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File No. 70-9127
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form U-1
AMENDMENT NO. 1 TO
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE COLUMBIA GAS SYSTEM, INC.
12355 Sunrise Valley Drive
Suite 300
Reston, VA 20191-3458
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(Names of company or companies filing this statement
and addresses of principal executive offices)
THE COLUMBIA GAS SYSTEM, INC.
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(Name of top registered holding company parent of
each applicant or declarant)
J. W. Trost, Vice President
COLUMBIA GAS SYSTEM SERVICE CORPORATION
12355 Sunrise Valley Drive
Suite 300
Reston, VA 20191-3458
(Name and address of agent for service)
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The Columbia Gas System, Inc. ("Columbia"), a registered holding company
under the Public Utility Holding Company Act of 1935 (the "Act"), hereby submits
for filing this Amendment No. 1 to the Application-Declaration on Form U-1 in
File No. 70-9127 to amend and restate the Application-Declaration in its
entirety.
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
(a) Furnish a reasonably detailed and precise description of the proposed
transaction, including a statement of the reasons why it is desired to
consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its relation
to the proposed transaction.
Columbia is seeking authority, consistent with Commission precedent, to
provide consulting services to associate and nonassociate companies and to
engage in activities contemplated by the Gas Related Activities Act of 1990
("GRAA"), on an international basis. Columbia recently identified an
international project for which it seeks authority to invest up to $5 million
to acquire certain oil and natural gas leasehold interests in southern Ontario,
Canada (the "Canadian Interests").
It is contemplated that Columbia would engage in these activities through
one or more, direct or indirect, existing nonutility subsidiaries or through one
or more newly-formed, direct or indirect, subsidiaries (the "Foreign Energy
Subsidiaries"). The Foreign Energy Subsidiaries, in turn, may form one or more
special-purpose subsidiaries to invest, directly or indirectly, in entities such
as corporations, limited liability companies, partnerships or other entities
that derive substantially all of their revenues from foreign consulting or
gas-related activities under the GRAA.
Such activities would be funded through a combination of short-term and
long-term loans, open account advances and other financing transactions as may
be authorized by Rules 45 and 52 and other applicable rules, regulations and
orders under the Act.
The Commission is requested to authorize Columbia to designate or
establish the Foreign Energy Subsidiaries and to authorize the initial funding
of the foreign consulting and foreign gas-related activities, as may be
required. Columbia also seeks authority for the Foreign Energy Subsidiaries to
engage currently in preliminary development activities in connection with
foreign gas-related projects but asks the Commission to reserve jurisdiction
over the acquisition of a security or an interest in the business of a
nonaffiliated entity engaged
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in such activities, other than with respect to the Canadian Interests, pending
completion of the record.
A Foreign Energy Subsidiary will not undertake any service activities if,
as a result thereof, it would become a public utility company within the meaning
of the Act. Further, Columbia will not seek recovery through higher rates to
its utility consumers to compensate it for any possible losses that
it may sustain on investments in the Canadian Interests or other foreign
investments that may be authorized by the Commission, or for any inadequate
returns on such investments.
1. Foreign Consulting
Columbia seeks authority for the Foreign Energy Subsidiaries to provide
consulting services, including but not limited to project development,
engineering, design, construction and construction management, storage, gas
control, geologic, fuel management, operating and maintenance services and other
similar kinds of managerial and technical services to associate and nonassociate
companies in connection with foreign utility and gas-related activities. See
Southern Co., Holding Co. Act Release No. 26212 (Dec. 30, 1994). See also
Consolidated Natural Gas Co., Post-effective Amendment No. 6 in File No. 70-8759
(requesting release of jurisdiction over foreign consulting activities). The
Foreign Energy Subsidiaries may render such services using its own work force,
independent contractors, and personnel and other resources of the Columbia
system ("System") as permitted by Section 13 and the rules thereunder.(1) It is
also contemplated that, in conjunction with providing services to nonassociates,
the Foreign Energy Subsidiaries may enter into separate agreements to sell or
license intellectual property it has created or acquired from nonassociate
companies in connection with its authorized business.
The Foreign Energy Subsidiaries will not undertake any service activities
if, as a result thereof, it would become a public utility company within the
meaning of the Act.
2. Foreign Gas-Related Activities
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1. Columbia requests authority, pursuant to Rule 53(a)(3), for the Foreign
Energy Subsidiaries to contract with Columbia's domestic public-utility
subsidiary companies to provide services to foreign utility companies or foreign
exempt wholesale generators in which Columbia may hereafter, directly or
indirectly, hold an interest. Columbia represents that no more than two percent
of the employees of the domestic public-utility companies will render services,
at any one time, to such foreign utility companies or foreign exempt wholesale
generators.
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In view of the increasingly global nature of the energy business, it is
both necessary and appropriate for Columbia and its subsidiaries, on a
world-wide basis, to apply the expertise that they have gained in their domestic
activities. Accordingly, Columbia seeks authority for the Foreign Energy
Subsidiaries to engage in activities contemplated by the GRAA internationally.
To the extent these activities involve the transportation or storage of natural
gas within the meaning of Section 2(a) of the GRAA, or are otherwise related to
the supply of natural gas, including exploration, development, production,
marketing, manufacture, or other similar activities within the meaning of
Section 2(b) of the GRAA (to the extent they have been previously approved by
the Commission), they would be exempted by Rule 58 if they were conducted within
the United States.
The Commission, however, has determined that the GRAA is not limited to
activities within the United States, and has authorized investments in foreign
gas-related projects on a case-by-case basis. See Consolidated Natural Gas Co.,
Holding Co. Act Release No. 26595 (Oct. 25, 1996) and Holding Co. Act Release
No. 26608 (Nov. 19, 1996) (collectively, the "CNG International Orders"). In
those orders, the Commission authorized CNG to invest in a number of foreign
pipeline projects in reliance on the GRAA.
In this matter, Columbia seeks authority to invest up to $5 million,
through the Foreign Energy Subsidiaries, to acquire the Canadian Interests that
are being offered for sale by Paragon Petroleum Corporation ("Paragon"), a
Canadian corporation. On October 17, 1997, Columbia Natural Resources, Inc.
("CNR") entered into a letter of intent with Paragon to acquire the Canadian
Interests. This transaction, subject to customary representations and
warranties, including the receipt of necessary regulatory approvals, is expected
to close by December 31, 1997. The properties are located in an area which is an
extension of the Appalachian Basin, an area of the United States in which
CNR has significant experience and success. It is CNR's current intention to
obtain a National Energy Board Certificate that will enable it to export
developed reserves from the Canadian Interests into the United States.
The Commission has previously authorized Columbia to engage in Canadian
oil and gas exploration activities. See The Columbia Gas System, Inc., Holding
Co. Act Release No. 17290 (Sept. 27, 1971) (authorizing the formation of a
wholly-owned Canadian oil and gas exploration and production subsidiary in
connection with an effort to obtain natural gas from the Prudhoe Bay and Arctic
region of Canada). See also The Columbia Gas System, Inc., Holding Co. Act
Release No. 18534 (Aug. 16, 1974) (authorizing the formation of Columbia Alaskan
Gas Transmission Corporation to participate in projects for the development of
proven gas reserves in Alaska and Canada, and for transportation of the gas to
the United States).
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Acquisition of the Canadian Interests is a gas-related activity within the
meaning of Section 2(b) of the GRAA. That section, in pertinent part, provides
that:
The acquisition by a registered company of any interest in any
company organized to participate in activities (other than those of
a natural gas company or involving the transportation or storage of
natural gas) related to the supply of natural gas, including
exploration, development, production, marketing, manufacture, or to
other similar activities related to the supply of natural or
manufactured gas, shall be deemed, for purposes of section 11(b)(1)
of the Act, to be reasonably incidental or economically necessary or
appropriate to the operation of such gas utility companies, if --
(1) the Commission determines, after notice and opportunity
for hearing in which the company proposing the acquisition
shall have the burden of proving, that such acquisition is in
the interest of consumers of each gas utility company or
consumers of any other subsidiary of such registered company;
and
(2) the Commission determines that such acquisition will not
be detrimental to the interest of consumers of any such gas
utility company or other subsidiary or to the proper
functioning of the registered holding company system.
Senator D'Amato, in a floor statement, explained that the term "development" in
Section 2(b) of the GRAA was intended to include "the acquisition of acreage,
land, leases or mineral rights containing expected or proven natural gas
reserves, initial drilling for reserves, and any related activities necessary to
remove natural gas." Cong. Rec. S17586 (daily ed.) (Oct. 27, 1990). Further, the
floor statement makes clear that Congress recognized oil and other petroleum
products, as well as natural gas, may be produced from such reserves. "A
producer of natural gas may operate and sell oil and other petroleum products,
as well as natural gas, depending upon the presence of oil and
natural gas in the geologic formation underlying a particular
well." Id.
The Commission has previously approved the exploration and development of
natural gas supply reserves under Section 2(b) of the GRAA. See National Fuel
Gas Co., Holding Co. Act Release No. 25265 (Dec. 20, 1991). The standards of
Section 2(b) are met in this matter because the expertise gained by Columbia,
through the Foreign Energy Subsidiaries, in foreign markets will provide
benefits to retail utility customers and other customers of the System,
including those of the its nonutility subsidiaries. Assuming that CNR is
successful in
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obtaining an export certificate, the Canadian Interests could increase the
supply of low-cost gas to U.S. Further, the Canadian Interests are located close
to the path of a proposed pipeline project, sponsored by Columbia, in
New York that would permit the flow of Canadian gas supplies to eastern
markets, in particular the metropolitan New York area. In addition, the foreign
GRAA activities offer: (i) knowledge of and experience with strategies, programs
and products tailored to highly-competitive markets, resulting in greater System
efficiencies, enhancing profits and helping to ensure continued low rates for
Columbia's consumers; (ii) higher rates of return that may be associated with
investments in foreign energy markets; and (iii) increased demand for System
resources, including personnel, which would result in a more optimal allocation
of such resources. See Consolidated Natural Gas Co., Holding Co. Act Release No.
26595 (Oct. 25, 1996).
Further, the proposed investment in the Canadian Interests would not be
detrimental to the interest of consumers of any gas utility company or other
subsidiary of Columbia or to the proper functioning of the registered holding
company system. The proposed investment of $5 million is de minimis in view of
the size of the System, whether measured by revenues, assets or consolidated
retained earnings. In addition, as noted above, Columbia specifically undertakes
that it will not seek recovery through higher rates to the System's utility
consumers to compensate it for any possible losses that it may sustain on
investments in the Canadian Interests or other foreign investments that may be
authorized by the Commission, or for any inadequate returns on such investments.
Consistent with the CNG International Orders, Columbia is asking the
Commission to reserve jurisdiction over its request to engage in foreign
gas-related activities (other than the Canadian Interests), pending completion
of the record, without additional notice, with respect to specific projects.
3. Money Pool
In its order dated December 23, 1996 (File No. 70-8925; Holding Co. Act
Release No. 26634), the Commission reserved jurisdiction over participation in
the System's Money Pool by new direct or indirect subsidiaries of Columbia
engaged in new lines of business. Columbia hereby requests that the Commission
release jurisdiction with respect to participation in the Money Pool by those
direct and indirect subsidiaries that are formed pursuant to the specific
authorization sought herein.
* * * * *
Rule 24(c)(1), in pertinent part, provides that, unless otherwise
designated in an application or declaration, every order is subject to a
requirement that the transaction proposed be carried out within 60 days of the
date of such order. As a practical matter, the failure to
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designate an alternative period has lead to a number of lapsed orders in the
past, necessitating the filing of post-effective amendments and the issuance of
supplemental orders. To avoid a recurrence of this situation, Columbia hereby
designates an indefinite period as the period in which it will carry out
transactions authorized in this order, or previously authorized by Commission
order, in accordance with the terms and conditions of, and for the purposes as
authorized by the relevant orders.
* * * * *
The conditions of Rule 54 are satisfied: At present, Columbia has no
"aggregate investment" within the meaning of Rule 53(a)(1)(i) in exempt
wholesale generators or foreign utility companies. Copies of this application
and all amendments thereto will be submitted to each of the state regulators
having retail rate jurisdiction over companies in the System. None of
the disabling conditions under Rule 53(b) exist with respect to Columbia and so
Rule 53(c) is inapplicable.
(b) Describe briefly, and where practicable state the approximate amount
of, any material interest in the proposed transaction, direct or indirect, of
any associate or affiliate of the applicant or declarant company or any
affiliate of any such associate company.
Not applicable.
(c) If the proposed transaction involves the acquisition of securities not
issued by a registered holding company or subsidiary thereof, describe briefly
the business and property, present or proposed, of the issuer of such
securities.
Not applicable.
(d) If the proposed transaction involves the acquisition or disposition of
assets, describe briefly such assets, setting forth original cost, vendor's book
cost (including the basis of determination) and applicable valuation and
qualifying reserves.
Not applicable.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
(a) State (1) the fees, commissions and expenses paid or incurred, or to
be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof, and
(2) if the proposed transaction involves the
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sale of securities at competitive bidding, the fees and expenses to be paid to
counsel selected by applicant or declarant to act for the successful bidder.
Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,500
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(b) If any person to whom fees or commissions have been or are to be paid
in connection with the proposed transaction is an associate company or an
affiliate of the applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
Legal services have been provided by Columbia Gas System Service
Corporation at cost.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
(a) State the section of the Act and the rules thereunder believed to be
applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of exemption.
The proposed transactions are jurisdictional under Sections 6, 7, 9, 10
and 13 of the Act and rules thereunder, Rule 54, and the Gas Related Activities
Act of 1990.
(b) If an applicant is not a registered holding company or a subsidiary
thereof, state the name of each public utility company of which it is an
affiliate, or of which it will become an affiliate as a result of the proposed
transaction, and the reasons why it is or will become such an affiliate.
Not applicable.
ITEM 4. REGULATORY APPROVAL
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the U. S. Securities and
Exchange Commission) over the proposed transaction.
The proposed transactions are not subject to the jurisdiction of any State
commission or of any federal commission other than this Commission. Columbia has
submitted a copy of
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this Application-Declaration to the public utility commissions in Kentucky,
Maryland, Ohio, Pennsylvania and Virginia.
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with the
proposed transaction.
Not applicable.
ITEM 5. PROCEDURE
(a) State the date when Commission action is requested. If the date is
less than 40 days from the date of the original filing, set forth the reasons
for acceleration.
It is requested that the Commission issue its Notice by November 4, 1997
and its order on or before December 4, 1997.
(b) State (i) whether there should be a recommended decision by a hearing
officer, (ii) whether there should be a recommended decision by any other
responsible officer of the Commission, (iii) whether the Division of Investment
Management may assist in the preparation of the Commission's decision, and (iv)
whether there should be a 30-day waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
Applicants hereby (i) waive a recommended decision by a hearing officer,
(ii) waive a recommended decision by any other responsible officer or the
Commission, (iii) consent that the Division of Investment Management may assist
in the preparation of the Commission's decision, and (iv) waive a 30-day waiting
period between the issuance of the Commission's order and the date on which it
is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
F. Opinion of Counsel for Columbia and Subsidiaries (to be filed by
Amendment).
G. Proposed Notice.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
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(a) Describe briefly the environmental effects of the proposed transaction
in terms of the standards set forth in Section 102(2)(C) of the National
Environmental Policy Act [42 U.S.C. 4232(2)(C)]. If the response to this term is
a negative statement as to the applicability of Section 102(2)(C) in connection
with the proposed transaction, also briefly state the reasons for that response.
The proposed transactions subject to the jurisdiction of this Commission
have no environmental impact in and of themselves.
(b) State whether any other federal agency has prepared or is preparing an
environmental impact statement ("EIS") with respect to the proposed transaction.
If any other federal agency has prepared or is preparing an EIS, state which
agency or agencies and indicate the status of that EIS preparation.
No federal agency has prepared or, to Columbia's knowledge, is preparing
an EIS with respect to the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned companies have duly caused this Application-Declaration to
be signed on their behalf by the undersigned thereunto duly authorized.
The signatures of the applicants and of the persons signing on their
behalf are restricted to the information contained in this application which is
pertinent to the application of the respective companies.
THE COLUMBIA GAS SYSTEM, INC.
DATE: October 22, 1997 BY: /s/ M. W. O'Donnell
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M. W. O'Donnell, Senior Vice President
& Chief Financial Officer
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EXHIBIT G
SECURITIES AND EXCHANGE COMMISSION
(Release No. )
October __, 1997
The Columbia Gas System, Inc. ("Columbia"), 12355 Sunrise Valley Drive,
Suite 300, Reston, Virginia, a Delaware Corporation, and a registered holding
company under the Public Utility Holding Company Act of 1935 ("the Act"), has
filed an application-declaration under Sections 6, 7, 9, 10 and 13 under the Act
and Rule 54 promulgated thereunder, and the Gas Related Activities Act of 1990
("GRAA").
Columbia requests authorization to provide consulting services, such as
project development, engineering, design, construction and construction
management, storage, gas control, geologic, fuel management, operating and
maintenance services and other related services to associate and nonassociate
companies and to engage in activities contemplated by the GRAA, in each case on
an international basis, through one or more of its, direct or indirect, existing
nonutility subsidiaries or through one or more newly-formed direct or indirect
subsidiaries (collectively, the "Foreign Energy Subsidiaries"). The Foreign
Energy Subsidiaries, in turn, may form one or more special-purpose subsidiaries
to invest, directly or indirectly, in entities such as corporations, limited
liability companies, partnerships or other entities that derive substantially
all of their revenues from foreign consulting or gas-related activities under
the GRAA. Columbia requests that the Commission authorize it to form the Foreign
Energy Subsidiaries and to fund the initial foreign consulting and foreign
gas-related activities as required. Columbia recently identified an
international project for which it seeks authority to invest up to $5 million
to acquire certain oil and natural gas leasehold interests in Ontario, Canada
(the "Canadian Interests"). Columbia also requests authority for the Foreign
Energy Subsidiaries to engage in preliminary development activities in
connection with foreign gas-related projects, but asks that the Commission
reserve jurisdiction over the acquisition of a security or interest in the
business of a nonaffiliated entity engaged in other foreign gas-related
activities, pending completion of the record.
A Foreign Energy Subsidiary will not undertake any service activities
if, as a result thereof, it would become a public utility company within the
meaning of the Act. Columbia further states that it will not seek recovery
through higher rates to its utility consumers to compensate it for any
possible losses that it may sustain on investments in the
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Canadian Interests or other foreign investments that may be authorized by the
Commission, or for any inadequate returns on such investments.
The application-declaration and any amendments thereto are available for
public inspection through the commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit their
views in writing by , to the Secretary, Securities and
Exchange Commission, Washington, D.C. 20549, and serve a copy on the
applicants-declarants at the address specified above. Proof of service (by
affidavit or, in case of an attorney-at-law, by certificate) should be filed
with the request. Any request for a hearing shall identify specifically the
issues of fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any notice or
order issued in this matter. After said date, the application-declaration, as
filed or as it may be amended, may be permitted to become effective.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
