================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-7320
ANR PIPELINE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 38-1281775
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Renaissance Center
Detroit, Michigan 48243-1902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 496-0200
---------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
As of April 30, 1998, there were outstanding 1,000 shares of common stock
of the Registrant, $100 par value per share, its only class of common stock.
None of the voting stock of the Registrant is held by nonaffiliates.
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements of ANR Pipeline Company and its subsidiaries (the
"Company" or "ANR Pipeline") are presented herein and are unaudited, except for
balances as of December 31, 1997, and therefore are subject to year-end
adjustments; however, all adjustments which are, in the opinion of management,
necessary for a fair statement of the results of operations for the periods
covered have been made. The adjustments which have been made are of a normal
recurring nature. Such results are not necessarily indicative of results to be
expected for the year due to seasonal variations and market conditions affecting
natural gas deliveries.
ANR PIPELINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
--------------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................... $ 3.5 $ 5.2
Notes receivable from related party..................................... 227.8 265.9
Accounts receivable:
Others............................................................... 17.8 35.9
Related parties...................................................... 18.3 14.7
Materials and supplies, at average cost................................. 28.0 28.3
Current deferred income taxes........................................... 49.0 74.7
----------- -----------
344.4 424.7
----------- -----------
Property, Plant and Equipment, at cost..................................... 3,384.1 3,372.9
Less - Accumulated depreciation......................................... 2,134.5 2,125.6
----------- -----------
1,249.6 1,247.3
----------- -----------
Other Assets:
Investment in related parties:
Pipeline partnerships................................................ 55.5 46.3
Other................................................................ 74.1 74.1
Deferred charges and other.............................................. 22.7 21.4
----------- -----------
152.3 141.8
----------- -----------
$ 1,746.3 $ 1,813.8
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 1 -
<PAGE>
ANR PIPELINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1998 1997
--------------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable:
Others............................................................... $ 68.4 $ 74.1
Related parties...................................................... 7.8 9.9
Taxes on income......................................................... 38.1 37.2
Other taxes............................................................. 22.9 24.1
Provision for regulatory and other matters.............................. 73.3 180.6
Other................................................................... 75.6 22.9
--------- ---------
286.1 348.8
--------- ---------
Long-Term Debt ............................................................ 497.9 497.9
--------- ---------
Deferred Credits and Other:
Accumulated deferred income taxes....................................... 157.7 160.9
Other deferred credits:
Others............................................................... 108.3 119.2
Related parties...................................................... 26.4 27.0
--------- ---------
292.4 307.1
--------- ---------
Common Stock and Other Stockholder's Equity:
Common stock, $100 par value, authorized, issued and outstanding
1,000 shares......................................................... .1 .1
Additional paid-in capital.............................................. 466.2 466.2
Retained earnings....................................................... 203.6 193.7
--------- ---------
669.9 660.0
--------- ---------
$ 1,746.3 $ 1,813.8
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 2 -
<PAGE>
ANR PIPELINE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED EARNINGS
(Millions of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Revenues:
Storage and transportation:
Others............................................................................ $ 206.7 $ 188.5
Related parties................................................................... 2.4 6.1
Other revenues:
Others............................................................................ 22.5 4.7
Related parties................................................................... 9.3 20.0
--------- ---------
240.9 219.3
--------- ---------
Costs and Expenses:
Operation and maintenance:
Others............................................................................ 82.7 70.0
Related parties................................................................... 15.9 24.8
Depreciation and amortization........................................................ 8.8 13.3
Interest expense..................................................................... 13.4 15.8
Taxes on income...................................................................... 30.2 35.5
--------- ---------
151.0 159.4
--------- ---------
Net Earnings............................................................................ $ 89.9 $ 59.9
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 3 -
<PAGE>
ANR PIPELINE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
--------- --------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings................................................................ $ 89.9 $ 59.9
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization......................................... 8.9 14.1
Net (increase) decrease in working capital:
Others.............................................................. ( 39.4) 29.4
Related parties..................................................... ( 5.6) ( 8.0)
Net change in other assets/liabilities................................ ( .3) 8.6
--------- --------
Total adjustments................................................... ( 36.4) 44.1
--------- --------
Net cash provided by operating activities............................. 53.5 104.0
--------- --------
Cash Flows from Investing Activities:
Decrease (increase) in note receivable from related party................... 38.1 ( 83.4)
Capital expenditures........................................................ ( 13.3) ( 19.1)
--------- --------
Net cash provided by (used in) investing activities................... 24.8 ( 102.5)
--------- --------
Cash Flows from Financing Activities:
Dividend paid............................................................... ( 80.0) -
--------- --------
Net cash used in financing activities................................. ( 80.0) -
--------- --------
Net (Decrease) Increase in Cash and Cash Equivalents........................... ( 1.7) 1.5
Cash and Cash Equivalents at Beginning of Period............................... 5.2 34.2
--------- --------
Cash and Cash Equivalents at End of Period..................................... $ 3.5 $ 35.7
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
- 4 -
<PAGE>
ANR PIPELINE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
For additional information relative to operations and financial position,
reference is made to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997. Certain reclassifications of prior period
statements have been made to conform with current reporting practices. The
effect of the reclassifications was not material to the Company's consolidated
financial position, results of operations or cash flows. Effective October 1,
1997, the depreciation rates associated with certain of the Company's assets
were revised, which had the effect of increasing net earnings by $3.7 million
for the three-month period ending March 31, 1998.
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," in 1998. The application of the new standard
did not have a material effect on the Company's consolidated financial
statements as the Company currently does not have any material items of other
comprehensive income.
The Company adopted Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits" ("FAS
132"), in 1998. FAS 132, which revises employer disclosures regarding pension
plans and other postretirement plans, is not expected to have a material effect
on the Company's consolidated financial statements.
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants ("AICPA") has issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), to be effective for periods beginning after December
15, 1998. The Company adopted SOP 98-1 in 1998. SOP 98-1 establishes standards
for the treatment of costs associated with software developed or obtained for
internal use. SOP 98-1 is not expected to have a material effect on the
Company's consolidated financial statements.
The AICPA has issued Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"), to be effective for periods beginning after
December 15, 1998. SOP 98-5 provides guidance on accounting for costs incurred
to open new facilities, conduct business in new territories or otherwise
commence some new operation. The application of SOP 98-5 is not expected to have
a material effect on the Company's consolidated financial statements.
Supplemental information relative to the Statement of Consolidated Earnings
includes the following: Gas sales revenues included in other revenues amounted
to $6.4 million and $12.3 million for the three-month periods ended March 31,
1998 and 1997, respectively. Cost of gas included in operation and maintenance
amounted to $6.1 million and $11.3 million for the three-month periods ended
March 31, 1998 and 1997, respectively.
Supplemental information relative to the Statement of Consolidated Cash
Flows includes the following: The Company made cash payments for interest, net
of interest capitalized, of $7.1 million and $6.8 million for the three-month
periods ended March 31, 1998 and 1997, respectively. Cash payments of income
taxes amounted to $23.1 million and $20.3 million for the three-month periods
ended March 31, 1998 and 1997, respectively.
- 5 -
<PAGE>
2. Income Taxes
Provisions for income taxes were as follows (millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Federal Income Taxes:
Currently payable.............................................................. $ 19.9 $ 37.5
Deferred....................................................................... 5.2 ( 5.3)
--------- ---------
25.1 32.2
State and City Income Taxes....................................................... 5.1 3.3
--------- ---------
$ 30.2 $ 35.5
========= =========
</TABLE>
3. Common Stock
All of the issued and outstanding common stock of the Company is owned by
American Natural Resources Company, a wholly owned subsidiary of Coastal Natural
Gas Company. Coastal Natural Gas Company is a wholly owned subsidiary of The
Coastal Corporation ("Coastal"). Therefore, earnings and cash dividends per
common share have no significance and are not presented.
4. Litigation, Environmental and Regulatory Matters
Litigation Matters
In October 1996, Coastal, along with certain of its affiliates, including
ANR Pipeline, was named as a defendant in a suit filed by several former and
current African American employees in the United States District Court, Southern
District of Texas. The suit alleges racially discriminatory employment policies
and practices and seeks damages in the amount of at least $100 million and
punitive damages of at least three times that amount. Plaintiffs' counsel are
seeking to have the suit certified as a class action. Coastal and its affiliates
vigorously deny these allegations and have filed responsive pleadings. In
January 1998, the plaintiffs amended their suit to exclude ANR Pipeline
employees from the potential class. A new suit was then filed in state court in
Wayne County, Michigan, seeking to have the Michigan suit certified as a class
action of African American employees of ANR Pipeline and seeking unspecified
damages as well as attorneys and expert fees. The Company has filed responsive
pleadings denying these allegations.
Numerous lawsuits and other proceedings which have arisen in the ordinary
course of business are pending or threatened against the Company or its
subsidiaries. Although no assurances can be given and no determination can be
made at this time as to the outcome of any particular lawsuit or proceeding, the
Company believes there are meritorious defenses to substantially all such claims
and that any liability which may finally be determined should not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
Environmental Matters
The Company's operations are subject to extensive and evolving federal,
state and local environmental laws and regulations which may affect such
operations and costs as a result of their effect on the construction, operation
and maintenance of its pipeline facilities. The Company anticipates annual
capital expenditures of approximately $3 to $5 million per year over the next
several years aimed at maintaining compliance with such laws and regulations.
Additionally, appropriate governmental authorities may enforce the laws and
regulations with a variety of civil and criminal enforcement measures, including
monetary penalties and remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as Superfund, as reauthorized, imposes liability, without regard to
fault or the legality of the original act, for disposal of a "hazardous
substance." The Company has been named as a potentially responsible party in
three Superfund waste disposal sites. At
- 6 -
<PAGE>
these sites, there is sufficient information to estimate total cleanup costs of
approximately $42 million and the Company estimates its pro-rata exposure, to be
paid over a period of several years, is approximately $0.4 million. The Company
has settled two sites, one of which required no payment and the second required
a payment of approximately $15,000.
There are additional areas of environmental investigation and remediation
responsibilities to which the Company may be subject. The states also have
regulatory programs that mandate environmental investigation and cleanup. In
Michigan, where the Company has extensive operations, the Environmental Response
Act requires individuals (including corporations) who have caused contamination
to remediate the contamination to regulatory standards. Owners or operators of
contaminated property who did not cause the contamination are not required to
remediate the contamination, but must exercise due care in their use of the
property so that the contamination is not exacerbated and the property does not
pose a threat to human health. ANR Pipeline estimates that its costs to comply
with the Michigan regulations will be approximately $12 million, which will be
expended over a period of two to ten years and for which appropriate provisions
have been made.
Future information and developments will require the Company to continually
reassess the expected impact of these environmental matters. However, the
Company has evaluated its total environmental exposure based on currently
available data, including its potential joint and several liability, and
believes that compliance with all applicable laws and regulations will not have
a material adverse impact on the Company's consolidated financial position or
results of operations.
Regulatory Matters
From November 1, 1992 to November 1, 1993, under an interim sales program,
the Company collected monthly gas inventory charges ("GIC") from its former
sales customers. The GIC compensated ANR Pipeline for the fixed cost of
maintaining an inventory of gas supply in order to meet its firm sales
obligations. In April 1994, the Company filed with the Federal Energy Regulatory
Commission ("FERC") a reconciliation report comparing its total gas costs and
revenues under the interim sales program and proposing refunds to customers
totaling $45.1 million. Certain customers disputed the level of those refunds,
and the FERC directed that a hearing be held. On March 12, 1998 the FERC issued
an Order which adopted most of the Company's positions, but required some
additional refunds. No party took rehearing of the Order and it became final. On
April 13, 1998, the Company submitted a revised reconciliation report consistent
with the FERC's Order, which report is subject to further proceedings.
The Company filed a general rate increase application on November 1, 1993.
The FERC permitted the Company to place increased rates into effect on May 1,
1994, subject to refund and hearing procedures. After extensive procedures, an
administrative law judge issued an Initial Decision in January 1997 which
accepted some but not all of the Company's proposed increase. The Company and
other parties thereafter filed exceptions regarding certain of the findings in
that Initial Decision. While those exceptions were pending review by the FERC,
the Company filed a comprehensive settlement to resolve all issues in the
proceeding. The settlement included provisions for lower rates, refunds,
procedures to resolve certain reserved matters, as well as a proposal for a new
short-term firm service that would enable the Company to charge higher rates for
shippers electing to purchase such new service. By order issued February 13,
1998, the FERC approved the settlement in all respects, other than the proposed
new short-term firm service, and addressed two of the three reserved matters
that the parties had requested the FERC to decide on the merits. The settlement
became effective on March 16, 1998, and on April 15, 1998, the Company paid
refunds of $66.6 million, which included interest, required by the settlement.
During the period the higher rates had been in effect, the Company estimated and
recorded provisions for these potential rate refunds, which exceeded the final
refund requirements by $38.7 million. Certain proceedings related to the
settlement's reserved matters are still pending before the FERC.
In July 1996, the United States Court of Appeals for the D.C. Circuit
upheld the basic structure of the FERC's Order 636 (issued in April 1992), but
remanded to the FERC, for further consideration, certain limited aspects of the
Order. On remand, the FERC (i) reaffirmed the right of pipelines to recover 100%
of their prudently incurred transition costs, but required pipelines to file
within 180 days a proposal for the level of costs to be allocated to
interruptible transportation customers; and (ii) reduced from a twenty-year term
to a five-year term, the "cap" to be applied to evaluation of bids for renewal
of contracts on existing volumes. The Company and others have sought rehearing
of certain aspects of the Order on remand. Further, the Company's compliance
filing regarding the level of costs to be
- 7 -
<PAGE>
allocated to interruptible service was accepted by the FERC as part of an
uncontested settlement following further proceedings before the FERC.
Certain of the above regulatory matters and other regulatory issues remain
unresolved among the Company, its customers, its suppliers and the FERC. The
Company has made provisions which represent management's assessment of the
ultimate resolution of the above issues. As a result, the Company anticipates
that these regulatory matters will not have a material adverse effect on its
consolidated financial position or results of operations. While the Company
estimates the provisions to be adequate to cover potential adverse rulings on
these and other issues, it cannot estimate when each of these issues will be
resolved.
Item 2.A. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
This report, including Management's Discussion and Analysis of Financial
Condition and Results of Operations, includes certain forward-looking statements
reflecting the Company's expectations and objectives in the near future;
however, many factors which may affect the actual results, including natural gas
prices, market and economic conditions, industry competition and changing
regulations, are difficult to predict. Accordingly, there is no assurance that
the Company's expectations and objectives will be realized. The forward-looking
statements contained herein are intended to qualify for the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934.
The Notes to Consolidated Financial Statements contain information that is
pertinent to the following analysis.
Liquidity and Capital Resources
General. Management believes that the Company's stable financial position
and earnings ability will enable it to continue to generate and obtain capital
for financing needs in the foreseeable future.
The AICPA has issued SOP 98-5, to be effective for periods beginning after
December 15, 1998. SOP 98-5 provides guidance on accounting for costs incurred
to open new facilities, conduct business in new territories or otherwise
commence some new operation. The application of SOP 98-5 is not expected to have
a material effect on the Company's consolidated financial statements.
Environmental. The Company's operations are subject to extensive and
evolving federal, state and local environmental laws and regulations which may
affect such operations and costs as a result of their effect on the
construction, operation and maintenance of its pipeline facilities. The Company
anticipates annual capital expenditures of approximately $3 to $5 million per
year over the next several years aimed at maintaining compliance with such laws
and regulations. Additionally, appropriate governmental authorities may enforce
the laws and regulations with a variety of civil and criminal enforcement
measures, including monetary penalties and remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as Superfund, as reauthorized, imposes liability, without regard to
fault or the legality of the original act, for disposal of a "hazardous
substance." The Company has been named as a potentially responsible party in
three Superfund waste disposal sites. At these sites, there is sufficient
information to estimate total cleanup costs of approximately $42 million and the
Company estimates its pro-rata exposure, to be paid over a period of several
years, is approximately $0.4 million. The Company has settled two sites, one of
which required no payment and the second required a payment of approximately
$15,000.
There are additional areas of environmental investigation and remediation
responsibilities to which the Company may be subject. The states also have
regulatory programs that mandate environmental investigation and cleanup. In
Michigan, where the Company has extensive operations, the Environmental Response
Act requires individuals (including corporations) who have caused contamination
to remediate the contamination to regulatory standards. Owners or operators of
contaminated property who did not cause the contamination are not required to
remediate the contamination, but must exercise due care in their use of the
property so that the contamination is not exacerbated and the property does not
pose a threat to human health. ANR Pipeline estimates that its costs to comply
with the Michigan regulations will be approximately $12 million, which will be
expended over a period of two to ten years and for which appropriate provisions
have been made.
- 8 -
<PAGE>
Future information and developments will require the Company to continually
reassess the expected impact of these environmental matters. However, the
Company has evaluated its total environmental exposure based on currently
available data, including its potential joint and several liability, and
believes that compliance with all applicable laws and regulations will not have
a material adverse impact on the Company's consolidated financial position or
results of operations.
Results of Operations
The change in the Company's earnings for the three-month period ended March
31, 1998 in comparison to the same period in 1997 is a result of the following:
Revenues. Storage and transportation revenues increased by $14.5 million
for the three-month period ending March 31, 1998 as compared to the same period
in 1997. The increase was primarily the result of net adjustments to provisions
for rate related contingencies of $38.7 million as a result of the Company's
rate case settlement, which became effective March 16, 1998. These adjustments
were partially offset by (a) lower revenues of $7.5 million resulting from
warmer than normal weather and continued intensified competition across the
United States natural gas industry, (b) a decrease in surcharge and other
revenue adjustments of $10.9 million and (c) reduced pass-through recoveries of
$3.3 million which are offset in operation and maintenance.
Other revenue increased by $7.1 million for the three-month period ended
March 31, 1998 as compared to the same period in 1997. The primary factors were
increased interest income partially offset by reduced gas sales revenue
resulting from a reduction in the quantity of gas auctioned on the open market.
Operation and Maintenance. Operation and maintenance expenses increased by
$3.8 million for the three-month period ended March 31, 1998 as compared to the
same period in 1997. The increase was the result of nonrecurring charges of
$16.1 million, primarily due to a provision recorded in the first quarter of
1998 for environmental regulatory compliance. This increase was partially offset
by lower gas purchase costs of $5.2 million and reduced third party
transportation services of $3.3 million.
Depreciation and Amortization. Depreciation expense decreased by $4.5
million for the three-month period ended March 31, 1998 as compared to the same
period in 1997. The decrease was primarily due to a revision of depreciation
rates as discussed in Note 1 of Notes to Consolidated Financial Statements.
Taxes on Income. Taxes on income decreased by $5.3 million for the
three-month period ended March 31, 1998 as compared to the same period in 1997.
The decrease was primarily due to an adjustment of excess accumulated deferred
income taxes.
Item 2.B. Other Development.
An affiliate of ANR Pipeline owns a one-third general partnership interest
in the proposed Independence Pipeline project. The proposed Independence
Pipeline project consists of the construction of 400 miles of 36-inch diameter
pipe, with an annual designed delivery capacity of 917 MMcf per day. The
in-service date of the Independence Pipeline project has been revised to
November 2000, subject to receipt of satisfactory regulatory approvals.
- 9 -
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The information required hereunder is incorporated by reference into
Part II of this Report from Note 4 of Notes to Consolidated Financial
Statements set forth in Part I of this Report.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANR PIPELINE COMPANY
(Registrant)
Date: May 14, 1998 By: WILLIAM L. JOHNSON
--------------------------
William L. Johnson
Senior Vice President
(As Authorized Officer and
Chief Accounting Officer)
- 10 -
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- --------------------------------------------------------------------------------
27 Financial Data Schedule
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ANR PIPELINE COMPANY FORM 10-Q
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 264
<ALLOWANCES> 0
<INVENTORY> 28
<CURRENT-ASSETS> 344
<PP&E> 3,384
<DEPRECIATION> 2,135
<TOTAL-ASSETS> 1,746
<CURRENT-LIABILITIES> 286
<BONDS> 498
<COMMON> 0
0
0
<OTHER-SE> 670
<TOTAL-LIABILITY-AND-EQUITY> 1,746
<SALES> 0
<TOTAL-REVENUES> 241
<CGS> 0
<TOTAL-COSTS> 108
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> 120
<INCOME-TAX> 30
<INCOME-CONTINUING> 90
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
