T H E Q U A R T E R LY N E W S L E T T E R F O R T H E AT L A S R E S O U R C E S , L LC I N V E S T M E N T C O M M U N I T Y

ENERGY

Volume 14 – Issue 1 • 1st Quarter 2013

NEWSLINE Energy NewsLine is published by Atlas Resources, LLC

Editorial Staff: Marci F. Bleichmar, Executive Vice President, MarketingJack L. Hollander, Executive Vice President,Direct Participation ProgramsBruce Bundy, Regional Marketing Director, CentralVicki Burbridge, Regional Marketing Director, WestBarry Dow, Regional Marketing Director, AppalachiaAndrew Eisen, Regional Marketing Director, EastRobert Gourlay, Regional Marketing Director, SoutheastPaul Tencer, Regional Marketing Director, Great PlainsNancy Hiler, Managing EditorKaren Morstad & Associates, Designer

We welcome your comments/questions. Contactinvestorservices@atlasenergy.com or 800-251-0171 option 3

ARP Reports 4thQuarter and FullYear Resultspage 1

IN THIS ISSUE: Tax Seasonpage 2

Atlas, Part of the Communitypage 3

ATLS Reports Year-End Resultspage 2

Natural Gas VehicleNewspage 3

Park Place Corporate Center One1000 Commerce Drive, Suite 410Pittsburgh, PA 15275

“Our results for the fourth quarter highlight the meaningful progresswe have made towards our objectives in expanding our enterprisethrough a strong asset base,” said Matthew A. Jones, President andChief Operating Officer of ARP.

Record Average Net ProductionARP achieved record average net daily production of 110.1 million cubicfeet (Mmcfed) for the fourth quarter 2012, an increase of 13.9 Mmcfed,or 14%, compared with the third quarter 2012.

The increase was primarily due to a full quarter’s volume from the acquisition of the remaining 50% interest in Equal Energy, Ltd.’s approximately 8,500 net undeveloped acres in the core of the Mississippi Lime play in northwestern Oklahoma in September 2012,and a full quarter’s volume from the acquisition of Titan Operating, LLC(“Titan”) in the Barnett Shale in July 2012.

Investment partnership margin, which is comprised of well constructionand completion margin, well services margin and administration andoversight fee revenues, contributed $10.7 million to Adjusted EBITDAand distributable cash flow for the fourth quarter 2012. In December2012, ARP completed fundraising for Atlas Resources Series 32-2012,raising a total of approximately $127.1 million in investor capital.

Marble Falls AcquisitionARP closed its acquisition of oil & gas properties in the Marble Falls region of the Fort Worth Basin from DTE Energy. Specifically, on December 20, 2012, ARP completed its acquisition DTE Gas Resources,LLC, an affiliate of DTE Energy Company (“DTE”), which owned approximately 35 million barrels of oil equivalents (MMboe) of provedreserves and substantial resource potential in the Fort Worth Basin inTexas for approximately $255 million.

Included in this transaction was approximately 88,000 net acres in the Fort Worth Basin of Texas, primarily in Jack County, offsetting ARP’s current Barnett Shale position. This acreage position includes approximately 75,000 net acres prospective for the oil and NGL rich Marble Falls play, in which there are approximately 700 identified vertical drilling locations in ARP’s position. ARP also believes that thereare further potential development opportunities through vertical down-spacing and horizontal drilling in the Marble Falls formation. ARP commenced initial drilling operations in the Marble Falls play inJanuary 2013.

This Marble Falls transaction represented ARP’s third acquisition in 2012in the Fort Worth Basin. All told, the company has invested a total of approximately $650 million in the Fort Worth Basin during 2012 to acquire estimated proved reserves of over 700 billion cubic feet of natural gas equivalents (Bcfe) at time of acquisition.

Solid Capital PositionMr. Jones went on to say that the company’s meaningful progress is evidenced by ARP’s completion in less than a year of approximately$650 million in acquisitions of valuable oil & gas reserves and undeveloped positions in the Fort Worth Basin.

“Notably, the recently completed acquisition in the Marble Falls regionfully compliments our already well-established assets and operatingteam in Fort Worth,” he said. “We look forward to the contributions ofthis oil & liquids play to our production margin. We have also made further improvements in our efficiency of operations and drilling activities. As a result, we expect our efforts to drive future cash flowgrowth while maintaining a solid capital position.”

Fourth Quarter & Year-End EarningsFor the fourth quarter 2012, adjusted earnings before interest, incometaxes, depreciation and amortization (“adjusted EBITDA”), a non-GAAPmeasure, totaled $31.8 million, or $0.66 per common unit, representing a $9.0 million or 40% increase from the third quarter 2012,and $84.5 million for the full year 2012.

Distributable cash flow, a non-GAAP measure, was $27.5 million, or$0.56 per common unit, for the fourth quarter 2012, representing a $9.1million or 49% increase, and $64.1 million for the full year 2012.

ARP declared a cash distribution of $0.48 per limited partner unit forthe fourth quarter 2012, at a coverage ratio of approximately 1.2x; and,on a GAAP basis, the net loss was $18.9 million for the fourth quarter2012 compared to $4.7 million for the prior year comparable period. Theloss for each period was caused principally by non-cash expenses, including $9.5 million of asset impairment write downs on certain non-core legacy oil and gas properties and non-cash compensation expense.

Year-End 2012 Oil & Gas ReservesThroughout 2012, ARP substantially increased its oil & gas reserves andundeveloped properties through both strategic acquisitions as well asorganic development. This activity, highlighted by the acquisitions ofproducing oil & gas assets in the Barnett Shale and Marble Falls regionsof the Fort Worth Basin, resulted in a significant increase in ARP’s provedreserves as of year end 2012.▲

NOTE: The above information contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those noted and is not a guarantee of future performance. Suchforward-looking statements include, but are not limited to, statements about future financial and operating results, resource potential, the company's plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties could cause actual results to materially differ. Please referto the Atlas Resources and Atlas Energy web site for additional details on the company’sfinancial results.

ARP Reports 4th Quarterand Full Year ResultsOn February 21, 2013, Atlas Resource Partners, L.P.(NYSE: ARP) reported its operating and financial resultsfor the fourth quarter 2012 and full year.

1

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THE QUARTERLY NEWSLETTER FOR THE ATLAS RESOURCES, LLC INVESTMENT COMMUNITY ENERGY

Volume 15 –Issue 2 • 2nd Quarter 2013

NEWSLINE Energy NewsLineis published by Atlas Resources, LLC

Editorial Staff: Marci F. Bleichmar, Executive Vice President, MarketingJack L. Hollander, Executive Vice President,Direct Participation ProgramsBruce Bundy, Regional Marketing Director, CentralVicki Burbridge, Regional Marketing Director, WestBarry Dow, Regional Marketing Director, AppalachiaAndrew Eisen, Regional Marketing Director, EastRobert Gourlay, Regional Marketing Director, SoutheastPaul Tencer, Regional Marketing Director, Great PlainsNancy Hiler, Managing EditorKaren Morstad & Associates, Designer

We welcome your comments/questions. Contactinvestorservices@atlasenergy.com or 800-251-0171 option 3

ARP Reports 4thQuarter and FullYear Resultspage 1

IN THIS ISSUE: Tax Seasonpage 2

Atlas, Part of the Communitypage 3

ATLS Reports Year-End Resultspage 2

Natural Gas VehicleNewspage 3

Park Place Corporate Center One1000 Commerce Drive, Suite 410Pittsburgh, PA 15275

“Our results for the fourth quarter highlight the meaningful progresswe have made towards our objectives in expanding our enterprisethrough a strong asset base,” said Matthew A. Jones, President andChief Operating Officer of ARP.

Record Average Net ProductionARP achieved record average net daily production of 110.1 million cubicfeet (Mmcfed) for the fourth quarter 2012, an increase of 13.9 Mmcfed,or 14%, compared with the third quarter 2012.

The increase was primarily due to a full quarter’s volume from the acquisition of the remaining 50% interest in Equal Energy, Ltd.’s approximately 8,500 net undeveloped acres in the core of the Mississippi Lime play in northwestern Oklahoma in September 2012,and a full quarter’s volume from the acquisition of Titan Operating, LLC(“Titan”) in the Barnett Shale in July 2012.

Investment partnership margin, which is comprised of well constructionand completion margin, well services margin and administration andoversight fee revenues, contributed $10.7 million to Adjusted EBITDAand distributable cash flow for the fourth quarter 2012. In December2012, ARP completed fundraising for Atlas Resources Series 32-2012,raising a total of approximately $127.1 million in investor capital.

Marble Falls AcquisitionARP closed its acquisition of oil & gas properties in the Marble Falls region of the Fort Worth Basin from DTE Energy. Specifically, on December 20, 2012, ARP completed its acquisition DTE Gas Resources,LLC, an affiliate of DTE Energy Company (“DTE”), which owned approximately 35 million barrels of oil equivalents (MMboe) of provedreserves and substantial resource potential in the Fort Worth Basin inTexas for approximately $255 million.

Included in this transaction was approximately 88,000 net acres in the Fort Worth Basin of Texas, primarily in Jack County, offsetting ARP’s current Barnett Shale position. This acreage position includes approximately 75,000 net acres prospective for the oil and NGL rich Marble Falls play, in which there are approximately 700 identified vertical drilling locations in ARP’s position. ARP also believes that thereare further potential development opportunities through vertical down-spacing and horizontal drilling in the Marble Falls formation. ARP commenced initial drilling operations in the Marble Falls play inJanuary 2013.

This Marble Falls transaction represented ARP’s third acquisition in 2012in the Fort Worth Basin. All told, the company has invested a total of approximately $650 million in the Fort Worth Basin during 2012 to acquire estimated proved reserves of over 700 billion cubic feet of natural gas equivalents (Bcfe) at time of acquisition.

Solid Capital PositionMr. Jones went on to say that the company’s meaningful progress is evidenced by ARP’s completion in less than a year of approximately$650 million in acquisitions of valuable oil & gas reserves and undeveloped positions in the Fort Worth Basin.

“Notably, the recently completed acquisition in the Marble Falls regionfully compliments our already well-established assets and operatingteam in Fort Worth,” he said. “We look forward to the contributions ofthis oil & liquids play to our production margin. We have also made further improvements in our efficiency of operations and drilling activities. As a result, we expect our efforts to drive future cash flowgrowth while maintaining a solid capital position.”

Fourth Quarter & Year-End EarningsFor the fourth quarter 2012, adjusted earnings before interest, incometaxes, depreciation and amortization (“adjusted EBITDA”), a non-GAAPmeasure, totaled $31.8 million, or $0.66 per common unit, representing a $9.0 million or 40% increase from the third quarter 2012,and $84.5 million for the full year 2012.

Distributable cash flow, a non-GAAP measure, was $27.5 million, or$0.56 per common unit, for the fourth quarter 2012, representing a $9.1million or 49% increase, and $64.1 million for the full year 2012.

ARP declared a cash distribution of $0.48 per limited partner unit forthe fourth quarter 2012, at a coverage ratio of approximately 1.2x; and,on a GAAP basis, the net loss was $18.9 million for the fourth quarter2012 compared to $4.7 million for the prior year comparable period. Theloss for each period was caused principally by non-cash expenses, including $9.5 million of asset impairment write downs on certain non-core legacy oil and gas properties and non-cash compensation expense.

Year-End 2012 Oil & Gas ReservesThroughout 2012, ARP substantially increased its oil & gas reserves andundeveloped properties through both strategic acquisitions as well asorganic development. This activity, highlighted by the acquisitions ofproducing oil & gas assets in the Barnett Shale and Marble Falls regionsof the Fort Worth Basin, resulted in a significant increase in ARP’s provedreserves as of year end 2012. ▲

NOTE: The above information contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those noted and is not a guarantee of future performance. Suchforward-looking statements include, but are not limited to, statements about future financial and operating results, resource potential, the company's plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties could cause actual results to materially differ. Please referto the Atlas Resources and Atlas Energy web site for additional details on the company’sfinancial results.

ARP Reports 4th Quarterand Full Year ResultsOn February 21, 2013, Atlas Resource Partners, L.P.(NYSE: ARP) reported its operating and financial resultsfor the fourth quarter 2012 and full year.

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2

On February 21, 2013, Atlas Energy, L.P. (NYSE: ATLS) reported operating and financial results for the fourth quarter and full year 2012.

Highlights• Atlas Energy declared a cash distribution of $0.30 per limited

partner unit for the fourth quarter 2012, which represents a $0.03per unit, or 11%, increase over the third quarter 2012, and a 25% increase over the prior year quarter. The fourth quarter 2012 distribution was paid on February 19, 2013 to holders of record as of February 6, 2013.

• Atlas Energy’s E&P subsidiary, Atlas Resource Partners, L.P. (NYSE: ARP), reached record average net production of 110.1 million cubic feet of natural gas equivalents per day (Mmcfed) for the fourth quarter 2012, a 14% increase from the prior quarter. For additional information, see related article on page 1.

• Atlas Pipeline Partners, L.P. (NYSE: APL), Atlas Energy’s midstream subsidiary, announced record processing volumes at each of its systems, reaching a total of 1,001.9 Mmcfd and NGLproduction of 80,120 barrels per day (bpd) for the fourth quarter 2012. APL also recently completed its acquisition of Cardinal Midstream in December 2012, in which APL acquired valuablegathering and processing facilities.

Continued Value Creation“Our results in 2012 at Atlas Energy should only be exceeded by our accomplishments this year and beyond,” said Edward E. Cohen, Chief Executive Officer of Atlas Energy. “All of our success is attributable to the tremendous efforts of both ARP and APL, both of which had strongperformances through the end of the year. We expect continued valuecreation for all of our stakeholders.” ▲

SPECIAL NOTE: Please see related article on ARP’s year-end results on page 1.

NOTE: The above information contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differmaterially from those noted and is not a guarantee of future performance. Such forward-looking statements include, but are not limited to, statements about future financial and operating results, resource potential, the company's plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties could cause actual results to materially differ. Pleaserefer to the Atlas Resources and Atlas Energy web site for additional details on the company’s financial results.

3

As reported in previous issues of this newsletter, the use of natural gas in various types of vehicles is on the rise domestically and worldwide. A number of new developmentscontinue to point to this growth.

Ford NGV Sales Soar

Ford Motor Co. sold a record 11,600 natural gas vehicles (NGVs)in 2012, more than four times the number it sold just two yearsago in 2010, the company announced on March 5, 2013.

Sales of Ford vehicles capable of running on compressed natural gas or propane auto gas have reached record levels, asbusinesses and commercial customers seek relief from constantly fluctuating gas station prices. The company sees thisas the latest sign that natural gas is making inroads as a transportation fuel, particularly for truck fleets, buses and taxis.The consumer market is tougher to crack, the automaker says,but sales are gaining there as well.

GM CEO Champions NGVs

General Motors CEO Daniel Akerson made headlines recentlychampioning the expanded use of compressed natural gas orliquefied natural gas as a vehicle fuel. He particularly backed itsuse in commercial trucks rather than passenger cars, pointingto the lack of infrastructure (fuel stations) currently standing inthe way.

According to the Houston Chronicle, Mr. Akerson “tiptoedaround the chicken-and-egg problem of fuel infrastructure –few buyers are likely to embrace natural gas-powered vehicles until there are places to refuel them, and no one willbuild refueling stations until there are more of the vehicles onthe road.”

Railway Begins NG Pilot

BNSF Railway, the second largest in the country by route-miles, plans to switch from diesel fuel to natural gas if test engines prove reliable, according to the Wall Street Journal. BNSF Railway is one of North America's leading freight transportation companies operating on 32,500 route miles oftrack in 28 states and two Canadian provinces.

BNSF will begin testing a small number of locomotives usingliquefied natural gas (LNG) as an alternative fuel later this year,Matthew K. Rose, BNSF chairman and CEO announced at anenergy conference in Houston, TX on March 6, 2013. “The useof liquefied natural gas as an alternative fuel is a potential transformational change for our railroad and for our industry,”Mr. Rose said.

BNSF has been working with the two principal locomotive manufacturers, GE and EMD, a unit of Caterpillar, to developthe natural gas engine technology that will be used in the pilot program. ▲

SOURCES: Ford Motor Co., BSNF Railway, General Motors, theWall Street Journal, and the Houston Chronicle.

Atlas, Part of the CommunityAs reported in past issues, Atlas Energy is very much a part ofevery community in which it operates. Over the past 40 years,time and time again, this has involved participation in variedcommunity organizations and other local efforts.

During the first three months of 2013 alone, Atlas has beenthere to participate in all types of activities and volunteergroups in its communities, ranging from sports teams, to sub-stance abuse prevention programs, as well as 4-H, YMCA,school sports and other youth groups.

By way of example, at a recent community event, Brad Eubanks, Vice President of Land for Atlas Energy LP of Pittsburgh said, “We believe it is important to give back to localcommunities where we live, work, and play.” ▲

Natural Gas Vehicle NewsTax Season

ATLS Reports Year-End Results

It's that season again, time to file our income tax returns. For those not familiar with oil and gas tax reporting, it is important to be aware of first-year common reporting errors.

Schedule K-1sThe information investors need is reported on a Schedule K-1 that, in addition to being mailed, is available every year online at the Atlas Energy website, www.atlasenergy.com, accessible with username andpassword.

Those who invested in an Atlas partnership program in 2012 as an investorgeneral partner need to confirm with their tax preparer or financial advisor that their reported share of intangible drilling costs (IDC) is treatedas an ordinary deduction, not as a loss from a passive activity. The most

common reporting error is treating the full amount of the IDC deductionas a tax preference item for purposes of the alternative minimum tax. TheIDC deduction should not be considered a tax preference item if it doesnot exceed 40 percent of alternative minimum taxable income.

For those who were self-employed in 2012 and invested in a partnershipas an investor general partner, the IDC deduction should be reported onthe SE Form supplemental to the Federal form 1040.

Composite State ReturnsWhen investing in an oil and gas partnership, income derived from wells located in different states needs to be reported to those states. However,a nonresident of each such state can elect to be included in the partnership’s composite income tax returns. A partnership that files a composite return will include electing nonresident partners’ share of the partnership’s income and deductions, attributable to such states.

By being part of one or more partnership state composite income tax returns, which are filed on the investor’s behalf, the investor will not haveto file a nonresident income tax return for those respective states unlessthey have income derived from those states from other sources. The partnership is required to withhold and pay state income taxes on behalfof the electing nonresident partners and the share of such taxes paid is reported on the investor’s Schedule K-1. Some entities may not elect to bepart of a composite return. Consult your tax advisor concerning properpartnership reporting. ▲NOTE: The above discussion is not intended to serve as tax advice. Please refer to the instructions accompanying your Schedule K-1, and please consult your own tax prepareror financial advisor and contact Atlas' investor services department with any questions.

Above: Ford natural gas vehicle.Right: LNG fueling station at Port of Long Beach, CA.

Atlas_Q22013_Newsletter_Mech.qxd:Layout 1 4/5/13 1:46 PM Page 2

2

On February 21, 2013, Atlas Energy, L.P. (NYSE: ATLS) reported operating and financial results for the fourth quarter and full year 2012.

Highlights• Atlas Energy declared a cash distribution of $0.30 per limited

partner unit for the fourth quarter 2012, which represents a $0.03per unit, or 11%, increase over the third quarter 2012, and a 25% increase over the prior year quarter. The fourth quarter 2012 distribution was paid on February 19, 2013 to holders of record as of February 6, 2013.

• Atlas Energy’s E&P subsidiary, Atlas Resource Partners, L.P. (NYSE: ARP), reached record average net production of 110.1 million cubic feet of natural gas equivalents per day (Mmcfed) for the fourth quarter 2012, a 14% increase from the prior quarter. For additional information, see related article on page 1.

• Atlas Pipeline Partners, L.P. (NYSE: APL), Atlas Energy’s midstream subsidiary, announced record processing volumes at each of its systems, reaching a total of 1,001.9 Mmcfd and NGLproduction of 80,120 barrels per day (bpd) for the fourth quarter 2012. APL also recently completed its acquisition of Cardinal Midstream in December 2012, in which APL acquired valuablegathering and processing facilities.

Continued Value Creation“Our results in 2012 at Atlas Energy should only be exceeded by our accomplishments this year and beyond,” said Edward E. Cohen, Chief Executive Officer of Atlas Energy. “All of our success is attributable to the tremendous efforts of both ARP and APL, both of which had strongperformances through the end of the year. We expect continued valuecreation for all of our stakeholders.” ▲

SPECIAL NOTE: Please see related article on ARP’s year-end results on page 1.

NOTE: The above information contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differmaterially from those noted and is not a guarantee of future performance. Such forward-looking statements include, but are not limited to, statements about future financial and operating results, resource potential, the company's plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties could cause actual results to materially differ. Pleaserefer to the Atlas Resources and Atlas Energy web site for additional details on the company’s financial results.

3

As reported in previous issues of this newsletter, the use of natural gas in various types of vehicles is on the rise domestically and worldwide. A number of new developmentscontinue to point to this growth.

Ford NGV Sales Soar

Ford Motor Co. sold a record 11,600 natural gas vehicles (NGVs)in 2012, more than four times the number it sold just two yearsago in 2010, the company announced on March 5, 2013.

Sales of Ford vehicles capable of running on compressed natural gas or propane auto gas have reached record levels, asbusinesses and commercial customers seek relief from constantly fluctuating gas station prices. The company sees thisas the latest sign that natural gas is making inroads as a transportation fuel, particularly for truck fleets, buses and taxis.The consumer market is tougher to crack, the automaker says,but sales are gaining there as well.

GM CEO Champions NGVs

General Motors CEO Daniel Akerson made headlines recentlychampioning the expanded use of compressed natural gas orliquefied natural gas as a vehicle fuel. He particularly backed itsuse in commercial trucks rather than passenger cars, pointingto the lack of infrastructure (fuel stations) currently standing inthe way.

According to the Houston Chronicle, Mr. Akerson “tiptoedaround the chicken-and-egg problem of fuel infrastructure –few buyers are likely to embrace natural gas-powered vehicles until there are places to refuel them, and no one willbuild refueling stations until there are more of the vehicles onthe road.”

Railway Begins NG Pilot

BNSF Railway, the second largest in the country by route-miles, plans to switch from diesel fuel to natural gas if test engines prove reliable, according to the Wall Street Journal. BNSF Railway is one of North America's leading freight transportation companies operating on 32,500 route miles oftrack in 28 states and two Canadian provinces.

BNSF will begin testing a small number of locomotives usingliquefied natural gas (LNG) as an alternative fuel later this year,Matthew K. Rose, BNSF chairman and CEO announced at anenergy conference in Houston, TX on March 6, 2013. “The useof liquefied natural gas as an alternative fuel is a potential transformational change for our railroad and for our industry,”Mr. Rose said.

BNSF has been working with the two principal locomotive manufacturers, GE and EMD, a unit of Caterpillar, to developthe natural gas engine technology that will be used in the pilot program. ▲

SOURCES: Ford Motor Co., BSNF Railway, General Motors, theWall Street Journal, and the Houston Chronicle.

Atlas, Part of the CommunityAs reported in past issues, Atlas Energy is very much a part ofevery community in which it operates. Over the past 40 years,time and time again, this has involved participation in variedcommunity organizations and other local efforts.

During the first three months of 2013 alone, Atlas has beenthere to participate in all types of activities and volunteergroups in its communities, ranging from sports teams, to sub-stance abuse prevention programs, as well as 4-H, YMCA,school sports and other youth groups.

By way of example, at a recent community event, Brad Eubanks, Vice President of Land for Atlas Energy LP of Pittsburgh said, “We believe it is important to give back to localcommunities where we live, work, and play.” ▲

Natural Gas Vehicle NewsTax Season

ATLS Reports Year-End Results

It's that season again, time to file our income tax returns. For those not familiar with oil and gas tax reporting, it is important to be aware of first-year common reporting errors.

Schedule K-1sThe information investors need is reported on a Schedule K-1 that, in addition to being mailed, is available every year online at the Atlas Energy website, www.atlasenergy.com, accessible with username andpassword.

Those who invested in an Atlas partnership program in 2012 as an investorgeneral partner need to confirm with their tax preparer or financial advisor that their reported share of intangible drilling costs (IDC) is treatedas an ordinary deduction, not as a loss from a passive activity. The most

common reporting error is treating the full amount of the IDC deductionas a tax preference item for purposes of the alternative minimum tax. TheIDC deduction should not be considered a tax preference item if it doesnot exceed 40 percent of alternative minimum taxable income.

For those who were self-employed in 2012 and invested in a partnershipas an investor general partner, the IDC deduction should be reported onthe SE Form supplemental to the Federal form 1040.

Composite State ReturnsWhen investing in an oil and gas partnership, income derived from wells located in different states needs to be reported to those states. However,a nonresident of each such state can elect to be included in the partnership’s composite income tax returns. A partnership that files a composite return will include electing nonresident partners’ share of the partnership’s income and deductions, attributable to such states.

By being part of one or more partnership state composite income tax returns, which are filed on the investor’s behalf, the investor will not haveto file a nonresident income tax return for those respective states unlessthey have income derived from those states from other sources. The partnership is required to withhold and pay state income taxes on behalfof the electing nonresident partners and the share of such taxes paid is reported on the investor’s Schedule K-1. Some entities may not elect to bepart of a composite return. Consult your tax advisor concerning properpartnership reporting. ▲NOTE: The above discussion is not intended to serve as tax advice. Please refer to the instructions accompanying your Schedule K-1, and please consult your own tax prepareror financial advisor and contact Atlas' investor services department with any questions.

Above: Ford natural gas vehicle.Right: LNG fueling station at Port of Long Beach, CA.

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