PVR’s business, results of operations or financial condition.~~ problems;

A• ~~substantial~~adverse orclaims ~~extended~~to ~~decline~~title inor ~~coal~~existing ~~prices~~defects ~~could reduce PVR’s coal royalties revenues and the value~~ of ~~PVR’s coal reserves.~~title;

A• ~~substantial~~interruptions ordue extended decline in coal prices from recent levels could have a material adverse effect on PVR’s lessees’ operations (including mine closures) and on the quantities of coal that may be economically produced from its properties. In addition, because a majority of PVR’s coal royalties are derived from coal mined on PVR’s properties under leases containing royalty rates based on the higher of a fixed base price or a percentage of the gross sales price, PVR’s coal royalties revenues could be reduced by such a decline. Such a decline could also reduce PVR’s coal services revenues and the value of its coal reserves. Additionally, volatility in coal prices could make it difficult to ~~estimate~~power with precision the value of PVR’s coal reserves and any coal reserves that PVR may consider for acquisition. The future state of the global economy, including financial and credit markets, on coal production levels and prices is uncertain. Depending on the longevity and ultimate severity of this downturn, demand for coal may decline, which could adversely effect production and pricing for coal mined by PVR’s lessees, and, consequently, adversely effect the royalty income received by PVR. outages;

~~PVR~~• ~~depends~~adverse onweather aand ~~limited~~natural ~~number~~disasters, ofsuch ~~primary~~as ~~operators~~heavy ~~for~~rains ~~a significant portion of its coal royalties revenues~~ and ~~the loss of or reduction in production from any of PVR’s major lessees would reduce its coal royalties revenues.~~flooding;

~~PVR~~• ~~depends~~labor-related on a limited number of primary operators for a significant portion of its coal royalties revenues. In the year ended December 31, 2009, five primary operators, each with multiple leases, accounted for 61% of PVR’s coal royalties revenues and 11% of our total consolidated revenues. If any of these operators enters bankruptcy or decides to cease operations or significantly reduces its production, PVR’s coal royalties revenues would be reduced. interruptions;

A• ~~failure~~employee oninjuries ~~the part of PVR’s lessees to make coal royalty payments could give PVR the right to terminate the lease, repossess the property~~ or ~~obtain~~fatalities; ~~liquidation damages~~ and/or enforce payment obligations under the lease. If PVR repossessed any of its properties, PVR would seek to find a replacement lessee. PVR may not be able to find a replacement lessee and, if it finds a replacement lessee, PVR may not be able to enter into a new lease on favorable terms within a reasonable period of time. In addition, the outgoing lessee could be subject to bankruptcy proceedings that could further delay the execution of a new lease or the assignment of the existing lease to another operator. If PVR enters into a new lease, the replacement operator might not achieve the same levels of production or sell coal at the same price as the lessee it replaced. In addition, it may be difficult for PVR to secure new or replacement lessees for small or isolated coal reserves, since industry trends toward consolidation favor larger-scale, higher technology mining operations to increase productivity rates.

~~PVR’s~~• ~~coal~~fires ~~business~~and ~~will be adversely affected if PVR is unable to replace or increase its coal reserves through acquisitions~~explosions.

~~Because~~Any ~~PVR’s~~interruptions ~~reserves~~to ~~decline~~the asproduction ~~its~~of ~~lessees mine its~~ coal, from PVR’s ~~future~~reserves ~~success~~could ~~and~~reduce ~~growth depends, in part, upon~~ its ~~ability to acquire additional~~ coal ~~reserves~~royalties ~~that~~revenues ~~are~~and ~~economically~~could ~~recoverable.~~have ~~The~~a ~~current~~material ~~state~~adverse ofeffect ~~the~~on ~~global~~PVR’s ~~economy~~business, ~~including~~results ~~financial~~of ~~markets,~~operations ~~and~~or financial ~~the~~condition. ~~consequential~~In ~~adverse effect on credit availability~~addition, ~~is adversely impacting~~ PVR’s ~~access~~coal toroyalties ~~new~~revenues ~~capital~~are ~~and~~based ~~credit~~upon ~~availability.~~sales ~~Depending~~of oncoal ~~the~~by ~~longevity~~its ~~and~~lessees ~~ultimate~~to ~~severity~~their ofcustomers. ~~this~~If ~~downturn,~~ PVR’s ~~ability~~lessees todo ~~make~~not ~~acquisitions~~receive ~~may~~payments befor ~~significantly~~delivered ~~adversely~~coal ~~affected.~~on Ifa ~~PVR~~timely isbasis ~~unable~~from totheir ~~negotiate~~customers, ~~purchase~~their ~~contracts~~cash flow towould ~~replace~~be oradversely ~~increase~~affected, ~~its~~which ~~coal~~could ~~reserves on~~cause ~~acceptable terms,~~ PVR’s ~~coal~~cash ~~royalties~~flow ~~revenues~~to ~~will~~be ~~decline~~adversely asaffected ~~its coal reserves are depleted~~ and ~~PVR~~ could, ~~therefore,~~have ~~experience~~ a material adverse effect on ~~its~~PVR’s business, results of operations or financial condition. If PVR is able to acquire additional coal reserves, there is a possibility that any acquisition could be dilutive to earnings and reduce its ability to make distributions to unitholders, including us, or to pay interest on, or the principal of, its debt obligations. Any debt PVR incurs to finance an acquisition may similarly affect its ability to make

30A substantial or extended decline in coal prices could reduce PVR’s coal royalties revenues and the value of PVR’s coal reserves.

~~TABLE~~A OFsubstantial ~~CONTENTS~~or extended decline in coal prices from recent levels could have a material adverse effect on PVR’s lessees’ operations (including mine closures) and on the quantities of coal that may be economically produced from its properties. In addition, because a majority of PVR’s coal royalties are derived from coal mined on PVR’s properties under leases containing royalty rates based on the higher of a fixed base price or a percentage of the gross sales price, PVR’s coal royalties revenues could be reduced by such a decline. Such a decline could also reduce PVR’s coal services revenues and the value of its coal reserves. Additionally, volatility in coal prices could make it difficult to estimate with precision

~~distributions~~27 to unitholders, including us, or to pay interest on, or the principal of, its debt obligations. PVR’s ability to make acquisitions in the future also could be limited by restrictions under its existing or future debt agreements, competition from other coal companies for attractive properties or the lack of suitable acquisition candidates.

PVR’sTable lessees could satisfy obligations to their customers with coal from properties other than PVR’s, depriving PVR of the ability to receive amounts in excess of the minimum coal royalties payments.Contents

~~PVR~~ the ~~does~~value ~~not~~of ~~control its lessees’ business operations.~~ PVR’s ~~lessees’~~coal ~~customer~~reserves ~~supply~~and ~~contracts~~any ~~do not generally require its lessees to satisfy their obligations to their customers with~~ coal ~~mined~~reserves ~~from~~that PVR’s ~~reserves. Several factors~~ may ~~influence~~consider afor ~~lessee’s~~acquisition. ~~decision~~The tofuture ~~supply~~state ~~its~~of ~~customers~~the ~~with~~global ~~coal~~economy, ~~mined~~including ~~from~~financial ~~properties~~and ~~PVR~~credit ~~does~~markets, ~~not~~on ~~own~~coal production orlevels ~~lease,~~and ~~including~~prices ~~the~~is ~~royalty~~uncertain. ~~rates~~Depending ~~under~~on the ~~lessee’s~~longevity ~~lease~~and ~~with~~ultimate ~~PVR,~~severity ~~mining~~of ~~conditions~~this downturn, ~~transportation~~demand ~~costs~~for ~~and availability and customer~~ coal ~~quality~~may ~~specifications.~~decline, Ifwhich acould ~~lessee~~adversely ~~satisfies~~effect ~~its~~production ~~obligations~~and topricing ~~its~~for ~~customers with~~ coal ~~from~~mined ~~properties~~by PVR’s ~~does~~lessees, ~~not~~and, ~~own or lease~~consequently, ~~production~~adversely ~~under~~effect ~~its~~the ~~lease~~royalty ~~will~~income ~~decrease,~~received ~~and~~by PVR ~~will receive lower coal royalties revenues~~.

~~Fluctuations~~PVR independs ~~transportation~~on ~~costs~~a ~~and~~limited ~~the~~number ~~availability~~of orprimary ~~reliability~~operators for a significant portion of its ~~transportation~~coal ~~could~~royalties ~~reduce~~revenues and the ~~production~~loss of ~~coal~~or ~~mined~~reduction in production from any of PVR’s ~~properties~~major lessees would reduce its coal royalties revenues.

~~Transportation~~PVR ~~costs~~depends ~~represent~~on a ~~significant~~limited ~~portion~~number of ~~the~~primary ~~total~~operators ~~cost~~for ofa ~~coal~~significant ~~for~~portion ~~the~~of ~~customers~~its ofcoal ~~PVR’s~~royalties ~~lessees~~revenues. ~~Increases~~In inthe ~~transportation~~year ~~costs~~ended ~~could~~December 31, ~~make~~2010, ~~coal~~five aprimary ~~less~~operators, ~~competitive~~each ~~source~~with ofmultiple ~~energy~~leases, accounted orfor ~~could~~73% ~~make coal produced by some or all~~ of PVR’s ~~lessees~~coal ~~less~~royalties ~~competitive~~revenues ~~than~~and ~~coal~~11% ~~produced~~of ~~from~~our ~~other~~total ~~sources~~consolidated revenues. OnIf ~~the~~any ~~other~~of ~~hand,~~these ~~significant~~operators ~~decreases~~enters inbankruptcy ~~transportation~~or ~~costs~~decides ~~could~~to ~~result~~cease inoperations ~~increased~~or ~~competition~~significantly ~~for~~reduces its production, PVR’s ~~lessees from~~ coal ~~producers~~royalties revenues inwould ~~other~~be ~~parts of the country or increased imports from offshore producers~~reduced.

A failure on the part of PVR’s lessees ~~depend~~to ~~upon~~make ~~rail,~~coal ~~barge,~~royalty ~~trucking~~payments could give PVR the right to terminate the lease, ~~overland~~repossess ~~conveyor~~the ~~and~~property ~~other~~or ~~systems~~obtain toliquidation ~~deliver~~damages ~~coal~~and/or toenforce ~~their~~payment ~~customers~~obligations under the lease. ~~Disruption~~If PVR repossessed any of ~~these~~its ~~transportation~~properties, ~~services~~PVR ~~due~~would seek to ~~weather-related~~find ~~problems,~~a ~~strikes,~~replacement ~~lockouts,~~lessee. ~~bottlenecks,~~PVR ~~mechanical~~may ~~failures~~not ~~and~~be ~~other~~able ~~events~~to ~~could~~find ~~temporarily~~a replacement ~~impair~~lessee ~~the~~and, ~~ability~~if ofit finds a replacement lessee, PVR’s ~~lessees~~may tonot ~~supply~~be ~~coal~~able to ~~their~~enter ~~customers~~into a new lease on favorable terms within a reasonable period of time. ~~PVR’s~~In ~~lessees’~~addition, ~~transportation~~the ~~providers~~outgoing ~~may~~lessee ~~face~~could ~~difficulties~~be insubject to bankruptcy proceedings that could further delay the ~~future~~execution ~~and~~of ~~impair~~a new lease or the ~~ability~~assignment of ~~its~~the ~~lessees~~existing lease to ~~supply~~another ~~coal~~operator. toIf ~~their~~PVR ~~customers~~enters into a new lease, ~~thereby~~the ~~resulting~~replacement inoperator ~~decreased~~might not achieve the same levels of production or sell coal ~~royalties~~at ~~revenues~~the tosame ~~PVR~~price as the lessee it replaced.

PVR’s ~~lessees’~~coal ~~workforces~~business ~~could~~will ~~become~~be ~~increasingly~~adversely ~~unionized~~affected inif ~~the~~PVR ~~future,~~is ~~which~~unable ~~could~~to ~~adversely~~replace ~~affect~~or ~~their~~increase ~~productivity~~its ~~and thereby reduce PVR’s~~ coal ~~royalties~~reserves through ~~revenues~~acquisitions.

~~One~~Because of PVR’s ~~lessees~~reserves ~~has~~decline ~~one~~as its lessees mine ~~operated~~its bycoal, ~~unionized~~PVR’s ~~employees.~~future ~~This~~success ~~mine~~and growth ~~was~~depends, ~~PVR’s~~in ~~third~~part, ~~largest~~upon ~~mine~~its onability ~~the~~to ~~basis~~acquire ofadditional coal ~~production~~reserves ~~for~~that ~~the~~are ~~year~~economically ~~ended~~recoverable. ~~December~~If ~~31,~~PVR ~~2009.~~is ~~All~~unable ofto negotiate purchase contracts to replace or increase its coal reserves on acceptable terms, PVR’s ~~lessees~~coal royalties revenues will decline as its coal reserves are depleted and PVR could, ~~become~~therefore, ~~increasingly~~experience ~~unionized~~a inmaterial ~~the~~adverse ~~future.~~effect Ifon ~~some~~its orbusiness, ~~all~~results of ~~PVR’s~~operations ~~lessees’~~or ~~non-unionized~~financial ~~operations~~condition. ~~were~~If PVR is able to ~~become~~acquire ~~unionized~~additional coal reserves, itthere is a possibility that any acquisition could ~~adversely~~be ~~affect~~dilutive ~~their~~to ~~productivity~~earnings and ~~increase~~reduce its ability to make distributions to unitholders, including us, or to pay interest on, or the ~~risk~~principal of, ~~work~~its ~~stoppages~~debt obligations. InAny ~~addition,~~debt PVR’s ~~lessees’~~incurs ~~operations~~to finance an acquisition may besimilarly ~~adversely~~affect ~~affected~~its byability ~~work~~to ~~stoppages~~make atdistributions ~~unionized~~to ~~companies~~unitholders, ~~particularly~~including ifus, ~~union~~or ~~workers were~~ to ~~orchestrate~~pay ~~boycotts~~interest ~~against~~on, ~~its~~or ~~lessees’~~the ~~operations. Any~~principal ~~further~~of, ~~unionization~~its ofdebt obligations. PVR’s ~~lessees’~~ability ~~employees~~to ~~could~~make ~~adversely~~acquisitions ~~affect~~in the ~~stability~~future also could be limited by restrictions under its existing or future debt agreements, lack of ~~production~~credit availability, competition from ~~its~~other coal ~~reserves~~companies ~~and~~for ~~reduce~~attractive ~~its~~properties ~~coal~~or ~~royalties~~the ~~revenues~~lack of suitable acquisition candidates.

PVR’s ~~coal~~lessees ~~reserve~~could ~~estimates~~satisfy ~~depend~~obligations onto ~~many~~their ~~assumptions~~customers ~~that~~with ~~may~~coal befrom ~~inaccurate,~~properties ~~which~~other ~~could~~than ~~materially~~PVR’s, ~~adversely~~depriving ~~affect~~PVR of the ~~quantities~~ability ~~and~~to ~~value~~receive amounts in excess of ~~PVR’s~~the minimum coal royalties ~~reserves~~payments.

PVR’s ~~estimates~~does ofnot control its ~~coal~~lessees’ ~~reserves~~business ~~may~~operations. ~~vary~~PVR’s ~~substantially~~lessees’ ~~from~~customer supply ~~the~~contracts ~~actual~~do ~~amounts~~not ofgenerally ~~coal~~require its lessees ~~may~~to besatisfy ~~able~~their obligations to ~~economically~~their ~~recover~~customers with coal mined from PVR’s reserves. ~~There~~Several ~~are~~factors ~~numerous~~may ~~uncertainties~~influence ~~inherent~~a inlessee’s ~~estimating~~decision ~~quantities~~to ofsupply ~~reserves~~its customers with coal mined from properties PVR does not own or lease, including ~~many~~the ~~factors~~royalty ~~beyond~~rates ~~PVR~~under the lessee’s ~~control.~~lease ~~Estimates~~with ofPVR, ~~coal~~mining ~~reserves~~conditions, ~~necessarily~~transportation ~~depend~~costs ~~upon~~and aavailability ~~number~~and ofcustomer ~~variables~~coal ~~and~~quality ~~assumptions,~~specifications. ~~any~~If ~~one~~a oflessee ~~which~~satisfies ~~may,~~its ifobligations ~~incorrect,~~to ~~result~~its customers inwith ancoal ~~estimate~~from ~~that~~properties ~~varies~~PVR ~~considerably~~does ~~from~~not ~~actual~~own ~~results.~~or ~~These~~lease, ~~factors~~production under its lease will decrease, and ~~assumptions~~PVR ~~relate~~will ~~to:~~receive lower coal royalties revenues.

•Fluctuations ~~geological~~in transportation costs and ~~mining~~the ~~conditions,~~availability ~~which~~or ~~may~~reliability ~~not~~of betransportation ~~fully~~could ~~identified~~reduce bythe ~~available~~production ~~exploration~~of ~~data;~~coal mined from PVR’s properties.

•Transportation costs represent a significant portion of the ~~amount~~total cost of ~~ultimately~~coal ~~recoverable~~for the customers of PVR’s lessees. Increases in transportation costs could make coal a less competitive source of energy or could make coal produced by some or all of PVR’s lessees less competitive than coal produced from other sources. On the other hand, significant decreases in transportation costs could result in increased competition for PVR’s lessees from coal producers in other parts of the ~~ground;~~country or increased imports from offshore producers.

•PVR’s lessees depend upon rail, barge, trucking, overland conveyor and other systems to deliver coal to their customers. Disruption of these transportation services due to weather-related problems, strikes, lockouts, bottlenecks, mechanical failures and other events could temporarily impair the ~~effects~~ability of ~~regulation~~PVR’s bylessees ~~governmental~~to ~~agencies;~~supply coal to their customers. PVR’s lessees’ transportation providers may face difficulties in the future and impair the ability of its lessees to supply coal to their customers, thereby resulting in decreased coal royalties revenues to PVR.

•28 ~~future coal prices, operating costs, capital expenditures, severance and excise taxes and development and reclamation costs.~~

31Table of Contents

~~TABLE~~PVR’s OFlessees’ ~~CONTENTS~~workforces could become increasingly unionized in the future, which could adversely affect their productivity and thereby reduce PVR’s coal royalties revenues.

~~Actual~~One of PVR’s lessees has one mine operated by unionized employees. This mine was PVR’s second largest mine on the basis of coal production for the year ended December 31, ~~revenues~~2010. ~~and~~All ~~expenditures~~of ~~with~~PVR’s ~~respect~~lessees tocould become increasingly unionized in the future. If some or all of PVR’s ~~coal~~lessees’ ~~reserves~~non-unionized ~~will~~operations ~~likely~~were ~~vary~~to ~~from~~become ~~estimates~~unionized, it could adversely affect their productivity and ~~these~~increase ~~variations~~the risk of work stoppages. In addition, PVR’s lessees’ operations may be ~~material.~~adversely affected Asby awork ~~result~~stoppages at unionized companies, ~~you~~particularly ~~should~~if ~~not~~union ~~place~~workers ~~undue~~were ~~reliance~~to onorchestrate boycotts against its lessees’ operations. Any further unionization of PVR’s lessees’ employees could adversely affect the stability of production from its coal ~~reserve~~reserves ~~data~~and ~~provided~~reduce byits ~~PVR~~coal royalties revenues.

~~Any~~PVR’s ~~change~~coal inreserve ~~fuel~~estimates ~~consumption~~depend ~~patterns~~on bymany assumptions ~~electric~~that ~~power~~may ~~generators~~be ~~away~~inaccurate, ~~from~~which ~~the~~could ~~use~~materially ofadversely ~~coal could~~ affect the ~~ability~~quantities ~~of PVR’s lessees to sell the coal they produce~~ and ~~thereby~~value ~~reduce~~of PVR’s coal ~~royalties revenues~~reserves.

~~According~~PVR’s toestimates ~~the U.S. Department~~ of ~~Energy,~~its ~~domestic~~coal ~~electric~~reserves ~~power~~may ~~generation~~vary ~~accounted~~substantially ~~for~~from ~~approximately~~the ~~89%~~actual ofamounts ~~domestic coal consumption in 2008. The amount~~ of coal ~~consumed~~its ~~for~~lessees ~~domestic~~may ~~electric~~be ~~power~~able ~~generation~~to iseconomically ~~affected~~recover. ~~primarily~~There byare ~~the~~numerous ~~overall~~uncertainties ~~demand~~inherent ~~for~~in ~~electricity,~~estimating quantities ~~the price and availability~~ of ~~competing fuels for power plants such as nuclear~~reserves, ~~natural~~including ~~gas,~~many ~~fuel~~factors ~~oil~~beyond ~~and hydroelectric power and environmental and other governmental regulations.~~ PVR’s ~~believes that most new power plants will be built to produce electricity during peak periods of demand~~control. ~~Many~~Estimates of ~~these~~coal ~~new~~reserves ~~power~~necessarily ~~plants~~depend ~~will~~upon ~~likely~~a benumber ~~fired by natural gas because~~ of ~~lower construction~~variables ~~costs compared to coal-fired plants~~ and ~~because~~assumptions, ~~natural~~any ~~gas~~one ~~is a cleaner burning fuel. The increasingly stringent requirements~~ of ~~the~~which ~~CAA~~ may, if incorrect, result in ~~more~~an ~~electric~~estimate ~~power~~that ~~generators~~varies ~~shifting~~ considerably from ~~coal~~actual ~~to natural gas-fired power plants~~results. ~~See~~These ~~Item~~factors ~~1, “Business — Government Regulation~~ and ~~Environmental~~assumptions ~~Matters — PVR~~relate ~~Coal~~to: ~~and Natural Resource Management Segment — Air Emissions.”~~

~~Extensive~~• ~~environmental~~geological ~~laws~~ and ~~regulations~~mining ~~affecting~~conditions, ~~electric~~which ~~power~~may ~~generators~~not ~~could~~be ~~have~~fully ~~corresponding~~identified ~~effects~~by onavailable ~~the~~exploration ~~ability of PVR’s lessees to sell the coal they produce and thereby reduce PVR’s coal royalties revenues.~~data;

~~Federal,~~• ~~state and local laws and regulations extensively regulate~~ the amount of ~~sulfur~~ultimately ~~dioxide,~~recoverable ~~particulate matter, nitrogen oxides, mercury and other compounds emitted into the air from electric power plants, which are the ultimate consumers of the~~ coal ~~PVR’s~~in lessees produce. These laws and regulations can require significant emission control expenditures for many coal-fired power plants, and various new and proposed laws and regulations may require further emission reductions and associated emission control expenditures. As a result of these current and proposed laws, regulations and trends, electricity generators may elect to switch to other fuels that generate less of these emissions, possibly further reducing demand for the coal that PVR’s lessees produce and thereby reducing its coal royalties revenues. See Item 1, “Business — Government Regulation and Environmental Matters — PVR Coal and Natural Resource Management Segment — Air Emissions.” ground;

~~Concerns~~• ~~about~~ the ~~environmental~~effects ~~impacts~~ of ~~fossil-fuel emissions, including perceived impacts on global climate change, are resulting in increased~~ regulation ofby ~~emissions~~governmental ofagencies; ~~greenhouse gases in many jurisdictions~~ and ~~increased interest in and the likelihood of further regulation, which could significantly affect PVR’s coal royalties revenues.~~

~~Global~~• ~~climate~~future ~~change~~coal ~~continues to attract considerable public and scientific attention. Several widely publicized scientific reports have engendered widespread concern about the impacts of human activity~~prices, ~~especially~~operating ~~fossil fuel combustion~~costs, oncapital ~~global climate change. Legislative attention in the United States is being paid to global climate change and to reducing greenhouse gas emissions~~expenditures, ~~particularly~~severance ~~from coal combustion by power plants. Such legislation was introduced in Congress in the last several years to reduce greenhouse gas emissions in the United States~~ and ~~further~~excise ~~proposals~~taxes or amendments are likely to be offered in the future. In anticipation of EPA’s endangerment finding regarding greenhouse gas emissions (which was finalized in December 2009), the agency proposed two sets of rules regarding possible future regulation of greenhouse gas emissions under the CAA. While the first proposes to regulate greenhouse gas emissions from motor vehicles, the other targets greenhouse gas emissions from large stationary sources such as power plants or industrial facilities. Several states have also either passed legislation or announced initiatives focused on decreasing or stabilizing carbon dioxide emissions associated with the combustion of fossil fuels, and ~~many~~development ~~of these measures have focused on emissions from coal-fired power plants. See Item 1, “Business — Governmental Regulation~~ and ~~Environmental~~reclamation ~~Matters — PVR Coal and Natural Resource Management Segment — Air Emissions~~costs.~~” Enactment of laws, passage of regulations regarding greenhouse gas emissions by the United~~

32Actual production, revenues and expenditures with respect to PVR’s coal reserves will likely vary from estimates, and these variations may be material. As a result, you should not place undue reliance on the coal reserve data provided by PVR.

~~TABLE~~PVR OFcould ~~CONTENTS~~be negatively impacted by any decline in the market demand for coal.

~~States~~The ordomestic ~~some~~demand for, and price of ~~its~~PVR’s ~~states,~~coal orprimarily ~~other~~depend ~~actions~~on tocoal ~~limit~~consumption ~~carbon~~patterns ~~dioxide~~of ~~emissions~~the ~~could~~domestic ~~result~~electric inutility industry. Consumption by the domestic electric ~~generators~~utility ~~switching~~industry ~~from~~is ~~coal~~affected toby the demand for electricity, environmental and other governmental regulations, technological developments and the price of competing coal and alternative fuel sources, such as natural gas, nuclear, hydroelectric power and other renewable energy sources. ~~This~~During ~~may~~the ~~adversely~~last ~~affect~~several years, the ~~use~~U.S. coal industry has experienced increased consolidation, which has contributed to the industry becoming more competitive. Increased competition by coal producers or producers of ~~and~~alternate fuels could decrease the demand for, ~~fossil~~or ~~fuels~~pricing of, ~~particularly~~or both, for PVR’s coal, adversely impacting demand for the coal that PVR’s lessees produce and thereby reducing our coal royalties revenues.

~~Delays~~In inaddition, ~~PVR’s~~Federal, ~~lessees~~state ~~obtaining~~and ~~mining~~local ~~permits~~laws and ~~approvals~~regulations extensively regulate the amount of sulfur dioxide, orparticulate matter, nitrogen oxides, mercury and other compounds emitted into the ~~inability~~air tofrom ~~obtain~~electric ~~required~~power ~~permits~~plants, which are the ultimate consumers of the coal our lessees produce. These laws and ~~approvals~~regulations can require significant emission control expenditures for many coal-fired power plants, ~~could~~and ~~have~~various annew ~~adverse~~and ~~effect~~proposed onlaws and regulations may require further emission reductions and associated emission control expenditures. As a result of these current and proposed laws, regulations and trends, electricity generators may elect to switch to other fuels that generate less of these emissions, possibly further reducing demand for the coal that our lessees produce and thereby reducing PVR’s coal royalties revenues. See Item 1, “Business — Government Regulation and Environmental Matters — Coal and Natural Resource Management Segment — Air Emissions.”

~~Mine~~Federal ~~operators, including PVR’s lessees, must obtain numerous permits~~ and ~~approvals~~state ~~that~~laws ~~impose~~restricting ~~strict~~the ~~conditions~~emissions ~~and~~of ~~obligations~~greenhouse ~~relating~~gases ~~to various environmental and safety matters~~ in ~~connection with coal mining. The permitting rules are complex and can change over time. The public has the right to comment on~~ many ~~permit~~jurisdictions ~~applications~~could ~~and~~adversely ~~otherwise~~affect ~~participate in the permitting process, including through court intervention. Accordingly, permits required by~~ PVR’s lessees to conduct operations may not be issued, maintained or renewed, may not be issued or renewed in a timely fashion, or may involve requirements that restrict PVR’s lessees’ ability to economically conduct their mining operations. Limitations on PVR’s lessees’ ability to conduct their mining operations due to the inability to obtain or renew necessary permits, or due to uncertainty, litigation or delays associated with the eventual issuance of these permits, could have an adverse effect on its coal royalties revenues. ~~See Item 1, “Business — Government Regulation and Environmental Matters — PVR Coal and Natural Resource Management Segment — Mining Permits and Approvals.”~~

~~Uncertainty~~Global ~~over~~climate ~~the~~change ~~precise~~continues ~~parameters~~to attract considerable public and scientific attention. Several scientific studies have suggested that emissions of ~~the~~certain ~~CWA~~gases, commonly referred to as “greenhouse gases”, or GHG’s, ~~regulatory~~including ~~scope~~carbon dioxide and amethane, ~~recent~~may ~~federal~~be ~~district~~contributing ~~court~~to ~~decision~~warming ~~may~~of ~~adversely~~the ~~impact PVR~~Earth’s ~~coal~~atmosphere. ~~lessees’~~Legislative ~~ability~~attention in the United States is being paid to ~~secure~~reducing ~~the~~GHG ~~necessary~~emissions. ~~permits~~Many ~~for~~states ~~their~~have ~~valley~~already ~~fill~~taken ~~surface~~legal ~~mining~~measures ~~activities~~to reduce emissions of greenhouse gases, primarily through the development of regional greenhouse gas cap-and-trade programs.

ToThere ~~dispose~~are ofmany ~~mining~~regulatory ~~overburden~~approaches ~~generated~~currently ~~from~~in ~~surface~~effect ~~mining~~or ~~activities,~~being ~~PVR’s~~considered ~~lessees often need~~ to ~~obtain~~address ~~government~~greenhouse ~~approvals~~gases, including ~~CWA~~possible ~~Section~~future 404 permits to construct valley fills and sediment control ponds. Ongoing uncertainty over which waters are subject to the CWA may adversely impact PVR’s lessees’ ability to secure these necessary permits. In addition, a 2007 decision by a U.S. treaty ~~District Court in West Virginia invalidated a permit issued to one of PVR’s lessees for the Republic No. 2 Mine and enjoined PVR’s lessee~~commitments, ~~Alex~~new ~~Energy,~~federal Inc., from taking any further actions under this permit. This ruling was appealed and the appellate court reversed and vacated the district court’s order. It is unclear if this ruling will be appealed or ifstate ~~the~~legislation ~~permits~~that ~~will be challenged on other grounds. Uncertainty over the correct legal standard for issuing Section 404 permits~~ may ~~lead~~impose toa ~~rulings~~carbon ~~invalidating~~emissions ~~other~~tax ~~permits,~~or additional challenges to various permits and additional delays and costs in applying for and obtaining new permits that could ultimately have an adverse effect on PVR’s coal royalties revenues. See Item 1, “Business — Government Regulation and Environmental Matters — PVR Coal and Natural Resource Management Segment — Clean Water Act,” for more information about the litigation described above.

~~PVR’s~~29 lessees’ mining operations are subject to extensive and costly laws and regulations, which could increase operating costs and limit its lessees’ ability to produce coal, which could have an adverse effect on PVR’s coal royalties revenues.

PVR’sTable lessees are subject to numerous and detailed federal, state and local laws and regulations affecting coal mining operations, including laws and regulations pertaining to employee health and safety, permitting and licensing requirements, air quality standards, water pollution, plant and wildlife protection, reclamation and restoration of mining properties after mining is completed, the discharge of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. Numerous governmental permits and approvals are required for mining operations. PVR’s lessees are required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that any proposed exploration for or production of coal may have upon the environment. The costs, liabilities and requirements associated with these regulations may be significant and time-consuming and may delay commencement or continuation of exploration or production operations. The possibility exists that new laws or regulations (or judicial interpretations of existing laws and regulations) may be adopted in the future that could materially affect PVR’s lessees’ mining operations, either through direct impacts such as new requirements impacting its lessees’ existing mining operations, or indirect impacts such as new laws and regulations that discourage or limit coal consumers’ use of coal. Any of these direct or indirect impacts could have an adverse effect on PVR’s coal royalties revenues. See Item 1, “Business — Government Regulation and Environmental Matters — PVR Coal and Natural Resource Management Segment.” Contents

33 establish a cap-and-trade program and regulation by the EPA. EPA rules require extensive regulation of GHG emissions from mobile sources and stationary sources, including imposing permitting requirements and obligations to use best available control technology for the reduction of GHG emissions whenever certain stationary sources, such as power plants, are built or significantly modified. Moreover, the EPA plans to update pollution standards for fossil fuel power plants and petroleum refineries.

~~TABLE~~The OFpermitting ~~CONTENTS~~of new coal-fired power plants has also been contested by state regulators and environmental organizations for concerns related to greenhouse gas emissions from the new plants. Other state regulatory authorities have also rejected the construction of new coal-fired power plants based on the uncertainty surrounding the potential costs associated with greenhouse gas emissions from these plants under future laws limiting the emissions of carbon dioxide. In addition, several permits issued to new coal-fired power plants without limits on greenhouse gas emissions have been appealed to EPA’s Environmental Appeals Board. The regulation of emissions of GHGs associated with the use of coal may lead PVR’s lessees’ customers to curtail their operations, switch to other fuels or other alternatives which may, individually and collectively, reduce demand for our lessees’ coal and thereby decrease revenues. See Item 1, “Business — Governmental Regulation and Environmental Matters — Coal and Natural Resource Management Segment — Air Emissions.” As a result of current laws and proposed laws, regulations and trends, electric generators may switch from coal to other fuels that generate less greenhouse gas emissions, possibly reducing demand for coal.

~~Because~~PVR’s oflessees’ ~~extensive and comprehensive regulatory requirements, violations during~~ mining operations are ~~not~~subject ~~unusual~~to ~~in the industry~~ extensive and, ~~notwithstanding~~costly ~~compliance efforts, PVR does not believe violations by its lessees can be eliminated completely. Failure to comply with these~~ laws and regulations ~~may result in the assessment of administrative~~, ~~civil~~which ~~and~~could ~~criminal~~increase ~~penalties,~~operating ~~the imposition of cleanup and site restoration~~ costs and ~~liens and, to a lesser extent, the issuance of injunctions to~~ limit ~~or cease operations.~~ PVR’s lessees ~~may also incur costs and liabilities resulting from claims for damages to property or injury to persons arising from their operations. If PVR~~’s ~~lessees~~ability ~~are required~~ to ~~pay~~produce ~~these costs and liabilities and if their financial viability is affected by doing so~~coal, ~~then~~which ~~their~~could ~~mining~~have ~~operations~~an ~~and,~~adverse aseffect aon ~~result,~~ PVR’s coal royalties revenues ~~and its ability to make distributions to us, could be adversely affected~~.

~~Risks~~PVR’s ~~Related~~lessees are subject to federal, state and local laws and regulations affecting coal mining operations, including laws and regulations pertaining to employee health and safety, permitting and licensing requirements, air quality standards, water pollution, plant and wildlife protection, reclamation and restoration of mining properties after mining is completed, the discharge of materials into the environment, surface subsidence from underground mining and the effects that mining has on groundwater quality and availability. PVR’s ~~Natural~~lessees ~~Gas~~are ~~Midstream~~required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that any proposed exploration for or production of coal may have upon the environment. The costs, liabilities and requirements associated with these regulations may be significant and time-consuming and may delay commencement or continuation of exploration or production operations. The possibility exists that new laws or regulations (or judicial interpretations of existing laws and regulations) may be adopted in the future that could materially affect PVR’s lessees’ mining operations, either through direct impacts such as new requirements impacting PVR’s lessees’ existing mining operations, or indirect impacts such as new laws and regulations that discourage or limit coal consumers’ use of coal. Any of these direct or indirect impacts could have an adverse effect on PVR’s coal royalties revenues. See Item 1, “Business — Government Regulation and Environmental Matters — Coal and Natural Resource Management Segment.”

~~The~~Because ~~success~~of extensive and comprehensive regulatory requirements, violations during mining operations are not unusual in the industry and, notwithstanding compliance efforts, PVR does not believe violations by its lessees can be eliminated completely. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup and site restoration costs and liens and, to a lesser extent, the issuance of injunctions to limit or cease operations. PVR’s ~~natural~~lessees ~~gas~~may ~~midstream~~also ~~business~~incur ~~depends~~costs ~~upon~~and ~~its~~liabilities ~~ability~~resulting from claims for damages to ~~find~~property or injury to persons arising from their operations. If PVR’s lessees are required to pay these costs and ~~contract~~liabilities ~~for~~and ~~new~~if ~~sources~~their financial ofviability ~~natural~~is ~~gas~~affected ~~supply~~by doing so, then their mining operations and, as a result, PVR’s coal royalties revenues and its ability to make distributions to us, could be adversely affected.

InRisks ~~order~~Related to ~~maintain or increase system throughput levels on~~ PVR’s ~~gathering~~Natural ~~systems~~Gas ~~and~~Midstream ~~asset~~Business utilization rates at its processing plants, PVR must contract for new natural gas supplies. The primary factors affecting PVR’s ability to connect new supplies of natural gas to its gathering systems include the level of drilling activity creating new gas supply near its gathering systems, PVR’s success in contracting for existing natural gas supplies that are not committed to other systems and PVR’s ability to expand and increase the capacity of its systems. PVR may not be able to obtain additional contracts for natural gas supplies.

~~Fluctuations~~The insuccess ~~energy prices can greatly affect production rates and investments by third parties in the development~~ of ~~new~~PVR’s ~~oil and~~ natural gas ~~reserves.~~midstream ~~Drilling~~business ~~activity~~depends ~~generally~~upon ~~decreases as oil and natural gas prices decrease. PVR has no control over the level of drilling activity in~~ its ~~areas~~ability ofto ~~operations,~~find ~~the amount of reserves underlying the wells~~ and ~~the~~contract rate at which production from a well will decline. In addition, PVR has no control over producers or their production decisions, which are affected by, among other things, prevailing and projected energy prices, demand for ~~hydrocarbons,~~new ~~the~~sources ~~level~~ of ~~reserves,~~natural ~~geological~~gas ~~considerations, governmental regulation and the availability and cost of capital~~supply.

~~PVR’s~~In ~~natural~~order ~~gas~~to ~~midstream~~maintain ~~assets,~~or ~~including~~increase ~~its~~system throughput levels on PVR’s gathering systems and ~~processing~~asset ~~plants,~~utilization ~~are~~rates ~~connected~~at toits ~~natural~~processing plants, ~~gas~~PVR ~~reserves~~must ~~and~~contract ~~wells~~ for ~~which~~new ~~the~~natural ~~production~~gas ~~will~~supplies. ~~naturally~~The ~~decline~~primary ~~over~~factors ~~time.~~affecting PVR’s ~~cash~~ability ~~flows associated with these systems will decline unless it is able~~ to ~~secure~~connect new supplies of natural gas ~~by connecting additional production~~ to ~~these~~its gathering systems. Ainclude ~~material~~the ~~decrease~~level ~~in natural gas production in PVR’s areas~~ of ~~operation,~~drilling asactivity acreating ~~result~~new ofgas ~~depressed~~supply ~~commodity~~near ~~prices~~its gathering ~~or otherwise~~systems, ~~would~~PVR’s ~~result~~success in acontracting ~~decline~~for inexisting ~~the volume of~~ natural gas ~~PVR~~supplies ~~handles,~~that ~~which~~are ~~would~~not ~~reduce~~committed ~~its~~to ~~revenues~~other systems and ~~operating income. In addition,~~ PVR’s ~~future~~ability ~~growth~~to ~~will~~expand ~~depend,~~and inincrease ~~part,~~the ~~upon~~capacity ~~whether~~of itits ~~can~~systems. ~~contract~~PVR ~~for~~may ~~additional~~not ~~supplies~~be atable ato ~~greater~~obtain ~~rate~~additional contracts ~~than~~for ~~the rate of~~ natural ~~decline~~gas ~~in PVR’s currently connected~~ supplies.

~~PVR~~Fluctuations ~~typically~~in ~~does~~energy ~~not~~prices ~~obtain~~can ~~independent~~greatly ~~evaluations~~affect production rates and investments by third parties in the development of new oil and natural gas reserves. ~~dedicated~~Drilling toactivity ~~its~~generally ~~gathering~~decreases ~~systems;~~as ~~therefore,~~oil ~~volumes~~and of natural gas onprices decrease. PVR’s ~~systems~~has no control over the level of drilling activity in its areas of operations, the ~~future~~amount ~~could~~of reserves beunderlying ~~less~~the ~~than~~wells itand ~~anticipates.~~the rate

~~PVR~~30 typically does not obtain independent evaluations of natural gas reserves connected to its gathering systems due to the unwillingness of producers to provide reserve information, as well as the cost of such evaluations. Accordingly, PVR does not have independent estimates of total reserves dedicated to its gathering systems or the anticipated life of such reserves. If the total reserves or estimated life of the reserves connected to PVR’s gathering systems is less than it anticipates and PVR’s is unable to secure additional sources of natural gas, then the volumes of natural gas gathered on PVR’s gathering systems in the future could be less than PVR anticipates. A decline in the volumes of natural gas on PVR’s systems could have a material adverse effect on PVR’s business, results of operations or financial condition.

ATable reduction in demand for NGL products by the petrochemical, refining or heating industries could materially adversely affect PVR’s business, results of operations and financial condition.Contents

~~The~~ at ~~NGL~~which ~~products~~production ~~PVR~~from ~~produces,~~a ~~including~~well ~~ethane,~~will ~~propane,~~decline. ~~normal~~In ~~butane~~addition, ~~isobutane~~PVR ~~and~~has ~~natural~~no ~~gasoline,~~control ~~have~~over aproducers ~~variety~~or oftheir ~~applications~~production decisions, ~~including~~which asare ~~heating~~affected ~~fuels~~by, ~~petrochemical~~among ~~feedstocks~~other ~~and~~things, ~~refining~~prevailing ~~blend~~and ~~stocks.~~projected energy Aprices, ~~reduction in~~ demand for ~~NGL products~~hydrocarbons, ~~whether~~the ~~because~~level of ~~general~~reserves, ~~economic~~geological ~~conditions~~considerations, ~~new~~governmental regulation and the availability and cost of capital.

34PVR’s natural gas midstream assets, including its gathering systems and processing plants, are connected to natural gas reserves and wells for which the production will naturally decline over time. PVR’s cash flows associated with these systems will decline unless it is able to secure new supplies of natural gas by connecting additional production to these systems. A material decrease in natural gas production in PVR’s areas of operation, as a result of depressed commodity prices or otherwise, would result in a decline in the volume of natural gas PVR handles, which would reduce its revenues and operating income. In addition, PVR’s future growth will depend, in part, upon whether it can contract for additional supplies at a greater rate than the rate of natural decline in PVR’s currently connected supplies.

~~TABLE~~PVR OFtypically ~~CONTENTS~~does not obtain independent evaluations of natural gas reserves dedicated to its gathering systems; therefore, volumes of natural gas on PVR’s systems in the future could be less than it anticipates.

~~government~~PVR ~~regulations,~~typically ~~reduced~~does ~~demand~~not byobtain ~~consumers~~independent ~~for~~evaluations ~~products~~of ~~made~~natural ~~with~~gas ~~NGL~~reserves ~~products,~~connected ~~increased~~to ~~competition~~its gathering ~~from~~systems ~~petroleum-based~~due ~~products~~to ~~due~~the unwillingness of producers to ~~pricing~~provide ~~differences~~reserve information, ~~mild~~as ~~winter~~well ~~weather~~as orthe ~~other~~cost ~~reasons~~of such evaluations. Accordingly, ~~could~~PVR ~~result~~does innot ahave ~~decline~~independent inestimates of total reserves dedicated to its gathering systems or the anticipated ~~volume~~life of ~~NGL~~such ~~products~~reserves. ~~PVR~~If ~~handles~~the total reserves or ~~reduce~~estimated life of the ~~fees~~reserves connected to PVR’s ~~charges~~gathering ~~for~~systems ~~its~~is ~~services.~~less ~~Any~~than ~~reduced~~it ~~demand~~anticipates ~~for~~and PVR’s ~~NGL~~is ~~products~~unable ~~could~~to ~~adversely~~secure ~~affect~~additional ~~demand~~sources ~~for~~of natural gas, then the ~~services~~volumes of natural gas gathered on PVR’s ~~provides~~gathering assystems ~~well~~in asthe ~~NGL~~future ~~prices,~~could ~~which~~be ~~would~~less ~~negatively~~than ~~impact~~PVR anticipates. A decline in the volumes of natural gas on PVR’s systems could have a material adverse effect on PVR’s business, results of operations ~~and~~or financial condition.

~~The~~A ~~profitability~~reduction ofin ~~PVR’s~~demand ~~natural~~for ~~gas~~NGL ~~midstream~~products ~~business~~by isthe ~~dependent~~petrochemical, ~~upon~~refining ~~prices~~or ~~and~~heating ~~market~~industries ~~demand~~could materially ~~for~~adversely ~~natural~~affect ~~gas~~PVR’s ~~and NGLs~~business, ~~which~~results ~~are~~of ~~beyond~~operations ~~PVR’s control~~ and ~~have~~financial ~~been volatile~~condition.

~~PVR~~The isNGL ~~subject~~products toPVR produces, ~~significant~~including ~~risks~~ethane, ~~due~~propane, tonormal ~~fluctuations~~butane, inisobutane and natural ~~gas~~gasoline, ~~commodity~~have ~~prices.~~a ~~During~~variety ~~2009~~of applications, ~~PVR~~including ~~generated~~as aheating ~~majority~~fuels, ofpetrochemical ~~its~~feedstocks ~~gross~~and ~~margin~~refining ~~from~~blend ~~two~~stocks. ~~types~~A reduction in demand for NGL products, whether because of ~~contractual~~general ~~arrangements~~economic ~~under~~conditions, ~~which~~new ~~its~~government ~~margin~~regulations, isreduced ~~exposed~~demand by consumers for products made with NGL products, increased competition from petroleum-based products due to ~~increases~~pricing ~~and~~differences, ~~decreases~~mild winter weather or other reasons, could result in a decline in the ~~price~~volume of ~~natural~~NGL ~~gas~~products ~~and~~PVR ~~NGLs — gas~~handles ~~purchase/keep-whole~~or ~~and~~reduce ~~percentage-of-proceeds~~the ~~arrangements~~fees PVR charges for its services. ~~See~~Any ~~Item~~reduced 1,demand ~~“Business —~~ for PVR’s ~~Contracts —~~ NGL products could adversely affect demand for the services PVR ~~Natural~~provides ~~Gas~~as ~~Midstream~~well ~~Segment~~as NGL prices, which would negatively impact PVR’s results of operations and financial condition.”

~~Virtually~~The ~~all~~profitability of ~~the system throughput volumes in~~ PVR’s Crescent System and Hamlin System are processed under percentage-of-proceeds arrangements. The system throughput volumes in PVR’s Panhandle System are processed primarily under either percentage-of proceeds or gas purchase/keep-whole arrangements. Under both types of arrangements, PVR provides gathering and processing services for natural gas received. Under percentage-of-proceeds arrangements, PVR generally sells the NGLs produced from the processing operations and the remaining residue gas at market prices and remits to the producers an agreed upon percentage of the proceeds based on ~~either an index price or the price actually received for~~ gas ~~and~~midstream NGLs. Under these arrangements, revenues and gross margins decline when natural gas prices and NGL prices decrease. Accordingly, a decrease in the price of natural gas or NGLs could have a material adverse effect on PVR’s business, ~~results~~is ofdependent ~~operations or financial condition. Under gas purchase/keep-whole arrangements, PVR generally buys natural gas from producers based~~ upon anprices ~~index price~~ and ~~then sells the NGLs and the remaining residue gas to third parties at~~ market ~~prices.~~demand ~~Because~~for ~~the extraction of the NGLs from the~~ natural gas during processing reduces the volume of natural gas available for sale, profitability is dependent on the value of those NGLs being higher than the value of the volume of gas reduction or “shrink.” Under these arrangements, revenues and ~~gross margins decrease when the price of natural gas increases relative to the price of~~ NGLs~~. Accordingly~~, awhich ~~change~~are inbeyond ~~the relationship between the price of natural gas and the price of NGLs could have a material adverse effect on~~ PVR’s ~~business,~~control ~~results~~and ofhave ~~operations~~been ~~or financial condition~~volatile.

InPVR ~~the~~is ~~past,~~subject ~~the~~to ~~prices~~significant ofrisks ~~natural~~due ~~gas~~to ~~and~~fluctuations ~~NGLs~~in ~~have~~natural ~~been~~gas ~~extremely~~commodity ~~volatile,~~prices. ~~and~~During 2010, PVR ~~expects~~generated ~~this~~a ~~volatility~~majority toof ~~continue.~~its ~~The~~gross ~~markets~~margin ~~and~~from ~~prices~~two ~~for~~types ~~residue~~of ~~gas~~contractual ~~and~~arrangements ~~NGLs~~under ~~depend~~which its ~~upon~~margin ~~factors~~is ~~beyond~~exposed ~~PVR’s~~to ~~control.~~increases ~~These~~and ~~factors~~decreases ~~include~~in ~~demand~~the ~~for~~price ~~oil,~~of natural gas and NGLs, — gas ~~which~~purchase/keep-whole ~~fluctuates~~and ~~with~~percentage-of-proceeds ~~changes~~arrangements. inSee ~~market~~Item 1, ~~and~~“Business — ~~economic~~PVR’s Contracts — PVR ~~conditions,~~Natural ~~and~~Gas ~~other~~Midstream ~~factors,~~Segment.” ~~including:~~

•Virtually all of the ~~state~~system throughput volumes in PVR’s Crescent System and Hamlin System are processed under percentage-of-proceeds ~~the~~arrangements. ~~global~~The ~~economy~~system throughput volumes in PVR’s Panhandle System are processed primarily under either percentage-of-proceeds or gas purchase/keep-whole arrangements. Under both types of arrangements, ~~including~~PVR ~~financial~~provides gathering and ~~credit~~processing ~~markets~~services for natural gas received. Under percentage-of-proceeds arrangements, PVR generally sells the NGLs produced from the processing operations and the remaining residue gas at market prices and remits to the producers an agreed upon percentage of the proceeds based on ~~worldwide~~either ~~demand~~an index price or the price actually received for ~~oil~~gas and ~~domestic~~NGLs. ~~demand~~Under these arrangements, revenues and gross margins decline when natural gas prices and NGL prices decrease. Accordingly, a decrease in the price of natural gas or NGLs could have a material adverse effect on PVR’s business, results of operations or financial condition. Under gas purchase/keep-whole arrangements, PVR generally buys natural gas from producers based upon an index price and then sells the NGLs and the remaining residue gas to third parties at market prices. Because the extraction of the NGLs from the natural gas during processing reduces the volume of natural gas available for sale, profitability is dependent on the value of those NGLs being higher than the value of the volume of gas reduction or “shrink.” Under these arrangements, revenues and gross margins decrease when the price of natural gas increases relative to the price of NGLs. Accordingly, a change in the relationship between the price of natural gas and the price of NGLs; could have a material adverse effect on PVR’s business, results of operations or financial condition.

•In the ~~impact~~past, the prices of ~~weather~~natural ongas ~~the~~and ~~demand~~NGLs ~~for~~have ~~oil~~been extremely volatile, and ~~natural~~PVR expects this volatility to continue. The markets and prices for residue gas; and NGLs depend upon factors beyond PVR’s control. These factors

•31 ~~the level of domestic oil and natural gas production;~~

•Table the availability of imported oil and natural gas;Contents

• include ~~actions~~demand ~~taken~~for byoil, ~~foreign~~natural ~~oil~~gas and ~~gas~~NGLs, ~~producing~~which ~~nations;~~fluctuates with changes in market and economic conditions, and other factors, including:

• the ~~availability~~state of ~~local~~the global economy, ~~intrastate~~including financial and ~~interstate~~credit ~~transportation~~markets, ~~systems~~on worldwide demand for oil and domestic demand for natural gas and NGLs;

• the ~~availability~~impact ~~and~~of ~~marketing~~weather ofon ~~competitive~~the ~~fuels~~demand for oil and natural gas;

• the ~~impact~~level of ~~energy~~domestic ~~conservation~~oil ~~efforts;~~ and natural gas production;

• the ~~extent~~availability of ~~governmental~~imported ~~regulation~~oil and ~~taxation.~~natural gas;

35• actions taken by foreign oil and gas producing nations;

~~TABLE~~• OFthe ~~CONTENTS~~availability of local, intrastate and interstate transportation systems;

~~Acquisitions~~• ~~and expansions may affect PVR’s business by substantially increasing~~ the ~~level~~availability ~~of its indebtedness~~ and ~~contingent~~marketing ~~liabilities and increasing the risks~~ of ~~being~~competitive ~~unable to effectively integrate these new operations.~~fuels;

~~From~~• time to time, PVR evaluates and acquires assets and businesses that it believes complement its existing operations. Readily available access to debt and equity capital and credit availability has been and continues to be critical factors in PVR’s ability to grow. The current state of the ~~global~~impact economy, including financial markets, and the consequential adverse effect on credit availability, is adversely impacting PVR’s access to new capital and credit availability. Depending on the longevity and ultimate severity of ~~this~~energy ~~downturn,~~conservation ~~PVR’s~~efforts; ability to make acquisitions may be significantly adversely affected. In the event PVR completes acquisitions, PVR may encounter difficulties integrating these acquisitions with its existing businesses without a loss of employees or customers, a loss of revenues, an increase in operating or other costs or other difficulties. In addition, PVR may not be able to realize the operating efficiencies, competitive advantages, cost savings or other benefits expected from these acquisitions. Future acquisitions might not generate increases in PVR’s cash distributions to its unitholders, and ~~because of the capital used to complete such acquisitions, or the debt incurred, PVR’s and our results of operations may change significantly.~~

~~Expanding~~• ~~PVR’s~~the ~~natural~~extent ~~gas~~of ~~midstream~~governmental ~~business~~regulation ~~by constructing new gathering systems, pipelines~~ and ~~processing facilities subjects PVR to construction risks~~taxation.

~~One~~Acquisitions ofand ~~the~~expansions ~~ways PVR~~ may ~~grow~~affect ~~its~~PVR’s ~~natural gas midstream~~ business isby ~~through~~substantially ~~the~~increasing ~~construction of additions to existing gathering, compression and processing systems. The construction of a new gathering system or pipeline,~~ the ~~expansion~~level of anits ~~existing~~indebtedness ~~pipeline through the addition of new pipe or compression~~ and ~~the~~contingent ~~construction~~liabilities ~~of new processing facilities involve numerous regulatory, environmental, political~~ and ~~legal~~increasing ~~uncertainties beyond PVR’s control and require~~ the ~~expenditure~~risks of ~~significant~~being ~~amounts~~unable ~~of capital. PVR’s access~~ to ~~such capital is currently adversely impacted by the state of the global economy, including financial and credit~~ ~~markets.~~effectively Ifintegrate ~~PVR does undertake~~ these projects, they may not be completed on schedule, or at all, or at the anticipated cost. Moreover, PVR’s revenues may not increase immediately upon the expenditure of funds on a particular project. For example, the construction of gathering facilities requires the expenditure of significant amounts of capital, which may exceed PVR’s estimates. Generally, PVR may have only limited natural gas supplies committed to these facilities prior to their construction. Moreover, PVR may construct facilities to capture anticipated future growth in production in a region in which anticipated production growth does not materialize. As a result, there is the risk that new ~~facilities may not be able to attract enough natural gas to achieve PVR’s expected investment return, which could have a material adverse effect on PVR’s business, results of~~ operations ~~or financial condition~~.

IfFrom time to time, PVR isevaluates ~~unable~~and acquires assets and businesses that it believes complement its existing operations. Readily available access to ~~obtain~~debt ~~new~~and ~~rights-of-way~~equity orcapital and credit availability have been and continue to be critical factors in PVR’s ability to grow. While global financial markets and economic conditions have been disrupted in the past, these conditions have improved more recently. The cost of ~~renewing~~raising money in the debt and equity capital markets has increased while the availability of funds from these markets generally has diminished. Depending on the longevity and ultimate severity of a downturn, PVR’s ability to make acquisitions may be significantly adversely affected. In the event PVR completes acquisitions, PVR may encounter difficulties integrating these acquisitions with its existing ~~rights-~~businesses without a loss of~~-way~~ ~~increases~~employees or customers, ~~then~~a loss of revenues, an increase in operating or other costs or other difficulties. In addition, PVR may not be ~~unable~~able to ~~fully~~realize ~~execute~~the operating efficiencies, competitive advantages, cost savings or other benefits expected from these acquisitions. Future acquisitions might not generate increases in PVR’s cash distributions to its ~~growth~~unitholders, ~~strategy~~and because of the capital used to complete such acquisitions, or the debt incurred, PVR’s and ~~its~~our ~~cash~~results ~~flows~~of ~~could~~operations bemay ~~reduced~~change significantly.

~~The~~Expanding ~~construction of additions to~~ PVR’s ~~existing~~natural ~~gathering~~gas ~~assets~~midstream ~~may~~business ~~require PVR to obtain new rights-of-way before~~ by constructing new ~~pipelines. PVR may be unable to obtain rights-of-way to connect new natural gas supplies to its existing~~ gathering ~~lines or capitalize on other attractive expansion opportunities. Additionally~~systems, itpipelines ~~may~~and ~~become~~processing ~~more~~facilities ~~expensive~~subjects ~~for~~ PVR to ~~obtain~~construction ~~new rights-of-way or to renew existing rights-of-way~~risks. ~~If the cost of obtaining new rights-of-way or renewing existing rights-of-way increases, then PVR’s cash flows could be reduced.~~

One of the ways PVR may grow its natural gas midstream business is ~~exposed~~through the construction of additions to existing gathering, compression and processing systems. The construction of a new gathering system or pipeline, the ~~credit~~expansion ~~risk~~of an existing pipeline through the addition of ~~its~~new ~~natural~~pipe ~~gas~~or ~~midstream~~compression ~~customers~~and the construction of new processing facilities involve numerous regulatory, environmental, political and ~~nonpayment~~legal uncertainties beyond PVR’s control and require the expenditure of significant amounts of capital. While global financial markets and economic conditions have been disrupted in the past, these conditions have improved more recently. Depending on the longevity and ultimate severity of this downturn, PVR’s ability to access new capital to fund new projects in a cost-effective manner may be significantly adversely impacted. If PVR does undertake these projects, they may not be completed on schedule, or ~~nonperformance~~at byall, or at the anticipated cost. Moreover, PVR’s ~~customers~~revenues ~~would~~may ~~reduce~~not ~~its~~increase ~~cash~~immediately ~~flows~~upon the expenditure of funds on a particular project. For example, the construction of gathering facilities requires the expenditure of significant amounts of capital, which may exceed PVR’s estimates. Generally, PVR may have only limited natural gas supplies committed to these facilities prior to their construction. Moreover, PVR may construct facilities to capture anticipated future growth in production in a region in which anticipated production growth does not materialize. As a result, there is the risk that new facilities may not be able to attract enough natural gas to achieve PVR’s expected investment return, which could have a material adverse effect on PVR’s business, results of operations or financial condition.

If PVR is ~~subject~~unable to ~~risk~~obtain new rights-of-way ~~loss resulting from nonpayment~~ or ~~nonperformance~~the bycost ~~its natural gas midstream customers. PVR depends on a limited number~~ of ~~customers~~renewing existing ~~for a significant portion~~ rights-of-way ~~its natural gas midstream revenues. In 2009~~increases, ~~21%,~~then ~~15% and 10% of~~ PVR’s ~~natural~~may ~~gas~~be ~~midstream~~unable ~~segment~~to ~~revenues~~fully ~~and~~execute ~~17%,~~its ~~11%~~growth ~~and~~strategy ~~8% of our total consolidated revenues resulted from three of PVR’s natural gas midstream customers, Conoco, Inc., Tenaska Marketing Ventures~~ and ~~ONEOK Energy Marketing. Any nonpayment or nonperformance by PVR’s natural gas midstream customers would reduce~~ its cash flows could be reduced.

36The construction of additions to PVR’s existing gathering assets may require PVR to obtain new rights-of-way before constructing new pipelines. PVR may be unable to obtain rights-of-way to connect new natural gas supplies to its existing gathering lines or capitalize on other attractive expansion opportunities. Additionally, it may become more expensive for PVR to obtain new rights-of-way or to renew existing rights-of-way. If the cost of obtaining new rights-of-way or renewing existing rights-of-way increases, then PVR’s cash flows could be reduced.

~~TABLE~~PVR OFis ~~CONTENTS~~exposed to the credit risk of its natural gas midstream customers, and nonpayment or nonperformance by PVR’s customers would reduce its cash flows.

~~Any~~PVR ~~reduction~~is insubject ~~the~~to ~~capacity~~risk of, loss resulting from nonpayment or ~~the~~nonperformance ~~allocations~~by ~~to,~~its ~~PVR~~natural ingas ~~interconnecting~~midstream ~~third-party~~customers. ~~pipelines~~PVR ~~could~~depends ~~cause~~on a ~~reduction~~limited number of ~~volumes~~customers ~~processed,~~for ~~which~~a ~~could~~significant ~~adversely~~portion ~~affect~~of ~~PVR’s~~its natural gas midstream revenues. ~~and~~In ~~cash~~2010, ~~flows.~~

~~PVR~~32 is dependent upon connections to third-party pipelines to receive and deliver residue gas and NGLs. Any reduction of capacities of these interconnecting pipelines due to testing, line repair, reduced operating pressures or other causes could result in reduced volumes gathered and processed in PVR’s natural gas midstream facilities. Similarly, if additional shippers begin transporting volumes of residue gas and NGLs on interconnecting pipelines, PVR’s allocations in these pipelines could be reduced. Any reduction in volumes gathered and processed in PVR’s facilities could adversely affect its revenues and cash flows.

NaturalTable gasof derivative transactions may limit PVR’s potential gains and involve other risks.Contents

~~In order to manage PVR’s exposure to price risks in the marketing of its natural gas and NGLs~~ 17%, ~~PVR periodically enters into condensate~~14%, ~~natural~~11% ~~gas~~ and ~~NGL~~10% ~~price hedging arrangements with respect to a portion~~ of ~~its expected production.~~ PVR’s ~~hedges~~natural ~~are~~gas ~~limited~~midstream insegment ~~duration,~~revenues ~~usually~~and ~~for periods of two years or less. However~~14%, ~~in connection with acquisitions~~11%, ~~sometimes~~9% ~~PVR’s~~and ~~hedges~~8% ~~are~~of ~~for~~our ~~longer~~total ~~periods.~~consolidated ~~These~~revenues ~~hedging~~resulted ~~transactions~~from ~~may~~four ~~limit~~of PVR’s ~~potential gains if~~ natural gas ormidstream customers ~~NGL~~Conoco ~~prices~~Phillips ~~were~~Company, toTenaska ~~rise~~Marketing ~~(or decline with respect to natural gas hedges entered into to lock the frac spread) over the price established by the hedging arrangements. Moreover~~Ventures, ~~PVR~~Targa ~~has~~Liquids ~~entered~~Marketing ~~into~~and ~~derivative~~Trade ~~transactions related to only a portion of its condensate, natural gas~~ and Williams NGL ~~volumes. As a result~~Marketing, ~~PVR will continue to have direct commodity price risk with respect to the unhedged portion of these volumes~~LLC. InAny ~~trying~~nonpayment toor ~~maintain~~nonperformance anby ~~appropriate balance,~~ PVR’s ~~may end up hedging too much or too little, depending upon how~~ natural gas ormidstream ~~NGL~~customers ~~prices~~would ~~fluctuate~~reduce inits ~~the~~cash ~~future~~flows.

InAny ~~addition~~reduction in the capacity of, ~~derivative~~or ~~transactions~~the ~~may~~allocations ~~expose~~to, PVR toin ~~the~~interconnecting ~~risk~~third-party ofpipelines ~~financial~~could ~~loss~~cause ina ~~certain~~reduction ~~circumstances~~of volumes processed, which ~~including~~could ~~instances~~adversely inaffect ~~which:~~PVR’s revenues and cash flows.

•PVR is dependent upon connections to third-party pipelines to receive and deliver residue gas and NGLs. Any reduction of capacities of these interconnecting pipelines due to testing, line repair, reduced operating pressures or other causes could result in reduced volumes gathered and processed in PVR’s ~~production~~natural isgas ~~less~~midstream ~~than~~facilities. ~~expected;~~Similarly, if additional shippers begin transporting volumes of residue gas and NGLs on interconnecting pipelines, PVR’s allocations in these pipelines could be reduced. Any reduction in volumes gathered and processed in PVR’s facilities could adversely affect its revenues and cash flows.

•Natural ~~there~~gas isderivative atransactions may ~~widening~~limit ~~of price basis differentials between delivery points for~~ PVR’s ~~production~~potential gains and ~~the~~involve ~~delivery~~other ~~point~~risks. ~~assumed in the hedge arrangement;~~

•In order to manage PVR’s exposure to price risks in the ~~counterparties~~marketing of its natural gas and NGLs, PVR periodically enters into condensate, natural gas and NGL price hedging arrangements with respect to a portion of its expected production. PVR’s ~~futures~~hedges ~~contracts~~are ~~fail~~limited in duration, usually for periods of two years or less. However, in connection with acquisitions, sometimes PVR’s hedges are for longer periods. These hedging transactions may limit PVR’s potential gains if NGL prices were to ~~perform~~rise ~~under~~(or prices decline with respect to natural gas hedges entered into to lock the ~~contracts;~~frac spread) over the price established by the hedging arrangements. Moreover, PVR has entered into derivative transactions related to only a portion of its condensate, natural gas and NGL volumes. As a result, PVR will continue to have direct commodity price risk with respect to the unhedged portion of these volumes. In trying to maintain an appropriate balance, PVR may end up hedging too much or too little, depending upon how natural gas or NGL prices fluctuate in the future.

•In ~~a sudden~~addition, ~~unexpected~~derivative ~~event~~transactions ~~materially~~may ~~impacts~~expose ~~natural~~PVR ~~gas~~to orthe ~~NGL~~risk ~~prices.~~of financial loss in certain circumstances, including instances in which:

In• ~~addition,~~PVR’s ~~derivative~~production ~~instruments involve basis risk. Basis risk in a derivative contract occurs when the index upon which the contract~~ is ~~based is more or~~ less ~~variable~~ than the index upon which the hedged asset is based, thereby making the hedge less effective. For example, a NYMEX index used for hedging certain volumes of production may have more or less variability than the regional price index used for the sale of that production. expected;

~~The~~• accounting standards regarding hedge accounting are complex, and even when PVR engages in hedging transactions that are effective economically, these transactions may not be considered effective for accounting purposes. Accordingly, our Consolidated Financial Statements may reflect volatility due to these derivatives, even when there is ~~no underlying economic impact at that point. In addition, it is not always possible for PVR to engage in~~ a ~~derivative~~widening ~~transaction~~of ~~that~~price ~~completely~~basis ~~mitigates~~differentials ~~its~~between ~~exposure~~delivery topoints ~~commodity prices. Our Consolidated Financial Statements may reflect a gain or loss arising from an exposure to commodity prices~~ for ~~which~~ PVR is’s ~~unable~~production toand ~~enter~~the ~~into~~delivery apoint ~~completely~~assumed ~~effective~~in the hedge ~~transaction.~~ arrangement;

~~PVR’s~~• ~~natural~~the ~~gas~~counterparties ~~midstream~~to ~~business~~PVR’s ~~involves~~futures ~~many~~contracts ~~hazards~~fail ~~and~~to ~~operational~~perform ~~risks,~~under ~~some~~the ofcontracts; ~~which may not be fully covered by insurance.~~or

~~PVR’s~~• ~~natural~~a ~~gas midstream operations are subject to the many hazards inherent in the gathering~~sudden, ~~compression,~~unexpected ~~treating,~~event ~~processing~~materially ~~and~~impacts ~~transportation of~~ natural gas ~~and~~or ~~NGLs,~~NGL ~~including:~~ prices.

•In ~~damage~~addition, toderivative ~~pipelines,~~instruments ~~related~~involve ~~equipment~~basis ~~and~~risk. ~~surrounding~~Basis ~~properties~~risk ~~caused~~in bya ~~hurricanes,~~derivative ~~tornadoes~~contract occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset is based, ~~floods~~thereby making the hedge less effective. For example, ~~fires~~a ~~and~~NYMEX ~~other~~index ~~natural~~used ~~disasters~~for ~~and~~hedging ~~acts~~certain volumes of ~~terrorism;~~production may have more or less variability than the regional price index used for the sale of that production.

•The ~~inadvertent~~accounting ~~damage~~standards ~~from~~regarding ~~construction~~hedge accounting are complex, and ~~farm~~even ~~equipment;~~when PVR engages in hedging transactions that are effective economically, these transactions may not be considered effective for accounting purposes. Accordingly, our Consolidated Financial Statements may reflect volatility due to these derivatives, even when there is no underlying economic impact at that point. In addition, it is not always possible for PVR to engage in a derivative transaction that completely mitigates its exposure to commodity prices. Our Consolidated Financial Statements may reflect a gain or loss arising from an exposure to commodity prices for which PVR is unable to enter into a completely effective hedge transaction.

•PVR’s ~~leaks of~~ natural gas, ~~NGLs~~midstream ~~and~~business ~~other~~involves ~~hydrocarbons;~~many hazards and operational risks, some of which may not be fully covered by insurance.

•PVR’s ~~fires~~natural gas midstream operations are subject to the many hazards inherent in the gathering, compression, treating, processing and ~~explosions.~~transportation of natural gas and NGLs, including:

37• damage to pipelines, related equipment and surrounding properties caused by hurricanes, tornadoes, floods, fires and other natural disasters and acts of terrorism;

~~TABLE~~• OFinadvertent ~~CONTENTS~~damage from construction and farm equipment;

~~These~~• ~~risks~~leaks ~~could result in substantial losses due to personal injury or loss~~ of ~~life, severe damage to and destruction of property and equipment and pollution or other environmental damage and may result in curtailment or suspension of PVR’s related operations. PVR’s~~ natural gas, ~~midstream~~NGLs ~~operations are concentrated in Texas~~ and ~~Oklahoma, and a natural disaster or~~ other ~~hazard~~hydrocarbons; affecting these areas could have a material adverse effect on its business, results of operations or financial condition. PVR is not fully insured against all risks incident to its natural gas midstream business. PVR does not have property insurance on all of its underground pipeline systems that would cover damage to the pipelines. PVR is not insured against all environmental accidents that might occur, other than those considered to be sudden and ~~accidental. If a significant accident or event occurs that is not fully insured, it could adversely affect PVR’s business, results of operations or financial condition.~~

~~Federal,~~• ~~state~~fires orand ~~local regulatory measures could adversely affect PVR’s natural gas midstream business~~explosions.

~~PVR~~These ~~owns~~risks ~~and~~could ~~operates~~result anin ~~11-mile~~substantial ~~interstate~~losses ~~natural~~due ~~gas~~to ~~pipeline~~personal ~~that,~~injury ~~pursuant~~or toloss ~~the~~of ~~NGA~~life, issevere ~~subject~~damage to ~~the~~and ~~jurisdiction~~destruction of ~~the~~property ~~FERC.~~and ~~The~~equipment ~~FERC~~and ~~has~~pollution ~~granted~~or ~~PVR~~other ~~waivers~~environmental ofdamage ~~various~~and ~~requirements~~may ~~otherwise~~result in ~~applicable~~curtailment toor ~~conventional~~suspension ~~FERC-jurisdictional pipelines, including the obligation to file a tariff governing rates, terms and conditions~~ of ~~open~~PVR’s ~~access~~related ~~transportation service~~operations. ~~The FERC has determined that~~ PVR’s ~~will~~natural ~~have~~gas tomidstream ~~comply~~operations ~~with~~are ~~the~~concentrated ~~filing~~in ~~requirements~~Texas ifand ~~the~~Oklahoma, ~~PVR~~and a natural ~~gas~~disaster ~~midstream~~or ~~segment~~other ~~ever~~hazard ~~desires~~affecting tothese ~~apply~~areas ~~for~~could ~~blanket~~have ~~transportation~~a ~~authority~~material toadverse ~~transport~~effect ~~third-party gas~~ on its ~~the~~business, ~~11-mile~~results ~~pipeline.~~of ~~The~~operations ~~FERC~~or ~~may revoke these waivers at any time.~~

~~PVR’s~~33 natural gas gathering facilities generally are exempt from the FERC’s jurisdiction under the NGA, but the FERC regulation nevertheless could change and significantly affect PVR’s gathering business and the market for its services. For a more detailed discussion of how regulatory measures affect PVR’s natural gas gathering business, see Item 1, “Business — Government Regulation and Environmental Matters — PVR Natural Gas Midstream Segment.”

FailureTable to comply with applicable federal and state laws and regulations can result in the imposition of administrative, civil and criminal remedies. Contents

financial condition. PVR’s is not fully insured against all risks incident to its natural gas midstream business. isPVR ~~subject~~does not have property insurance on all of its underground pipeline systems that would cover damage to ~~extensive~~the pipelines. PVR is not insured against all environmental ~~regulation~~accidents that might occur, other than those considered to be sudden and accidental. If a significant accident or event occurs that is not fully insured, it could adversely affect PVR’s business, results of operations or financial condition.

~~Many of the operations and activities of PVR’s gathering systems~~Federal, ~~plants and other facilities are subject to significant federal,~~ state ~~and~~or local ~~environmental~~regulatory ~~laws~~measures ~~and~~could adversely ~~regulations.~~affect ~~These include, for example, laws and regulations that impose obligations related to air emissions and discharge of wastes from~~ PVR’s ~~facilities and the cleanup of hazardous substances that may have been released at properties currently or previously owned or operated by PVR or the prior owners of its~~ natural gas midstream business ~~or locations to which it or they have sent wastes for disposal~~. These laws and regulations can restrict or impact PVR’s business activities in many ways, including restricting the manner in which it disposes of substances, requiring pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions, requiring remedial action to remove or mitigate contamination, and requiring capital expenditures to comply with control requirements. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where substances and wastes have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of substances or wastes into the environment.

~~There~~PVR isowns ~~inherent~~and ~~risk~~operates ofan ~~the~~11-mile ~~incurrence~~interstate ofnatural ~~environmental~~gas pipeline ~~costs~~that, ~~and~~pursuant ~~liabilities~~to inthe ~~PVR’s~~NGA, ~~natural~~is ~~gas~~subject ~~midstream business due~~ to ~~its~~the ~~handling~~jurisdiction of ~~natural~~the ~~gas~~FERC. ~~and~~The ~~other~~FERC ~~petroleum~~has ~~products,~~granted ~~air~~PVR ~~emissions~~waivers ~~related~~of tovarious ~~its~~requirements ~~natural~~otherwise ~~gas~~applicable ~~midstream~~to ~~operations,~~conventional ~~historical~~FERC-jurisdictional ~~industry operations~~pipelines, ~~waste~~including ~~disposal practices and~~ the ~~use~~obligation byto ~~the~~file ~~prior~~a ~~owners~~tariff governing ofrates, ~~its~~terms ~~natural~~and ~~gas~~conditions ~~midstream business~~ of ~~natural~~open ~~gas~~access ~~flow~~transportation ~~meters containing mercury~~service. ~~For~~The ~~example,~~FERC anhas ~~accidental~~determined ~~release~~that ~~from one of~~ PVR’s ~~pipelines~~will orhave ~~processing facilities could subject it~~ to ~~substantial~~comply ~~liabilities~~with ~~arising~~the ~~from~~filing ~~environmental~~requirements ~~cleanup,~~if ~~restoration~~the ~~costs~~PVR ~~and~~ natural ~~resource~~gas ~~damages,~~midstream ~~claims made~~segment byever ~~neighboring~~desires ~~landowners~~to ~~and~~apply ~~other~~for ~~third~~blanket ~~parties~~transportation authority ~~for~~to ~~personal~~transport ~~injury~~third-party ~~and~~gas ~~property~~on ~~damage,~~the ~~and~~11-mile ~~fines~~pipeline. orThe ~~penalties~~FERC ~~for~~may ~~related~~revoke ~~violations~~these ofwaivers ~~environmental~~at ~~laws~~any ~~or regulations~~time. ~~Moreover, the possibility exists~~

38PVR’s natural gas gathering facilities generally are exempt from the FERC’s jurisdiction under the NGA, but the FERC regulation nevertheless could change and significantly affect PVR’s gathering business and the market for its services. For a more detailed discussion of how regulatory measures affect PVR’s natural gas gathering business, see Item 1, “Business — Government Regulation and Environmental Matters — PVR Natural Gas Midstream Segment.”

~~TABLE~~Failure OFto ~~CONTENTS~~comply with applicable federal and state laws and regulations can result in the imposition of administrative, civil and criminal remedies.

~~that stricter laws, regulations or enforcement policies could significantly increase~~ PVR’s ~~compliance~~natural ~~costs~~gas ~~and~~midstream ~~the~~business ~~cost~~is ofsubject ~~any~~to ~~remediation~~extensive ~~that may become necessary. PVR may incur material~~ environmental ~~costs and liabilities~~ regulation. Insurance may not provide sufficient coverage in the event an environmental claim is made. See Item 1, “Business — Government Regulation and Environmental Matters — PVR Natural Gas Midstream Segment.”

~~The~~Many of the operations and activities of PVR’s gathering systems, plants and other facilities are subject to significant federal, state and local environmental laws and regulations. These include, for example, laws and regulations that impose obligations related to air emissions and discharge of wastes from PVR’s facilities and the cleanup of hazardous substances that may have been released at properties currently or previously owned or operated by PVR or the prior owners of its natural gas midstream ~~segment~~business ~~may~~or ~~record~~locations ~~impairment~~to ~~losses~~which onit ~~its~~or ~~long~~they have sent wastes for disposal. These laws and regulations can restrict or impact PVR’s business activities in many ways, including restricting the manner in which it disposes of substances, requiring pre-~~lived~~approval ~~assets~~for the construction or modification of certain projects or facilities expected to produce air emissions, requiring remedial action to remove or mitigate contamination, and requiring capital expenditures to comply with control requirements. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where substances and wastes have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of substances or wastes into the environment.

~~The~~There is inherent risk of the incurrence of environmental costs and liabilities in PVR’s natural gas midstream ~~segment~~business ~~has~~due ~~completed~~to aits ~~number~~handling of ~~acquisitions~~natural ingas ~~recent~~and ~~years~~other petroleum products, ~~including~~air ~~the~~emissions ~~North~~related ~~Texas~~to ~~System~~its ~~(Lone~~natural ~~Star~~gas ~~Gathering,~~midstream ~~L.P.~~operations, historical orindustry ~~Lone~~operations, ~~Star).~~waste ~~See~~disposal ~~Note~~practices 5and to the ~~Consolidated~~use ~~Financial~~by ~~Statements~~the ~~for~~prior aowners ~~description~~ of ~~the~~its ~~PVR~~ natural gas midstream ~~segment’s~~business ~~material~~of ~~acquisitions.~~natural Ingas ~~conjunction~~flow ~~with~~meters ~~our~~containing ~~accounting~~mercury. ~~for~~For ~~these acquisitions~~example, itan ~~was~~accidental ~~necessary~~release ~~for~~from usone toof ~~estimate~~PVR’s ~~the~~pipelines ~~values~~or processing offacilities ~~the~~could ~~assets~~subject ~~acquired~~it ~~and~~to substantial liabilities ~~assumed,~~arising ~~which~~from ~~involved~~environmental ~~the~~cleanup, ~~use~~restoration ofcosts ~~various~~and ~~assumptions.~~natural ~~The~~resource ~~most significant assumptions~~damages, ~~and~~claims ~~the~~made ~~ones~~by ~~requiring~~neighboring ~~the~~landowners ~~most~~and ~~judgment,~~other ~~involve~~third ~~the~~parties ~~estimated~~for ~~fair~~personal ~~values~~injury ofand property damage, ~~plant~~ and ~~equipment, and~~fines ~~the~~or ~~resulting~~penalties ~~amount~~for ofrelated ~~goodwill,~~violations ifof ~~any.~~environmental ~~Unforeseen~~laws ~~changes~~or inregulations. ~~operations~~Moreover, the ~~business~~possibility ~~environment~~exists that stricter laws, regulations or ~~market~~enforcement ~~conditions~~policies could ~~substantially~~significantly ~~alter~~increase ~~management~~PVR’s ~~assumptions~~compliance costs and ~~could~~the cost ~~result~~of inany ~~lower~~remediation ~~estimates~~that ofmay ~~values~~become ofnecessary. ~~acquired~~PVR ~~assets~~may orincur ofmaterial ~~future~~environmental ~~cash~~costs ~~flows~~and liabilities. ~~This~~Insurance ~~could~~may ~~result~~not provide sufficient coverage in ~~impairment~~the ~~charges~~event ~~being~~an ~~recorded~~environmental inclaim ~~our~~is ~~Consolidated~~made. ~~Statements~~See ofItem 1, “Business — Government ~~Income~~Regulation and Environmental Matters — PVR Natural Gas Midstream Segment.”

~~Tax~~The ~~Risks~~PVR tonatural ~~Our~~gas ~~Common~~midstream ~~Unitholders~~segment may record impairment losses on its long-lived assets.

~~Our~~The ~~tax~~PVR ~~treatment~~natural ~~depends~~gas onmidstream ~~our~~segment ~~status~~has ascompleted a ~~partnership~~number ~~for~~of ~~federal~~acquisitions ~~income~~in ~~tax~~recent ~~purposes~~years, asincluding ~~well~~the asNorth ~~our~~Texas ~~not~~System ~~being~~(Lone ~~subject~~Star Gathering, L.P., or Lone Star). See Note 5 to the Consolidated Financial Statements for a description of the PVR natural gas midstream segment’s material ~~amount~~acquisitions. In conjunction with our accounting for these acquisitions, it was necessary for us to estimate the values of ~~entity-level~~the ~~taxation~~assets byacquired ~~individual~~and ~~states.~~liabilities Ifassumed, which involved the ~~Internal~~use ~~Revenue~~of ~~Service~~various ~~were~~assumptions. toThe ~~treat~~most ussignificant orassumptions, ~~PVR~~and asthe aones ~~corporation~~requiring ~~for~~the ~~federal~~most ~~income~~judgment, ~~tax~~involve ~~purposes~~the orestimated wefair orvalues ~~PVR~~of ~~were~~property, plant toand ~~become~~equipment, ~~subject~~and tothe ~~additional~~resulting ~~amounts~~amount of ~~entity-level~~goodwill, ~~taxation~~if ~~for~~any. ~~state~~Unforeseen ~~tax~~changes ~~purposes~~in operations, ~~then~~the ~~our~~business environment or market conditions could substantially alter management’s assumptions and could result in lower estimates of values of acquired assets or of future cash ~~available~~flows. ~~for~~This ~~distribution~~could toresult ~~our~~in ~~unitholders~~impairment ~~would~~charges bebeing ~~substantially~~recorded ~~reduced~~in our Consolidated Statements of Income.

~~The~~34 value of our investment in PVR depends largely on PVR being treated as a partnership for federal income tax purposes, which requires that 90% or more of PVR’s gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Internal Revenue Code. PVR may not meet this requirement or current law may change so as to cause, in either event, PVR to be treated as a corporation for federal income tax purposes or otherwise subject to federal income tax. Moreover, the anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service, or IRS, on this or any other matter affecting us.

IfTable PVR were treated as a corporation for federal income tax purposes, it would pay federal income tax on its taxable income at the corporate tax rate, which is currently a maximum of 35%. Distributions to us would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to us. As a result, there would be a material reduction in our anticipated cash flow and distributions to unitholders, including us, likely causing a substantial reduction in the value of PVR units. Contents

IfTax weRisks ~~were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate. Distributions~~ to ~~our~~Our ~~unitholders~~Common ~~would~~Unitholders generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to our unitholders. As a result, there would be a material reduction in our anticipated cash flow and distributions to unitholders, likely causing a substantial reduction in the value of our common units.

~~The~~Our tax treatment ofdepends ~~publicly~~on ~~traded~~our ~~partnerships~~status oras ana ~~investment~~partnership infor ~~our~~federal ~~common~~income ~~units~~tax ~~could~~purposes beas well as our not being subject to ~~potential~~a ~~legislative~~material amount of entity-level taxation by individual states. If the Internal Revenue Service, ~~judicial~~IRS, were to treat us or ~~administrative~~PVR ~~changes~~as ~~and~~a ~~differing~~corporation ~~interpretations~~for federal income tax purposes or we or PVR were to become subject to additional amounts of entity-level taxation for state tax purposes, ~~possibly~~then onour acash ~~retroactive~~available ~~basis~~for distribution to our unitholders would be substantially reduced.

~~Current~~The ~~law~~value of ~~may~~our ~~change~~investment soin asPVR todepends ~~cause~~largely uson or PVR tobeing be treated as a ~~corporation~~partnership for federal income tax purposes, orwhich ~~otherwise~~requires ~~subjecting~~that us90% or more of PVR’s togross ~~entity-level~~income ~~taxation.~~for ~~Specifically,~~every ~~the~~taxable ~~present~~year ~~federal~~consist of qualifying income, ~~tax~~as ~~treatment~~defined in Section 7704 of ~~publicly~~the ~~traded~~Internal ~~partnerships,~~Revenue ~~including~~Code. ~~us,~~PVR may not meet this requirement or ancurrent ~~investment~~law may change so as to cause, in ~~our~~either ~~common~~event, ~~units~~PVR ~~may~~to be ~~modified~~treated byas ~~administrative,~~a ~~legislative~~corporation for federal income tax purposes or ~~judicial~~otherwise ~~interpretation~~subject atto ~~any~~federal ~~time~~income tax. ~~For example~~Moreover, at the ~~federal~~anticipated ~~level,~~after-tax ~~legislation~~economic ~~has~~benefit ~~been~~of ~~proposed~~an ~~that~~investment ~~would~~in ~~eliminate~~our ~~partnership~~common ~~tax~~units ~~treatment~~depends largely on our being treated as a partnership for ~~certain~~federal ~~publicly~~income ~~traded~~tax purposes.

39If PVR were treated as a corporation for federal income tax purposes, it would pay federal income tax on its taxable income at the corporate tax rate, which is currently a maximum of 35% Distributions to us would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to us. As a result, there would be a material reduction in our anticipated cash flow and distributions to unitholders, including us, likely causing a substantial reduction in the value of PVR units.

~~TABLE~~If OFwe ~~CONTENTS~~were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate. Distributions to our unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to our unitholders. As a result, there would be a material reduction in our anticipated cash flow and distributions to unitholders, likely causing a substantial reduction in the value of our common units.

~~partnerships~~The ~~and~~tax ~~recharacterize~~treatment ~~certain types~~ of ~~income~~publicly ~~received~~traded ~~from~~ partnerships. ~~Any~~or ~~modification~~an toinvestment ~~the~~in our ~~federal~~common ~~income~~units ~~tax~~could ~~laws and interpretations thereof may or may not~~ be ~~applied~~subject ~~retroactively. We are unable~~ to ~~predict~~potential ~~whether~~legislative, ~~any~~judicial ofor ~~these~~administrative changes, orand ~~other~~differing ~~proposals~~interpretations, ~~will~~possibly ~~ultimately~~on bea ~~enacted.~~retroactive ~~Any such changes could negatively impact the value of an investment in our common units~~basis.

AtCurrent ~~the~~law ~~state~~may ~~level,~~change ~~because~~so ofas ~~widespread~~to ~~state~~cause ~~budget~~us ~~deficits~~or ~~and~~PVR ~~other reasons, several states are evaluating ways~~ to ~~subject~~be ~~partnerships~~treated toas ~~entity-level~~a ~~taxation~~corporation ~~through~~for ~~the~~federal ~~imposition of state~~ income, ~~franchise~~tax purposes or ~~other~~otherwise ~~forms~~subjecting ofus ~~taxation.~~or ~~For example,~~ PVR ~~is subject~~ to an entity-level ~~tax on the portion of our income that is generated in Texas~~taxation. Specifically, the ~~Texas~~present ~~margin~~federal income tax istreatment ~~imposed at a maximum effective rate~~ of ~~0.7%~~publicly oftraded ~~PVR’s~~partnerships, ~~gross~~including ~~income~~us, ~~apportioned~~or toan ~~Texas~~investment in ~~the~~our ~~prior~~common ~~year.~~units ~~Imposition~~may ofbe ~~such~~modified aby ~~tax~~administrative, onlegislative us or ~~PVR~~judicial byinterpretation ~~Texas~~at ~~and~~any ~~other~~time. ~~states~~For ~~will~~example, ~~reduce~~at the ~~cash~~federal ~~available~~level, ~~for~~legislation ~~distribution~~has recently tobeen ~~our~~considered ~~unitholders.~~that ~~Our~~would ~~partnership agreement~~have ~~provides~~eliminated ~~that~~partnership iftax atreatment ~~law~~for iscertain ~~enacted~~publicly ortraded ~~existing~~partnerships ~~law~~and isrecharacterize ~~modified~~certain ortypes ~~interpreted~~of inincome areceived ~~manner~~from ~~that~~partnerships. ~~subjects~~Any usmodification to ~~taxation~~the asfederal aincome ~~corporation~~tax orlaws ~~otherwise~~and interpretations ~~subjects~~thereof usmay toor ~~entity-level~~may ~~taxation~~not ~~for~~be ~~federal,~~applied ~~state~~retroactively. orWe ~~local~~are ~~income~~unable ~~tax~~to ~~purposes,~~predict ~~then~~whether ~~the~~any ~~minimum~~similar ~~quarterly~~changes ~~distribution~~will ~~amount~~ultimately ~~and~~be ~~the~~enacted. ~~target~~Any ~~distribution~~such ~~amounts~~changes ~~will~~could benegatively ~~adjusted~~impact ~~to reflect~~ the ~~impact~~value of ~~that~~an ~~law~~investment onin usour common units.

At the state level, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise or other forms of taxation. For example, PVR is subject to an entity-level tax on the portion of our income that is generated in Texas. Specifically, the Texas margin tax is imposed at a maximum effective rate of 0.7% of PVR’s gross income apportioned to Texas in the prior year. Imposition of such a tax on us or PVR by Texas and other states will reduce the cash available for distribution to our unitholders. Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects ~~PVR~~us to taxation as a corporation or otherwise subjects ~~PVR~~us to entity-level taxation for federal, state or local income tax purposes, then the minimum quarterly distribution amount and the target distribution amounts will be adjusted to reflect the impact of that law on ~~PVR~~us. ~~Likewise, our cash distributions to our unitholders will be reduced if we or PVR is subjected to any form of such entity-level taxation.~~

IfPVR’s ~~the~~partnership ~~IRS~~agreement ~~contests~~provides ~~the~~that ~~federal~~if ~~income~~a ~~tax~~law ~~positions~~is ~~that~~enacted weor existing law is modified or ~~PVR~~interpreted ~~take,~~in ita ~~may~~manner ~~adversely~~that ~~affect~~subjects ~~the~~PVR ~~market~~to ~~for~~taxation ~~our~~as ~~common~~a ~~units~~corporation or otherwise subjects PVR’s ~~common~~to entity-level ~~units~~taxation for federal, state or local income tax purposes, then the minimum quarterly distribution amount and the ~~costs~~target distribution amounts will be adjusted to reflect the impact of ~~any~~that ~~contest~~law ~~will~~on ~~reduce~~PVR. ~~cash~~Likewise, ~~available~~our ~~for~~cash ~~distribution~~distributions to our unitholders will be reduced if we or PVR is subjected to any form of such entity-level taxation.

WeIf ~~have not requested a ruling from~~ the IRS ~~with~~contests ~~respect to our treatment as a partnership for federal income tax purposes or any other matter that affects us. Moreover, PVR has not requested any ruling from~~ the ~~IRS with respect to its treatment as a partnership for~~ federal income tax ~~purposes or any other matter that affects it. The IRS may adopt~~ positions that ~~differ from the positions~~ we or PVR take., Itit may beadversely ~~necessary~~affect ~~to resort to administrative or court proceedings to sustain some or all of~~ the ~~positions we or PVR take. A court may disagree with some or all of the positions we or PVR take. Any contest with the IRS may materially and adversely impact the~~ market for our common units or PVR’s common units ~~and the price at which they trade. In addition~~, ~~the cost of any contest between PVR~~ and the IRS will result in a reduction in cash available for distribution to PVR unitholders and thus will be borne indirectly by us, as a unitholder and as the owner of the general partner of PVR. Moreover, the costs of any contest ~~between us and the IRS~~ will ~~result~~reduce ~~in a reduction in~~ cash available for distribution to our unitholders ~~and thus will be borne indirectly by our unitholders~~.

~~Our~~We ~~unitholders~~have ~~may~~not berequested ~~required~~a toruling ~~pay~~from ~~taxes~~the onIRS ~~their~~with ~~share~~respect ofto our treatment as a partnership for federal income ~~even~~tax ifpurposes ~~they~~or doany other matter that affects us. Moreover, PVR has not ~~receive~~requested any ~~cash~~ruling ~~distributions~~from the IRS with respect to its treatment as a partnership for federal income tax purposes or any other matter that affects it. The IRS may adopt positions that differ from usthe positions we or PVR take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we or PVR take. A court may disagree with some or all of the positions we or PVR

~~Because~~35 our unitholders are treated as partners to whom we allocate taxable income which could be different in amount than the cash we distribute, our unitholders will be required to pay any federal income taxes and, in some cases, state and local income taxes on their share of our taxable income, whether or not they receive cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the tax liability that results from the taxation of their share of our taxable income.

TaxTable gain or loss on disposition of our common units could be more or less than expected.Contents

If take. aAny ~~unitholder~~contest ~~sells~~with ~~his~~the orIRS ~~her~~may ~~common~~materially ~~units,~~and headversely orimpact ~~she~~the ~~will~~market ~~recognize~~for aour ~~gain~~common units or ~~loss~~PVR’s ~~equal~~common tounits and the ~~difference~~price ~~between~~at ~~the~~which ~~amount~~they ~~realized~~trade. ~~and~~In addition, the ~~adjusted~~cost ~~tax~~of ~~basis~~any contest inbetween ~~those~~PVR ~~common~~and ~~units.~~the ~~Prior~~IRS ~~distributions~~will toresult ~~such~~in ~~unitholder~~a reduction in ~~excess~~cash ofavailable ~~the~~for ~~total~~distribution ~~net~~to ~~taxable~~PVR ~~income~~unitholders ~~allocated~~and tothus ~~him~~will orbe ~~her,~~borne ~~which~~indirectly ~~decreased~~by ~~his~~us, oras ~~her~~a ~~tax~~unitholder ~~basis~~and inas ~~his~~the orowner ~~her~~of ~~common~~the ~~units,~~general ~~will,~~partner inof ~~effect~~PVR. Moreover, ~~become~~the ~~taxable~~costs ~~income~~of toany contest ~~such~~between ~~unitholder~~us ifand the ~~common~~IRS ~~units~~will ~~are~~result ~~sold~~in at a ~~price~~reduction ~~greater~~in ~~than~~cash ~~such~~available ~~unitholder’s~~for ~~tax~~distribution ~~basis~~to inour ~~those~~unitholders ~~common~~and ~~units,~~thus ~~even~~will ifbe ~~the~~borne ~~price~~indirectly heby orour unitholders.

40Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.

~~TABLE~~Because OFour ~~CONTENTS~~unitholders are treated as partners to whom we allocate taxable income which could be different in amount than the cash we distribute, our unitholders will be required to pay any federal income taxes and, in some cases, state and local income taxes on their share of our taxable income, whether or not they receive cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the tax liability that results from the taxation of their share of our taxable income.

~~she~~Tax ~~receives~~gain isor ~~less~~loss ~~than~~on ~~that~~disposition ~~unitholder’s original cost. A substantial portion~~ of ~~the~~our ~~amount~~common ~~realized,~~units ~~whether~~could ~~or not representing gain, may~~ be ~~taxed~~more ~~as ordinary income to the unitholder due to recapture items, including depreciation recapture. In addition, if a unitholder sells his~~ or ~~her~~less ~~common~~than units, he or she may incur a tax liability in excess of the amount of cash such unitholder received from the sale because the amount realized from the sale includes a unitholder’s share of our nonrecourse liabilitiesexpected.

~~Tax-exempt~~If ~~entities~~a unitholder sells his or her common units, he or she will recognize a gain or loss equal to the difference between the amount realized and ~~non-U~~the adjusted tax basis in those common units.S. ~~persons~~Prior distributions ~~face~~to ~~unique~~such unitholder in excess of the total net taxable income allocated to him or her, which decreased his or her tax ~~issues~~basis ~~from~~in ~~owning~~his or her common units, will, in effect, become taxable income to such unitholder if the common units are sold at a price greater than such unitholder’s tax basis in those common units, even if the price he or she receives is less than that unitholder’s original cost. A substantial portion of the amount realized, whether or not representing gain, may ~~result~~be intaxed ~~adverse~~as ~~tax~~ordinary ~~consequences~~income to ~~them~~the unitholder due to recapture items, including depreciation recapture. In addition, if a unitholder sells his or her common units, he or she may incur a tax liability in excess of the amount of cash such unitholder received from the sale because the amount realized from the sale includes a unitholder’s share of our nonrecourse liabilities.

~~Investment in common units by tax~~Tax-exempt entities, ~~including employee benefit plans~~ and ~~individual retirement accounts (known as IRAs), and~~ non-U.S. persons ~~raises~~face ~~issues~~ unique totax ~~them.~~issues ~~For example, virtually all of our income allocated to organizations exempt~~ from ~~federal~~owning ~~income~~common ~~tax,~~units ~~including~~that ~~IRAs~~may ~~and~~result ~~other~~in ~~retirement~~adverse plans, will be unrelated business taxable income and will be taxable to such a unitholder. Distributions to non-U.S. persons will be reduced by withholding taxes imposed at the highest effective applicable tax ~~rate,~~consequences ~~and non-U.S. persons will be required~~ to ~~file U~~them.~~S. federal income tax returns and pay tax on their share of our taxable~~ ~~income. Tax-exempt entities and non-U.S. persons should consult their tax advisor before investing in our common units.~~

WeInvestment ~~treat~~in ~~each~~common ~~purchaser~~units by tax-exempt entities, including employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of our ~~common~~income ~~units~~allocated asto ~~having~~organizations ~~the~~exempt ~~same~~from federal income tax, ~~benefits~~including ~~without~~IRAs ~~regard~~and other retirement plans, will be unrelated business taxable income and will be taxable to ~~the~~such ~~common~~a ~~units~~unitholder. ~~purchased~~Distributions to non-U.S. ~~The~~persons ~~IRS~~will ~~may~~be ~~challenge~~reduced ~~this~~by ~~treatment~~withholding taxes imposed at the highest effective applicable tax rate, ~~which~~and ~~could~~non-U.S. ~~adversely~~persons ~~affect~~will ~~the~~be ~~value~~required to file U.S. federal income tax returns and pay tax on their share of our taxable income. Tax-exempt entities and non-U.S. persons should consult their tax advisor before investing in our common units.

~~Due~~We totreat aeach ~~number~~purchaser of ~~factors, including~~ our ~~inability to match transferors and transferees of~~ common units, weas ~~adopt~~having ~~depreciation~~the ~~and~~same ~~amortization~~tax ~~positions~~benefits ~~that~~without ~~may~~regard ~~not~~to ~~conform~~the ~~with~~common ~~all~~units ~~aspects of existing Treasury Regulations~~purchased. AThe ~~successful~~ IRS may challenge tothis ~~those~~treatment, ~~positions~~which could adversely affect the amount of tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain from a unitholder’s sale of common units and could have a negative impact on the value of our common units ~~or result in audits of and adjustments to our unitholders’ tax returns~~.

WeTo ~~prorate~~maintain ~~our~~the ~~items~~uniformity of ~~income,~~the ~~gain~~economic and tax characteristics of our common units, ~~loss~~we have adopted depreciation and ~~deduction~~amortization ~~between~~positions ~~transferors~~that ~~and~~may ~~transferees~~not conform with all aspects of ~~our~~existing ~~common~~Treasury ~~units~~Regulations. ~~each~~A ~~month~~successful ~~based~~IRS ~~upon~~challenge to those positions could adversely affect the ~~ownership~~amount of ~~our~~tax ~~common~~benefits ~~units~~available onto ~~the~~our ~~first~~unitholders. ~~day~~It also ofcould ~~each~~affect ~~month,~~the ~~instead~~timing of onthese ~~the~~tax ~~basis~~benefits ofor the ~~date~~amount aof ~~particular~~gain ~~common~~from ~~unit~~a isunitholder’s ~~transferred.~~sale ~~The~~of ~~IRS~~common ~~may~~units ~~challenge~~and ~~this~~could ~~treatment,~~have ~~which~~a ~~could~~negative ~~change~~impact on the ~~allocation~~value of ~~items~~our ofcommon ~~income,~~units ~~gain,~~or ~~loss~~result in audits of and ~~deduction~~adjustments ~~among~~to our unitholders’ tax returns.

We prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. The ~~use~~IRS ~~of this proration method~~ may ~~not be permitted under existing Treasury Regulations, and if the IRS were to~~ challenge this ~~method~~treatment, wewhich ~~may~~could ~~be required to~~ change the allocation of items of income, gain, loss and deduction among our unitholders. Recently, however, the Department of the Treasury and the IRS issued proposed Treasury Regulations that provide a safe harbor pursuant to which a publicly traded partnership may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders. Although existing publicly traded partnerships are entitled to rely on these proposed Treasury Regulations, they are not binding on the IRS and are subject to change until final Treasury Regulations are issued.

AWe ~~unitholder~~prorate ~~whose~~our ~~common~~items ~~units~~of ~~are~~income, ~~loaned~~gain, toloss aand ~~“short~~deduction between ~~seller”~~transferors toand ~~cover~~transferees aof ~~short~~our ~~sale~~common units each month based upon the ownership of our common units ~~may~~on bethe ~~considered~~first asday ~~having~~of ~~disposed~~each month, instead of ~~those~~on the basis of the date a particular common ~~units~~unit is transferred. IfThe souse of this proration method may not be permitted under existing Treasury Regulations, ~~such~~and ~~unitholder~~if ~~would~~the noIRS ~~longer~~were to challenge this method, we may be ~~treated~~required ~~for~~to ~~tax~~change ~~purposes~~the asallocation of items of income, gain, loss and deduction among our unitholders. Recently, the U.S. Treasury Department issued proposed Treasury Regulations that provide a ~~partner~~safe ~~with~~harbor ~~respect~~pursuant to ~~those~~which ~~common~~a ~~units~~publicly ~~during~~traded partnership may use a similar monthly simplifying convention to allocate tax items. Nonetheless, the ~~period~~proposed regulations do not specifically authorize the use of the ~~loan~~protection ~~and~~method ~~may~~we ~~recognize~~have ~~gain~~adopted. If the IRS were to challenge our proration method or ~~loss~~new ~~from~~Treasury Regulations were issued, we may be required to change the ~~disposition~~allocation of items of income, gain, loss and deduction among our unitholders.

~~Because~~36 a unitholder whose common units are loaned to a “short seller” to cover a short sale of units may be considered as having disposed of the loaned common units, such unitholder may no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those common

41Table of Contents

~~TABLE~~A OFunitholder ~~CONTENTS~~whose common units are loaned to a “short seller” to cover a short sale of common units may be considered as having disposed of those common units. If so, such unitholder would no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.

Because a unitholder whose common units are loaned to a “short seller” to cover a short sale of units may be considered as having disposed of the loaned common units, such unitholder may no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller should modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units.

PVR has adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between us and the public unitholders of PVR. The IRS may challenge this treatment, which could adversely affect the value of our common units.

When we or PVR issue additional units or engage in certain other transactions, PVR determines the fair market value of its assets and allocates any unrealized gain or loss attributable to such assets to the capital accounts of PVR’s unitholders and us. Although PVR may from time to time consult with professional appraisers regarding valuation matters, including the valuation of its assets, PVR makes many of the fair market value estimates of its assets itself using a methodology based on the market value of its common units as a means to measure the fair market value of its assets. PVR’s methodology may be viewed as understating the value of PVR’s assets. In that case, there may be a shift of income, gain, loss and deduction between certain PVR unitholders and us, which may be unfavorable to such PVR unitholders. Moreover, under our valuation methods, subsequent purchasers of our common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to PVR’s intangible assets and a lesser portion allocated to PVR’s tangible assets. The IRS may challenge PVR’s valuation methods, or our or PVR’s allocation of the Section 743(b) adjustment attributable to PVR’s tangible and intangible assets, and allocations of income, gain, loss and deduction between us and certain of PVR’s unitholders.

A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.

The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the technical termination of our partnership for federal income tax purposes.

We will be considered to have technically terminated for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. A sale or exchange would occur, for example, if we sold our business or merged with another company, or if any of our unitholders, ~~including Penn Virginia or any of its affiliates,~~ sold or transferred their partner interests in us. While we would continue our existence as a Delaware limited partnership, our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns (and our unitholders could receive two Schedules K-1) for one fiscal year and could result in a deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the year of termination. A technical termination would not effect our classification as a partnership for federal income tax purposes, but instead, we would be treated as a new partnership for tax purposes. If treated as a new partnership, we must make new tax elections and could be subject to penalties if we are unable to determine that a technical termination occurred. The IRS has recently announced a relief procedure whereby if a publicly traded partnership that has technically terminated requests publicly traded partnership technical termination relief and the IRS grants such relief, among other things, the partnership will only have to provide one Schedule K-1 to unitholders for the year notwithstanding two partnership tax years.

Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to holders of common units in PVR.

Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to holders of common units in PVR. Other holders of common units in PVR will receive remedial allocations of deductions from PVR. Remedial allocations of deductions to us will be very limited. In addition, our ownership of PVR IDRs will cause more taxable income to be allocated to us from PVR than will be allocated to holders who hold only common units in PVR. If PVR is ~~successful in increasing its distributions over time, our income allocations from our PVR IDRs will increase, and, therefore, our ratio of taxable~~

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TABLETable OFof CONTENTSContents

successful in increasing its distributions over time, our income allocations from our PVR IDRs will increase, and, therefore, our ratio of taxable income to cash distributions will increase. Because our ratio of taxable income to cash distributions will be greater than the ratio applicable to holders of common units in PVR, our unitholder’s allocable taxable income will be significantly greater than that of a holder of common units in PVR who receives cash distributions from PVR equal to the cash distributions such unitholder receives from us.

Our unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of investing in our common units.

In addition to federal income taxes, our unitholders will likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we or PVR conduct business or own property now or in the future, even if those unitholders do not reside in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. It is the responsibility of our unitholders to file all U.S. federal, state and local tax returns that may be required of each of them.

~~Item~~Risks 1BRelated ~~Unresolved~~to ~~Staff~~the ~~Comments~~Potential Merger

WeThe ~~have~~market ~~received~~value noof ~~written~~the ~~SEC~~stated ~~staff~~consideration ~~comments~~to ~~regarding~~ our ~~periodic~~unitholders orwill ~~current~~be ~~reports~~determined ~~under~~by the ~~Exchange~~price ~~Act~~of ~~which~~PVR’s ~~were~~common ~~issued~~units, ~~180~~the value ~~days~~of orwhich ~~more~~will ~~preceding~~decrease if the ~~end~~market value of PVR’s common units decreases, and our ~~2009~~unitholders ~~fiscal~~cannot ~~year~~be sure of the market value of PVR common units that ~~remain~~will ~~unresolved~~be issued.

43Pursuant to the Merger Agreement, our unitholders will receive approximately 38.3 million PVR common units as a result of the Merger. The aggregate market value of PVR’s common units that our unitholders will receive in the Merger will fluctuate with any changes in the trading price of PVR’s common units. This means there is no “price protection” mechanism contained in the Merger Agreement that would adjust the number of PVR common units that our unitholders will receive based on any decreases in the trading price of PVR common units. If PVR’s common unit price decreases, the market value of the stated consideration received by our unitholders will also decrease. Consider the following example:

~~TABLE~~Example: OFPursuant ~~CONTENTS~~to the Merger Agreement, our unitholders will receive 0.98 PVR common units for each PVG common unit, subject to receipt of cash in lieu of any fractional PVR common units. Based on the closing sales price of PVR common units on September 20, 2010 of $24.98 per unit, the market value of all PVR common units to be received by our unitholders would be approximately $956.6 million. If the trading price for PVR common units decreased 10% from $24.98 to $22.48 per unit, then the market value of all PVR common units to be received by our unitholders would be approximately $860.9 million. Accordingly, there is a risk that the premium that existed on September 20, 2010, the last trading day before the public announcement of the Merger, will not be realized by our unitholders at the time the Merger is completed. PVR common unit price changes may result from a variety of factors, including general market and economic conditions, changes in its business, operations and prospects, and regulatory considerations. Many of these factors are beyond the PVR’s control.

~~Item~~The 2right ~~Properties~~of our unitholders to distributions will be changed following the Merger.

~~Title~~Under PVR’s existing partnership agreement, we are entitled to ~~Properties~~receive ~~Owned~~approximately or2.0% ~~Controlled~~of all distributions made by PVR and increasing percentages, up to a maximum of 48%, of the amount of incremental cash distributed by PVR in respect of the PVR common units as certain target distribution levels are reached in excess of $0.275 per PVR common unit in any quarter. After the Merger, the former unitholders of PVG common units as a group will be entitled to receive approximately 54% of all distributions made by PVR. As a result of this change, the distributions received by the former unitholders of PVG could be significantly different. If distributions from PVR were to increase significantly, the distributions to the former PVG unitholders could be significantly less than they would be if the current structure was not changed.

~~The~~While ~~following~~the ~~map~~Merger ~~shows~~Agreement ~~the~~is ~~general~~in ~~locations~~effect, ofour ~~PVR’s~~opportunities ~~coal~~to ~~reserves~~enter ~~and~~into ~~related~~different ~~infrastructure~~business ~~investments~~combination ~~and~~transactions ~~PVR’s~~with ~~natural~~other ~~gas~~parties ~~gathering~~on more favorable terms may be limited, and ~~processing~~we ~~systems~~may asbe oflimited ~~December~~in ~~31,~~our ~~2009:~~ability to pursue other attractive business opportunities.

~~PVR~~While ~~believes~~the ~~that~~Merger itAgreement ~~has~~is ~~satisfactory~~in ~~title~~effect, we are prohibited from knowingly initiating, soliciting or encouraging the submission of any acquisition proposal or from participating in any discussions or negotiations regarding any acquisition proposal, subject to ~~all~~certain exceptions. As a result of ~~its~~these ~~properties~~provisions ~~and~~in the ~~associated~~Merger ~~coal~~Agreement, ~~reserves~~our inopportunities ~~accordance~~to enter into more favorable transactions may be limited. Likewise, if we were to sell directly to a third party, we might have received more value with ~~standards~~respect ~~generally~~to ~~accepted~~the general partner interest in us and the ~~coal~~incentive ~~and~~distribution ~~natural~~rights ~~resource~~in ~~management~~PVR ~~and~~based ~~natural~~on ~~gas~~the ~~midstream~~value ~~industries~~of PVR’s business at such time.

~~Facilities~~38

PVRTable currentlyof leases its office space in Radnor, Pennsylvania, Dallas and Houston, Texas as well as Kingsport, Tennessee. PVR owns the field office in Charleston, West Virginia. PVR believes that its properties are adequate for its current needs. Contents

~~Coal~~Moreover, ~~Reserves~~the ~~and~~Merger ~~Production~~Agreement provides for the payment of up to $18.0 million in termination fees under specified circumstances, which may discourage other parties from proposing alternative transactions that could be more favorable to our unitholders.

AsWe ofhave ~~December~~also ~~31,~~agreed ~~2009,~~to ~~PVR~~refrain ~~owned~~from ortaking ~~controlled~~certain ~~approximately~~actions ~~829~~with ~~million~~respect ~~tons~~to ofour ~~proven~~businesses and ~~probable~~financial ~~coal~~affairs ~~reserves~~pending ~~located~~the onconsummation ~~approximately~~of ~~497,000~~the ~~acres~~Merger ~~(including~~or ~~fee~~termination ~~and~~of ~~leased~~the ~~acreage)~~Merger Agreement. These restrictions could be in ~~Illinois,~~effect ~~Kentucky,~~for ~~New~~an ~~Mexico,~~extended ~~Virginia~~period ~~and~~of ~~West~~time ~~Virginia~~if the consummation of the Merger is delayed. ~~PVR’s~~These ~~coal~~limitations ~~reserves~~do ~~are~~not preclude us from conducting our business in ~~various~~the ~~surface~~ordinary ~~and~~or ~~underground~~usual ~~mine~~course ~~seams~~or ~~located~~from onacquiring assets or businesses so long as such activity does not have a “material adverse effect” as such term is defined in the ~~following~~Merger ~~properties:~~Agreement or materially affect our ability to complete the transactions contemplated by the Merger Agreement.

•In ~~Central~~addition ~~Appalachia~~to ~~Basin:~~the ~~properties~~economic ~~located~~costs inassociated ~~eastern~~with ~~Kentucky~~pursuing the Merger, ~~southwestern~~the ~~Virginia~~management of our general partner will continue to devote substantial time and ~~southern~~other ~~West~~human ~~Virginia;~~resources to the proposed Merger which could limit our ability to pursue other attractive business opportunities, including potential joint ventures, stand-alone projects and other transactions. If we are unable to pursue such other attractive business opportunities, then our growth prospects and the long-term strategic position of our businesses following the Merger could be adversely affected

•Failure ~~Northern~~to ~~Appalachia~~complete ~~Basin:~~the ~~properties~~Merger ~~located~~or delays in ~~northern~~completing ~~West~~the ~~Virginia;~~Merger could negatively impact our common unit price.

•If ~~Illinois~~the ~~Basin:~~Merger ~~properties~~is ~~located~~not incompleted ~~southern~~for ~~Illinois~~any ~~and~~reason, ~~western~~we ~~Kentucky;~~may ~~and~~be subject to a number of material risks, including the following:

• ~~San~~the ~~Juan~~price ~~Basin:~~of ~~properties~~our ~~located~~common inunits may decline to the ~~four~~extent ~~corners~~that ~~area~~the current market price of ~~New~~these ~~Mexico.~~securities reflects a market assumption that the Merger will be completed; and

~~Coal~~• ~~reserves~~some ~~are~~costs ~~coal~~relating ~~tons~~to ~~that can be economically extracted or produced at~~ the ~~time of determination considering legal~~Merger, ~~economic~~such ~~and~~as ~~technical~~certain ~~limitations.~~investment ~~All~~banking offees ~~the~~and ~~estimates~~legal ~~of PVR’s coal reserves are classified as proven~~ and ~~probable~~accounting ~~reserves.~~fees, ~~Proven~~must ~~and~~be ~~probable~~paid ~~coal~~even ~~reserves~~if ~~are~~the ~~defined~~Merger asis ~~follows:~~not completed.

~~Proven~~The ~~Coal~~costs ~~Reserves. Proven~~of ~~coal~~the ~~reserves~~Merger ~~are~~could ~~reserves~~adversely ~~for~~affect ~~which:~~PVR’s ~~(i)~~operations ~~quantity~~and iscash ~~computed~~flows ~~from~~available ~~dimensions~~for distribution ~~revealed~~to inits ~~outcrops,~~unitholders. ~~trenches, workings or drill holes; (ii) grade and/or quality are computed from~~

44We and PVR estimate the total costs of the Merger to be approximately $10.5 million, primarily consisting of investment banking, legal counsel, and accounting fees, and financial printing and other related costs. These costs could adversely affect PVR’s operations and cash flows available for distributions to PVR’s unitholders. The foregoing estimate is preliminary and is subject to change.

~~TABLE~~If OFthe ~~CONTENTS~~Merger Agreement were terminated, we may be obligated to pay PVR for costs incurred related to the Merger. These costs could require us to seek loans or use our available cash that would have otherwise been available for distributions.

~~the~~Upon ~~results~~termination of ~~detailed sampling; and (iii)~~ the ~~sites~~Merger ~~for inspection~~Agreement, ~~sampling~~ and ~~measurement~~depending ~~are~~upon ~~spaced so closely, and~~ the ~~geologic~~circumstances ~~character~~leading isto sothat ~~well defined~~termination, ~~that~~we ~~the~~could ~~size,~~be ~~shape,~~responsible ~~depth~~for reimbursing ~~and~~PVR ~~mineral~~for ~~content~~Merger ofrelated ~~reserves~~expenses ~~are~~that ~~well-established~~PVR has paid.

~~Probable~~If ~~Coal~~the ~~Reserves. Probable~~Merger ~~coal~~Agreement ~~reserves~~is ~~are~~terminated, ~~reserves~~the ~~for~~expense reimbursements ~~which~~required ~~quantity~~by ~~and~~us ~~grade~~under ~~and/or~~the ~~quality~~Merger ~~are~~Agreement ~~computed~~may ~~from~~require ~~information~~us ~~similar~~ to ~~that~~seek ~~used~~loans ~~for~~or ~~proven~~use ~~reserves,~~cash ~~but~~received ~~the~~from ~~sites~~our ~~for~~distributions ~~inspection,~~from ~~sampling~~PVR ~~and~~to ~~measurement~~reimburse ~~are~~these ~~more widely spaced or are otherwise less adequately spaced~~expenses. ~~The~~In ~~degree~~either ~~of assurance~~case, ~~although~~reimbursement ~~lower~~of ~~than~~these ~~that~~costs ~~for~~could ~~proven~~reduce ~~coal~~the ~~reserves,~~cash iswe ~~high~~have available ~~enough~~ to ~~assume~~make ~~continuity~~quarterly ~~between points of observation~~distributions.

InTax ~~areas~~Risks ~~where~~Related ~~geologic conditions indicate potential inconsistencies related~~ to ~~coal reserves, PVR performs additional exploration to ensure~~ the ~~continuity~~Potential ~~and~~Merger ~~mineability of the coal reserves. Consequently, sampling in those areas involves drill holes or channel samples that are spaced closer together than those distances cited above.~~

~~Coal~~No ~~reserve~~ruling ~~estimates~~has ~~are~~been ~~adjusted~~obtained ~~annually~~with ~~for~~respect ~~production,~~to ~~unmineable~~the ~~areas,~~U.S. ~~acquisitions~~federal ~~and~~income ~~sales~~tax ofconsequences ~~coal in place. The majority~~ of ~~PVR’s coal reserves are high in energy content, low in sulfur and suitable for either~~ the ~~steam or to a lesser extent metallurgical market~~Merger.

~~The~~No ~~amount~~ruling has been or will be requested from the IRS with respect to the U.S. federal income tax consequences of ~~coal~~the ~~that~~Merger. aInstead, ~~lessee~~we are ~~can~~relying ~~profitably~~on ~~mine~~the atopinion ~~any~~of ~~given~~counsel ~~time~~to our Conflicts Committee, and PVR is ~~subject~~relying on the opinion of its counsel, as to ~~several~~the ~~factors~~U.S. ~~and~~federal ~~may~~income betax ~~substantially~~consequences ~~different~~of ~~from~~the ~~“proven~~Merger to our unitholders and ~~probable~~PVR’s ~~coal~~unitholders, ~~reserves~~respectively.” ~~Included~~These opinions ~~among~~and ~~the~~positions ~~factors~~may ~~that~~not ~~influence~~be ~~profitability~~sustained ~~are~~if ~~the~~challenged ~~existing~~by ~~market~~the ~~price~~IRS, ~~coal~~which ~~quality~~could ~~and~~result ~~operating~~in ~~costs~~a material change to the expected tax consequences of the Merger.

~~PVR’s~~The ~~lessees~~intended ~~mine coal using both underground and surface methods~~U. ~~As of December 31, 2009, PVR’s lessees operated 34 surface mines and 41 underground mines~~S. ~~Approximately~~federal ~~52%~~income oftax ~~the~~consequences ~~coal produced from PVR’s properties in 2009 came from underground mines and 48% came from surface mines. Most~~ of ~~PVR’s lessees use~~ the ~~continuous~~Merger ~~mining~~are ~~method~~dependent inupon ~~all~~each of ~~their~~us ~~underground~~and ~~mines located on~~ PVR’s ~~properties.~~being Intreated ~~continuous~~as mining, main airways and transportation entries are developed and remote-controlled continuous miners extract coal from “rooms,” leaving “pillars” to support the roof. Shuttle cars transport coal to a ~~conveyor~~partnership ~~belt~~ for ~~transportation to the surface~~U.S. Infederal ~~several~~income ~~underground~~tax ~~mines, PVR’s lessees use two continuous miners running at the same time, also known as a supersection, to improve productivity and reduce unit costs~~purposes.

~~One~~The treatment of ~~PVR’s lessees uses~~ the ~~longwall~~Merger ~~mining~~as ~~method~~nontaxable ~~at two different mines~~ to ~~mine~~our ~~underground~~unitholders ~~reserves.~~and ~~Longwall mining uses hydraulic jacks or shields, varying from four feet~~ to ~~twelve~~PVR ~~feet~~unitholders inis ~~height,~~dependent toupon ~~support~~each ~~the~~of ~~roof~~us ofand ~~the~~PVR ~~mine~~being ~~while~~treated as a ~~mobile~~partnership ~~cutting~~for ~~shearer~~U.S. ~~advances~~federal ~~through~~income ~~the~~tax ~~coal~~purposes. ~~Chain~~If ~~conveyors~~either ~~then~~we ~~move~~or ~~the~~PVR ~~coal~~were totreated as a ~~standard~~corporation ~~deep mine conveyor belt system~~ for ~~delivery to the surface~~U.S. ~~Continuous~~federal ~~mining~~income istax ~~used~~purposes, tothe ~~develop~~consequences ~~access to long rectangular panels~~ of ~~coal~~the ~~that~~Merger ~~are~~would ~~mined~~be ~~with~~materially ~~longwall~~different ~~equipment,~~and ~~allowing controlled caving behind~~ the ~~advancing~~Merger ~~machinery.~~would ~~Longwall~~be ~~mining~~treated isas ~~typically~~a ~~highly~~taxable exchange ~~productive~~in ~~when~~which ~~used~~gain ~~for~~or ~~large blocks~~loss ofwould ~~medium~~be torecognized ~~thick~~by ~~coal~~our ~~seams~~unitholders.

~~Surface~~The ~~mining methods used by PVR’s lessees include auger and highwall mining to enhance production, improve reserve recovery and reduce unit costs~~U.S. Onfederal ~~PVR’s~~income ~~San~~tax ~~Juan~~treatment ~~Basin property, a combination~~ of the ~~dragline~~Merger ~~and truck-and-shovel surface mining methods~~ is ~~used~~ subject to ~~mine~~potential ~~the~~legislative ~~coal.~~changes ~~Dragline~~ and ~~truck-and-shovel~~differing ~~mining~~judicial ~~uses~~or ~~large~~administrative ~~capacity machines to remove overburden to expose the coal seams~~interpretations. ~~Wheel loaders then load the coal in haul trucks for transportation to a loading facility.~~

~~PVR’s~~39 lessees’ customers are primarily electric utilities, also referred to as “steam” markets. Coal produced from PVR’s properties is transported by rail, barge and truck, or a combination of these means of transportation. Coal from the Virginia portion of the Wise property and the Buchanan property is primarily shipped to electric utilities in the Southeast by the Norfolk Southern railroad. Coal from the Kentucky portion of the Wise property is primarily shipped to electric utilities in the Southeast by the CSX railroad. Coal from the Coal River and Spruce Laurel properties in West Virginia is shipped to steam and metallurgical customers by the CSX railroad, by barge along the Kanawha River and by truck or by a combination thereof. Coal from the Northern Appalachia properties is shipped by barge on the Monongahela River, by truck and by the CSX and Norfolk Southern railroads. Coal from the Illinois Basin properties is shipped by barge on the Green River and by truck. Coal from the San Juan Basin property is shipped to steam markets in New Mexico and

45Table of Contents

~~TABLE~~The OFU.S. ~~CONTENTS~~federal income tax consequences of the Merger depend on determinations of fact and interpretations of complex provisions of U.S. federal income tax law. The U.S. federal income tax rules are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to Treasury Regulations and other modifications and interpretations. Any modification to the U.S. federal income tax laws or interpretations thereof may or may not be applied retroactively and could change the U.S. federal income tax treatment of the Merger to our unitholders and PVR’s unitholders. For example, the U.S. House of Representatives has passed legislation relating to the taxation of “carried interests” that may treat transactions, such as the Merger, occurring on or after an effective date of January 1, 2011, as a taxable exchange to a unitholder of a partnership such as PVG. The U.S. Senate has considered legislation that may have a similar effect. We and PVR are unable to predict whether this proposed legislation or any other proposals will ultimately be enacted, and if so, whether any such proposed legislation would be applied retroactively.

~~Arizona~~Our byunitholders ~~the~~may ~~Burlington~~recognize ~~Northern~~taxable ~~Santa~~income Feor ~~railroad.~~gain ~~All~~for ofU.S. ~~PVR’s~~federal ~~properties~~income ~~contain~~tax ~~and~~purposes ~~have~~as ~~access~~a toresult ~~numerous~~of ~~roads~~the ~~and state or interstate highways~~Merger.

~~The~~It ~~following~~is ~~table~~not ~~shows~~anticipated ~~PVR~~that gain or loss will be recognized for U.S. federal income tax purposes by our unitholders as a result of the Merger, except that a unitholder may recognize a gain due to (i) any decrease in our unitholder’s ~~most~~share ~~important~~of ~~coal~~partnership ~~producing~~liabilities ~~seams~~pursuant byto Section 752 of the Code, (ii) cash or property atdistributions ~~December~~to 31us or our unitholders, and ~~2009:~~(iii) amounts paid by one person to or on behalf of another person pursuant to the Merger Agreement.

Area	Property	State	Producing Mine Types	Seam Name	Height Range (ft.)
Central Appalachia	Wise	VA, KY	Surface, Underground	Parsons	1.00 – 6.00
				Phillips	1.50 – 6.00
				Low Splint	1.00 – 5.50
				Taggart/Marker	1.50 – 9.00
				U. Wilson	1.50 – 5.50
				Kelly/Imboden	1.00 – 7.50
	Buchanan	VA	Underground	Hagy	2.50 – 3.50
	Wayland	KY		U. Elkhorn No. 2	2.33 – 4.00
	Coal River, Fields Creek	WV	Surface, Underground	Coalburg	1.00 – 11.00
				Winifrede	1.00 – 6.50
				Cedar Grove	1.00 – 5.50
				No. 2 Gas	1.50 – 8.00
	Alloy	WV	Underground	Powellton	2.50 – 4.50
	Coal River, Cabin Creek	WV	Surface	Coalburg	1.00 – 5.00
				Buffalo Creek	1.00 – 5.50
				Winifrede	1.00 – 10.00
	Coal River, West Coal River	WV	Surface, Underground	Stockton	4.00 – 12.00
				No. 2 Gas	2.50 – 4.00
	Huff Creek/Toney Fork	WV	Surface	Coalburg	5.00 – 16.00
			Underground	Chilton	3.00 – 4.00
			Underground	U. Alma	3.00 – 4.00
	Powell Mountain	VA, KY	Surface, Underground	Splint Seams	2.00 – 2.75
			Underground	Darby	2.50 – 3.00
Northern Appalachia	Federal No 2	WV	Underground	Pittsburgh	6.50 – 9.50
	Upshur		Surface	Pittsburgh	3.00 – 6.50
Illinois Basin	Green River	KY	Surface, Underground	KY No. 9	3.00 – 5.00
	Allied	KY	Underground	KY No. 9	3.00 – 5.00
San Juan Basin	Lee Ranch	NM	Surface	Cleary Seams	8.00 – 16.00

We estimate that the Merger will result in an increase in the amount of net income (or decrease in the amount of net loss) allocable to all of our unitholders that receive PVR common units in the Merger.

~~The~~We ~~following~~estimate ~~tables~~that ~~set~~the ~~forth~~closing ~~production~~of ~~data~~the ~~for~~Merger will result in an increase in the ~~periods~~amount ~~presented~~of ~~and~~net ~~reserve~~income ~~information~~(or ~~with~~decrease ~~respect~~in the amount of net loss) allocable to ~~each~~all of our unitholders that receive PVR’s ~~properties~~common units in the Merger. Although we have projected specific ranges of such an impact for our unitholders, the ~~period~~actual ~~presented~~amount and effect of such increase in net income (~~tons~~or decrease in ~~millions~~net loss): for any of our unitholders may be more than anticipated because it will depend upon the unitholder’s particular situation, including when, and at what prices, the unitholder purchased our common units and the ability of the unitholder to utilize any suspended passive losses. In addition, the projections are based upon numerous assumptions, and the federal income tax liability of such unitholders could be further increased if PVR makes a future offering of PVR common units and uses the proceeds of the offering in a manner that does not produce substantial additional deductions, such as to repay indebtedness currently outstanding or to acquire property that is not eligible for depreciation or amortization for federal income tax purposes or that is depreciable or amortizable at a rate significantly slower than the rate currently applicable to PVR’s assets.

	Production for Year Ended December 31,
Property	2009		2008		2007
Central Appalachia		18.3		19.6		18.8
Northern Appalachia		3.8		3.6		4.2
Illinois Basin		4.7		4.6		3.8
San Juan Basin		7.5		5.9		5.7
Total		34.3		33.7		32.5

Item 1B Unresolved Staff Comments

	Proven and Probable Reserves as of December 31, 2009
Property	Underground		Surface		Total		Steam		Metallurgical		Total
Central Appalachia		443.6		160.3		603.9		514.7		89.2		603.9
Northern Appalachia		23.4		—		23.4		23.4		—		23.4
Illinois Basin		154.2		9.7		163.9		163.9		—		163.9
San Juan Basin		—		37.4		37.4		37.4		—		37.4
Total		621.2		207.4		828.6		739.4		89.2		828.6

None.

4640

TABLETable OFof CONTENTSContents

~~Of the approximately 829 million tons of proven and probable coal reserves to which PVR had rights as of December 31, 2009, PVR owned the mineral interests and the related surface rights to 454.~~Item 2 ~~million~~Properties tons, or 53%, and PVR owned only the mineral interests to 189.6 million tons, or 24%. PVR leased the mineral rights to the remaining 184.8 million tons, or 23%, from unaffiliated third parties and, in turn, subleased these reserves to PVR’s lessees. For the reserves PVR leases from third parties, PVR pays royalties to the owner based on the amount of coal produced from the leased reserves. Additionally, in some instances, PVR purchases surface rights or otherwise compensates surface right owners for mining activities on their properties. In 2009, PVR’s aggregate expenses to third-party surface and mineral owners were $5.8 million.

~~The~~Title ~~following~~to ~~table~~Properties ~~sets~~Owned ~~forth~~or ~~the~~Controlled ~~coal~~by ~~reserves~~ PVR ~~owned and leased with respect to each of its coal properties as of December 31, 2009 (tons in millions):~~

Property	Owned		Leased		Total Controlled
Central Appalachia		452.9		151.0		603.9
Northern Appalachia		23.4		—		23.4
Illinois Basin		133.9		30.0		163.9
San Juan Basin		33.6		3.8		37.4
Total		643.8		184.8		828.6

The following map shows the general locations of PVR’s coal reserves and related infrastructure investments and PVR’s natural gas gathering and processing systems as of December 31, 2010:

LOGO

~~The~~PVR ~~following~~believes ~~table~~that ~~sets~~it ~~forth~~has ~~PVR’s~~satisfactory title to all of its properties and the associated coal ~~reserve~~reserves ~~activity~~in accordance ~~for~~with standards generally accepted in the ~~periods~~coal ~~presented~~and natural resource management and ~~ended~~natural ~~(tons~~gas inmidstream ~~millions):~~industries.

	2009			2008			2007
Reserves – beginning of year		826.8			818.4			765.4
Purchase of coal reserves		2.4			34.6			60.0
Tons mined by lessees		(34.3	)		(33.7	)		(32.5	)
Revisions of estimates and other		33.7			7.5			25.5
Reserves – end of year		828.6			826.8			818.4

Facilities

PVR’s ~~coal~~currently ~~reserve~~leases ~~estimates are prepared from geological data assembled and analyzed by PVR’s general partner’s or~~ its ~~affiliates’~~office ~~geologists~~space ~~and~~in ~~engineers. These estimates are compiled using geological data taken from thousands of drill holes~~Radnor, ~~geophysical logs~~Pennsylvania, ~~adjacent~~Dallas ~~mine~~and ~~workings~~Houston, ~~outcrop~~Texas ~~prospect~~as ~~openings~~well ~~and~~as ~~other~~Kingsport, ~~sources~~Tennessee. PVR ~~These~~owns ~~estimates~~the ~~also~~field ~~take~~office ~~into~~in ~~account legal~~Charleston, ~~qualitative,~~West ~~technical~~Virginia. ~~and~~PVR ~~economic~~believes ~~limitations~~ that ~~may~~its ~~keep~~properties ~~coal~~are ~~from~~adequate ~~being~~for ~~mined.~~its ~~Coal~~current reserve estimates will change from time to time due to mining activities, analysis of new engineering and geological data, acquisition or divestment of reserve holdings, modification of mining plans or mining methods and other factorsneeds.

~~PVR~~Coal ~~classifies low sulfur coal as coal with a sulfur content of less than 1.0%, medium sulfur coal as coal with a sulfur content between 1.0%~~ Reserves and ~~1.5%~~Production and high sulfur coal as coal with a sulfur content of greater than 1.5%. Compliance coal is that portion of low sulfur coal that meets compliance standards for the CAA. As of December 31, 2009, approximately 25% of PVR’s reserves met compliance standards for the CAA and 37% were low sulfur. The following table sets forth PVR’s estimate of the sulfur content and the typical clean coal quality of its recoverable coal reserves for the period presented (tons in millions):

			Sulfur Content										Typical CleanCoal Quality
			Reserves as of December 31, 2009										Heat Content
Property	Compliance(1)		LowSulfur(2)		MediumSulfur		HighSulfur		SulfurUnclassified		Total		BTU perPound(3)		Sulfur(%)		Ash(%)
Central Appalachia		203.1		283.0		205.4		106.9		8.6		603.9		14,041		1.04		6.50
Northern Appalachia		—		—		—		23.4		—		23.4		12,900		2.58		8.80
Illinois Basin		—		—		—		163.9		—		163.9		11,034		2.39		8.32
San Juan Basin		—		22.1		11.5		3.8		—		37.4		9,200		0.89		17.80
Total		203.1		305.1		216.9		298.0		8.6		828.6

As of December 31, 2010, PVR owned or controlled approximately 804 million tons of proven and probable coal reserves located in Illinois, Kentucky, New Mexico, Virginia and West Virginia. PVR’s coal reserves are in various surface and underground mine seams located on the following properties:

~~(1)~~• ~~Compliance~~Central ~~coal~~Appalachia isBasin ~~low~~: ~~sulfur~~properties ~~coal~~located ~~which,~~in ~~when~~eastern ~~burned~~Kentucky, ~~emits~~southwestern ~~less~~Virginia ~~than~~and ~~1.2~~southern ~~pounds~~West ~~of sulfur dioxide per million BTU. Compliance coal meets the sulfur dioxide emission standards imposed by Phase II of the~~Virginia;

47• Northern Appalachia Basin : properties located in northern West Virginia;

~~TABLE~~• OFIllinois ~~CONTENTS~~Basin : properties located in southern Illinois and western Kentucky; and

~~CAA~~• ~~without~~San ~~blending~~Juan inBasin ~~other~~: ~~coals~~properties orlocated ~~using~~in ~~sulfur~~the ~~dioxide~~four ~~reduction~~corners ~~technologies.~~area ~~Compliance coal is a subset~~ of ~~low~~New ~~sulfur coal and is, therefore, also reported within the amounts for low sulfur coal~~Mexico.

~~(2)~~Coal ~~Includes~~reserves ~~compliance~~are coal tons that can be economically extracted or produced at the time of determination considering legal, economic and technical limitations. All of the estimates of PVR’s coal reserves are classified as proven and probable reserves. Proven and probable coal reserves are defined as follows:

~~(3)~~41 ~~As-received BTU per pound includes the weight of moisture in the coal on an as sold basis.~~

TheTable followingof table shows the proven and probable coal reserves PVR leased to mine operators by property for the period presented (tons in millions): Contents

	Proven and Probable Reserves As of December 31, 2009
Property	TotalControlled		Leasedto Operators		Percentage Leased
Central Appalachia		603.9		540.2		89	%
Northern Appalachia		23.4		23.0		98	%
Illinois Basin		163.9		111.5		68	%
San Juan Basin		37.4		37.4		100	%
Total		828.6		712.1		86	%

Proven Coal Reserves. Proven coal reserves are reserves for which: (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (ii) grade and/or quality are computed from the results of detailed sampling; and (iii) the sites for inspection, sampling and measurement are spaced so closely, and the geologic character is so well defined, that the size, shape, depth and mineral content of reserves are well-established.

~~Other~~Probable ~~Natural~~Coal ~~Resource~~Reserves. Probable ~~Management~~coal ~~Assets~~reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are more widely spaced or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven coal reserves, is high enough to assume continuity between points of observation.

~~Coal~~In ~~Preparation~~areas where geologic conditions indicate potential inconsistencies related to coal reserves, PVR performs additional exploration to ensure the continuity and ~~Loading~~mineability ~~Facilities~~of the coal reserves. Consequently, sampling in those areas involves drill holes or channel samples that are spaced closer together than those distances cited above.

~~PVR~~Coal ~~generates~~reserve ~~coal~~estimates ~~services~~are ~~revenues~~adjusted ~~from~~annually ~~fees~~for itproduction, ~~charges~~unmineable toareas, ~~its~~acquisitions ~~lessees~~and ~~for~~sales ~~the use~~ of ~~its~~ coal ~~preparation~~in ~~and~~place. ~~loading~~The ~~facilities,~~majority ~~which~~of PVR’s coal reserves are ~~located~~high in ~~Virginia~~energy content, ~~West~~low ~~Virginia~~in sulfur and ~~Kentucky.~~suitable ~~The~~for ~~facilities~~either ~~provide~~the ~~efficient~~steam ~~methods~~or to ~~enhance~~a ~~lessee~~lesser ~~production~~extent ~~levels~~metallurgical ~~and exploit PVR’s reserves~~market.

~~Timber~~The amount of coal that a lessee can profitably mine at any given time is subject to several factors and ~~Oil~~may be substantially different from “proven and ~~Gas~~probable ~~Royalty~~coal ~~Interests~~reserves.” Included among the factors that influence profitability are the existing market price, coal quality and operating costs.

PVR’s ~~owns~~lessees mine ~~approximately~~coal ~~243~~using both underground and surface methods. As of December 31,~~000~~ ~~acres~~2010, PVR’s lessees operated 28 surface mines and 39 underground mines. Approximately 46% of ~~forestland~~the coal produced from PVR’s properties in ~~Kentucky,~~2010 ~~Virginia~~came from underground mines and ~~West~~54% ~~Virginia.~~came ~~The~~from ~~majority~~surface mines. Most of PVR’s ~~forestland~~lessees isuse the continuous mining method in all of their underground mines located on PVR’s properties. ~~that~~In ~~also~~continuous ~~contain~~mining, ~~its~~main airways and transportation entries are developed and remote-controlled continuous miners extract coal ~~reserves~~from “rooms,” leaving “pillars” to support the roof. Shuttle cars transport coal to a conveyor belt for transportation to the surface. In several underground mines, PVR’s lessees use two continuous miners running at the same time, also known as a supersection, to improve productivity and reduce unit costs.

One of PVR’s ~~owns~~lessees ~~royalty~~uses ~~interests~~the inlongwall ~~approximately~~mining ~~7.2~~method ~~Bcfe~~at oftwo ~~proved~~different ~~oil~~mines ~~and~~to ~~gas~~mine underground reserves. ~~located~~Longwall inmining ~~Kentucky~~uses hydraulic jacks or shields, ~~Virginia~~varying ~~and~~from ~~West~~four ~~Virginia.~~feet ~~Approximately~~to ~~86%~~twelve feet in height, to support the roof of ~~PVR’s~~the ~~oil~~mine ~~and~~while ~~gas~~a ~~royalty~~mobile ~~interests~~cutting inshearer ~~these~~advances ~~reserves~~through the coal. Chain conveyors then move the coal to a standard deep mine conveyor belt system for delivery to the surface. Continuous mining is used to develop access to long rectangular panels of coal that are ~~associated~~mined with ~~properties~~longwall ~~acquired~~equipment, ~~from~~allowing ~~Penn~~controlled ~~Virginia~~caving inbehind ~~2007~~the advancing machinery. Longwall mining is typically highly productive when used for large blocks of medium to thick coal seams.

~~Natural~~Surface ~~Gas~~mining ~~Midstream~~methods ~~Systems~~used by PVR’s lessees include auger and highwall mining to enhance production, improve reserve recovery and reduce unit costs. On PVR’s San Juan Basin property, a combination of the dragline and truck-and-shovel surface mining methods is used to mine the coal. Dragline and truck-and-shovel mining uses large capacity machines to remove overburden to expose the coal seams. Wheel loaders then load the coal in haul trucks for transportation to a loading facility.

PVR’s lessees’ ~~natural~~customers ~~gas~~are ~~midstream~~primarily ~~business~~electric ~~derives~~utilities, ~~revenues~~also ~~primarily~~referred to as “steam” markets. Coal produced from ~~gas~~PVR’s ~~processing~~properties ~~contracts~~is ~~with~~transported ~~natural~~by ~~gas~~rail, ~~producers~~barge and ~~from~~truck, ~~fees~~or ~~charged~~a ~~for~~combination ~~gathering~~of ~~natural~~these ~~gas~~means ~~volumes~~of transportation. Coal from the Virginia portion of the Wise property and ~~providing~~the ~~other~~Buchanan ~~related~~property ~~services~~is primarily shipped to electric utilities in the Southeast by the Norfolk Southern railroad. ~~PVR~~Coal ~~owns,~~from ~~leases~~the orKentucky ~~has~~portion ~~rights-~~of~~-way~~ the Wise property is primarily shipped to electric utilities in the Southeast by the CSX railroad. Coal from the Coal River and Spruce Laurel properties ~~where~~in West Virginia is shipped to steam and metallurgical customers by the ~~majority~~CSX ofrailroad, ~~its~~by ~~natural~~barge ~~gas~~along ~~midstream~~the ~~facilities~~Kanawha ~~are~~River ~~located.~~and ~~PVR~~by ~~also~~truck ~~owns~~or by a combination ~~natural~~thereof. ~~gas~~Coal ~~marketing~~from ~~business~~the Northern Appalachia properties is shipped by barge on the Monongahela River, ~~which~~by ~~aggregates~~truck ~~third-party~~and ~~volumes~~by the CSX and ~~sells~~Norfolk ~~those~~Southern ~~volumes~~railroads. ~~into~~Coal ~~intrastate~~from ~~pipeline~~the ~~systems~~Illinois Basin properties is shipped by barge on the Green River and atby ~~market~~truck. ~~hubs~~Coal ~~accessed~~from the San Juan Basin property is shipped to steam markets in New Mexico and Arizona by ~~various~~the ~~interstate~~Burlington ~~pipelines~~Northern Santa Fe railroad. All of PVR’s properties contain and have access to numerous roads and state or interstate highways.

~~PVR~~The ~~owned~~following ~~six~~tables ~~natural~~set ~~gas~~forth ~~processing~~production ~~facilities~~data ~~having~~for ~~400~~the ~~MMcfd~~periods ofpresented ~~total~~and ~~capacity~~reserve asinformation ofwith ~~December~~respect ~~31,~~to each ~~2009.~~of PVR’s ~~natural~~properties ~~gas~~for ~~midstream operations currently include four natural gas gathering and processing systems and two stand-alone natural gas gathering systems, including: (i)~~ the ~~Panhandle~~period ~~gathering~~presented ~~and processing facilities in the Texas/Oklahoma panhandle area;~~ (~~ii)~~tons ~~the Crossroads gathering and processing facilities~~ in ~~East Texas; (iii~~millions): the Crescent gathering and processing facilities in central Oklahoma; (iv) the Arkoma gathering system in eastern Oklahoma; (v) the North Texas gathering and pipeline facilities in the Fort Worth Basin; and (vi) the Hamlin gathering and processing facilities in west-central Texas. These assets included approximately 4,118 miles of natural gas gathering pipelines as of December 31, 2009. In addition, PVR owns a 25% member interest in Thunder Creek, a joint venture that gathers and transports coalbed methane in Wyoming’s Powder River Basin.

~~Panhandle~~42 ~~System~~

General.Table The Panhandle System is a natural gas gathering system stretching over ten counties in the Anadarko Basin of the panhandle of Texas and Oklahoma. The system consists of approximately 1,681 miles of natural gas gathering pipelines, ranging in size from two to 16 inches in diameter, and the Beaver, Contents


	Production for Year Ended December 31,
Property	2010		2009		2008
Central Appalachia		18.2		18.3		19.6
Northern Appalachia		4.0		3.8		3.6
Illinois Basin		4.2		4.7		4.6
San Juan Basin		8.1		7.5		5.9

Total		34.5		34.3		33.7

TABLE OF CONTENTS


	Proven and Probable Reserves as of December 31, 2010
Property	Underground		Surface		Total		Steam		Metallurgical		Total
Central Appalachia		429.2		154.3		583.5		500.1		83.4		583.5
Northern Appalachia		29.7		-		29.7		29.7		-		29.7
Illinois Basin		152.7		8.5		161.2		161.2		-		161.2
San Juan Basin		-		29.3		29.3		29.3		-		29.3

Total		611.6		192.1		803.7		720.3		83.4		803.7

~~Spearman~~Of the approximately 804 million tons of proven and ~~Sweetwater~~probable ~~natural~~coal ~~gas~~reserves ~~processing~~to ~~plants~~which PVR had rights as of December 31, 2010, PVR owned the mineral interests and the related surface rights to 432 million tons, or 54%, and PVR owned only the mineral interests to 190 million tons, or 23%. ~~Included~~PVR leased the mineral rights to the remaining 182 million tons, or 23%, from unaffiliated third parties and, in turn, subleased these reserves to PVR’s lessees. For the ~~system~~reserves isPVR anleases ~~11-mile~~from third parties, ~~10-inch~~PVR ~~diameter~~pays royalties to the owner based on the amount of coal produced from the leased reserves. Additionally, ~~FERC~~in some instances, PVR purchases surface rights or otherwise compensate surface right owners for mining activities on their properties. In 2010, PVR’s aggregate expenses to third-~~jurisdictional~~party ~~residue~~surface ~~line~~and mineral owners were $7.7 million.

~~In July 2009, PVR completed an acquisition of a natural gas processing and residue pipeline facilities in western Oklahoma for approximately $22.6 million in cash.~~ The ~~acquired~~following ~~assets~~table ~~included~~sets aforth ~~60 MMcfd gas processing plant located near Sweetwater, Oklahoma (~~the ~~“Sweetwater”~~coal ~~plant).~~reserves ~~Additionally,~~ PVR ~~completed~~owned aand 40leased ~~MMcfd~~with ~~processing~~respect ~~plant~~to ~~expansion~~each inof its coal ~~Spearman~~properties ~~complex~~as ~~that~~of ~~was put into service on July~~ December 31, ~~2009.~~2010 ~~The~~(tons ~~acquired and expanded processing facilities increased PVR’s processing capacity~~ in ~~the~~millions): Panhandle System to 260 MMcfd. The increased processing capacity has allowed PVR to process gas volumes that were being bypassed due to processing capacity constraints in the Panhandle System and has alleviated pipeline pressure-related volume constraints in the eastern portion of the Panhandle System.

The Panhandle System is comprised of a number of major gathering systems and 26 related compressor stations that gather natural gas, directly or indirectly, to the Beaver, Spearman and Sweetwater plants. These include the Beaver, Perryton, Spearman, Wolf Creek/Kiowa Creek and Ellis systems. These gathering systems are located in Beaver, Ellis, Harper and Roger Mills Counties in Oklahoma and Hansford, Hemphill, Hutchinson, Lipscomb, Ochiltree and Roberts Counties in Texas.


Property	Owned		Leased		Total Controlled
Central Appalachia		435.7		147.8		583.5
Northern Appalachia		29.7		-		29.7
Illinois Basin		130.8		30.4		161.2
San Juan Basin		25.4		3.9		29.3

Total		621.6		182.1		803.7

The ~~Beaver~~following ~~plant~~table ~~has~~sets ~~100~~forth ~~MMcfd~~PVR’s ofcoal ~~inlet~~reserve ~~gas~~activity ~~capacity.~~

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