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 Distribution
10 Lafayette Square Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
Seneca Resources Corporation National Fuel Gas Supply Corporation
1201 Louisiana Street, Suite 400 10 Lafayette Square
Houston, Texas 77002 Buffalo, New York 14203
National Fuel Resources, Inc. Utility Constructors, Inc.
165 Lawrence Bell Drive, Suite 120 10 Lafayette Square
Williamsville, New York Buffalo, New York 14203
Horizon Energy Development, Inc. Highland Land & Minerals, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
Data-Track Account Services, Inc. Leidy Hub, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
Seneca Independence Pipeline Company Niagara Independence Marketing
10 Lafayette Square Company
Buffalo, New York 14203 1201 Louisiana Street, Suite 400
Houston, Texas 77002
Niagara Energy Trading Inc.
1201 Louisiana Street, Suite 400
Houston, Texas 77002
(Names of companies filing this statement
and addresses of principal executive offices)
<PAGE>
---------------------------------------------
NATIONAL FUEL GAS COMPANY
(Name of top registered holding company)
---------------------------------------------
James R. Peterson Curtis W. Lee, Esq. Robert J. Reger, Jr., Esq.
Assistant Secretary General Manager-Finance Reid & Priest LLP
National Fuel Gas Company National Fuel Gas 40 West 57th Street
10 Lafayette Square Distribution New York, New York 10019
Buffalo, New York 14203 Corporation
10 Lafayette Square
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 ("Holding Company Act"). Each wholly-owned
subsidiary of National has joined in this Application/Declaration.
Such subsidiaries include National Fuel Gas Distribution Corporation
("Distribution"), National Fuel Gas Supply Corporation, Seneca
Resources Corporation, Utility Constructors, Inc., Highland Land &
Minerals, Inc., Leidy Hub, Inc., Horizon Energy Development, Inc.,
Data-Track Account Services, Inc., National Fuel Resources, Inc.,
Seneca Independence Pipeline Company, Niagara Independence Marketing
Company and Niagara Energy Trading Inc. The subsidiaries listed above
and any other non-utility subsidiaries of National established prior
to December 31, 2002 are collectively referred to as the
"Subsidiaries". The Subsidiaries, excluding Distribution, are
collectively referred to as the "Non-Utility Subsidiaries". National
and its Subsidiaries are collectively referred to herein as the
National Fuel Gas System ("System").
The System is seeking, as more fully described hereinafter,
Commission authorization, to the extent not exempt from Commission
approval under the Holding Company Act, or otherwise permitted or
authorized under the Holding Company Act pursuant to Commission rule,
regulation or order, for the items that follow, which authorization is
to be applicable for the period from the effective date of the order
(the "Order Date") through December 31, 2002 (the "Authorization
Period") (except as specified herein):
<PAGE>
I. External financing by National, including A) short-term financing in
the form of borrowings under credit facilities, issuance of commercial
paper, other borrowings from banks or financial institutions
and/or the issuance of other securities, B) long-term financing (debt
and equity), C) hedging of financing risks, including those associated
with existing and anticipated fixed and floating rate debt (whether
denominated in U.S. dollar or foreign currency), and D) financing by
means of the issuance of other securities. The proceeds of such
financings, together with other available funds, would be used by
National to make investments in Subsidiaries, to redeem, acquire or
retire outstanding securities, to make investments in Exempt Wholesale
Generators (EWGs) and Foreign Utility companies (FUCOs), subject
to the limitations of Rule 53, to make investments in Energy-Related
Companies and Gas- Related Companies, subject to the limitations of
Rule 58, and for other corporate purposes.
II. Intra-System financing of Subsidiaries, to the extent not exempt
pursuant to Rule 52 or Rule 45, as applicable, including
continuation of the intra-System Money Pool.
III. External financing by Subsidiaries, to the extent not exempt
pursuant to Rule 52, and the formation of financing entities.
IV. Guarantees by National with respect to obligations of its
Subsidiaries.
-2-
<PAGE>
V. Use of proceeds to make exempt investments in EWGs, FUCOs,
Energy-Related Companies and Gas-Related Companies.
I. EXTERNAL FINANCING BY NATIONAL
A. INTRODUCTION
National currently obtains funds externally (i) through
short-term debt financing under credit facilities with banks and
financial institutions and through a commercial paper program,
(ii) through long-term debt financing through the issuance of
debentures and medium-term notes and (iii) through equity
financing by means of compensation, benefits and incentive
plans, customer stock purchase plans and dividend reinvestment
plans (collectively, "Stock Issuance Plans"). Short-term
borrowings are authorized pursuant to the Order of the
Commission dated December 28, 1995 (HCAR No. 26443; File
No. 70-8729). The long-term borrowings are authorized
pursuant to the Orders of the Commission in File No. 70-8541
dated April 20, 1995 (HCAR No. 26276), October 19, 1995
(HCAR No. 26393), March 6, 1996 (HCAR No. 26483) and June 26,
1996 (HCAR No. 26537). Currently, National has Stock
Issuance Plans authorized pursuant to the following Orders of the
Commission: 1997 Award and Option Plan (HCAR No. 26670 dated
February 18, 1997; File No. 70-8975); Shares Payment Policy (HCAR
No. 26655 dated January 24, 1997; File No. 70-8943); Customer
Stock Purchase Plan (HCAR No. 26394 dated October 19, 1995; File
No. 70-8657); Dividend Reinvestment and Stock Purchase Plan (HCAR
No. 26261 dated March 30, 1995; File No. 70-8579); 401(k) Plans
(HCAR No. 26176 dated November 30, 1994; File No. 70-7674; 1993
Award and Option Plan (HCAR No. 25753 dated March 5, 1993; File
No. 70-8109); 1984 Stock Plan and 1983
-3-
<PAGE>
Incentive Stock Option Plan (HCAR No. 24793 dated December 28,
1988; File No. 70- 7581).
National is herewith requesting authorization to issue and
reissue, from time to time during the Authorization Period, short-term
debt (debt with a term not exceeding 270 days) aggregating not more
than $1 billion outstanding at any one time. National also is
requesting authority to issue and reissue, from time to time during
the Authorization Period, additional long-term securities aggregating
not more than $3 billion outstanding at any one time. Such securities
issuances would be in addition to any common stock that may be issued
pursuant to National's Rights Plan, as previously authorized pursuant
to the Order of the Commission dated June 12, 1996 (HCAR No. 26514;
File No: 70-8841).
National may issue securities covered by this
Application/Declaration in any of the following ways: (i) through
underwriters or dealers; (ii) directly to a limited number of
purchasers or to a single purchaser, (iii) through agents, (iv) in
exchange for securities of other companies, the acquisition of which
is authorized under a separate order of the Commission or exempt
pursuant to Section 32, 33 or 34 or Rule 58, as applicable, and/or
(v) through Stock Issuance Plans.
If underwriters are used in the sale of the securities, such
securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions,
-4-
<PAGE>
including negotiated transactions, at a fixed public offering price or
at varying prices determined at the time of sale. The securities may
be offered to the public either through underwriting syndicates (which
may be represented by managing underwriters designated by National) or
directly by one or more underwriters acting alone. The securities may
be sold directly by National or through agents designated by National
from time to time. If dealers are utilized in the sale of any of the
securities, National will sell such securities to the dealers and any
such dealer may then resell such securities to the public at fixed
prices or varying prices to be determined by such dealer at the time
of resale. National may also sell any securities to agents acting as
principal. Such agents may then resell such securities to the public
at fixed prices or varying prices to be determined by the agent at the
time of resale. If equity securities are being sold in an underwritten
offering, National may grant the underwriters thereof an
over-allotment option permitting the purchase from National of
additional equity securities (an additional 15% under present
guidelines), at the same price as the equity securities then being
offered, solely for the purpose of covering over-allotments.
Securities issued by National may be sold pursuant to "delayed
delivery contracts" which permit the underwriters or agents to locate
buyers who will agree with National to buy the securities at an agreed
price on the trade date but accept delivery at a later date. Debt
securities may also be sold through the use of medium term note and
similar programs or in transactions whereby securities are sold to
initial purchasers (typically, investment banks or similar
institutions) and then resold by the initial purchasers in reliance upon
-5-
<PAGE>
Rule 144A or another exemption under the Securities Act of 1933, as
amended ("Securities Act") or pursuant to Regulation S under the
Securities Act.
The System intends that any authorization granted pursuant to
this Application/Declaration regarding the issuance of securities will
supersede the previous authorizations described in the first paragraph
of this Section A to the extent such previous authorizations apply to
the issuance of securities (except as specified herein).
Parameters for Authorization
The Application/Declaration makes requests for authority, without
any additional prior Commission approvals, to engage in future
financing transactions for which the specific terms and conditions are
not at this time known. Accordingly, it is appropriate that certain
conditions concerning the financial status of National exist at the
time of engaging in such financing transactions. The general
conditions for undertaking such financing transactions without further
prior approval are given directly below.
1. National Debt of Investment Grade and Maintenance of Equity
Ratio
National would be authorized to engage in the long-term
debt financing activities described herein as long as: (i) its
long-term debt rating is of investment grade as established by a
nationally recognized statistical rating organization as that term is
-6-
<PAGE>
used in Rule 15c3-l(c)(2)(vi)(F) under the Securities Exchange Act of
1934 (the "Exchange Act"), and (ii) its common equity (as reflected in
its most recent Form 10-K or Form 10-Q, as the case may be) does not
fall below 30% of its consolidated capitalization. The issuance of any
long-term debt would occur over such a period of time and in a
combination with the issuance of equity such that it would not cause
National's common equity to fall below 30% of consolidated
capitalization.
2. Effective Cost of Money on Borrowings
The effective cost of money on debt borrowings made
pursuant to the authorizations granted under this
Application/Declaration will not, at the time of the issuance, exceed
300 basis points over the then current yield to maturity of comparable
term U.S. Treasury securities.
3. Effective Cost of Money on Other Approved Securities
The effective cost of money on preferred stock and
other fixed income oriented securities will not, at the time of the
issuance, exceed 500 basis points over the then current yield to
maturity of 30-year term U.S. Treasury securities.
4. Maturity of Debt
-7-
<PAGE>
The maturity of each issuance of debt will be not more
than 100 years.
5. Issuance Expenses
The underwriting fees, commissions, or other similar
fees paid in connection with the issuance, sale or distribution of a
security pursuant to this Application/Declaration will not exceed 5%
of the principal or total amount of the financing.
6. Aggregate Dollar Limit
The aggregate amount of external debt and equity
financing to be issued or reissued by National during the
Authorization Period will not exceed (i) $3 billion of additional
long-term debt and equity outstanding at any one time (not including
any common stock that may be issued pursuant to National's Rights Plan
authorized pursuant to the Order of the Commission dated June 12, 1996
(HCAR No. 26514; File No. 70-8841)) and (ii) $1 billion of short-term
borrowings outstanding at any one time. The value of debt securities
will equal the aggregate principal amount of such securities. The
value of equity securities will equal the consideration received by
National at the time the securities are issued.
The proceeds from the sale of securities by National in
external financing transactions will be used by National, together
with other available funds, for general corporate purposes including
(i) the financing, in part, of capital expenditures of National and
-8-
<PAGE>
its Subsidiaries, (ii) the financing of inventories and other working
capital requirements, (iii) the acquisition, retirement or redemption
of securities of which National is the issuer without the need for
prior Commission approval pursuant to Rule 42 or a successor rule,
and/or (iv) investments in EWGs and FUCOs, subject to the limitations
of Rule 53, and in Energy-Related Companies and Gas-Related Companies,
subject to the limitations of Rule 58.
B. SHORT-TERM FINANCING
To provide financing for general corporate purposes,
including the temporary financing of other working capital
requirements and construction spending, National requests
authorization to issue or reissue from time to time during the
Authorization Period, up to $1 billion of short-term debt consisting
of borrowings under its credit facilities, the issuance of commercial
paper, and/or other forms of short-term financing generally available
to borrowers with investment grade credit ratings.
National further requests authorization to amend its
commercial paper program or credit facilities without further
Commission authorization, provided that the term of any borrowing
thereunder does not extend beyond 270 days from its date of issuance
or borrowing.
1. Commercial Paper
-9-
<PAGE>
Commercial paper would be sold by National, from time to time, in
established domestic or foreign commercial paper markets directly or
through dealers and placement agents at prevailing discount rates, or
at prevailing coupon rates, at the date of issuance for commercial
paper of comparable quality and maturities sold to commercial paper
dealers generally. It is expected that the dealers and placement
agents acquiring commercial paper from National will re-offer such
paper at a discount to corporate, institutional and, with respect to
foreign commercial paper, also to individual investors. Such corporate
and institutional investors may include, among others, commercial
banks, insurance companies, pension funds, investment trusts, mutual
funds, foundations, colleges and universities, finance companies and
nonfinancial corporations.
Back-up bank lines of credit for 100% of the outstanding amount
of commercial paper are generally required by credit rating agencies.
National currently has a committed credit facility which acts as
back-up to its commercial paper program.
2. Credit Facilities with Banks and other Financial
Institutions
National proposes to establish credit facilities with various
banks and/or other financial institutions and to issue and sell, from
time to time, short-term notes.
Such notes would bear interest at rates comparable to, or lower
than, those available through other forms of short-term borrowing with
-10-
<PAGE>
similar terms contemplated in this Application/Declaration. The term
of any short-term notes would not exceed 270 days, and the total
amount of notes outstanding at any time, when added to the aggregate
amounts of short-term borrowing outstanding under other forms of
short-term borrowing contemplated in this Application/Declaration,
would not exceed the total amount of short-term debt for which
authorization is requested. The borrowing arrangements with the banks
and financial institutions may require compensating balances and/or
commitment fees or similar fees. National requests authority to incur,
if necessary, commitment or similar fees not to exceed one-half of one
percent (.50%) of the average daily credit facility available, and/or
compensating balances not to exceed twenty percent (20%) of the credit
facility established. National, at all times, will attempt to
negotiate the most favorable effective borrowing rate taking into
account any compensating balances and/or fees.
3. Other Securities
National may engage in other types of short-term financing as it
may deem appropriate in light of its needs and market conditions at
the time of issuance. Such short-term financing may include, without
limitation, bank borrowings, and other short-term securities issued
under a mortgage or indenture. The term of any such short-term
borrowing would not exceed 270 days. In no case will the outstanding
balance of all short-term borrowings exceed $1 billion during the
Authorization Period.
-11-
<PAGE>
C. LONG-TERM FINANCING
Long-term securities may consist of any combination of long-term
debt (debt having terms in excess of 270 days), common stock,
preferred stock, or other equity and long-term debt securities, as
the case may be.
1. Long-term Debt Financing
National requests Commission authorization to issue or reissue
from time to time during the Authorization Period additional long-term
debt securities in an aggregate principal amount which, when combined
with the value of the consideration received from the issuances of
common stock, preferred stock and other equity securities during the
Authorization Period, will not exceed $3 billion at any one time
outstanding. The term of any such long-term debt securities will
be in excess of 270 days. Examples of such long-term debt securities
would include, but not be limited to, debentures, convertible debt,
subordinated debt, medium-term notes, bank borrowings, and securities
with call or put options. Any long-term debt security would have such
designation, aggregate principal amount, maturity, interest rate(s) or
methods of determining the same, terms of payment of interest,
redemption provisions, non-refunding provisions, sinking fund
terms, conversion or put terms, U.S. dollar or foreign currency
denominations, security and subordination provisions, and other
terms and conditions as National may determine at the time of
issuance. Medium-term notes would be issued under the
-12-
<PAGE>
Indenture dated as of October 15, 1994, between National and The Bank
of New York, Trustee (or any successor trustee), as amended (the
"Indenture"). Debentures and other long-term debt securities may be
issued under the Indenture or under a mortgage or other indenture.
2. Equity Financing
National requests Commission authorization to issue equity
securities from time to time during the Authorization Period, the
value of which, as determined at the time the securities are issued,
when combined with other long-term securities issued pursuant to this
Application/Declaration, would not exceed $3 billion, at any one time
outstanding. The value of equity securities will equal the consideration
received by National at the time the securities are issued. Such issuance
would include (a) common stock and the rights appurtenant thereto
(together, the "Shares"), including, but not limited to, Shares issued
pursuant to the following Stock Issuance Plans and any successor Stock
Issuance Plans: (i) the 1997 Award and Option Plan (HCAR No. 26670)
whereby awards granting the right to purchase up to 1,900,000 Shares
may be issued over a ten-year period through December 12, 2006, (ii)
the Shares Payment Policy (HCAR No. 26655), (iii) the Customer Stock
Purchase Plan (HCAR No. 26394), (iv) the Dividend Reinvestment and
Stock Purchase Plan (HCAR No. 26261), (v) the 401(k) Plans (HCAR No.
26176), (vi) the 1993 Award and Option Plan (HCAR No. 25753), (vii)
the 1984 Stock Plan, (HCAR No. 24793) and (viii) the 1983 Incentive
Stock Option Plan (HCAR No. 24793), (b) preferred stock, (c) other
preferred securities, (d) options and/or warrants convertible into
common or preferred stock and (e) common and/or preferred stock issued
upon the exercise of convertible debt, rights, options, warrants
and/or similar securities.
-13-
<PAGE>
From time to time during the Authorization Period, other
similar Stock Issuance Plans may be adopted by National. For instance,
a direct stock purchase plan with a dividend reinvestment feature that
allows sales to persons not already shareholders may be implemented.
National proposes to issue Shares pursuant to the existing plans and
similar plans or plan funding arrangements hereinafter adopted and to
engage in other sales of its Shares for reasonable business purposes
without any additional prior Commission order during the Authorization
Period, except that the grants of Shares and rights to purchase Shares
under the 1997 Award and Option Plan may be issued from time to time
until December 12, 2006. Transactions of this variety would thus be
treated the same as other equity transactions permitted pursuant to
this Application/Declaration. Any authorization requested hereby
regarding the issuance of securities will supersede the authorizations
cited above to the extent such previous authorizations apply to the
issuance of securities, except that the authority previously issued in
connection with the 1997 Award and Option Plan (HCAR No. 26670) shall
still apply to the extent such previous authority extends through
December 12, 2006.
D. HEDGING
In addition, National requests authorization, to the extent
needed, to enter into hedging transactions ("Hedge Program") to be
initiated during the Authorization Period, with respect to all or a
portion of existing or anticipated financings, including floating rate
debt or fixed rate debt, using interest rate swaps or other derivative
products that may be useful for such purposes.
-14-
<PAGE>
National is seeking authority, to the extent needed, to
enter into one or more interest rate swaps ("Swaps"), and one or more
derivative instruments, such as caps, floors, collars, ceilings,
options and forwards (collectively, "Derivative Transactions"), with
one or more counterparties from time to time during the Authorization
Period, in notional amounts aggregating not in excess of the amount of
debt outstanding at any one time.
Among other strategies that may be employed from time to
time, National may use two different interest rate swap strategies.
Under one swap strategy, National would agree to make payments to a
counterparty, payable periodically. The rate 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 rate. This would be a "floating-to-fixed swap" on
National's part. Under another swap strategy, National and the
counterparty may exchange roles. National would pay a fixed rate and
receive a variable rate on a notional amount. This would be a
"fixed-to-floating swap" on National's part.
National also seeks authorization, to the extent needed, to
enter into an anticipatory interest rate hedging program (the
"Anticipatory Hedge Program") for anticipated debt issuances utilizing
Swaps and Derivative Transactions within a limited time prior to the
issuance of short- or long-term debt securities. The Anticipatory
Hedge Program is designed to reduce risk to National as discussed
below.
-15-
<PAGE>
The Anticipatory Hedge Program would be utilized to fix
and/or limit the interest rate risk associated with any new issuance
through (i) a forward sale of exchange-traded U.S. Treasury futures
contracts, U.S. Treasury securities and/or a forward swap (each a
"Forward Sale"), (ii) the purchase of put options on U.S. Treasury
securities (a "Put Options Purchase"), (iii) a Put Options Purchase in
combination with the sale of call options on U.S. Treasury securities
(a "Zero Cost Collar"), or (iv) some combination of a Forward Sale,
Put Options Purchase and/or Zero Cost Collar. The program may be
executed on-exchange ("On-Exchange Trades") with brokers through the
opening of futures and/or options positions traded on the Chicago
Board of Trade ("CBOT"), the opening of over-the-counter positions
with one or more counterparties ("Off-Exchange Trades") or a combination
of On-Exchange Trades and Off-Exchange Trades. National will determine
the optimal structure of the Anticipatory Hedge Program at the time of
execution. National may decide to lock in interest rates and/or limit
its exposure to interest rate increases. All open positions under the
Anticipatory Hedge Program will be closed on or prior to the date of
the new issuance and National will not, at any time, take possession
of the underlying U.S. Treasury securities.
All transactions entered into under the Hedge Program will
be bona fide hedges and will meet the criteria established by the
Financial Accounting Standards Board in order to qualify for hedge
accounting treatment, and National will comply with the financial
disclosure requirements associated with hedging transactions.
-16-
<PAGE>
National seeks Commission approval of the entire Hedge
Program to ensure the maximum flexibility in structuring effective
financing-related hedging strategies.
E. OTHER SECURITIES
In addition to the specific securities for which
authorization is sought herein, National also proposes to issue other
types of securities that it deems appropriate during the Authorization
Period. National requests that the Commission reserve jurisdiction
over the issuance of additional types of securities. National also
undertakes to file a post-effective amendment which will describe the
general terms of each such security and request a supplemental order
of the Commission authorizing the issuance thereof by National.
National further requests that each supplemental order be issued by
the Commission without further time-consuming public notice.
II. INTRA-SYSTEM FINANCING BY SUBSIDIARIES
Under Rule 52, sales of certain specified types of securities are
exempt when issued by a subsidiary of a registered holding company for
the purpose of financing the business of such subsidiary. If the
subsidiary is a public utility, the issue must be approved by the
state utility commission for the state in which the utility subsidiary
operates. The New York Public Service Commission and the Pennsylvania
Public Utility Commission exercise jurisdiction over the issuance by
Distribution of long-term securities. Commission authorization is,
-17-
<PAGE>
therefore, requested for the issuance, from time to time during the
Authorization Period, of long- and short- term debt and equity
securities by Distribution and the Non-Utility Subsidiaries, to the
extent not exempt pursuant to Rule 52 or previously authorized by the
Commission, in an aggregate amount not to exceed $250 million, and the
purchase, thereof, in each instance, by National.
A. CONTINUATION OF MONEY POOL/INTERNAL SHORT-TERM FINANCING
At certain times during the year, National and certain of
its Subsidiaries generate surplus funds. The Commission last
authorized short-term loans of such surplus funds between Subsidiaries
participating in the money-pool arrangement in HCAR No. 26443 dated
December 28, 1995. National proposes that such intra-System borrowing
arrangements be authorized to continue in the form of a money-pool
arrangement ("Money Pool"). Each Subsidiary may contribute excess
funds to the money pool from time to time.
National will administer the money pool and coordinate the
System's short-term borrowings. Borrowings outside the System, when
necessary, will be made by National. National has requested in this
Application/Declaration, authority to issue or reissue from time to
time during the Authorization Period up to $1 billion of short-term
debt (debt having terms less than or equal to 270 days)
outstanding at any one time consisting of borrowings under its
credit facilities, the issuance and sale of commercial paper, other
borrowings from banks or other financial institutions and/or
issuances of other securities.
-18-
<PAGE>
Such borrowed amounts will be included in the money pool. Thus, the
money pool funds will be derived from one or more of the following
sources:
1) surplus funds of National and/or of its Subsidiaries;
2) proceeds from National's sale of commercial paper;
3) borrowings by National from banks or other financial
institutions and/or issuances of other securities.
National proposes to administer the money pool by matching
up, to the extent possible, the short-term cash surpluses and
borrowing requirements of itself and its subsidiaries. Subsidiary
requests for short-term loans would be met first from available
surplus funds of the other subsidiaries, and then from National
corporate funds, to the extent available. Once these sources of funds
become insufficient to meet the short-term loan requests, borrowings
will be made by National through the issuance and sale of commercial
paper, borrowings under credit facilities, other borrowing
facilities with banks or other financial institutions and/or issuances
of other securities. Such borrowings shall not exceed $1 billion
outstanding at any one time during the Authorization Period.
Borrowing from the Money Pool
-----------------------------
Pursuant to Rule 52, borrowings from the Money Pool by any
of the Non-Utility Subsidiaries are exempt transactions under the
Holding Company Act. Distribution hereby seeks approval to make
borrowings from the Money Pool. Distribution proposes to repay
-19-
<PAGE>
borrowings from the Money Pool principally by means of funds received
as a result of providing services to its customers under its tariffs,
and from the possible sale of debt or equity securities.
National, itself, will not borrow from surplus funds of its
Subsidiaries.
Borrowings from the Money Pool, and repayments thereof, will
be adequately documented and will be evidenced on the books of each
participant who is borrowing funds or lending surplus funds through
the Money Pool.
If only internal funds (surplus funds of National and the
Subsidiaries) make up the funds available in the Money Pool, the
interest rate applicable and payable to or by subsidiaries for all
loans of such internal funds will be the rates for high-grade
unsecured 30- day commercial paper sold through dealers by major
corporations as quoted in The Wall Street Journal or other national
financial publications.
If external funds (funds borrowed by National either through
commercial paper or borrowings from banks or other financial
institutions) make up all of the funds available in the Money Pool, or
when both surplus funds from other participating subsidiaries and
external funds are concurrently borrowed through the "Money Pool", the
interest rate applicable to all such borrowings and payable by
borrowing subsidiaries will be equal to National's net cost for such
external borrowings.
-20-
<PAGE>
Interest will be payable by the borrowing Subsidiary until
the principal amount borrowed is fully repaid.
B. INTERNAL NON-EXEMPT LONG-TERM FINANCING BY NON-UTILITY
SUBSIDIARIES
The Non-Utility Subsidiaries propose to issue and National
proposes to acquire securities of a type which do not qualify for
exemption under Rule 52 for the purpose of financing the business of
any such Non-Utility Subsidiaries in an aggregate principal amount not
to exceed $250 million during the Authorization Period. Proceeds of
such securities issuances would be used to finance the business of any
such Non-Utility Subsidiaries, including making exempt acquisitions
under Sections 32, 33, and 34 and Rule 58, as applicable. The types of
such non-exempt securities shall be as described in part III.A.,
below, except that no Non-Utility Subsidiary shall issue any
guarantees to National.
III. EXTERNAL FINANCING BY SUBSIDIARIES
A. EXTERNAL NON-EXEMPT FINANCING BY NON-UTILITY SUBSIDIARIES
The Non-Utility Subsidiaries are expected to be active in the
development and expansion of energy-related, non-utility businesses.
They will be competing with large, well-capitalized companies in
-21-
<PAGE>
different sectors of the energy industry. In order to accomplish
investments in such competitive arenas, it will be necessary for the
Non-Utility Subsidiaries to have the ability to engage in financing
transactions which are commonly accepted for such types of
investments. For example, the Non-Utility Subsidiaries may issue and
sell common stock, preferred stock, bonds, notes or other forms of
indebtedness pursuant to Rule 52.
In addition, to the extent such transactions are not exempt from
the Holding Company Act or otherwise authorized or permitted by rule,
regulation or order of the Commission issued thereunder, National
requests authority under the Holding Company Act for the Non-Utility
Subsidiaries to issue and/or sell securities of any type (including
guarantees) (collectively, "Non-Utility Securities") to persons other
than National (with or without a guarantee being provided by National
or another Non-Utility Subsidiary), including banks, insurance
companies and other financial institutions, in an aggregate principal
amount which, when combined with the aggregate principal amount of
non-exempt debt financing by Distribution described in part III.B.,
will not exceed $250 million at any one time outstanding. Non-Utility
Securities would be issued and sold pursuant to the authorization
requested herein in one or more transactions from time to time from
the Order Date through the earlier to occur of (1) December 31, 2002
and (2) the effective date of any rule of general applicability
hereafter adopted by the Commission exempting such transactions (to
the extent they remain jurisdictional under the Holding Company Act)
from the approval requirements under Sections 6(a) and 7 of the Act.
-22-
<PAGE>
Equity Non-Utility Securities issued to a person other than
National may include capital shares, partnership interests, member
interests in limited liability companies, trust interests, or the
equivalent of any of the foregoing under applicable foreign law.
Non-Utility Securities may be denominated in either U.S. dollars or
foreign currencies. The amount and type of such Non-Utility
Securities, and the terms thereof, including (in the case of any
indebtedness) interest rate, maturity, prepayment or redemption
privileges, and the terms of any collateral security granted with
respect thereto, would in each case be negotiated at arm's length,
without further approval by the Commission. National would report to
the Commission pursuant to Rule 24 under the Holding Company Act as
described in part VI, below, concerning the issuance and sale of such
Non-Utility Securities to the extent that such reporting is required
by Rule 52 under the Holding Company Act.
It is possible that a Non-Utility Subsidiary may grant a security
interest in its assets in connection with the issuance of debt
Non-Utility Securities. Such security interest may take the form of a
pledge of the capital shares or other equity securities of a
non-utility company that it owns, including a security interest in any
distributions from a non-utility company, and/or a collateral
assignment of its rights under and interests in other property,
including rights under contracts to which it is a party or to which
its property is subject. In connection with the issuance of any such
debt Non-Utility Securities, placement, commitment fees, or other
similar fees may be paid to lenders, placement agents, or others, on
terms and in amounts to be established at arm's length and in
conformity with market practice.
-23-
<PAGE>
Furthermore, in connection with the issuance of debt Non-Utility
Securities, the Non-Utility Subsidiaries may seek to manage their
financing-related risk through the use of Swaps and other Derivative
Transactions. Any such transactions will comply with the parameters
established for National's Hedge Program as described herein. Any
guarantee that would be required in connection with the Hedge Program
would be provided pursuant to the authorization granted herein.
B. EXTERNAL NON-EXEMPT DEBT FINANCING BY DISTRIBUTION
It may be necessary for Distribution to have the ability to
issue, to persons other than National, non-exempt debt securities. To
the extent such debt securities are not exempt from the Holding
Company Act or otherwise authorized or permitted by rule, regulation
or order of the Commission issued thereunder, National requests
authority under the Holding Company Act for Distribution to issue
and/or sell debt securities of any type to persons other than National
(with or without a guarantee being provided by National or a
Non-Utility Subsidiary), including banks, insurance companies, and
other financial institutions, in an aggregate principal amount which,
when combined with the aggregate principal amount of external
non-exempt financings by Non-Utility Subsidiaries described in part
III.A., will not to exceed $250 million.
C. FINANCING ENTITIES
-24-
<PAGE>
National and the Non-Utility Subsidiaries seek authority to
organize new corporations, trusts, partnerships or other entities
created for the purpose of facilitating financings through their issue
to third parties of interests in such entities. Request is also made
for these financing entities to issue such securities to third parties
to the extent such transactions are not exempt under Rule 52.
Additionally, request is made for authorization with respect to (i)
the issuance of debentures or other evidences of indebtedness,
pursuant to an indenture or otherwise, by National or a Non-Utility
Subsidiary to a financing entity in return for the proceeds of the
financing, and (ii) the acquisition by National or a Non-Utility
Subsidiary of voting interests or equity securities issued by the
financing entity to establish National's or such Non-Utility
Subsidiary's ownership of the financing entity. National and the Non-
Utility Subsidiaries also request authorization to enter into
guarantees and expense agreements with their respective financing
entities, pursuant to which they would agree to pay all amounts
payable with respect to securities issued by such entities.
Such guarantee authority with respect to their respective
financing entities will not exceed $250 million in the aggregate at
any one time during the Authorization Period.
IV. GUARANTEES BY NATIONAL
National requests authorization to guarantee securities of
its Subsidiaries, and provide other forms of credit support with
respect to obligations of its Subsidiaries as may be necessary or
appropriate to enable them to carry on in the ordinary course of their
-25-
<PAGE>
respective businesses subject to a maximum aggregate limitation on
such guarantee authority at any one time of $2 billion. The $2 billion
of guarantees is in addition to any financing requested in this
Application/Declaration. Such authorization of National to provide
credit support would supersede and replace the authorization of
National to guarantee up to $500 million of obligations as set forth
in the order of the Commission dated November 12, 1993 (HCAR No.
25922). Guarantees made directly or indirectly by National to any
Subsidiary which is an EWG, FUCO, Energy Related Company or
Gas-Related Company will be subject to the limitations of Rules 53 or
58, as applicable. National states that terms and conditions of any
guarantees will be negotiated on a case by case basis as the need
arises. Guarantees and other forms of credit support provided by
National on behalf of any EWG or FUCO would be subject to the
limitations of Rule 53, and any guarantee or other form of credit
support provided on behalf of any Energy-Related Company or
Gas-Related Company would be subject to the limitations of Rule 58.
V. USE OF FINANCING PROCEEDS FOR ACQUISITIONS OF EWGS, FUCOS,
GAS-RELATED COMPANIES AND ENERGY-RELATED COMPANIES
National proposes to use some or all of the proceeds of the
financings proposed herein to make exempt investments in EWGs and
FUCOs in an aggregate amount at any time outstanding which, when added
to National's "Aggregate Investment" (as defined in Rule 53(a)(1)) in
any EWGs or FUCOs at any time, shall not exceed 50% of National's
"Consolidated Retained Earnings" (also as defined in Rule 53(a)(1)).
-26-
<PAGE>
National is in compliance and will comply with Rule 53(a) and all
other applicable rules under the Holding Company Act, including,
without limitation, such rules as may be promulgated in the future
pursuant to Section 33 of the Holding Company Act.
Currently, National's Aggregate Investment in EWGs and FUCOs is
zero. National's average Consolidated Retained Earnings, pursuant to
Rule 53(a)(1), for the four quarters ended September 30, 1997 is
approximately $473,476,000. National and its subsidiaries maintain
books and records and financial statements to identify investments
in and earnings from EWGs and FUCOs in which they directly or
indirectly hold an interest. National undertakes to provide the
SEC access to such books and records and financial statements that
are available to National upon the request of the SEC. Thus, the
Rule 53(a)(2) requirements are satisfied. No more than 2% of the
employees of Distribution render services, at any one time,
directly or indirectly, to the EWGs or FUCOs in which National
directly or indirectly holds an interest, thereby satisfying Rule
53(a)(3). All of the documents required to be filed under Rule
53(a)(4) with federal, state and local regulators having jurisdiction
over the retail rates of Distribution have been submitted.
None of the conditions described in Rule 53(b) exist with respect
to National, thereby satisfying Rule 53(b) and making Rule 53(c)
inapplicable.
-27-
<PAGE>
National also proposes to use some or all of the proceeds of the
financings proposed herein to make exempt investments under Rule 58.
Currently, National's Aggregate Investment, as defined in Rule
58(b)(3), in Energy-Related Companies is zero.
VI. FILING OF CERTIFICATES OF NOTIFICATION
Transactions contemplated herein which occur pursuant to the
authorization which may be granted by the Commission in this
proceeding will be reported through quarterly Rule 24 certificates of
notification which, in order to avoid duplication of reported
information, may include cross-references to National's filings with
the Commission under the Securities Act of 1933, as amended, and
Securities Exchange Act of 1934, as amended. Rule 24 certificates of
notification will be filed within 60 days after each of the first
three quarters of National's fiscal year and 90 days after the fourth
quarter of National's fiscal year. The first filing will be made
within 60 days after the end of the fiscal quarter in which the
Commission grants its order with respect to this
Application/Declaration. With respect to transactions under the Hedge
Program such Rule 24 certificate of notification will include: the
trade date, the type of hedge transaction, the notional principal
amount, a description of the transaction, and the material terms of
the underlying instrument.
VII. SUMMARY OF AUTHORIZATIONS SOUGHT
-28-
<PAGE>
National and its Subsidiaries request Commission authorization to
undertake the following financing transaction during the Authorization
Period, without any additional Commission approvals required except as
indicated.
I. External financing by National
A) To issue or reissue from time to time during the Authorization
Period, up to $1 billion of short-term debt outstanding at any one
time, consisting of borrowings under its credit facilities, the
issuance of commercial paper, other forms of short-term financing
generally available to borrowers with investment grade credit ratings
and/or the issuance of other securities. National further requests
authorization to amend its commercial paper program or credit
facilities without further Commission authorization provided that the
term of any borrowing thereunder does not go beyond 270 days from its
date of issuance or borrowing.
B) Authorization to issue or reissue from time to time during the
Authorization Period, additional long-term debt and equity securities
in an aggregate amount, outstanding at any time, not to exceed $3
billion. The value of debt securities will equal the aggregate
principal amount of such securities. The value of equity securities
will equal the consideration received by the National at the time the
securities are issued.
-29-
<PAGE>
C) Authorization to enter into transactions pursuant to its Hedge
Program to be initiated during the Authorization Period, with respect
to all or a portion of existing or anticipated financings, including
floating rate debt or fixed rate debt, using interest rate swaps or
other derivative products that may be useful for such purposes.
D) Authorization is also being sought to issue, during the
Authorization Period, other types of securities that National deems
appropriate from time to time over which issuance the Commission would
reserve jurisdiction.
II. Intra-system financing by Subsidiaries
A) Authorization is requested for the continuance of the Money
Pool during the Authorization Period, where the maximum amount of
Money Pool borrowings outstanding for each Subsidiary will be
determined by National and the Subsidiaries in accordance with
business needs. Actual short-term financing would be issued based on
the capital needs of the various entities.
B) Authority is requested for the Non-Utility Subsidiaries to
issue, and National to acquire, from time to time during the
Authorization Period, securities of a type which do not qualify for
exemption under Rule 52 but which are considered appropriate during
the Authorization Period in an aggregate principal amount not to
exceed $250 million at any time outstanding.
-30-
<PAGE>
III. External Financing by Subsidiaries
A) The Non-Utility Subsidiaries request Commission authorization
(i) to issue securities of any type (including guarantees to
nonaffiliates), in an aggregate principal amount which, when combined
with the aggregate principal amount of non-exempt debt financing by
Distribution described in B) below, will not to exceed $250 million,
to the extent such issuances are not exempt from the provisions of the
Holding Company Act and (ii) to enter into Swaps and other Derivative
Transactions.
B) Distribution requests Commission authorization to issue debt
securities to nonaffiliates, in an aggregate principal amount which,
when combined with the aggregate principal amount of external
non-exempt financings by Non-Utility Subsidiaries described in A)
above, will not to exceed $250 million at any one time outstanding, to
the extent such issuances are not exempt from the provisions of the
Holding Company Act.
C) National and the Non-Utility Subsidiaries seek authority to
organize new corporations, trusts, partnerships or other entities
created for the purpose of facilitating financings through their issue
to third parties of interests in such entities. Request for
authorization is also made for these financing entities to issue such
securities to the extent such transactions may not be exempt under
Rule 52. Additionally, request is made for authorization with respect
to (i) the issuance of debentures or other evidences of indebtedness
pursuant to an indenture or otherwise, by National or a Non-Utility
-31-
<PAGE>
Subsidiary to a financing entity in return for the proceeds of the
financing, and (ii) the acquisition by National or a Non-Utility
Subsidiary of voting interests or equity securities issued by the
financing entity to establish National's or such Non-Utility
Subsidiary's ownership of the financing. National and the Non-Utility
Subsidiaries also request authorization to enter into guarantees and
expense agreements with their respective financing entities, pursuant
to which they would agree to pay all amounts payable with respect to
securities issued by such entities.
Such guarantee authority with respect to their respective
entities will not exceed $250 million in the aggregate at any one time
during the Authorization Period.
IV. National requests authorization to enter guarantee
arrangements and otherwise provide credit support with respect to
obligations of its subsidiaries as may be necessary or appropriate in
the ordinary course of their respective businesses. The maximum
aggregate limit on all such credit support by National at any one time
will be $2 billion. The $2 billion of guarantees is in addition to any
financing requested in this Application. Guarantees and other forms of
credit support provided by National on behalf of any EWGs, FUCOs,
Energy- Related Companies or Gas-Related Companies would be subject to
the limitations of Rule 53 or Rule 58, as applicable.
V. Use of Proceeds to Make Exempt Investments in EWGs, FUCOs,
Energy-Related Companies and Gas-Related Companies.
-32-
<PAGE>
National seeks Commission authorization to use the proceeds from
the financings approved herein to invest in EWGs and FUCOs in
compliance with the standards set forth in Rule 53 and in
Energy-Related Companies and Gas-Related Companies, subject to the
limitations of Rule 58.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
It is estimated that the expenses to be incurred by the
applicants in connection with the proposed transactions are as
follows: Legal Fees (including New Jersey Counsel)* $35,000
ITEM 3. APPLICABLE STATUTORY PROVISIONS
The issuance of debt and equity securities by National and, to
the extent not exempt pursuant to Rule 52, by Subsidiaries is subject
to Sections 6 and 7 of the Holding Company Act. Sections 9 and 10 of
the Holding Company Act are applicable to the acquisition by National
of such securities issued by its subsidiaries, but may be exempt
pursuant to Rule 52.
The issuance by National or any Subsidiary of National of a
guarantee is subject to Sections 6, 7 and 12(b) of the Holding Company
Act and Rule 45 thereunder.
- ------------------
* The above fees do not include the expenses for the issuance of
the securities authorized pursuant to the Application. As noted
previously, National proposes that such fees be capped at 5% of
the issuance amount.
-33-
<PAGE>
The Money Pool transactions are subject to Sections 6, 7, 9, 10
and 12(b) and (f) of the Holding Company Act and Rule 45 thereunder.
To the extent that any Derivative Transactions or the Hedge
Program involves the jurisdictional issuance of a "security" or an
"extension of credit", Sections 6(a), 7 and 12(b) of the Holding
Company Act and Rule 45 promulgated thereunder are applicable to the
proposed transactions.
The transactions proposed herein are also subject to Sections 32
and 33 of the Holding Company Act and Rules 53, 54 and 58 promulgated
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 long-term notes to be issued by Distribution
and the allocation of costs and benefits to Distribution. (See
Exhibits D-1 and D-3 for Distribution's Application and Petition.)
-34-
<PAGE>
ITEM 5. PROCEDURE
It is requested that the Commission issue its Notice by December
19, 1997 and its order on or before January 20, 1998.
Applicants hereby (i) waive a recommended decision by a hearing
officer, (ii) waive a recommended decision by any other responsible
officer or the Commission, (iii) consent that the Division of
Investment Management may assist in the preparation of the
Commission's decision, and (iv) waive a 30-day waiting period between
the issuance of the Commission's order and the date on which it is to
become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
To be filed by Amendment.
There have been no material changes, not in the ordinary course
of business, since the date of the financial statements filed
herewith.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
As more fully described in Item 1, the proposed transactions
subject to the jurisdiction of this Commission relate only to the
means of financing activities. The proposed transactions subject to
-35-
<PAGE>
the jurisdiction of this Commission have no environmental impact in
and of themselves.
No federal agency has prepared or, to National's knowledge, is
preparing an EIS with respect to the proposed transaction.
-36-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused this
Application/Declaration to be signed on their behalf by the
undersigned thereunto duly authorized.
NATIONAL FUEL GAS COMPANY
By /s/ Philip C. Ackerman
-------------------------
Philip C. Ackerman
Senior Vice President
NATIONAL FUEL GAS DISTRIBUTION
CORPORATION
By /s/ Philip C. Ackerman
-------------------------
Philip C. Ackerman
President
SENECA RESOURCES CORPORATION
By /s/ G. T. Wehrlin
-------------------------
G. T. Wehrlin
Controller
NATIONAL FUEL GAS SUPPLY CORPORATION
By /s/ Richard Hare
-------------------------
Richard Hare
President
-37-
<PAGE>
NATIONAL FUEL RESOURCES, INC.
By /s/ R. J. Kreppel
-------------------------
R. J. Kreppel
President
UTILITY CONSTRUCTORS, INC.
By /s/ Philip C. Ackerman
-------------------------
Philip C. Ackerman
President
HORIZON ENERGY DEVELOPMENT, INC.
By /s/ Philip C. Ackerman
-------------------------
Philip C. Ackerman
President
HIGHLAND LAND & MINERALS, INC.
By /s/ Philip C. Ackerman
-------------------------
Philip C. Ackerman
President
DATA-TRACK ACCOUNT SERVICE, INC.
By /s/ Philip C. Ackerman
-------------------------
Philip C. Ackerman
President
LEIDY HUB, INC.
By /s/ G. T. Wehrlin
-------------------------
G. T. Wehrlin
Secretary/Treasurer
-38-
<PAGE>
SENECA INDEPENDENCE PIPELINE COMPANY
By /s/ Richard Hare
-------------------------
Richard Hare
President
NIAGARA INDEPENDENCE MARKETING COMPANY
By /s/ C. H. Friedrich
-------------------------
C. H. Friedrich
Treasurer
NIAGARA ENERGY TRADING INC.
By /s/ C. H. Friedrich
-------------------------
C. H. Friedrich
Treasurer
-39-
