<PAGE> 1
File Number 70-8599
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 1
to
FORM U-1
DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
(a registered holding company and
the parent of the other party)
CONSOLIDATED SYSTEM LNG COMPANY
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
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
J. M. Hostetler, Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
<PAGE> 2
File Number 70-8599
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM U-1
DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
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 sixteen
subsidiaries. These subsidiary companies are primarily engaged
in natural gas exploration, production, purchasing, gathering,
transmission, storage, distribution, by-product operation, energy
services, and other activities related to the natural gas
business.
<PAGE> 3
Consolidated System LNG Company ("Consolidated LNG")
is a wholly-owned subsidiary of Consolidated, holding what
remains of Consolidated's past venture into the liquefied natural
gas (or LNG) business. (Consolidated LNG was authorized to be
financed by Consolidated, and to engage in the LNG business, by
the Securities and Exchange Commission ("SEC") in its order dated
July 23, 1971, Release No. 35-17206, File No. 70-5042.) The
company is for all practical purposes dormant. Consolidated does
not foresee any change in this regard and is contemplating --
but not proposing at this time -- the dissolution of
Consolidated LNG.
Consolidated LNG proposes to buy back at par shares of
its common stock, $ 10,000 par value per share, from
Consolidated. This will provide additional cash to Consolidated
for financing of its other non-utility and utility subsidiaries.
BACKGROUND
__________
During the late 1960's and early 70's, demand for
natural gas exceeded available supply for a variety of reasons.
Natural gas companies, like Consolidated, sought authority from
the Federal Power Commission ("FPC") (now the Federal Energy
Regulatory Commission or "FERC") to import liquefied natural gas
("LNG") from overseas. This required the construction of
facilities to receive the LNG from tankers and re-vaporize such
<PAGE> 4
for further transport via underground pipelines. In
Consolidated's case, it teamed up with Columbia Natural Gas
System, Inc., and each incorporated a special purpose subsidiary,
i.e., Consolidated LNG and Columbia LNG Corporation ("Columbia
LNG"), respectively, to conduct the LNG business.
After FPC authorization in 1972(1), Columbia LNG and
Consolidated LNG, as joint owners, constructed an LNG receiving
terminal at Cove Point, Maryland, re-gasification facilities at
the Cove Point site, and a pipeline connecting the Cove Point
facility to existing underground pipelines near Loudoun, Virginia
(collectively, the "LNG facilities"). The LNG facilities
received shipments of LNG from Algeria beginning in 1978. The
shipments ceased in December of 1980 because Algeria sought price
increases which Columbia LNG and Consolidated LNG were unwilling
to pay. The LNG facilities were "mothballed" and remain so to
this day.
In November of 1982, Consolidated LNG filed an
application (Docket No. CP83-75-000) with the FERC to abandon its
interest in the LNG facilities and to amortize the unrecovered
investment in the abandoned facilities over a ten-year period.
______________
(1) The FPC authorized Columbia LNG and Consolidated LNG to
import LNG and construct the required facilities in COLUMBIA LNG
CORP. ET AL., Op. No. 622, 47 FPC 1624 (1972), ON REHEARING, Op.
No. 622-A, 48 FPC 723 (1972), REMANDED, COLUMBIA LNG CORP. V.
FPC, 491 F.2d 651 (5th Cir. 1974), ON REMAND, Op. No. 786, 57 FPC
354 (1977).
<PAGE> 5
On January 28, 1988, the FERC issued an order approving a
settlement in this proceeding, which allowed Consolidated LNG to
recover approximately $188 million over a ten-year period,
beginning March 1, 1988.(2) This included the recovery of
substantially all of its undepreciated investment and a return
thereon.(3) The costs are recovered through rates charged by
Consolidated's interstate pipeline sub-subsidiary, CNG
Transmission Corporation, as required by the FERC.(4)
Thus, Consolidated LNG, though otherwise inactive, has
been accumulating net income and a return of its capital
investment since 1988. No dividend was paid from 1988 to 1994.
(In other words, Consolidated LNG has not made the standard
payout of 100% of its liquid cash assets to Consolidated since
1988.) A dividend of $ 2,502,000 was declared on December 15,
1994 and paid on February 15, 1995, leaving $304,000 in retained
earnings as of that date.
PROPOSED STOCK BUY BACK AND DIVIDEND
____________________________________
Consolidated LNG now proposes to buy back shares of its
stock at $10,000 per share from Consolidated, from time to time
through December 31, 2000, to the extent Consolidated LNG has
cash available to buy back its stock. Currently, Consolidated
LNG has 8,340 outstanding shares of stock, $10,000 par value
______________
(2) CONSOLIDATED SYSTEM LNG COMPANY, ET. AL., 42 FERC Paragraph
61,078.
(3) ID., at page 61,375.
(4) ID., at page 61,376.
<PAGE> 6
per share, all of which are owned by its parent, Consolidated.
The shares to be repurchased by Consolidated LNG will be held as
treasury shares.
The buy backs would effect payouts of liquid cash
assets to Consolidated. The first buy back by Consolidated LNG
is anticipated to be 4,852 shares; a payout to Consolidated of
$48,520,000. Consolidated LNG also plans to declare a dividend
and thereby payout the cash in retained earnings ($304,000 as of
December 31, 1994) to Consolidated. When combined with the 1994
dividend of $2,502,000, Consolidated LNG achieves an approximate
100% payout of liquid cash assets to Consolidated.
For the remainder of the 10 year FERC authorized
amortization period (until 1997), Consolidated LNG will pay 100%
of its liquid cash assets for the years 1995 through 1997 to
Consolidated via dividends paid out of retained earnings and
additional stock buy backs.
Consolidated LNG requests Commission authorization to
buy back shares of its stock from Consolidated, from time to
time, to effect the payout of liquid cash assets to Consolidated.
Consolidated LNG is for all practical purposes a defunct company.
The return of capital to Consolidated will provide cash for
Consolidated to meet its obligations to finance its other
subsidiaries, and thus it will directly benefit other
Consolidated subsidiaries, utility and non-utility alike.
<PAGE> 7
SECTION 12(C) AND RULE 42
_________________________
Section 12(c) of the Act, among other things, makes it
"unlawful for any registered holding company or any subsidiary
company thereof . . . to acquire, retire, or redeem any security
of such company . . . in contravention of such rules and
regulations or orders as the Commission deems necessary or
appropriate. . . ." The intent of Section 12(c) is "to protect
the financial integrity of companies in holding-company systems,
to safeguard the working capital of public-utility companies, to
prevent the payment of dividends out of capital or unearned
surplus, or to prevent the circumvention of the provisions of
[the Act] or the rules, regulations, or orders thereunder."
The Commission's Rule 42, promulgated under Section
12(c) of the Act, allows a registered holding company or
subsidiary "to acquire, retire, or redeem any security of which
it is the issuer . . . without the need for prior Commission
approval...." However, a "proviso" to Rule 42 is that "[t]his
section shall not apply to a transaction by a registered holding
company or its subsidiary company with an associate company...."
Such is the case here.
<PAGE> 8
Consolidated LNG submits that its proposal to buy back
its shares to effect a return of capital to its parent does not
contravene the intent of Section 12(c). The intent of Section
12(c) -- put in negative terms -- is to prevent the "milking
of operating companies in the interest of the controlling holding
company groups." EASTERN UTILITIES ASSOCIATES, 49 SEC Docket 77
(HCAR No. 25330, June 13, 1991), at 78. Here, Consolidated LNG
submits, the payment of liquid cash assets to Consolidated, to be
used for Consolidated's system financing, will benefit
Consolidated's operating companies. Also, Consolidated LNG
submits that it is for all practical purposes no longer an
operating company, and that its capital can better serve the
Consolidated system by return of such to Consolidated for use in
general system financing.
Consolidated LNG submits that its circumstances are
exceptional and that its proposal is not the type of activity
that Section 12(c) was designed to prevent. With the abandonment
of the LNG facilities, Consolidated LNG became an inactive
company, its only function being to recover substantially all of
its undrepreciated investment in the facility together with
carrying costs and taxes. Under the circumstances, Consolidated
LNG submits that the return of capital to the parent is
"appropriate in the public interest" and "in the best interest of
the security holders." (Consolidated is the sole "security
holder" of Consolidated LNG.) Finally, since the returned
capital will be used by Consolidated for the financing of its
other utility and non-utility subsidiaries, it will serve
<PAGE> 9
to increase the financial integrity of the other companies in the
Consolidated system. Thus, the proposal here fulfills the intent
of Section 12(c) -- as stated in the positive above -- "to
protect the financial integrity of companies in holding-company
systems . . . ."
Consolidated LNG's net income and retained earnings
through 1994 are as follows:
DIVIDEND DIVIDEND NET RETAINED
YEAR DECLARED PAID INCOME EARNINGS
1988 $ 0 0 $15,428,000 $(33,084,000)
1989 0 0 4,845,000 (28,239,000)
1990 0 0 5,163,000 (23,076,000)
1991 0 0 4,412,000 (18,664,000)
1992 0 0 14,138,000 (4,526,000)
1993 0 0 3,547,000 (979,000)
1994 2,502,000 0 3,785,000 304,000
0
__________ ___________
TOTAL $2,502,000 0 $51,318,000
<PAGE> 10
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
Consolidated LNG in connection with the proposed transaction will
not exceed $7,000, including the $2,000 filing fee, $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
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
<PAGE> 11
Declaration and other related documents and papers required to
consummate the proposed transactions are as stated above.
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.
As discussed above, Section 12(c) and Rule 42 are
deemed applicable to the proposed buyback of shares of stock by
Consolidated LNG.
If the Commission considers the proposed transaction to
require any authorization, approval or exemption, under any
section of the Act or Rule or Regulation other than those cited
herein, such authorization, approval or exemption is hereby
requested.
(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.
<PAGE> 12
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 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.
Consolidated and Consolidated LNG request that the
Commission issue its order with respect to the transaction
proposed as soon as possible.
(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 -
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.
<PAGE> 13
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 - 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 statement are made
a part of this statement:
(a) Exhibits
________
F Opinion of Counsel for Consolidated and
Consolidated LNG;
O Proposed Notice pursuant to Rule 22(f).
(b) Financial Statements
____________________
Financial statements of the declarants are deemed
unnecessary with respect to the proposed authorizations sought
herein due to the simple nature of the proposed transaction and
<PAGE> 14
the dollar amount relative to the size of the declarants.
However, any financial information will be furnished to the
Commission upon request.
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 transaction does 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> 15
SIGNATURES
___________
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 behalf by the
undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By L. D. Johnson
Vice Chairman of the Board
and Chief Financial Officer
CONSOLIDATED SYSTEM LNG COMPANY
By J. M. Hostetler
Its Attorney
Dated: June 7, 1995
<PAGE> 1
EXHIBIT F-1
June 7, 1995
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-____
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 transaction
proposed by Consolidated Natural Gas Company ("Consolidated") and
Consolidated System LNG Company ("Consolidated LNG"), (referred
collectively as the "Companies"), in the Declaration filed
concurrently herewith, ("Declaration"). The Declaration seeks
authority for Consolidated LNG to buy back at par from
Conslidated shares of its stock, $10,000 par value per share, to
effect payouts of available cash to Consolidated, as further
described in the Declaration.
I have examined the Certificate of Incorporation and Bylaws
of the Companies; the corporate minutes of the Companies relating
to the transactions proposed with respect to the 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 permits the Declaration to become
effective, all requisite action will have been taken by the
Companies which are parties to the Declaration, except the actual
carrying out thereof.
In the event the proposed transaction is consummated in
accordance with the Declaration, I am of the opinion that:
(a) No state commission has jurisdiction of the proposed
transaction;
(b) All state laws applicable to the proposed transaction
will have been complied with;
<PAGE> 2
(c) Consolidated LNG will legally acquire shares of its
stock for return to its treasury and Consolidated will
legally acquire cash (the amount equaling the number of
shares multiplied by the $10,000 par value per share),
as described in the said Declaration; and
(d) The consummation of the proposed transaction will not
violate the legal rights of the holders of any
securities issued by Consolidated or Consolidated LNG
or any associate company thereof.
I hereby consent to the use of this opinion in connection
with the filing.
Sincerely,
J. M. Hostetler
Attorney
<PAGE> 1
EXHIBIT O
Proposed Re-Notice Pursuant to Rule 22f)
(Release No. 35- )
FILINGS UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
("ACT")
June __, 1995
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and
rules promulgated thereunder. All interested persons are
referred to the application(s) and/or declaration(s) for complete
statements of the proposed transaction(s) summarized below. The
application(s) and/or declaration(s) and any amendments thereto
is/are available for public inspection through the Commission's
Office of Public Reference. Interested persons wishing to
comment or request a hearing on the application(s) and/or
declaration(s) should submit their views in writing by
___________, 199_ to the Secretary, Securities and Exchange
Commission, Washington, DC 20549, and serve a copy on the
relevant applicant(s) and/or declarant(s) at the address(es)
specified below. Proof of service (by affidavit or, in case of
an attorney at law, by certificate) should be filed with the
request. Any request for 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
<PAGE> 2
receive a copy of any notice or order issued in the matter.
After said date, the application(s) and/or declaration(s), as
filed or as amended, may be granted and/or permitted to become
effective.
Consolidated Natural Gas Company, et al. (70-8599)
_________________________________________________
Consolidated Natural Gas Company ("Consolidated"), CNG
Tower, Pittsburgh, Pennsylvania 15222-3199, a registered holding
company, and its wholly-owned subsidiary, Consolidated System LNG
Company ("Consolidated LNG"), 625 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3199, have filed an amendment to a
declaration they filed March 21, 1995, under Section 12(c) of the
Act and Rule 42 thereunder. The Commission issued a notice on
the original declaration (HCAR No.l 26273) on April 14, 1995.
Consolidated LNG now proposes to buy back at par shares of its
common stock, $ 10,000 par value per share, from Consolidated --
instead of a one-time dividend as previously proposed -- to
effect a return of capital to the parent. This will provide
additional cash to Consolidated for financing of its other non-
utility and utility subsidiaries.
Consolidated LNG has not made the standard payout of
100% of its liquid cash assets to Consolidated since 1988. A
<PAGE> 3
dividend of $ 2,502,000 was declared on December 15, 1994 and
paid on February 15, 1995, leaving $304,000 in retained earnings
as of that date. Consolidated LNG proposes an initial return of
capital to its parent of approximately $48,824,000, of which
$48,520,000 will come from the stock buy back, and $304,000 will
be out of retained earnings. When combined with the 1994
dividend of $2,502,000, it achieves an approximate 100% payout of
liquid cash assets to Consolidated. Future liquid cash assets
will be paid by dividend out of retained earnings and additional
stock buy backs.
Consolidated LNG is for all practical purposes a
defunct company. The return of this capital to Consolidated will
provide cash for Consolidated to meet its obligations to finance
its other subsidiaries, and thus it will directly benefit other
Consolidated subsidiaries, utility and non-utility alike.
________________________________________
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
