File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U-1
APPLICATION OR DECLARATION
under
the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
National Fuel Gas Company National Fuel Gas
10 Lafayette Square Distribution Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
Seneca Resources Corporation National Fuel Gas Supply
10 Lafayette Square Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
National Fuel Resources, Inc. Utility Constructors, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
(Names of companies filing this statement
and addresses of principal executive offices)
_____________________________________________
NATIONAL FUEL GAS COMPANY
(Name of top registered holding company)
_____________________________________________
Philip C. Ackerman Robert J. Reger, Jr., Esq.
Senior Vice President Reid & Priest
National Fuel Gas Company 40 West 57th Street
10 Lafayette Square New York, New York 10019
Buffalo, New York 14203
(Names and addresses of agents for service)<PAGE>
Item 1. Description of Proposed Transactions.
National Fuel Gas Company ("National") is a public
utility holding company registered under the Public Utility
Holding Company Act of 1935, as amended (the "Holding Company
Act"). National Fuel Gas Distribution Corporation
("Distribution"), National Fuel Gas Supply Corporation
("Supply"), Seneca Resources Corporation ("Seneca"), National
Fuel Resources, Inc. ("NFR") and Utility Constructors, Inc.
("Utility Constructors"), wholly-owned subsidiaries of National,
are joining in this Application-Declaration. Three other wholly-
owned subsidiaries of National, Highland Land & Minerals, Inc.,
Data-Track Account Services, Inc. and Leidy Hub, Inc., have not
joined in this Application or Declaration. Neither National nor
any subsidiary of National currently has an ownership interest in
an exempt wholesale generator ("EWG") or a foreign utility
company ("FUCO") as defined in Sections 32 and 33 of the Holding
Company Act.
The Applicant-Declarants have filed this Application-
Declaration in connection with their 1995-1997 long-term
financing program. The Applicant-Declarants seek to obtain long-
term debt authority from the Commission through December 31,
1997.
DEBENTURES AND MEDIUM-TERM NOTES REQUIREMENTS
---------------------------------------------
National proposes to issue and sell at one time or from
time to time not to exceed $350,000,000 aggregate principal
amount of debt securities consisting of (i) one or more series of
its Debentures (the "New Debentures") and/or (ii) one or more
series of its Debentures designated as Medium-Term Notes (the
"New MTNs"), in each case on terms to be determined at the time
of bidding or when the agreement to sell is made, as the case may
be.
The New Debentures will be offered by use of negotiated
sales or competitive bidding.
The New MTNs will be offered, on a periodic basis, as
the need for funds arises. New MTN offerings will be handled by
or through an agent or agents. National may also sell New MTNs
to an agent acting as principal. Any such New MTN may be resold
by such agent to one or more investors or other purchasers,
including other dealers, from time to time in one or more
transactions, including negotiated transactions, at a fixed
public offering price or at varying prices related to prevailing
market prices at the time of resale.
The New Debentures and/or New MTNs will be issued under
an Indenture dated as of October 15, 1974, between the Company
and a trustee, who is currently The Bank of New York (formerly
Irving Trust Company), as Trustee (the "Trustee"), as heretofore
supplemented (the "Indenture"), and as it will be supplemented by
one or more supplemental indentures in the form attached as
Exhibit A-3. The New Debentures will have a term not less than
one year and not more than forty years. The maturities of the
New MTNs, which will range from 9 months to forty years, from
date of issue, will be determined by agreement between National
and the respective purchasers. The price and annual interest
rate (which may either be fixed or variable) of each series of
New Debentures and/or each issuance of New MTNs will be
determined at the time of bidding or when the agreement to sell
is made, as the case may be. The prices will range between 95%
and 105% of the principal amount. Interest will be paid on pre-
established dates and at stated maturities.
The supplemental indentures, which provide for the
issuance of New Debentures and/or New MTNs, may include
provisions for the redemption prior to maturity at various
percentages of the principal amount and may include various
restrictions on optional redemption for a given number of years
which could be for the term of the New Debenture or New MTNs.
Market conditions at the time of sale will determine the
applicable redemption terms. National may issue New Debentures
and/or New MTNs containing terms, conditions and features setting
forth covenants, put and call rights and/or amortization and/or
sinking fund provisions that may attract investors and reduce
National's interest costs and/or risks.
National will not issue New MTNs or New Debentures at
rates in excess of those generally obtained at the time of
pricing for sales of medium-term notes or debentures having the
same maturity, issued by companies of comparable credit quality
and having similar terms, conditions and features.
The New Debentures and, to the extent that their terms
exceed twelve months, the New MTNs will be considered funded debt
under National's Indenture and as such National will not be
permitted to issue New Debentures and/or New MTNs unless:
(a) The consolidated income available for interest and
subsidiary preferred stock dividends for any twelve consecutive
calendar months within the fifteen calendar months immediately
preceding the date of such issue shall have been not less than
two times the sum of (i) the total annual interest charges upon
the consolidated debt (as defined) of National and its
subsidiaries; and (ii) the total annual dividend requirements on
subsidiary preferred stock, in each case to be outstanding
immediately after such issue; and
(b) After giving effect to the issue of such New
Debentures and/or New MTNs and to the application of the proceeds
thereof, the sum of (i) the principal amount of outstanding
consolidated debt (as defined) of National and its subsidiaries;
and (ii) the amount of outstanding subsidiary preferred stock,
shall, in the aggregate, not be more than 60% of consolidated net
tangible assets.
An Officer's Certificate and, to the extent required,
an Independent Accountants' Certificate will be supplied to the
Trustee from time to time in accordance with the Indenture
certifying compliance with these requirements.
The advantages that National may realize through the
use of a medium-term note program are:
-- Lower interest costs may be obtained because medium-
term notes are offered on a continuous basis so that the supply
does not exceed the investors' demand at any given time. By
contrast, large underwritten offerings must be priced in an
effort to assure that the entire proposed offering will be
purchased by investors at one time.
-- It provides the flexibility to issue debt maturing at
any point along the yield curve. Previously, there was not a
convenient method of issuing smaller amounts of shorter-term debt
in the public markets.
-- The size of the offering can be tailored to National's
immediate need for funds.
-- Market timing risks are reduced due to the averaging of
interest rates over the offering period.
-- The ability to price and issue medium-term notes
immediately will allow National to take advantage of market
opportunities.
None of the proceeds from the sale of the New
Debentures or New MTNs proposed herein will be used by National
or any subsidiary of National for the acquisition of an interest
in an EWG or a FUCO. Additionally, neither National nor any
subsidiary of National is a party to, or has any rights under, a
service, sales or construction agreement with an EWG or a FUCO.
In the event that National or any subsidiary of National does
acquire an interest in an EWG or a FUCO and proceeds from the
sale of the New Debentures or New MTNs are required, National
will file an application-declaration in accordance with the
Holding Company Act, if required.
National proposes to lend, by December 31, 1997, not to
exceed $250,000,000 to Distribution, not to exceed $150,000,000
to Supply, not to exceed $150,000,000 to Seneca, not to exceed
$20,000,000 to NFR and not to exceed $20,000,000 to Utility
Constructors, in exchange for unsecured subsidiary notes; but the
total amount lent by National to such subsidiaries pursuant to
the order herein requested will not exceed the proceeds received
by National from the issuance of the New Debentures and/or New
MTNs. The interest rates and maturity dates of such notes and
their terms, conditions and features will be designed to parallel
the effective cost of capital and other terms, conditions and
features of the corresponding New Debentures and/or New MTNs.
This means, among other things, that National will have the
option to require payment of such notes at any time to the extent
that the New Debentures and/or New MTNs mature, are redeemed, or
otherwise reacquired by National.
Distribution, Supply, Seneca, NFR and Utility
Constructors will issue subsidiary notes to National bearing
interest at the effective interest cost of the principal amount
of the related New Debentures and/or New MTNs (which will include
the coupon rate of the New Debenture and/or New MTN issued by
National, an amortization of the underwriters' or agents' fees
and an allocation of the other recoverable costs associated with
the long-term debt financing program), in each case rounded to
the next highest 1/100th of 1%. For example, if National (i)
issued $10,000,000 of New MTNs with a term of 30 years, a coupon
of 8.50% and an all-in effective cost of 8.6235% (8.6235% equals
8.50% plus (a) the effect of amortizing the agents' fees over the
life of the New MTN (such fees for a 30-year New MTN would equal
.750 of the aggregate principal amount of the New MTNs Notes
sold), and (b) an allocation over the life of the New MTN of the
other costs associated with the long-term debt financing program
(estimated to be an additional 5 basis points per issue)), and
(ii) lent those proceeds to Seneca, Seneca would execute an
unsecured promissory note to National promising to pay
$10,000,000 in 30 years with an interest rate of 8.63%. Seneca's
interest payment dates would be the same as those of National
under the corresponding New MTNs, and Seneca would promise to
repay principal to National early if National redeemed or
tendered for the corresponding New MTNs.
The proceeds from the sale of such notes may be used by
Distribution, Supply, Seneca, NFR and Utility Constructors (i) to
reduce their respective outstanding short-term borrowings under
the lines of credit described more fully in the Application or
Declaration, as amended, filed with the Commission (File No. 70-
8297) and the Commission's related orders and any successor
Application or Declaration and Commission Order, (ii) to repay
notes payable to National which relate to outstanding debentures
or medium-term notes of National that have been redeemed or
tendered for or matured and, to the extent such debentures or
medium-term notes are redeemed or tendered for by National, any
premium to the extent that National and such subsidiaries incur a
premium in refinancing, plus unrecovered debt discount and
expense on the outstanding issue tendered for or redeemed, (iii)
for their construction or other capital expenditure programs,
and/or (iv) for general corporate purposes. (Please refer to
Item 6 Exhibit (B) S-10 "Projected Statement of Cash Flows by
Subsidiary for Calendar Years 1995, 1996 and 1997" for an
analysis of the projected borrowing needs of each National
subsidiary joining in this Application or Declaration.)
In the event that proceeds are used to repay subsidiary
notes payable to National which relate to outstanding debentures
or medium-term notes of National that have been redeemed or
tendered for, National may elect to issue New Debentures and/or
New MTNs shortly before the redemption (or discharge) or shortly
thereafter. If the New Debentures and/or New MTNs are issued
after a redemption (or discharge) of existing debentures or
medium-term notes, National will borrow the necessary funds on a
short-term basis, and the related subsidiary will temporarily
fund the payment to National necessary for the redemption (or
discharge) by borrowing under the money pool arrangement.
National shall not use the proceeds from the sale of
New Debentures and/or New MTNs to enter into refinancing
transactions unless the estimated present value savings derived
from the net difference between interest payments on a new issue
of comparable securities and those securities refunded is, on an
after-tax basis, greater than the present value of all
repurchasing, redemption, tendering and issuing costs, assuming
an appropriate discount rate.
INTEREST RATE SWAP REQUIREMENTS
-------------------------------
In conjunction with the Applicant-Declarants' long-term
financing plan, National may enter into one or more interest rate
swap agreements ("swaps") in notional amounts aggregating not in
excess of $350,000,000 at any one time outstanding. As a result,
National is seeking additional authority to enter into one or
more swaps, and one or more derivative instruments, such as
interest rate caps, interest rate floors and interest rate
collars (collectively, the swaps and derivative instruments are
sometimes referred to as "Swap and Derivative Transactions"),
with one or more counterparties from time to time through
December 31, 1997, in notional amounts aggregating not in excess
of $350,000,000 at any one time outstanding.
National already has certain authority to enter into
swaps with notional amounts not in excess of $200,000,000
pursuant to the SEC order granted in connection with National's
short-term borrowing and system Money Pool arrangements (File
No. 70-8297, Release No. 35-25964 dated December 29, 1993).
However, this Application-Declaration requests additional
authority to enter into Swaps and Derivative Transactions in
connection with National's long-term debt, as described in
Strategy 1 and Strategy 2 below. National has not engaged in any
swap transactions pursuant to the December 29, 1993 order (File
No. 70-8297) as of the date of this Application - Declaration.
All Swap and Derivative Transactions will be directly related to
then outstanding long or short-term debt. Additionally, should
the notional amount of any Swap and Derivative Transaction exceed
by more than $25,000,000 the notional or outstanding principal
amount of the underlying instrument, National will within 90 days
following such event either (a) reduce, restructure or terminate
such Swap and Derivative Transaction or (b) issue a new
instrument or restructure the underlying instrument such that the
notional amount of such Swap and Derivative Transaction will not
exceed by more than $25,000,000 the notional or outstanding
principal amount of the underlying instrument.
National proposes to use two different swap strategies.
Under one swap strategy ("Strategy 1"), National would agree to
make payments of interest to a counterparty, payable
periodically. The interest would be payable at a variable or
floating rate index and would be calculated on a notional (i.e.,
principal) amount. In return, the counterparty would agree to
make payments to National based upon the same notional amount and
at an agreed upon fixed interest rate. This would be a
"floating-to-fixed swap" on National's part. Under another swap
strategy ("Strategy 2"), National and the counterparty may
exchange roles. National would pay a fixed interest rate and
receive a variable interest rate on a notional amount. This
would be a "fixed-to-floating swap" on National's part.
Currently, most swap counterparties are banks, which
generally act as dealers (principals) rather than brokers
(agents). The counterparties themselves sometimes represent all
or part of the opposite side of a swap transaction. Otherwise,
the counterparties enter into one or more transactions with other
entities, to create the opposite side of a swap transaction,
generally intending to make a profit on the spread. National
will enter into Swap and Derivative Transactions only with
counterparties whose deposits or long-term debt have, at the time
the Swap and Derivative Transaction is entered into, no lower
than an "A" rating from Moody's Investors Service, Inc.
("Moody's"), or an equivalent rating from Standard & Poor's
Corporation, Fitch Investors Service or Duff & Phelps (each an
"Alternate Rating Agency"); provided, however, National may enter
into a Swap and Derivative Transaction with a counterparty whose
deposits or long-term debt have, at the time the Swap and
Derivative Transaction is entered into, a "Baa" rating from
Moody's (or an equivalent rating from an Alternate Rating Agency)
if National has at the time outstanding debt similarly rated.
Additionally, National will enter into only those interest rate
swap agreements whose governing law provides generally for the
enforcement of the netting provisions of such agreements upon the
default of the counterparty with National.
Strategy 1
----------
National proposes to enter into Strategy 1 swaps from
time to time (i) in order to reduce the interest costs of
existing high cost debt and/or (ii) in order to reduce the
interest cost of new long-term debt issuances for part or all of
their terms. A reduction in interest cost may occur because, by
using a Strategy 1 swap, National functionally converts some or
all of the fixed interest rate payments on long-term debt to
floating rate payments that vary in relation to a short-term debt
index. A Strategy 1 swap would reduce National's interest costs
of the debentures or medium-term notes associated with the swap
for the term of such a swap as long as the short-term index used
in the swap to determine the floating rate paid by National
remains the same, decreases, or rises modestly. If the short-
term index rises during the term of the swap, the interest costs
saved by National would decrease until the short-term index is
equal to the fixed rate received by National. If the short-term
index rises above the fixed rate received by National, debt costs
to National, going forward, would be higher than they would be
without using a Strategy 1 swap (but only as long as this
situation exists at subsequent reset dates).
Each time National issues debentures or medium-term
notes, the proceeds are lent to one or more of its subsidiaries
at an all-in cost that is equal to the coupon on the debt plus
(i) the amortization of the underwriters' or agents' fees and
(ii) an allocation of the other recoverable costs associated with
the long-term debt financing program (estimated to be an
additional 5 basis points per issue). The loans are documented
by intercompany notes from the subsidiaries to National. All the
costs of both long-term and short-term debt are borne by the
subsidiaries. Furthermore, the gains and the losses of doing
Swap and Derivative Transactions will be assumed by the
underlying subsidiary. National would enter into a swap in
connection with an underlying subsidiary note only after
determining it to be in the best interest of the subsidiary at
the time of consummation of the swap. Subsidiaries that could
receive the Strategy 1 allocations from National include
Distribution, Supply, Seneca, NFR and Utility Constructors. The
subsidiary that would receive the cost allocations related to a
Strategy 1 swap would be obligated to execute an unsecured note
or an agreement with National to make the interest payments (and
receive the fixed rate interest) at each reset date of the
floating rate index.
A Strategy 1 swap is used to convert the existing fixed
payments made by the subsidiary of National to floating payments
for part or all of the term of the debt. National would decide
which subsidiary's debt to match against a swap under Strategy 1
based on the current cost of the debt, the term remaining for the
debt, whether the debt is redeemable, availability of all
regulatory approvals to do the swap against the underlying debt
and the individual needs of the subsidiary. The effective net
interest payments or receipts realized by National will be passed
along to the subsidiaries of National that issued the underlying
debt. None of the payments or receipts will be retained by
National. No principal payments are made by either party either
upon initiation or termination of a Strategy 1 swap.
Each Strategy 1 swap would be associated with one or
more specific fixed rate debenture(s) or medium-term note(s).
More than one Strategy 1 swap could be associated with one
specific debenture or medium-term note, but the aggregate
notional amount of swaps (Strategy 1 and Strategy 2 and swaps
authorized under the Money Pool) would not exceed $350,000,000 at
any one time outstanding. Furthermore, the aggregate notional
amount of Strategy 1 swaps will not exceed, at the time any swap
contract is entered into, the aggregate principal amount of
National's long-term debt then outstanding. Each Strategy 1 swap
would have a term (which may range from 1 month to 40 years) that
is less than or equal to the remaining maturity of the debenture
or medium-term note it is associated with. National may from
time to time enter into a Strategy 1 swap or swaps with a
counterparty whereby National would pay a floating interest rate
based on one of the following indices: LIBOR (the "London
Interbank Deposit Offered Rate"); the Federal Funds rate;
certificate of deposit indices; or commercial paper indices (H.15
CP index or any other commercial paper index). National would in
return receive a fixed interest rate. The fixed interest rate
would be the Treasury yield for the corresponding term of the
swap plus a swap spread that is based on the "forward curve"
which is a market expectation of the movement of the floating
rate index used in the swap in the future relative to the United
States Treasury Securities rates. There will be no maximum
interest rate respecting payments that National may make under
the Strategy 1 swaps unless National purchases an interest rate
cap.
In no event, under a Strategy 1 swap, will National
enter into a swap contract in which the floating interest rate
paid by National, inclusive of any intermediary fee, would exceed
by more than 200 basis points, at each reset period, the index
used for such Strategy 1 swap.
National's effective net interest payments or receipts
under a Strategy 1 swap will be allocated to the subsidiary of
National that issued the unsecured subsidiary note that
corresponds to the debenture or medium-term note associated with
the Strategy 1 swap. If more than one subsidiary issued
unsecured notes that correspond to the specific debenture or
medium-term note, the net interest payments and receipts of the
Strategy 1 swap will be allocated in proportion to the amounts of
unsecured notes outstanding for each subsidiary, provided all
subsidiaries have the necessary legal authority to make and
receive such payments. (If a subsidiary lacks such authority,
the notional amount of the swap will not exceed the principal
amount of the note or notes issued by the subsidiaries that have
the necessary legal authority, and the payments and receipts will
only be allocated to those subsidiaries.) Thus, the subsidiaries
realize all the savings (costs) associated with the Strategy 1
swap. The allocation of the net interest payments or receipts of
the Strategy 1 swap to the subsidiary will be made at each reset
date of the respective floating rate index. The subsidiary that
issued the unsecured note that corresponds to the debenture or
medium-term note associated with the Strategy 1 swap would be
obligated to execute an unsecured note or an agreement with
National to make the floating rate payments (and receive the
fixed rate receipts) at each reset date of the floating rate
index.
The hypothetical example below, based upon quoted
market rates and indices at December 7, 1994, illustrates the
savings that National and hence its subsidiaries could achieve by
using a Strategy 1 swap.
Assume National has the following existing debenture or medium-
term note:
Principal $50,000,000
Interest 8.5%
Remaining term 30 years
Proceeds were lent to Supply
Strategy 1 Swap
Notional amount $50,000,000
Term 2 years (4 reset periods,
first one beginning today)
National pays Floating rate equal to
6-month LIBOR (6.75%)
National receives fixed rate equal to 7.93% (market
quote).
Savings realized by National at first reset
(pay 6.75%, receive 7.93%) $ 295,000
Savings realized by National for the term
of the swap1 (four payments) $ 1,180,000
The pre-tax savings would be allocated in their
entirety to Supply, which issued the subsidiary note
corresponding to the underlying debenture.
Therefore, the effective interest cost on the 30-year
issue would be 7.32% (versus 8.50% without the swap) for 2 years
of its term, assuming that 6-month LIBOR remains unchanged.
In this example, National would realize a pre-tax
savings of $295,000 at the first reset date of the swap. Reset
-----------------
1. Assuming that the 6-month LIBOR is constant over the 2-year
period of the swap. The amount of savings calculated in this
example is undiscounted.
dates sometimes begin on the date on which the swap is entered
into, or a later date, and then follow at agreed upon intervals.
For Strategy 1 swaps, pre-tax savings or costs at reset
dates will depend upon how the floating rate index changes, and
therefore upon how the floating rate of interest paid by National
changes. Thus, for example, if 6-month LIBOR increases to 7.0%
at the time of the second reset in this example, the pre-tax
savings realized would be reduced to $232,500. $232,500 = (7.93%
- 7.0%) X ($50,000,000 divided by 2). Should 6-month LIBOR be
higher than 7.93% at the time of such reset, National would
incur an additional cost. For example, if 6-month LIBOR
instead increased to 8.5% at the time of the second reset,
National (and hence Supply) would incur a pre-tax cost of $142,500.
The accounting entries on National's and Supply's books
for the Strategy 1 swap transaction described in the above
example (at the first reset date only and assuming flat interest
rates) will be as follows, for a one-month period:
National Fuel Gas Company and Subsidiaries
------------------------------------------
Accounting Entries
------------------
Strategy 1 Swap
---------------
National Fuel Gas Company
-------------------------
Entry No. 1
Accrued Interest Expense $354,167
Interest Payable $354,167
To record accrued interest expense on $50,000,000 8.5% debentures
for the month of January 1995.
Entry No. 2
Interest Receivable $49,167
Accrued Interest Expense $49,167
To record the net proceeds on $50,000,000 swap (pay 6.75%,
receive 7.93%) for the month of January 1995.
Entry No. 3
Accounts Receivable
Associated Companies $305,000
Interest Income $305,000
To charge subsidiary company with net interest cost on
$50,000,000 unsecured subsidiary note minus net swap savings
(cost) for the month of January 1995.
Subsidiary Company
------------------
Entry No. 4
Accrued Interest Expense $305,000
Accounts Payable
Associated Companies $305,000
To record interest expense on $50,000,000 unsecured subsidiary
note plus net swap savings (cost) for the month of January 1995.
Entry No. 5
Accrued Income Taxes Payable $106,750
Federal Income Tax Expense $106,750
To record the federal income tax benefit for the month of January
1995.
National Fuel Gas Company and Subsidiaries
-------------------------------------------
Elimination Entries
-------------------
Entry No. 6
Interest Income $305,000
Interest Expense $305,000
To record elimination entries for the month of January 1995.
A Strategy 1 swap transaction, if material, would be
disclosed in a note to the consolidated financial statements of
National in accordance with the Generally Accepted Accounting
Principles. The Strategy 1 swap position will not be recorded on
the balance sheet of National.
National will not enter into a Strategy 1 swap unless
the estimated savings at the time of initiation of the swap
(derived from the net difference between the interest to be paid
by National and the interest to be received by National under the
Strategy 1 swap using then current market rates) are, on an
after-tax basis, greater than the transaction and ancillary costs
of the Strategy 1 swap.
National may also use other derivative strategies from
time to time in conjunction with a Strategy 1 swap or the
issuance of a floating rate medium-term note or debenture. Such
derivative strategies may include interest rate caps, interest
rate floors and interest rate collars.2 Depending on how low the
interest rate cap is set or how high the interest rate floor is
set, National may pay or receive an upfront fee, and/or share
with the counterparty a portion of the savings realized on the
spread between the capped rate and the floating rate. The
-------------------
2. An interest rate collar occurs when National buys a cap and
sells a floor.
notional amount of interest rate caps, interest rate floors and
interest rate collars to be entered into in conjunction with a
Strategy 1 swap or the issuance of floating rate medium-term
notes or debentures will not exceed, at the time such derivative
strategies are entered into, the sum of (a) the aggregate
notional amount of Strategy 1 swaps then outstanding and (b) the
aggregate principal amount of floating rate medium-term notes or
debentures then outstanding.
For example, National may decide to use a cap to limit
its exposure to interest rate increases that it would be exposed
to by entering into a Strategy 1 swap or issuing floating rate
medium-term notes or debentures. National may purchase a cap for
a notional amount that is less than or equal to the then
outstanding notional amount of Strategy 1 swaps or principal
amount of floating rate medium-term notes or debentures , at an
interest rate that may be higher than the floating rate of
interest at the time of entering into the cap. National would
therefore receive any interest costs above the level of the cap
for the notional amount for which the cap was purchased.
National may also decide to buy a collar, where it
would sell a floor in addition to buying a cap. By selling a
floor at the time the cap would be purchased, National would
receive a fee that would defray some or all the fee paid for
purchasing the cap. National may also sell the floor independent
of the cap. National would be obligated to pay the interest
costs on the notional amount if the floating rate falls below the
floor rate. The interest rate at which the floor would be sold
would depend on the floating rate that would have to be paid for
the Strategy 1 swap or floating rate medium-term notes or
debentures and National's view on interest rates at that time and
in the future.
Caps, collars and floors would enable National to
manage the interest rate risks associated with floating rate
payment obligations.
National would determine whether to use caps, floors or
collars at the time that National enters into a Strategy 1 swap
or issues floating rate medium-term notes or debentures or at any
time during the term of the swap or floating rate medium-term
notes or debentures. The decision on whether to use any of the
derivatives listed above would depend on National's view of the
expected interest rate movements during the term of the swap or
floating rate medium-term notes or debentures, the expected risks
of loss, and the cost of buying a cap, floor or collar.
The payments or receipts associated with a cap, collar
or floor will be allocated to the subsidiary that issued the
underlying obligation.
It is anticipated that each Strategy 1 swap would
provide that each party may terminate or "unwind" the agreement
with the other party's consent, by making early termination
payments and/or as may otherwise be set forth in an agreement as
described below. Termination payments would be determined in
accordance with the formula provided in the agreement between the
parties, such as the one provided in the International Swap
Dealers Association Master Agreement filed as Exhibit B-4 to this
Application/Declaration, unless the parties negotiated different
payment arrangements. Termination payments are dependent upon
market conditions and could be substantial at times. Termination
payments or the costs to "unwind" a swap would depend on the
movement of the interest rates for the short term index used in
the swap after the swap is consummated. If National enters into
a Strategy 1 swap where National pays a floating rate and
receives a fixed rate, the fixed rate of the swap is calculated
as the rate of interest that sets the net present value of the
forward curve for the short-term index to zero, plus the bid/ask
spread. The bid/ask spread for a swap can vary from 1 to 10
basis points depending on the market demand for the swap at that
time.
If the interest rates had moved exactly as the forward
curve had predicted, during the term of the swap, the termination
or "unwind" cost for the swap would be zero. If the interest
rates move higher than predicted by the forward curve, National
would incur a cost to "unwind". This cost would be equal to the
present value of the forward curve (at the time the termination
takes place) for the short-term index for the remaining term of
the swap, discounted at the interest rate of the Treasury zero-
coupon bond having the same term as the remaining term of the
swap. Here again a bid/ask spread based on market conditions
would be added/subtracted from the "unwind" cost. If the
interest rates had moved lower than the forward curve had
predicted, National would receive the "unwind" cost, calculated
as described above.
It would be very difficult to determine a dollar figure
for such a termination since the calculations depend entirely on
the movement of interest rates and the implied forward curve at
the time of termination. However, termination or "unwind" costs
(or receipts) are not expected to exceed 10% of the notional
amount in most cases. Termination payments (or receipts)
associated with Strategy 1 swaps would be allocated to the
subsidiary that executed the note or agreement to National
regarding the payment obligations of the terminated swap.
Strategy 2
----------
National could, from time to time, combine new or
existing floating rate debt (such as the floating rate short-term
debt issued from time to time pursuant to National's short-term
borrowing and system Money Pool arrangements (File No. 70-8297,
Release No. 35-25964 dated December 29, 1993)) with a
fixed-to-floating interest rate swap (Strategy 2 swap). National
would enter into a Strategy 2 swap with a counterparty whereby
National would pay a fixed interest rate based on the forward
curve. National would in return receive a floating interest rate
based on such indices as LIBOR, the Federal Funds rate,
certificate of deposit indices or commercial paper indices (H.15
CP index or any other commercial paper index). No principal
payments are made or received by either counterparty upon either
the initiation or termination of an interest rate swap, including
a Strategy 2 swap.
The hypothetical example below, based upon quoted
market rates and indices at December 7, 1994, illustrates the
nature of a Strategy 2 swap and the savings that might be
associated with using it.
Amount of short-term debt $50,000,000
Interest paid on short-term debt
(using the H.15 CP index (6.02%)
plus credit spread of National-
estimated at .13%) $256,250 per month
Strategy 2 Swap
Notional amount of swap $50,000,000
Term of swap 5 years (60 resets)
At each reset, (every month)
National pays a fixed rate @8.02%
(market quote) $334,167 per month
National receives H.15 CP index
at 6.02% $250,833 per month
Total cost of using a swap
($334,167 + 256,250 - 250,833) $339,584
At the next reset, if the H.15 CP
index increases to 7.0%:
Interest paid on short-term debt of
$50,000,000 (using the H.15 CP
index (7.0%) plus the credit spread of
National estimated at .13%) $297,083 per month
Fixed rate on the swap @ 8.02% $334,167 per month
National receives H.15 CP index
at 7.0% $291,667 per month
Total cost of using the swap for the
second reset would be $339,583 per month
As long as National's credit spread does not widen
during the 5 years when the swap would be effective, the total
interest rate to National for the 5 years would be 8.15%
(($339,583 x 12)/$50,000,000).
National would enter into a Strategy 2 swap, and not
reduce its short-term debt, as opposed to issuing a 5-year
medium-term note or debenture and reducing short-term debt, only
if the estimated costs associated with the swap, including
transaction and other costs3, were less than the costs of issuing
the long-term debt and any costs associated with reducing short-
term debt.
For example, if National issued a medium-term note
having the same term as the above swap (5 years) with the
following terms:
Principal amount of debt issued $50,000,000
Effective all-in interest cost4 8.25%
Monthly interest cost5 $343,750
The net savings to National by using a swap for
each reset are ($343,750 - 339,583) $4,167
Total net savings to National by using the swap
over the 5-year period (undiscounted
and pre-tax)6 $250,020
National would save 10 basis points7 in interest cost
calculated on a semi-annual bond basis by using the above swap
-------------------
3. These costs may include any intermediary fees, credit
spreads, and legal and other costs associated with using a
Strategy 2 swap versus a debenture or medium-term note. These
other costs could include (i) slightly higher long-term debt
costs that occur because National's debt rating did not increase
as a result of higher short-term debt levels, and/or (ii)
increased bank fees (e.g., costs of committed credit facilities)
occasioned by the existence of higher short-term debt levels.
4. Effective all-in interest cost means the coupon rate of
interest for the medium-term note plus the agent/underwriter fee
allocated over the life of the medium-term note.
5. Monthly interest is used to compare the cost of the medium-
term note to the swap because the swap resets monthly.
6. Assuming that the H.15 CP index and National's short-term
debt costs move in unison for the term of the swap.
7. The savings do not include transaction and other costs.
Please see footnote 3 for more details concerning these costs.
and retaining short-term debt instead of issuing the above
medium-term note.
In the example above, the subsidiary of National which
is allocated the cost of the swap will save $4,167 per month
(each reset), for a total of $250,020 over a period of 5 years
(undiscounted), by keeping the short-term debt levels constant
and using the above swap to fix a particular interest rate for
the long-term, instead of issuing the above medium-term note, as
long as the H.15 CP index and National's short-term debt costs
move in unison.
In the above example, if the interest cost of
National's short-term debt does not move in unison with H.15 CP
index, National may incur additional costs or it may save more,
depending on how the two interest rates change in relation to one
another.
For example, if the short-term interest cost for
National increased to 7.10% at the time of a subsequent reset,
and the H.15 CP index increased to 7%, the savings to National
would be calculated as follows:
Interest paid on short-term debt @ 7.10% $295,833 per
month
Strategy 2 Swap
National pays a fixed rate @ 8.02% $334,167 per month
National receives H.15 CP index
@ 7% $291,667 per month
Total cost of using a swap
($334,167 + 295,833 - 291,667) $338,333
Net savings to National for this
reset ($343,750 - 338,333) $5,417
National saved $5,417 for this reset versus $4,167 for
the previous reset because National's short-term borrowing rates
did not increase as much as the H.15 CP index did.
This savings can also decrease, or National may incur
an additional cost, if at the time of a subsequent reset the
difference between National's short-term interest costs and the
H.15 CP index increases. For example, if National's short-term
interest rate is then 7.20% and the H.15 CP index is then 7%, the
net monthly savings of the Strategy 2 swap versus issuing
additional debt at 8.25% declines from $4,167 to $1,250.
$343,750 (avoided long-term debt interest) - $334,167 (swap
payment) + $291,667 (swap receipt) - $300,000 (short-term
interest payment) = $1,250.
National does not expect the relative differences
between short-term borrowing rates and the H.15 CP index to vary
substantially over time (i.e., by more than 10 basis points in
either direction), unless National is downgraded by the bond
rating agencies. There is a possibility that such a downgrade
may erase the savings for the rest of the term of the swap or
until National is upgraded by the bond rating agencies.
The accounting entries for the Strategy 2 swap
transaction will be as follows on the books of National and the
affected subsidiary, using the first Strategy 2 example above,
for a one-month period:
National Fuel Gas Company and Subsidiaries
------------------------------------------
Accounting Entries
------------------
Strategy 2 Swap
---------------
National Fuel Gas Company
-------------------------
Entry No. 1
Accrued Interest Expense $256,250
Interest Payable $256,250
To accrue interest on $50,000,000 short-term debt at 6.15% for
the month of January 1995.
Entry No. 2
Accrued Interest Expense $83,334
Interest Payable $83,334
To record net interest expense on $50,000,000 swap (pay 8.02%,
receive 6.02%) for the month of January 1995.
Entry No. 3
Accounts Receivable
Associated Companies $339,584
Interest Income $339,584
To charge subsidiary company with net interest on $50,000,000
short-term subsidiary note for the month of January 1995.
Subsidiary Company
------------------
Entry No. 4
Accrued Interest Expense $339,584
Accounts Payable
Associated Companies $339,584
To record interest expense on $50,000,000 short-term debt for the
month of January 1995.
Entry No. 5
Accrued Income Taxes Payable $118,854
Federal Income Tax Expense $118,854
To record the federal income tax benefit for the month of January
1995.
National Fuel Gas Company and Subsidiaries
------------------------------------------
Elimination Entries
-------------------
Entry No. 6
Interest Income $339,584
Interest Expense $339,584
To record elimination entries for the month of January 1995.
The Strategy 2 swap, if material, would be disclosed in
a note to the consolidated financial statements of National in
accordance with the Generally Accepted Accounting Principles.
The Strategy 2 swap position will not be recorded on National's
balance sheet.
In no event, under any Strategy 2 swap, will National
enter into a swap contract in which the effective fixed rate of
interest paid by National, inclusive of any intermediary fee,
would exceed by more than 2.0% per annum, at the time of entering
into any Strategy 2 swap contract, the yield on direct
obligations of the United States Government as published by the
Federal Reserve (i.e., Treasury Bonds, Notes and Bills) with
maturities comparable to the maturity of such Strategy 2 swap
contract.
The aggregate notional amount of Strategy 2 swaps will
not, at any one time, exceed the difference between a)
$350,000,000 and b) the aggregate principal amount of New
Debentures and New MTNs then outstanding. Furthermore, the
aggregate notional amount of Strategy 2 swaps will not exceed, at
the time the swap contract is entered into, the amount of short-
term debt then outstanding pursuant to National's system Money
Pool arrangements (File No. 70-8297). The term for any Strategy
2 swaps will range from 9 months to 40 years.
Each time National issues debentures or medium-term
notes, the proceeds are lent to one or more of its subsidiaries
at an all in cost that is equal to the coupon on the debt plus
(i) the amortization of the underwriters' or agents' fees and
(ii) an allocation of the other recoverable costs associated with
the long-term debt financing program (calculated to be an
additional 5 basis points per issue). The loans are documented
by intercompany notes from the subsidiaries to National. All the
costs of both long-term and short-term debt are borne by the
subsidiaries. Furthermore, the gains and the losses of doing a
swap and one or more derivative instruments will be assumed by
the underlying subsidiary. National would enter into a swap in
connection with an underlying subsidiary only after determining
it to be in the best interest of the subsidiary at the time of
consummation of the swap.
Since a Strategy 2 swap would be used in lieu of
issuing New MTNs or New Debentures under this file, the
subsidiary that would have received the proceeds of issuing long-
term debt would be the one which would bear the costs (savings)
of the swap. The costs associated with the short-term debt that
is not repaid as a result of using this swap strategy would be
allocated to the subsidiary that would have paid interest
associated with the New MTNs or New Debentures that would
otherwise have been issued. The fixed rate payments and the
floating rate receipts of the Strategy 2 swap would be allocated
to the same subsidiary to which the costs associated with the
short-term debt are assigned. Only those subsidiaries which
would require the use of a certain principal amount of debt for
the life of a proposed strategy 2 swap would be allocated the
costs (savings) of the swap. Subsidiaries that could receive the
Strategy 2 allocations from National include Distribution,
Supply, Seneca, NFR and Utility Constructors. The subsidiary
that would receive the cost allocations related to a Strategy 2
swap (short-term debt principal and interest payments, fixed rate
payments under the swap and floating rate receipts under the
swap) would be obligated to execute an unsecured note or an
agreement with National to make the interest payments (and
receive the floating rate interest) at each reset date of the
floating rate index.
It is anticipated that each Strategy 2 swap would
provide that each party may terminate or "unwind" the agreement
with the other party's consent, by making early termination
payments and/or as may otherwise be set forth in an agreement.
Termination payments would be determined in accordance with the
formula provided in the agreement between the parties, such as
the one provided in the International Swap Dealers Association
Master Agreement filed as Exhibit B-4 to this Application/
Declaration, unless the parties negotiated different payment
arrangements. Termination payments are dependent upon market
conditions and could be substantial at times. The methodology
for calculating the cost of "unwinding" a Strategy 2 swap would
be the same as that used for a Strategy 1 swap. Termination
payments for a Strategy 2 swap could be functionally compared to
a premium that is paid to the bondholders, for redeeming or
discharging high cost debt. Termination or "unwind" costs (or
receipts) are not expected to exceed 10% of the notional amount
in most cases. Termination payments (or receipts) for Strategy 2
swaps would be allocated to the subsidiary that executed the note
or agreement to National regarding the payment obligations of the
terminated swap.
National may also use interest rate caps from time to
time in conjunction with a Strategy 2 swap. The payments or
receipts associated with a cap will be allocated to the same
subsidiary to which the costs associated with the underlying
strategy 2 swap are assigned.
General
-------
Since a swap is essentially an exchange of interest
payment obligations of National and a counterparty, National will
neither receive nor pay any proceeds (i.e., principal) from any
swaps.
None of the Swap and Derivative Transactions will be
"leveraged." This means that changes in interest payments
(receipts) under any Swap and Derivative Transaction due to
changes in the floating rate index used in such instrument will
not exceed the product of the change in such index and the
notional amount of such instrument.
Reporting Requirements
----------------------
Within thirty days following the trade date of any Swap
and Derivative Transaction, National will submit a report to the
Commission disclosing the following information with respect to
such Swap and Derivative Transaction: the trade date; the type
of Swap and Derivative Transaction traded; the notional principal
amount; a description of the index and margin in the case of a
swap or the underlying index and strike rate in the case of a cap
or a floor; the termination date; the name of the counterparty;
the material terms of the underlying instrument (including the
interest rate (or index and margin) and the maturity or
termination date of such instrument), and the name of the
subsidiary to which the cash inflows and outflows under the Swap
and Derivative Transaction will be allocated.
Within forty-five days following the close of each
fiscal quarter, National will submit a report to the Commission
disclosing the net cash outflow or inflow for each swap, and the
net cash outflow for each floor, that has been open at any time
during such quarter. With respect to swaps, the net outflow
refers to the difference between the interest flow received by
National versus the interest flow paid by National during such
quarter for that swap. With respect to any floor, the cash
outflow refers to the sum of payments made by National during
such quarter under any floor sold by National.
National will additionally disclose, also within forty-
five days following the close of each fiscal quarter, the market
value for each Swap and Derivative Transaction that is
outstanding at the close of such quarter, as of that closing
date. National will also disclose any gains or losses realized
from the liquidation during such quarter of any position in a
Swap and Derivative Transaction, together with the proceeds and
sale price constituting such gain or loss, and its carrying
value, if any.
Further, National will disclose, also within forty-five
days following the close of each fiscal quarter, certain
information if the notional principal amount of any Swap and
Derivative Transaction during that quarter exceeds the
outstanding or notional principal amount of the underlying
instrument. Specifically, National will disclose the date and
reason for such condition. In addition, National will disclose
the date (a) the related Swap and Derivative Transaction was
terminated or the notional principal amount of such instrument
was reduced or (b) a new instrument related to the open Swap and
Derivative Transaction was entered into. If National enters into
a new underlying instrument for that Swap and Derivative
Transaction, it will also disclose the terms of the new
underlying instrument.
Item 2. Fees, Commissions and Expenses.
The estimated fees and expenses to be incurred by
National in connection with the transactions proposed are set
forth in Exhibit I-1 hereto.
Item 3. Applicable Statutory Provisions.
(A) Sections 6(a), 7, 9(a), 10 and 12(b) of the
Holding Company Act and Rules 23, 24 and 45 under the Holding
Company Act are applicable to the transactions. To the extent
any other Sections of the Holding Company Act may be applicable
to the proposed transactions, the Company hereby requests
appropriate orders thereunder.
Item 4. Regulatory Approval.
No Federal regulatory authority, other than the
Commission, has jurisdiction over the proposed transaction.
No State regulatory authority has jurisdiction over the
proposed transactions except that the Public Service Commission
of New York and the Pennsylvania Public Utility Commission have
jurisdiction over the issuance and sale of the notes to be issued
by Distribution and the allocation of costs and benefits to
Distribution, and Applications or Petitions (Exhibits D-1 and
D-3) will be filed by Distribution requesting the approval of
such commissions.
Item 5. Procedure.
In light of the sensitivity of the proposed
transactions to market interest rates and the substantial cost
savings associated with the potential redemption by National of
certain series of its Debentures, National respectfully requests
that the Commission's action with respect to the transactions
proposed in this Application or Declaration be taken on or before
February 10, 1995.
National currently has $220,000,000 principal amount of
New Debentures and/or New MTNs registered under the Securities
Act of 1933. National will file, if needed, a Registration
Statement on Form S-3 under the Securities Act of 1933 covering
the remaining $130,000,000 principal amount of New Debentures
and/or New MTNs. Until such Registration Statement is filed with
the Commission, National requests that the Commission reserve
jurisdiction over the issuance of $130,000,000 principal amount
of New Debentures and/or New MTN's.
National respectfully requests that the Commission's
order herein be entered pursuant to the provisions of Rule 23.
If a hearing be ordered, National waives a recommended decision
by a Hearing Officer, or any other responsible officer of the
Commission, agrees that the Office of Public Utility Regulation
may assist in the preparation of the Commission decision and
requests that there be no waiting period between the issuance of
the Commission's order and the date on which it becomes
effective.
Item 6. Exhibits and Financial Statements.
The following exhibits are made a part of this
statement:
(A) Exhibits
A-1 Indenture, dated as of October 15, 1974,
between National and The Bank of New York
(formerly Irving Trust Company)
(Exhibit 2(b), File No. 2-51796).
A-2 Ninth Supplemental Indenture, dated as of
January 1, 1990 (Exhibit 4.4, Form 10-K for
fiscal year ended September 30, 1992); Tenth
Supplemental Indenture, dated as of February
1, 1992 (Exhibit 4(a), Form 8-K dated
February 14, 1992, in File No. 1-3880);
Twelfth Supplemental Indenture, dated as of
June 1, 1992 (Exhibit 4(c), Form 8-K dated
June 18, 1992, in File No. 1-3880);
Thirteenth Supplemental Indenture, dated as
of March 1, 1993 (Exhibit 4(a)(14), File No.
33-49401); and Fourteenth Supplemental
Indenture, dated as of July 1, 1993 (Exhibit
4.1, Form 10-K for fiscal year ended
September 30, 1993).
A-3 Proposed form of Supplemental Indenture for
New Debentures and/or New MTNs. File No.
70-8143
A-4 Form of New Debenture. File No. 70-8143
A-5 Forms of New MTN. File No. 70-8143
B-1 Form of Proposal and Purchase Agreement for
New Debentures. File No. 70-8143
B-2 Form of Sales Agency and/or Distribution
Agreement for MTNs. File No. 70-8143
B-3 Form of Underwriting Agreement for New
Debentures. File No. 70-8143
B-4 Form of Proposed Swap Agreement. File No.
70-8143
C-1 Form S-3 Registration Statement of National
under the Securities Act of 1933 relating to
sale of $220,000,000 aggregate principal
amount of the New Debentures and/or MTNs
(File No. 33-49401).
C-2 Form T-1 Statement of Eligibility under the
Trust Indenture Act of 1939 of the Bank of
New York, as Trustee under the Indenture
(Exhibit 26, File No. 33-49401).
D-1 Copy of Petition of Distribution to the
Public Service Commission of New York.*
D-2 Copy of Order of the Public Service
Commission of New York in Case No. ______.*
D-3 Copy of Securities Certificate Application of
Distribution filed with the Pennsylvania
Public Utility Commission.*
D-4 Copy of Pennsylvania Public Utility
Commission's Securities Certificates No.
S-_________ and G-________.*
F-1 Opinion of Reid & Priest, Counsel for
National.*
F-2 Opinion of Stryker, Tams & Dill, New Jersey
Counsel for National.*
F-3 Opinion of Richard M. DiValerio, Counsel for
Distribution, Supply, Seneca, NFR and Utility
Constructors.*
G Financial Data Schedules.*
H-1 Suggested form of notice of proposed
transactions.
I-1 Schedule of Estimated Fees and Expenses.*
(B) Financial Statements
S-1 Pro Forma Consolidated Statement of Income
and Earnings Reinvested in the Business for
the twelve months ended September 30, 1994,
Pro Forma Consolidated Balance Sheet at
September 30, 1994 and Pro Forma Adjusting
Entries.
S-2 National Fuel Gas Company Pro Forma Statement
of Income and Earnings Reinvested in the
Business for the twelve months ended
September 30, 1994, Pro Forma Balance Sheet
at September 30, 1994 and Pro Forma Adjusting
Entries.
S-3 National Fuel Gas Distribution Corporation
Pro Forma Statement of Income and Earnings
Reinvested in the Business for the twelve
months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro
Forma Adjusting Entries.
S-4 National Fuel Gas Supply Corporation Pro
Forma Statement of Income and Earnings
Reinvested in the Business for the twelve
months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro
Forma Adjusting Entries.
S-5 Seneca Resources Corporation Pro Forma
Statement of Income and Earnings Reinvested
in the Business for the twelve months ended
September 30, 1994, Pro Forma Balance Sheet
at September 30, 1994 and Pro Forma Adjusting
Entries.
S-6 Utility Constructors, Inc. Pro Forma
Statement of Income and Earnings Reinvested
in the Business for the twelve months ended
September 30, 1994, Pro Forma Balance Sheet
at September 30, 1994 and Pro Forma Adjusting
Entries.
S-7 National Fuel Resources, Inc. Pro Forma
Statement of Income and Earnings Reinvested
in the Business for the twelve months ended
September 30, 1994, Pro Forma Balance Sheet
at September 30, 1994 and Pro Forma Adjusting
Entries.
S-8 Notes to Financial Statements.
S-9 Computation of the income test as of
September 30, 1994, required for the issuance
of additional Funded Debt, as required by
National Fuel Gas Company's Indenture.
S-10 Projected Statement of Cash Flows by
Subsidiary for Calendar Years 1995, 1996 and
1997.
There have been no material changes not in the ordinary
course of business since September 30, 1994.
FOOTNOTES
*To be supplied by amendment.
Item 7. Information as to Environmental Effects
The proposed transactions outlined herein concern
financing arrangements contemplated by National, Distribution,
Supply, Seneca, NFR and Utility Constructors and involve no major
action which will significantly affect the quality of the
environment.
No Federal agency has prepared or is preparing an
environmental impact statement with respect to the transactions
proposed in this Application or Declaration.
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.
NATIONAL FUEL GAS COMPANY
By /s/ Gerald T. Wehrlin
_____________________
Gerald T. Wehrlin
Controller
NATIONAL FUEL GAS
DISTRIBUTION CORPORATION
By /s/ Gerald T. Wehrlin
_____________________
Gerald T. Wehrlin
Senior Vice President,
Controller
SENECA RESOURCES CORPORATION
By /s/ Gerald T. Wehrlin
_____________________
Gerald T. Wehrlin
Secretary, Treasurer and
Controller
NATIONAL FUEL GAS SUPPLY
CORPORATION
By /s/ Joseph P. Pawlowski
_______________________
Joseph P. Pawlowski
Treasurer
NATIONAL FUEL RESOURCES, INC.
By /s/ David F. Smith
__________________
David F. Smith
President
UTILITY CONSTRUCTORS, INC.
By /s/ Joseph P. Pawlowski
_______________________
Joseph P. Pawlowski
Treasurer
DATED: December 29, 1994
(212) 603-2204
New York, New York
December 29, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: National Fuel Gas Company
National Fuel Gas Distribution Corporation
National Fuel Gas Supply Corporation
Seneca Resources Corporation
National Fuel Resources, Inc.
Utility Constructors, Inc.
------------------------------------------
Ladies and Gentlemen:
Transmitted for filing with the Securities and
Exchange Commission pursuant to the Public Utility Holding
Company Act of 1935, please find a copy of the joint
Application or Declaration on Form U-1 of National Fuel Gas
Company ("National"), National Fuel Gas Distribution
Corporation, National Fuel Gas Supply Corporation, Seneca
Resources Corporation, National Fuel Resources, Inc. and
Utility Constructors, Inc.
We would be grateful if you would send copies of
any communications which may be addressed to National in
connection with the filing to the undersigned.
Very truly yours,
REID & PRIEST, Counsel for
NATIONAL FUEL GAS COMPANY
/s/ Robert J. Reger, Jr.
_______________________
By: Robert J. Reger, Jr.
cc: Harry Eisenstein
