File No. 70-7833
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________
U-1
AMENDMENT NO. 8
(POST-EFFECTIVE)
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
______________________________________________
Names of Companies filing this statement and addresses of principal
executive offices:
National Fuel Resources, Inc. Leidy Hub, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
(Formerly Enerop Corporation)
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Name of Top Registered Holding Company:
NATIONAL FUEL GAS COMPANY
Names and Addresses of Agent for Service:
David F. Smith, President Gerald T. Wehrlin, Secretary
National Fuel Resources, Inc. Leidy Hub, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York
It is respectfully requested that the Commission send copies of all
notices, orders and communications to:
Kyle G. Storie
10 Lafayette Square
Buffalo, New York 14203
Item 1. Description of Proposed Transaction.
National Fuel Resources, Inc. ("NFR") and Leidy Hub, Inc.
("Leidy") are wholly-owned subsidiaries of National Fuel Gas Company
("National"). National is a public utility holding company
registered under the Public Utility Holding Company Act of 1935, as
amended ("Act"). Neither National, nor any of the subsidiaries of
National other than NFR and Leidy, join in this Post-Effective
Amendment to the Application-Declaration on file in this proceeding.
A. Background.
NFR has undertaken the following transactions and
activities as authorized by the Commission in HCAR No. 35-25437:
(1) NFR has been and continues to be engaged in the
business of marketing natural gas and related activities.
(2) NFR entered into a partnership with Citizens Gas Supply
Corporation ("Citizens Gas"). The name of the partnership was
Citizens National Gas Co. ("Partnership").
(3) The Partnership engaged in purchasing, storing,
transporting and marketing natural gas and the acquisition of related
assets.
(4) NFR has been and continues to participate in the
National Fuel System Money Pool ("Money Pool"). NFR may make
borrowings from the Money Pool in a maximum principal amount at any
one time outstanding of $15 million through December 31, 1995
pursuant to HCAR No. 35-25964.
Additionally, pursuant to HCAR No. 35-25437, NFR was
authorized to make available to the Partnership, through December 31,
1991, one or more loans aggregating up to $10 million. NFR
requested this authority so that the Partnership could invest in "any
and all physical assets, and any and all associated contracts and
property interests attendant thereto, for use in connection with
gathering, transportation, distribution or marketing of natural gas
which it would consider taking for itself, and which is consistent
with, or is a natural and reasonable extension of, its business as it
existed just prior to the closing date" (hereinafter referred to as
"Marketing Related Investments") (See pp. 8 - 9 of Form U-1,
Amendment No. 3, File No. 70-7833). The funds for these loans to the
Partnership were to be derived from NFR Money Pool borrowings and
working capital. No loans are outstanding between the Partnership
and NFR.
On October 28, 1993, NFR filed the Seventh Certificate
Pursuant to Rule 24 in regard to this file No. 70-7833, HCAR No.
35-25437, informing the Commission that during the quarter ended
September 30, 1993, NFR and Citizens National Gas Company had
completed the sale of substantially all of the Partnership assets.
Thereafter, the Partnership was wound up and dissolved(1).
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(1) Neither NFR nor any of its affiliates sought approval to sell
the Partnership assets and dissolve the Partnership because it was
determined that no such approval was necessary under the Act.
Section 9(a) was deemed not to be applicable because that section
covers the acquisition but not the sale of a security or an interest
in a business. Additionally, the Partnership assets were not utility
assets, so that, Section 12(d) was also inapplicable.
B. Proposed Transactions.
(1) NFR proposes to make Marketing Related Investments
through borrowings by NFR from the Money Pool up to the then current
maximum amount of borrowings that NFR is authorized to make from the
Money Pool, which is currently $15 million in the aggregate. It is
anticipated tht the majority of these marketing related investments
will entail the purchase of gas reserves, gas pipelines and
appurtenant property.
(2) NFR proposes to take assignment from Leidy of certain
research and development investments at book value as described
below(2).
(i) One of the investments which would be assigned
from Leidy to NFR is Leidy's investment in Metscan, Inc. ("Metscan").
Metscan developed a low cost and efficient electronic automatic meter
reading device ("AMD"), that provides an economical and efficient
method of reading residential natural gas utility meters. The AMD is
a microprocessor which is affixed to a gas meter and which
accumulates and stores information regarding natural gas usage by a
customer and transmits it by telephone line to a computer. This
information is then available for billing purposes. The Metscan
system, i.e., the attachment of the AMD to a gas meter, and its
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(2) As reported in a Certificate Pursuant to Rule 24 filed on
January 24, 1994, Enerop Corporation has changed its name to
Leidy Hub, Inc. ("Leidy"). Leidy will focus on marketing hub
activities which is more fully explained in a separate U-1
filing which is being filed contemporaneously with this
Amendment.
connection by telephone line to a computer (i) improves meter reading
efficiency, as accurate readings can be received electronically, (ii)
enhances meter security and theft detection, because actual
consumption data is phoned in monthly (or possibly daily) and the AMD
has a tamper alarm, and (iii) enhances consumption monitoring by the
ability to provide daily consumption data. As noticed in HCAR No.
35-26023 issued April 8, 1994, Leidy has proposed through
Post-Effective Amendment No. 13 to File No. 70-7201 to acquire 29,
167 shares of Metscan Class B Preferred Stock, $.01 par value,
("Class B Preferred"), out of a total number of 2,736,667 shares to
be sold, for $35,000 ($1.20 per share). Once the proposed
transaction has been consummated, Leidy will own 7.31% of Metscan's
common stock, 9.83% of the Metscan Class A Preferred Stock and 1.07%
of the Class B Preferred, or about 5.52% of the actual and potential
equity investment in Metscan and Leidy's total investment in Metscan
will be $1,261,000.00. All of Leidy's interest in Metscan will be
transferred to NFR at book value.
(3) NFR also seeks authorization to accept assignment of
the Agreement dated October 1, 1993, between Leidy (then Enerop) and
Perfection Corporation attached as Exhibit A-8 (the "Perfection
Agreement") regarding research, development and marketing of
polyethylene ball valves ("Valves") for polyethylene fuel gas piping
systems ("Perfection Valve Development Program"). Under the
Perfection Agreement, Leidy (then Enerop) pays an aggregate of
$610,000.00 in return for a royalty of three percent (3%) of the net
revenue from the sale of the Valves ("Royalty") up to a 16% return on
investment(3). Perfection is a manufacturing company with its
principal place of business in Madison, Ohio. Perfection is not an
affiliate of National or any of National's subsidiaries. It is
anticipated that the Valves will be marketed and sold throughout the
United States with a significant percentage of such sales occurring
within National's system. A condition subsequent to the Perfection
Agreement is that Leidy (then Enerop) receive SEC approval under the
Act, if it is determined that such approval is necessary.
NFR hereby seeks authority to accept assignment of
the Perfection Agreement from Leidy and to undertake the obligations
and rights thereunder, including the obligation to make the aggregate
$610,000.00 investment and the right to receive the Royalty. The
Perfection investment constitutes "[t]he acquisition by a registered
company of an interest in a company organized to participate in
activities related to the supply of natural gas." Thus, pursuant to
Section 2(b) of the Gas Related Activities Act of 1990 ("GRAA") the
Perfection investment will meet the requirement of Section 11(b) of
the Act that it be reasonably incidental or economically necessary or
appropriate to the operation of the utility (i.e., National Fuel Gas
Distribution Corporation ("Distribution")) provided the Perfection
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(3) The Perfection Agreement covers three separate valve research
and development programs. Enerop invested $125,000.00 in the
1-1/4" Program and $85,000.00 in the 2" Program. These programs
have been rolled up into the Perfection Agreement along with
the new 3-4-6" Program. The $400,000.00 investment in the
3-4-6" Program contemplated in the Perfection Agreement will be
made by NFR upon SEC approval of this Amendment.
investment is in the interest of the consumers of Distribution or the
consumers of any other subsidiary of National.
Plastic piping has been shown to be superior to traditional
metal piping in regard to durability, leak resistance, ease of
installation, etc. It is anticipated that the various plastic Valves
developed as a result of the Perfection Research and Development
Program will also be superior to metal ones in these respects.
Additionally, its anticipated that in many instances plastic Valves
will be installed in a pipeline system that is otherwise already all
plastic. In such circumstances the need for cathodic protection will
be eliminated since no corrosion will occur within an all plastic
system. Distribution's consumers will benefit from the development
of these Valves because the utility will experience lower operations
and maintenance costs, thus helping to keep rates from rising.
B.2 Future Planned Activities
NFR also plans in the future to finance or invest in and
provide consulting services to (i) research and development projects
related to the gas industry, (ii) qualifying co-generation facilities
as defined in the Public Utility Regulatory Policies Act of 1978
("PURPA"), (iii) qualifying small production facilities as defined in
PURPA, (iv) exempt wholesale generators within the meaning of Section
32 of the Act, and (v) foreign utility companies ("FUCOs") within the
meaning of Section 33 of the Act. NFR will file for any required
authorization prior to undertaking any investment in or financing of
any research and development project, independent power project or
foreign utility company and no such authorization is currently being
sought.
Item 2. Fees, Commissions and Expenses
Attorney's fees Less than $10,000.00
Item 3. Applicable Statutory Provisions.
Sections 9(a), 10, 12(b), 32 and 33 and Rules 23, 24, 43
and 45 and the Section 2(b) of the GRAA are all applicable to the
transactions contemplated hereunder.
Applicable Provisions Proposed Transaction
Section 12(b) NFR's investment in Marketing
Rule 45 Related Investments through
borrowings from the National
Money Pool.
Sections 9(a) and 10, Assignment of Leidy's Interest
Rules 23 and 43, in Metscan, Inc. to NFR at Book
Section 2(b) of the GRAA Value.
Sections 9(a), 10, and Assignment of the Perfection
12(b), Rules 23 and 43 Agreement to NFR from Leidy at
Section 2(b) of the GRAA Book Value and Assumption of
Obligations thereunder.
To the extent that the proposals herein are considered by
the SEC to require authorization, approval or exemption under any
section of the Act or provision of the rule or regulations other than
those specifically referred to herein, request for such authorization
approval or exemption is hereby made.
Item 4.
No federal regulatory authority, other than the SEC, has
jurisdiction over the proposals. No state regulatory authority has
jurisdiction over the proposed transactions.
Item 5. Procedure
The SEC is requested to issue an order permitting the
Application-Declaration to become effective as soon as possible with
respect to consummation of the transactions described herein.
National respectfully requests that the SEC's orders herein
be entered pursuant to the provisions of Rule 23. If a hearing is
ordered, Applicant-Declarants waive a recommended decision by a
hearing officer, or any other responsible officer of the SEC, and
agree that the Division of Investment Management, Office of Public
Utility Regulation may assist in the preparation of the SEC's
decision and/or order; and request that the SEC's order become
effective upon issuance.
The Applicants hereby request that certain information
contained in the Exhibits hereto, as indicated in Item 6 Exhibits
(the "Information") be kept confidential pursuant to Rule 104(b)
(Section 250.104(b) of the Commission's Regulations).
Public disclosure of the Information is not necessary or
appropriate in the public interest or for the protection of investors
or consumers.
The Information includes a projection of NFR's internal
rate of return on the Perfection investment which contains projected
sales volumes and selling price per unit for each Valve. Also
included in the Information are Marketing Studies prepared by
Perfection in regard to each Valve which describe market
opportunities on a regional basis, competitors and their products,
possible competitive responses to introduction of the Perfection
Valves and features which the Valves must contain to be competitive.
All of this information would be highly coveted by
Perfection's competitors (and otherwise unavailable) and if disclosed
would put Perfection's Valve programs at a significant competitive
disadvantage given that competitors are not required to make public
their marketing studies and information. Additionally, the amount of
the Perfection investment ($610,000.00) is of an order of magnitude
too small to be material to either investors or consumers.
The investing and consuming public would be best served by
allowing the Information to remain confidential, thereby allowing
Perfection to compete on an equal basis with its competitors.
Item 7.
The proposed transactions outlined herein involve no 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 the Application-Declaration.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused this
Amendment to the application-declaration to be signed on their behalf
by the undersigned thereunto duly authorized.
Dated: May 20, 1994
NATIONAL FUEL RESOURCES, INC.
By: /s/ David F. Smith
David F. Smith
President
LEIDY HUB, INC.
By: /s/ Gerald T. Wehrlin
Gerald T. Wehrlin
Secretary
