<PAGE> 1
File Number 70-8447
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 1
to
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
and its subsidiary companies:
CNG COAL COMPANY CNG TRANSMISSION CORPORATION
CNG ENERGY COMPANY CONSOLIDATED NATURAL GAS
CNG GAS SERVICES CORPORATION SERVICE COMPANY, INC.
CNG PRODUCING COMPANY CONSOLIDATED SYSTEM LNG COMPANY
and its subsidiary HOPE GAS, INC.
company CNG PIPELINE THE EAST OHIO GAS COMPANY
COMPANY THE PEOPLES NATURAL GAS COMPANY
CNG RESEARCH COMPANY VIRGINIA NATURAL GAS, INC.
CNG STORAGE SERVICE COMPANY WEST OHIO GAS COMPANY
Consolidated Natural Gas Company,
a registered holding company,
is the parent of the other parties.
Names and addresses of agents for service:
S. E. WILLIAMS, Senior Vice President
and General Counsel
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
N. F. CHANDLER, General Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
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File Number 70-8447
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Consolidated Natural Gas Company et al. restate their
application-declaration under the above file number in the entirety as
follows:
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.
INTRODUCTION
Consolidated Natural Gas Company ("Consolidated") is a Delaware
corporation and a public utility holding company registered as such under the
Public Utility Holding Company Act of 1935 ("Act"). It is engaged solely in
the business of owning and holding all of the outstanding securities, with the
exception of certain minor long-term debt, of fifteen subsidiaries. These
subsidiary companies are primarily engaged in natural gas exploration,
production, purchasing, gathering, transmission, storage, distribution, by-
product operation, research and other activities related to the natural gas
business.
PROPOSED INVESTMENT IN GAS MARKET CENTER
CNG Market Center Services, Inc. ("CNGMC") was incorporated under the
laws of the State of Delaware on June 24, 1994, with an authorized equity
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capitalization of $2,000,000 consisting of 200 shares of common stock, $10,000
par value each. Upon approval by the Securities and Exchange Commission
("Commission") of this Application-Declaration, CNGMC will issue up to 200
shares of its common stock to CNG Energy Company ("CNG Energy"), a Delaware
corporation and a wholly-owned subsidiary of Consolidated, at a price of
$10,000 per share to become a special purpose, wholly-owned subsidiary of CNG
Energy.
CNGMC will own a 50% general partnership interest in a partnership
("Partnership") to be set up to develop and operate a new natural gas market
center to be called the "CNG/Sabine Center". The other 50% general
partnership interest in the Partnership will be owned by Sabine Hub Services
Company ("Sabine"), a wholly-owned subsidiary of Texaco, Inc. . CNGMC or
Sabine are sometimes herein referred to as "Partner", or collectively as
"Partners." The Partnership will be formed, after Commission approval of this
Application-Declaration, as a general partnership pursuant to the Uniform
Partnership Act of the State of Delaware, and will have a primary term,
subject to year to year extensions. The Partnership Agreement ("Partnership
Agreement") is Exhibit B-1.
DESCRIPTION OF CNG/SABINE CENTER'S BUSINESS
The CNG/Sabine Center will introduce the "super-hub" concept by arranging
for services at points along the 7,400 mile pipeline system of CNG
Transmission Corporation ("CNGT"), a wholly-owned pipeline subsidiary of
Consolidated. Any use of the CNGT pipeline system would be under the
open-access provisions of Order 636 of the Federal Energy Regulatory
Commission ("FERC") as now applicable to CNGT. The CNGT system is well suited
for a market center because of its strategic location close to major gas-using
markets, its ability to receive and dispatch gas at many points and its
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numerous connections to interstate pipelines that serve the major
gas-producing and gas-consuming regions.
Sabine will bring to the venture its experience as operator of the Henry
Hub, the major gas market center and supply aggregation point in Louisiana.
Since 1990, the Henry Hub has served as the standard delivery settlement
mechanism for natural gas futures traded on the New York Mercantile Exchange.
Initial services to be provided by the Partnership consist of the
following:
a) An intra-hub transfer service comprising of an accounting service
facilitating the title transfer of packages of gas among customers of
the Partnership at the CNG/Sabine Center in a current month.
b) A market activity reporting service which is an additional accounting
and administrative service to facilitate customer purchases and sales
of packages of natural gas intended for delivery in future months.
c) An agency service under which the Partnership may arrange for gas
transportation, parking and short-term storage services on behalf of its
customers at the CNG/Sabine Center.
In addition to the above, other gas market center services may also be offered
at the CNG/Sabine Center to meet the evolving needs of the natural gas
industry.
For its participation in the Partnership, Sabine will rely, in part, on
its intellectual property, software, technology rights and licenses which it
owns or to which it is entitled. Sabine will contribute a license to the
Partnership for use of an accounting system suitable for use with the
contemplated activities on the CNGT system. Sabine will also contribute the
use of personnel to the Partnership; initially two management level employees
will be assigned to acquire a hands-on knowledge of the Partnership's
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contemplated operations and to jointly direct the marketing strategies for the
Partnership.
Pursuant to an agreement entered into under Rules 87 and 90 and dated
August 15, 1983, CNGT has agreed to provide, at cost, certain management and
administrative services to CNG Energy. Pursuant to such agreement, CNG Energy
will request that CNGT provide on its behalf management and other support
services to the Partnership. Such services will initially include the
assignment of two management level employees of CNGT to acquire a hands-on
knowledge of the Partnership's contemplated operations and to jointly direct
the marketing strategies for the Partnership.
The major policies and authorized activities of the Partnership are to be
established by a management committee comprised of two representatives
appointed by each Partner. Such appointments are subject to the approval of
the other Partner, which is not to be unreasonably withheld. The management
committee is to appoint a chief operating officer who shall oversee the
day-to-day business of the Partnership. The Partnership will indemnify each
Partner and each affiliate or representative of such Partner against actions,
claims, demands and liabilities arising out of the acts of such persons in
good faith within the scope of their authority in the course of the
Partnership's business. The Partnership Agreement has a cross-indemnification
provision whereby each Partner will indemnify and agree to hold harmless the
other Partner, its affiliates, employees, agents and representatives against
liabilities arising from the acts of the indemnitor, its affiliates,
employees, agents and representatives, outside those acts in conformance with
the Partnership Agreement, which result in binding the indemnitee.
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INTERIM OPERATION OF CNG/SABINE CENTER
CNG Energy and Sabine have entered into a letter agreement dated June 22,
1994 ("Interim Agreement") which provides for the commencement by Sabine alone
of the hub operations to be assumed by the Partnership upon its formation.
The Interim Agreement is filed as Exhibit B-2. Sabine under the Interim
Agreement will perform hub marketing services, develop pro forma contracts for
such services, arrange for third-party providers of hub related services and
negotiate and provide hub services. Consolidated has granted a temporary,
non-exclusive and revocable license for the use of the "CNG" name in
connection with the operation of the hub during the term of the Interim
Agreement.
During the term of the Interim Agreement, Sabine's operation of hub
services will be at its sole risk and expense, without financial obligation to
CNG Energy, its parent or its affiliates. Any revenues derived from Sabine's
hub operations will belong to Sabine. The Partnership Agreement contains a
provision which requires Sabine to assign all hub contracts to the Partnership
upon formation of the Partnership. Contracts approved as to content by CNG
Energy during the Interim Agreement period are to be ratified by CNGMC upon
such assignment; contracts not so approved will be assigned to the Partnership
free and clear of all pre-existing liabilities for breach, non-performance or
other third party liability.
GAS RELATED ACTIVITIES ACT OF 1990
Section 2(a) of the Gas Related Activities Act of 1990 ("GRAA") provides
that the requirements of Section 11(b)(1) of the Act are met with respect to
the acquisition of an interest in a company organized to participate in
activities involving the transportation or storage of natural gas. The
proposed activities involving transportation and storage ("banking") of the
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Partnership directly, and of CNGMC indirectly, may be deemed to satisfy the
requirements of Section 2(a) of the GRAA and, therefore, of Section 11(b) of
the Act.
Section 2(b) of the GRAA provides that the requirements of Section
11(b)(1) of the Act are met with respect to the acquisition of an interest in
a company organized to participate in activities related to the supply of
natural gas, broadly defined to include exploration, development, production,
marketing and other similar activities, if:
(1) the Commission determines . . . that such acquisition is
in the interest of consumers of each gas utility company of such
registered 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.
Section 2(c) of the GRAA provides that each determination be made "on a
case-by-case basis, and not based on any preset criteria."
The proposed activities of the Partnership not otherwise falling under
Section 2(a) of the GRAA, satisfy the requirements of Section 2(b) the GRAA
and, therefore, of Section 11(b)(1) of the Act. The GRAA requires the
Commission to determine whether such proposed marketing activities will
benefit system "consumers." As used in the GRAA, the term "consumers" refers
both to retail utility customers and to wholesale customers such as pipelines.
Consolidated's consumers, both current and future, wholesale and retail, will
benefit from the Partnership's business.
The Office of Economic Policy of the FERC in a 1991 discussion paper
identified the several following ways in which market centers reduce barriers
to a more efficient gas market.(1) Such centers improve the matching of
_______________
(1) Paper issued by Office of Economic Policy, Federal Energy Regulatory
Commission, "The Importance of Market Centers," (Washington, D.C., August
21,
1991).
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buyers and sellers, thereby cutting transaction costs. They also make pricing
information available more widely, thus improving price discovery which is
essential to efficient commodity markets. Market centers reduce institutional
constraints like receipt and delivery point inflexibility, resulting in
greater gas sales and reliability. Gas merchants, through the use of market
centers, can lower costs by aggregating and matching their customers'
different load profiles and production schedules. The FERC staff in such
report suggests that FERC should encourage the organization of market centers,
and identified certain locations on the CNGT system as likely candidates for
market center development.
More specifically, the Partnership's business will maintain and increase
Consolidated's system gas throughput to local distribution companies ("LDCs"),
both associated and nonassociated, and their end-users. The creation of a
market center on the CNGT pipeline system will encourage transportation of
natural gas into such system. This will enhance the investments that
customers of CNGT have made in service agreements with CNGT.
Further, the increase in throughput (i.e., volumes of gas transported through
the pipeline of CNGT) attributable to the market center's activities should
result in more competitive transportation rates for the wholesale customers of
CNGT, including the Consolidated System LDCs. The additional transportation
fees should increase Consolidated System revenues and lower intrasystem gas
transportation costs on CNGT's system.
The market center would also help the LDC customers of CNGT in that it
would contribute toward the making of a better market for such LDC's capacity
release. Another consumer benefit is that the CNG/Sabine Market Center would
provide a point (in reality, the entire CNGT system) for buyers and sellers to
execute trades of gas, which will be supported by CNGT's offering of parking
and wheeling services through the Partnership. This would overall help
maintain the liquidity of the gas market.
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For all of the above reasons, the proposed activities of the Partnership
should be found to be in the interest of consumers of the Consolidated System;
and, accordingly that Section 2(b)(1) of the GRAA is satisfied.
It is further requested that the Commission find the proposed activities
will not be detrimental to the interests of consumers or to the proper
functioning of the holding company system, and that Section 2(b)(2) of the
GRAA is thereby satisfied. No subsidiary of Consolidated will be obligated to
engage in any transactions with the Partnership. Consolidated's maximum
investment of $2 million in CNGMC, anticipated to be in the form of mostly
short-term open account advances, will be de minimis in relation to the
Consolidated System's consolidated total assets of approximately $5 billion.
SOURCE OF FUNDS
It is proposed for CNG Energy to raise funds to invest in CNGMC, and for
CNGMC in turn to raise funds to invest in the Partnership, by (i) selling
shares of its respective common stock ($1,000 par value each in the case of
CNG Energy and $10,000 par value each in the case of CNGMC) to the issuer's
immediate parent, (ii) open account advances from the borrower's immediate
parent or the CNG System Money Pool ("Money Pool"), or (iii) long-term loans
from the borrower's immediate parent, in any combination thereof, provided
that the amounts and terms of CNG Energy to CNGMC shall be the mirror image of
the same respective type of Consolidated (or Money Pool in the case of open
account advances) to CNG Energy financings.
The open account advances and long-term loans will have the same
effective terms and interest rates as related borrowings of Consolidated in
the forms listed below:
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(1) Open Account Advances may be made to the borrower to provide
working capital and to finance the activities authorized by the
Commission. Open account advances may be made, repaid and remade
on a revolving basis, and all such open account advances will be
repaid on or before a date not more than one year from the date of
the first advance to such borrower with interest at the same
effective rate of interest as Consolidated's weighted average
effective rate of commercial paper and/or revolving credit
borrowings. If no such borrowings are outstanding, then the
interest rate shall be predicated on the Federal Funds' effective
rate of interest as quoted daily by the Federal Reserve Bank of
New York. Such advances may be made through the CNG System money
pool authorized under a Commission order dated June 12, 1986, HCAR
No. 24128, File No. 70-7258.
(2) Consolidated or CNG Energy, the parent company as the case may be,
may make long-term loans to its respective immediate subsidiary,
CNG Energy or CNGMC, for the financing of its activities described
herein. Loans shall be evidenced by long-term non-negotiable
notes of the borrower (documented by book entry only) maturing
over a period of time (not in excess of 30 years) to be determined
by the officers of the parent company, with the interest
predicated on and equal to Consolidated's cost of funds for
comparable borrowings. In the event Consolidated has not had
recent comparable borrowings, the rates will be tied to the
Salomon Brothers indicative rate for comparable debt issuances
published in Salomon Brothers Inc. Bond Market Roundup
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or similar publication on the date nearest to the time of
takedown. All loans may be prepaid at any time without premium or
penalty.
Consolidated will obtain the funds required for CNG Energy through
internal cash generation, issuance of long-term debt securities, borrowings
under credit agreements or through other authorizations approved by the SEC
subsequent to the effective date of this application-declaration.
ORDER REQUESTED
The following authorizations for the period ending July 1, 2004 are
hereby requested:
(1) For CNG Energy, from time to time, to obtain funds for the
purpose of investing in CNGMC through (a) the sale of shares of
CNG Energy common stock, $1,000 par value per share, to
Consolidated, (b) open account advances from the Money
Pool and/or Consolidated, and/or (c) long-term loans from
Consolidated, the aggregate outstanding amount so obtained in all
categories from Consolidated and the Money Pool not to exceed
$2,000,000.
(2) For CNGMC, from time to time, to obtain funds for the purpose of
investing in the Partnership through (a) the sale of shares of
common stock, $10,000 par value per share, to CNG Energy, (b) open
account advances from CNG Energy and/or the CNG System Money Pool,
and/or (c) long-term loans from CNG Energy, the aggregate
outstanding amount so obtained in all categories from CNG Energy and
the Money Pool not to exceed $2,000,000.
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(3) For CNGMC to make capital contributions to the Partnership not to
aggregate more than $2,000,000.
(4) For CNGMC to be a full participant in the CNG System Money Pool.
RULE 24 CERTIFICATES
It is also requested that Rule 24 Certificates of Notification be filed
to provide information as follows:
(1) an income statement and balance sheet reflecting the activities of
CNGMSC and the Partnership, to be filed not later than 45 days
following the end of each calendar quarter (beginning with the
calendar quarter ended December 31, 1994);
(2) a more detailed income statement and balance sheet in the form
mutually agreed by CNGMSC and the staff of the Commission, if
consecutive income statements reflect a net loss for a consecutive
12 month period; and
(3) a copy of the accounting system maintained by CNGMSC and the
Partnership as well as any cost allocation methodology, work order
procedures and cost accounting procedures needed to collect and
account for the income and expenses of the activities of CNGMSC and
the Partnership, including the allocation of Partnership profits to
CNGMSC and Sabine, to be filed within 6 months of the date of the
initial order issued in this proceeding.
(b) Describe briefly, and where practicable, state the approximate
amount of any material interest in the proposed transaction, direct or
indirect, of any associate company or affiliate of the applicant or any
affiliate of any such associate company.
None, except as set forth in Item 1(a).
(c) If the proposed transaction involves the acquisition of securities
not issued by a registered holding company or a subsidiary thereof, describe
briefly the business and property, present or proposed, of the issuer of such
securities.
None, except as set forth in Item 1(a).
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(d) If the proposed transaction involves the acquisition or disposition
of assets, described briefly such assets, setting forth original cost,
vendor's book cost (including the basis of determination) and applicable
valuation and qualifying reserves.
None, except as set forth in Item 1(a).
Item 2. Fees, Commissions and Expenses
______________________________
(a) State (i) 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 (ii) if the proposed transaction involves the 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.
It is estimated that the fees, commissions and expenses ascertainable at
this time to be incurred by Consolidated and CNG Energy in connection with the
herein proposed transaction will not exceed $7,000, consisting of the $2,000
filing fee under the Act, $4,000 payable to Consolidated Natural Gas Service
Company, Inc. ("Service Company") for services on a cost basis (including
regularly employed counsel) for the preparation of this
application-declaration and other documents, and $1,000 for miscellaneous
other expenses.
(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.
The charges of Service Company, a subsidiary service company, for
services on a cost basis (including regularly employed counsel) in connection
with the preparation of this post-effective amendment and other related
documents and papers required to consummate the proposed transactions are as
stated above.
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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.
Applicable Statutory
Transactions Provisions or Rules
____________ ___________________
Issuance to Consolidated of common Section 6(a), 7
stock, open account advance obliga- Rule 43
tions or long-term notes by
CNG Energy
Acquisition by Consolidated of Sections 9(a), 10 and 12(b)
of common stock, open account Rule 45
advance obligations or long-
term notes of CNG Energy
Issuance to CNG Energy of common Sections 6(a), 7
stock, open account advance Rule 43
obligations or long-term notes
by CNGMC
Acquisition by CNG Energy of common Sections 9(a), 10 and 12(b)
stock, open account advance obliga- Rule 45
tions or long-term notes of CNGMC
Acquisition by CNGMC of Sections 9(a), 10 and 12(b)
partnership interests in the Rule 45
Partnership.
Money Pool transactions Sections 6(a), 7, 9(a), 10 and 12(b)
involving CNG Energy and/or CNGMC Rules 43 and 45
CNGMC's participation in the Partnership will satisfy the requirements
of Rule 16 under the Act. Consequently, the Partnership and affiliates not
otherwise subject to the jurisdiction of the Act will be exempt from all
obligations, duties or liabilities that would be imposed upon them by the Act
in the absence of Rule 16.
If the Commission considers the proposed future transactions to require
any authorization, approval or exemption, under any section of the Act for
Rule or Regulation other than those cited hereinabove, such authorization,
approval or exemption is hereby requested.
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(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 Securities and Exchange
Commission) over the proposed transactions.
The financing authorization sought herein is not subject to the
jurisdiction of any State or Federal Commission (other than the Commission).
(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.
Inapplicable.
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 hereby requested that the Commission issue its order with respect
to the transaction proposed herein on or before October 3, 1994.
(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
Investment Management - Office of Public Utility Regulation 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.
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the
proposed transactions. The office of the Division of Investment Management -
<PAGE> 16
Office of Public Utility Regulation may assist in the preparation of the
Commission's decision. There should be no 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
_________________________________
The following exhibits and financial statements are made a part of this
statement:
(a) Exhibits
A-1 Certificate of Incorporation of CNG Energy.
(Incorporated by reference to Exhibit A-1 to Form U-1 of
Consolidated, File No. 70-8285)
A-2 By-Laws of CNG Energy.
(Incorporated by reference to Exhibit A-2 to Form U-1 of
Consolidated, File No. 70-8285)
A-3 Certificate of Incorporation of CNGMC
A-4 By-laws of CNGMC
B-1 CNG/Sabine Center General Partnership Agreement.
B-2 Letter Agreement between CNG Energy and Sabine Hub to
establish interim operation of hub.
F Opinion of counsel for Consolidated and CNG Energy.
O Draft of Notice.
(b) Financial Statements
Financial statements are deemed unnecessary with respect to
the authorizations herein sought due to the nature of the
matter proposed. However, Consolidated will furnish any
financial information that the Commission shall request.
<PAGE> 17
Item 7. Information as to Environmental Effects
_______________________________________
(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 item is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons or
that response.
The proposed transactions do not involve major federal action
having a significant effect on the human environment. See Item 1(a).
(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 is preparing an environmental
impact statement with respect to the proposed transaction.
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this statement to be
signed on their respective behalf by the undersigned thereunto duly
authorized.
CONSOLIDATED NATURAL GAS COMPANY
By L. D. Johnson
Executive Vice President
and Chief Financial Officer
CNG COAL COMPANY
CNG ENERGY COMPANY
CNG GAS SERVICES CORPORATION
CNG PRODUCING COMPANY
CNG PIPELINE COMPANY
CNG RESEARCH COMPANY
CNG STORAGE SERVICE COMPANY
CNG TRANSMISSION CORPORATION
CONSOLIDATED NATURAL GAS SERVICE
COMPANY, INC.
CONSOLIDATED SYSTEM LNG COMPANY
HOPE GAS, INC.
THE EAST OHIO GAS COMPANY
THE PEOPLES NATURAL GAS COMPANY
VIRGINIA NATURAL GAS, INC.
WEST OHIO GAS COMPANY
By N. F. Chandler
Their Attorney
Date: August 22, 1994
<PAGE> 1 EXHIBIT F
August 22, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Consolidated Natural Gas Company, et al.,
S.E.C. File Number 70-8447
Dear Sirs:
The following opinion is rendered in accordance with the requirements of
Exhibit F to Form U-1 of the Securities and Exchange Commission ("SEC") with
respect to the transactions proposed ("Proposed Transactions") by Consolidated
Natural Gas Company ("Consolidated") and CNG Energy Company ("CNG Energy"),
(referred collectively as the "Companies"), in the Application-Declaration at
SEC File No. 70-8447, as amended ("Application-Declaration"). In the
Application-Declaration authority is requested for CNG Energy to finance a
new, limited purpose subsidiary, CNG Market Center Services, Inc. ("Market
Center"), which will acquire a 50% general partnership interest in CNG/Sabine
Center, and for CNG Energy to obtain for such purposes, through July 1, 2004,
up to $2,000,000 through (i) the sale of shares of its common stock, $1,000
par value per share, to Consolidated, (ii) open account advances from
Consolidated or the CNG System Money Pool ("Money Pool"), or (iii) long-term
loans from Consolidated, in any combination thereof. The
Application-Declaration further requests authority for CNG Energy to use such
funds obtained from Consolidated (or the Money Pool) to acquire in
mirror-image form similar securities of Market Center to enable it to finance
its interest in the CNG/Sabine Center partnership.
I have examined the certificate of incorporation and bylaws of the
Companies; corporate actions of the Companies relating to the Proposed
Transactions; the Application-Declaration; and such other documents, records,
laws and other matters as I deemed relevant and necessary for the proposes of
this opinion.
Based on such examination and relying thereon, I am of the opinion that
when the SEC shall have permitted the Application-Declaration to become
effective, all requisite action will have been taken by the Companies which
are parties to said Application-Declaration, except the actual carrying out
thereof.
In the event the Proposed Transactions are consummated in accordance with
the Application-Declaration, I am of the opinion that:
(a) No state commission has jurisdiction of the proposed transactions;
(b) All state laws applicable to the Proposed Transactions will have
been complied with;
<PAGE> 2
(c) CNG Energy is validly organized and duly existing; the capital
stock of CNG Energy will be validly issued, fully paid and
nonassessable, and the holder thereof will be entitled to the
rights and privileges pertaining thereto set forth in the
Certificate of Incorporation of CNG Energy; and the open account
advances and long-term loans to CNG Energy will be valid and binding
obligations of CNG Energy in accordance with their terms;
(d) Consolidated will legally acquire the capital stock of, and
interests in open account advances and long-term loans to, CNG
Energy as described in the said Application-Declaration;
(e) CNG Energy will legally acquire the capital stock of, and interests
in open account advances and long-term loans to, Market Center as
described in the said Application-Declaration; and
(f) Open account advances borrowed from the Money Pool will be valid and
binding obligations of the borrower, and the relevant participants
in the Money Pool will legally acquire interests in such open
account advances as debt securities of the borrower.
(g) The consummation of the Proposed Transactions will not violate the
legal rights of the holders of any securities issued by Consolidated
or CNG Energy or any associate company thereof.
I hereby consent to the use of this opinion in connection with said
filing.
Very truly yours,
N. F. Chandler
Attorney
