<PAGE> 1
File Number 70-8621
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Post-Effective 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
(a registered holding company and
the parent of the other party)
CNG ENERGY SERVICES CORPORATION
One Park Ridge Center
Pittsburgh, Pennsylvania 15255-0746
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
<PAGE> 2 File Number 70-8621
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective amendment No. 1
to
FORM U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
___________________________________
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"). CNG Energy Services
Corporation ("Energy Services") is a wholly owned subsidiary of Consolidated.
PRIOR AUTHORIZATIONS
Energy Services was authorized by the Securities and Exchange Commission
("SEC" or "Commission") to be the gas marketing subsidiary for the CNG System
by order dated February 27, 1987, HCAR No. 24329. This order authorized Energy
Services, as a gas marketer, to purchase, pool, transport, exchange, store and
sell gas supplies from competitively priced sources, including the spot
markets, independent producers and brokers, and CNG Producing Company ("Gas
Related Activities").
By Order dated July 26, 1995 (the "Order") Energy Services was authorized,
without further Commission approval, through December 31, 1997, to invest an
<PAGE> 3
aggregate amount up to $150 million(1) to acquire: (i) an ownership interest,
which may be up to 50% of the voting or nonvoting stock, in one or more
corporations established for the sole purpose of engaging in Gas Related
Activities; (ii) either in its own name or through a wholly owned special
purpose subsidiary company, up to 50% of the general partnership interests in
one or more partnerships, or up to 50% voting equity interest in one or more
other joint business entities such as joint ventures or limited liability
companies, which are established for the sole purpose of engaging in Gas
Related Activities; and/or (iii) up to 100% of the limited partnership
interests in one or more partnerships established for the sole purpose of
engaging in Gas Related Activities. None of the projects in which Energy
Services may invest can be a public-utility company.
As of June 30, 1997 Energy Services had invested pursuant to the Order
$19,168,000 and $14,845,000 in two pipeline gathering partnerships(2),
respectively, in the Main Pass area near the Alabama coast of the Gulf of
Mexico.
_____________
(1) The original authorization limit in this proceeding was the lesser of $150
million or Energy Services' unused financing authority under the current
Consolidated System annual intra-system financing authorization, which was
$300 million in the order dated June 29, 1995, HCAR No. 26321. Since the
inception of the Consolidated System omnibus financing authorization in the
order dated March 28, 1996, HCAR No. 25600, the concept of unused financing
authority has become meaningless.
(2) The two partnerships are the Main Pass Gathering Company and the Main Pass
Oil Gathering Company, which transport the gas and oil jointly produced
from the gas fields in the Main Pass region. Energy Services owns the
interests in these partnerships through wholly-owned special purpose
subsidiaries, CNG Main Pass Gathering Corporation and CNG Oil Gathering
Corporation, respectively. On December 31, 1996, the Main Pass Gathering
Company was merged into Dauphin Island Gathering Partners.
<PAGE> 4
The Order authorized Consolidated and Energy Services to guarantee their
obligations incurred as a a result of equity investments made in the joint
entities up to an aggregate amount of $150 million(3). No such guarantees have
been made to date.
REQUEST FOR EXTENSION
Energy Services continues to have the need to be able to "partner" with
others to allow it to obtain the right to use and control facilities with
greater capacity in a diverse number of geographic areas, and with a lesser
amount of capital investment than it could do on its own. Entering into joint
business ventures in which nonaffiliated parties would invest reduces the
amount of capital Energy Services has at risk in a given project. Most of the
type of projects Energy Services would consider investing in would be
permanently financed with non-recourse project financing, thereby further
reducing the risk to Energy Services. In some cases, Energy Services would
also benefit from the co-investors' experience as to the efficient operation of
some project facilities. It is for such reasons that the applicants now
request an extension of time for the authorization previously granted in this
proceeding until December 31, 2002.
_______________
(3) The original limit on guarantees as stated in the Order was similar to that
stated with respect to the amount of financing, i.e. the lesser of $150
million or Energy Services' unused annual system financing authorization.
See footnote (1) supra.
<PAGE> 5
The aggregate amount invested (including capitalized development
expenses) by Energy Services in such joint entities will not in the aggregate
exceed $200 million during the extended authorization period ending December
31, 2002. Energy Services would not own more than 50% of the equity voting
interests in any of the joint entities, and the capital structure of each of
the entities is expected to be simple and straight forward, consisting
primarily of equity and project financing. None of the projects in which
Energy Services would seek to invest will be a utility company.
Request is also made for an extension of authority for Energy Services to
enter into service agreements with one or more of the entities in which it is
investing. These could be in the form of an operating and maintenance
agreement under which Energy Services would operate and manage the business of
the entity, and/or an administrative services agreement whereby Energy Services
would provide administrative services (including accounting and marketing
services) to the entity. Energy Services would generally be compensated under
such agreements on an annual fee plus direct service cost reimbursement basis.
However, marketing services may be provided for a set fee per unit of product
sold, and operating and maintenance agreements may also provide for a bonus or
penalty based upon the degree of efficiency in operating the project.
Consolidated and Energy Services also seek to continue to be able to make
guarantees of obligations to make equity investments in the joint entities,
which parent guarantees are commonly requested by institutions providing <PAGE>
6
project financing. Such guarantees would be calculated as part of the maximum
$2 billion authority to guarantee obligations of subsidiaries granted to
Consolidated and certain of its subsidiaries by the Commission order dated
March 28, 1996, HCAR No. 26500.
NEED FOR APPLICABILITY OF RULE 16
The applicants regard each of the joint business entities in which Energy
Services would invest pursuant to an authorization granted in this proceeding,
and each affiliate thereof (except for companies within the Consolidated
System), to be exempt under rule 16 from all obligations imposed upon it by the
Act, as a subsidiary company or an affiliate of a registered holding company or
of a subsidiary company thereof. The basis for such position is as follows.
* The entity would not be a public utility company as defined in section
2(a)(5) of the Act.
* The entities would be organized to engage primarily in Gas Related
Activities which by their very nature relate to the supply of natural gas.
* No more than 50% of the voting interests in the entity will be owned,
directly or indirectly, by a registered holding company.
<PAGE> 7
* The acquisition by Energy Services of its direct or indirect interests in
the entity is the subject of this Application-Declaration.
There is an inherent relationship between rule 16 and the Gas Related
Activities Act of 1990 ("GRAA")(4). Section 2 of the GRAA states that section
11(b)(1) of the Act will be satisfied if a registered holding company (or
subsidiary thereof) acquires any interest in any company organized to
participate in activities involving the transportation or storage of natural
gas, or (if certain determinations are made) in any company organized to
participate in activities related to the supply of natural gas (specifically
including marketing activities). Rule 16(a)(2) requires the exempt company to
be organized primarily for the exploration, development, production,
manufacture, storage, transportation or supply of natural gas. It is Energy
Services' position that the joint entities in which it would participate would,
in their engaging in Gas Related Activities, be involved in activities "related
to the supply of natural gas" as used in the GRAA and also in "supply of
natural gas" activities as used in rule 16. There is a strong parallel
structure in the GRAA and rule 16 in that both specifically refer to storage
and transportation of natural gas, and both refer to "the supply of natural
gas." It would seem, therefore, that both the statute and the rule are
referring to basically same types of activities.
_______________
(4) Pub. Law 101-572. <PAGE> 8
Since the Gas Related Activities of Energy Services as a gas marketing
company have already been found to satisfy the GRAA, they should also be deemed
to satisfy the requirements of rule 16.
The joint entities in which Energy Services may invest under an extension
of its authorization in this proceeding may be "gas related companies" within
the meaning of rule 58 adopted under the Act(5). However, rule 16 would not be
available to exempt companies formed under rule 58 since condition (4) of rule
16, i.e. the acquisition would not be approved pursuant to section 9(a) and 10
of the Act, will not have been met. It has been Consolidated's prior
experience in acquiring a minority position in entities mostly owned by persons
not subject to the Act, that such persons insist that the new company not be
subject to the Act. It is primarily for this reason that the applicants seek
an extension of authority in this proceeding rather than attempting to rely on
rule 58 in each instance(6).
_______________
(5) HCAR No. 26667 (Feb. 14, 1997).
(6) The Commission in the release adopting rule 58 stated that "...it believes
that a proposal to amend rule 16 to make it consistent with rule 58, and to
enhance its usefulness (which is limited at present) should be considered.
Such an amendment, however, is beyond the scope of this rulemaking."
(supra, Section IV A).
<PAGE> 9
AUTHORIZATIONS REQUESTED
Request is hereby made for authority to do the following through
December 31, 2002 without any further prior SEC approval.
1.For Energy Services to acquire for an aggregate amount not to exceed $200
million, directly or indirectly through wholly-owned subsidiaries, up to
50% voting equity interests in joint business entities with non-affiliates
as described above without any further prior SEC approval. Related
capitalized development expenses will be included as part of the
investment costs of acquiring such interests.
2.For Consolidated and/or Energy Services to make guarantees of obligations
to make equity contributions in connection with Energy Services'
investments in such joint business entities, the aggregate amount of such
guarantees to be limited as described above.
3.For Energy Services to enter into service agreements with such joint
business entities as described herein.
All of the financing between Consolidated and Energy Services for
acquisitions of joint business interests would be pursuant to the CNG System
omnibus financing authorization in the Commission order dated March 28, 1996,
HCAR No. 26500.
<PAGE> 10
RULE 24 CERTIFICATES
It is also requested that rule 24 Certificates of Notification be filed
within 60 days after the end of each semi-annual calendar period to report to
the Commission with respect to transactions authorized pursuant to this filing.
Such certificates shall contain the following information with respect to each
entity in which Energy Services has made an investment.
1. Name
2. Organizational form
3. Type of business
4. Total capitalization and the amount invested by Energy
Services for the period and on a cumulative basis
This information may be reported in the rule 24 Master Certificates of
Notification filed under SEC File No. 70-8667.
It is noted that rule 16(c) requires that the annual report of each
entity exempt pursuant to rule 16 be filed as an exhibit to Consolidated's
annual report on Form U5S.
Item 2. Fees, Commissions and Expenses
_______________________________
It is estimated that the fees, commissions and expenses ascertainable at
this time to be incurred by Consolidated and Energy Services in connection with
<PAGE> 11
the herein proposed transaction will not exceed $10,000, including amounts
payable to Consolidated Natural Gas Service Company, Inc. for services on a
cost basis (including regularly employed counsel) for the preparation of this
application-declaration and other documents.
Item 3. Applicable Statutory Provisions
_______________________________
Sections 9(a) and 10 are deemed applicable to the acquisitions by Energy
Services of interests in joint business entities and of stock of special
purpose subsidiaries used as an intervening investment medium for investments
in partnerships.
Sections 12(b) and rule 45 are considered applicable to guarantee
arrangements among Consolidated, Energy Services and special purpose wholly-
owned subsidiaries of Energy Services.
Section 13(b) may apply to service agreements between Energy Services and
joint business entities.
Rule 16 is deemed to exempt the joint entities in which Energy Services
expects to invest.
If the Commission considers the proposed future transactions to require
any authorization, approval or exemption, under any section of the Act or rule
<PAGE> 12
or regulation other than those cited hereinabove, such authorization, approval
or exemption is hereby requested.
Item 4. Regulatory Approval
___________________
The financing authorization sought herein is not subject to the
jurisdiction of any State or Federal Commission (other than the SEC).
Item 5. Procedure
_________
It is hereby requested that the Commission issue its order with respect to
the transaction proposed herein on or before December 31, 1997.
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.
<PAGE> 13
Item 6. Exhibits and Financial Statements
_________________________________
The following exhibits and financial statements are made a part of this
statement:
(a) Exhibits
(F) Opinion of counsel for Consolidated and Energy Services.
(to be filed by amendment)
(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.
Item 7. Information as to Environmental Effects
_______________________________________
The proposed transactions do not involve major federal action having a
significant effect on the human environment. See Item 1(a).
No federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transaction.
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this amendment to be signed
on its behalf by the undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By D. M. Westfall
Senior Vice President and
Chief Financial Officer
CNG ENERGY SERVICES CORPORATION
By N. F. Chandler
Its Attorney
Date: October 6, 1997
<PAGE> 1
EXHIBIT O
Proposed Notice Pursuant to Rule 22f)
(Release No. 35- )
FILINGS UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("ACT")
October , 1997
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
October , 1997 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 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.
<PAGE> 2
Consolidated Natural Gas Company, et al. (70-8621)
__________________________________________________
Consolidated Natural Gas Company ("Consolidated"), CNG Tower, Pittsburgh,
Pennsylvania 15222-3199, a registered holding company, and its wholly-owned
non-utility subsidiary, CNG Energy Services Corporation ("Energy Services"),
One Park Ridge Center, Pittsburgh, Pennsylvania 15244-0746, have filed a post-
effective amendment to an application-declaration under sections 9(a), 10,
12(b), and 13(b) of the Act and rule 45 thereunder.
By order dated February 27, 1987 (HCAR No. 24329), the Commission
authorized Energy Services, among other things, to be the gas marketing
subsidiary for the CNG System This order authorized Energy Services, as a gas
marketer, to purchase, pool, transport, exchange, store and sell gas supplies
from competitively priced sources, including the spot markets, independent
producers and brokers, and CNG Producing Company ("Gas Related Activities").
By Order dated July 26, 1995 ("Order") Energy Services was authorized,
without further Commission approval, through December 31, 1997, to invest an
aggregate amount up to $150 million to acquire: (1) an ownership interest,
which may be up to 50% of the voting or nonvoting stock, in one or more
corporations established for the sole purpose of engaging in Gas Related
Activities; (2) either in its own name or through a wholly owned special
purpose subsidiary company, up to 50% of the general partnership interests in
one or more partnerships, or up to 50% voting equity interest in one or more
other joint business entities such as joint ventures or limited liability
companies, which are established for the sole purpose of engaging in Gas
Related Activities; and/or (3) up to 100% of the limited partnership interests
<PAGE> 3
in one or more partnerships established for the sole purpose of engaging in Gas
Related Activities. None of the projects in which Energy Services may invest
can be a public-utility company.
AS of June 30, 1997 Energy Services has invested pursuant to the Order
$19,168,000 and $14,845,000 in two pipeline gathering systems, respectively, in
the Main Pass area near the Alabama coast of the Gulf of Mexico.
The Order authorized Consolidated and Energy Services to guarantee their
obligations incurred as a a result of equity investments made in the joint
entities up to an aggregate amount of $150 million. No such guarantees have
been made to date.
The applicants now request an extension of time for the authorization
previously granted in this proceeding until December 31, 2002. The applicants
further request that the aggregate amount to be invested (including capitalized
development expenses) by Energy Services in such joint entities will not in the
aggregate exceed $200 million during the authorization period ending December
31, 2002. Energy Services would not own more than 50% of the equity voting
interests in any of the joint entities, and the capital structure of each of
the entities is expected to be simple and straight forward, consisting
primarily of equity and project financing. None of the projects in which
Energy Services would seek to invest will be a utility company.
Consolidated and Energy Services also seek to continue to be able to make
guarantees of obligations to make equity investments in the joint entities,
<PAGE> 4
which parent guarantees are commonly requested by institutions providing
project financing. Such guarantees would be calculated as part of the maximum
$2 billion authority to guarantee obligations of subsidiaries granted to
Consolidated and certain of its subsidiaries in Commission order dated March
28, 1996, HCAR No. 26500.
The applicants seek to have each of the joint business entities in which
Energy Services would invest pursuant to an authorization granted in this
proceeding, and each affiliate thereof (except for companies within the
Consolidated System), to be exempt under rule 16 from all obligations imposed
upon it by the Act, as a subsidiary company or an affiliate of a registered
holding company or of a subsidiary company thereof. The joint entities in
which Energy Services may invest under an extension of its authorization in
this proceeding may be "gas related companies" within the meaning of rule 58
adopted under the Act (HCAR No. 26667). However, rule 16 would not be
available to exempt companies formed under rule 58 since condition (4) of rule
16, i.e. the acquisition would not be approved pursuant to section 9(a) and 10
of the Act, will not have been met.
____________________________
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
