File No. 70-9175
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
AMENDMENT NO. 1 TO
FORM U-1
APPLICATION - DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
________________________________________________
Names of Companies filing this statement and addresses of principal
executive offices:
National Fuel Gas Company National Fuel Gas Supply
10 Lafayette Square Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
Name of Top Registered Holding Company: NATIONAL FUEL GAS COMPANY
Names and Addresses of Agents for Service:
J. P. Pawlowski, Secretary J. R. Peterson, Assistant
National Fuel Gas Supply Secretary
Corporation National Fuel Gas Company
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
It is respectfully requested that the Commission send copies of all
notices, orders and communications to:
D. W. Reitz
Assistant General Counsel
National Fuel Gas Supply Corporation
10 Lafayette Square, Suite 1500
Buffalo, New York 14203
The Form U-1 previously filed in this matter is amended and restated
as follows:
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 ("Act"). Joining in this application is
National Fuel Gas Supply Corporation ("Supply"), a wholly-owned
subsidiary of National engaged in the interstate transportation and
storage of natural gas subject to the jurisdiction of the Federal
Energy Regulatory Commission. National and its subsidiaries are
collectively referred to herein as the "National Fuel Gas System."
In addition to Supply, National Fuel's subsidiaries consist of
National Fuel Gas Distribution Corporation ("Distribution"), Seneca
Resources Corporation, Utility Constructors, Inc., Leidy Hub, Inc.,
Horizon Energy Development, Inc., Data-Track Account Services, Inc.,
National Fuel Resources, Inc., Highland Land & Minerals, Inc.,
Niagara Energy Trading Inc., Niagara Independence Marketing Company,
and Seneca Independence Pipeline Company. Distribution is the only
utility subsidiary of National. Distribution sells natural gas and
provides natural gas transportation services through a local
distribution system located in an area in western New York and
northwestern Pennsylvania that includes Buffalo, Niagara Falls and
Jamestown, New York, and Erie and Sharon, Pennsylvania. Neither
National nor any of its subsidiaries currently has an ownership
interest in an EWG or a FUCO as defined in Sections 32 and 33 of the
Act.
Cunningham Natural Gas Corporation ("Cunningham") is a New York
corporation with a principal business address of 165 Kennedy Street,
Bradford, Pennsylvania 16701. Cunningham operates two natural gas
wells, one in Allegany County, New York, and the other in Potter
County, Pennsylvania, and a number of shallow oil wells in
Pennsylvania.
On October 8, 1997, Supply and Cunningham entered into an Asset
Purchase and Reorganization Agreement (the "Agreement"), under which
Supply, subject to certain conditions including Securities and
Exchange Commission ("Commission") approval of this
application-declaration, will acquire substantially all the assets
of Cunningham in exchange for registered shares of common voting
stock, $1 par value, of National, in a manner intended to qualify
for non-recognition of gain or loss pursuant to Section 368 of the
Internal Revenue Code (the "Exchange").
Pursuant to the Agreement, Supply would acquire all of
Cunningham's assets in the Exchange, with the exception of the
excluded assets identified below. The assets to be acquired by
Supply ("the Assets") include the following:
(1) Cunningham's two natural gas wells, and related
pipelines, equipment, vehicles, leases, sales agreements and other
property used in the production of natural gas;
(2) Cunningham's cash, cash equivalents and receivables,
except as identified below;
(3) Approximately 640 acres of undeveloped timber property in
Allegany County, New York; and
(4) Any marketable securities that remain in Cunningham's
accounts with two investment brokers at the time the Exchange is
consummated (the "Closing"). (One account is with Salomon Smith
Barney, and the other is with Edward Jones. At this time, these
accounts consist entirely of money funds and certificates of
deposit.)
The following assets of Cunningham will be excluded from the
Exchange:
(1) Cunningham's oil wells and any equipment or other
property used by Cunningham in the production and sale of oil, which
will be sold to one or more other parties in separate transactions;
(2) an amount of cash or cash equivalents (not to exceed
$300,000) retained by Cunningham to pay deferred compensation
obligations predating the Agreement; and
(3) two pickup trucks and one brine truck, which will be sold
to one or more other parties in separate transactions.
In exchange for the Assets, Supply will deliver registered
shares of common stock of National ("the Shares") to Cunningham
having an aggregate market value ("the Consideration"), as of the
end of the last business day immediately preceding the Closing ("the
Valuation Date"), equal to the sum of the following:
(1) the cash and cash equivalents to be transferred to Supply;
(2) the market value as of the Valuation date of any
securities to be transferred to Supply (although it is expected that
no such securities will be transferred);
(3) the unpaid balance of Cunningham's receivables from its
gas sales customer;
(4) the fair market value of the real property owned by
Cunningham, according to appraisals to be commissioned by Supply and
Cunningham; and
(5) an agreed-upon amount of additional consideration.
Applicants have estimated that the Consideration will be
approximately $3,158,000. If, as assumed by the pro forma financial
statements included with this filing, the Exchange had been
consummated on November 30, 1997, the Shares would have consisted of
67,641 Shares, which is less than 2/10 of 1% of the 38,280,699
Shares issued and outstanding (as of March 17, 1998), and the market
value of the Shares ($3,158,000) would also have amounted to a small
fraction of 1% of the total assets of National and its subsidiaries,
which totaled $2,350,588,000 as of November 30, 1998.
The Shares to be exchanged for Cunningham's assets will be
registered with the Commission under the Securities Act of 1933,
issued in compliance with any applicable state Blue Sky Laws, and
listed on the New York Stock Exchange. The Shares shall be
exchanged without preference over any outstanding common stock of
National as to dividends or distribution, and shall have equal
voting rights with all such outstanding common stock.
In order to effectuate the Exchange, National will issue the
Shares to Supply, and Supply will, in turn, pay National an amount
equal to the Consideration for the Shares. (Footnote #1) Supply
will then exchange the Shares for the Assets.
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(Footnote #1) Supply plans to finance this payment to National
through borrowings from the National Fuel Gas System money pool.
See Holding Co. Act Release No. 26443 (December 28, 1995); File No.
70-8729.
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The Agreement also contemplates that, following the Exchange,
Cunningham would wind up its affairs pursuant to a plan of
liquidation, under which its shareholders would receive the Shares
in exchange for their Cunningham common stock.
The acquisition of Cunningham's natural gas properties is
expected to improve operations of Supply's underground natural gas
storage facilities in Allegany and Steuben Counties, New York.
This application-declaration is being submitted pursuant to
Sections 6(a), 7, 9(a) and 10 of the Act. With respect to
acquisition authorization under Sections 9(a) and 10, Section 2(b)
of the Gas Related Activities Act of 1990, 15 U.S.C. 79k (Law
Co-op. 1993) provides that the functional relationship requirement
of Section 11 of the Act will be deemed satisfied if the Commission
determines that
"(1) . . . such acquisition is in the
interest of consumers of each gas utility company
of [the] registered company or consumers of any
other subsidiary of such registered company; and
(2) . . . such acquisition will not be
detrimental to the interests of consumers of any
such gas utility company or other subsidiary or to
the proper functioning of the registered holding
company system."
The Exchange is in the interest of Supply's direct and indirect
transportation and storage customers, including Distribution,
National's public utility subsidiary and its customers, because the
Exchange is expected to result in improved performance and greater
utilization of Supply's storage fields in Allegany and Steuben
Counties. Distribution purchases firm storage services from Supply
and relies upon the capacity and deliverability of Supply's storage
fields to meet its winter heating requirements. In addition, the
Exchange will be in no way detrimental to such customers, the public
interest, investors, or the proper functioning of the National Fuel
Gas System.
While it does not appear that Supply's acquisition of
Cunningham's assets will be exempt under Rule 58 because it does not
involve the acquisition of securities, approval of this asset
acquisition would be fully consistent with the Commission's purpose
in issuing Rule 58; i.e., "to facilitate investments by registered
holding companies in energy-related and gas-related companies."
(Footnote #2) As a producer of natural gas, Cunningham falls within
the definition of "gas-related company."
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(Footnote #2) Holding Co. Act Release No. 26667 (February 14,
1997), 62 FR 7900 at 7902 (February 20, 1997).
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With respect to stock issuance authorization under Sections
6(a) and 7 of the Act, Section 7(d)(3) provides that a declaration
shall not become effective if financing by the issue or sale of the
particular security is not necessary or appropriate to the
economical and efficient operation of a business in which applicant
lawfully is engaged or has an interest. As shown by the discussion
above, issuance of the Shares is necessary or appropriate to the
economical and efficient operation of Supply's business, and will
satisfy this and all other requirements of Section 7 of the Act.
Item 2. Fees, Commissions and Expenses
Registration Fees (Estimated) $932
Expenses of Counsel and
Auditors for National (Estimated) $5,000
Fees and Expenses of Counsel $40,000
for Supply (Estimated)
Appraisal Fees (Estimated) $10,000
Misc. Expenses (Estimated) $1,000
Item 3. Applicable Statutory Provisions
Sections 6(a), 7, 9(a), and 10 of the Act, and Rules 23, 24,
and 43 are considered or may be applicable to the proposed
transactions.
Sections 6(a) and 7 of the Act and Rule 43 will apply to the
issuance of the Shares by National.
Sections 9(a) and 10 may apply to Supply's acquisition of
Cunningham's assets. In addition, these sections would apply to the
acquisition by Supply of any marketable securities that remain in
Cunningham's investment accounts on the date of the closing, to the
extent such acquisition would not be exempt under Rule 40.
The Gas Related Activities Act would be applicable to any
aspect of the Exchange that is subject to Sections 9(a) and 10.
To the extent that any aspect of the Exchange is considered by
the Commission to require authorization, approval or exemption under
any section of the Act or provision of the rules or regulations
other than those specifically referred to herein, request for such
authorization, approval or exemption is hereby made.
Item 4. Regulatory Approval
No consent or approval of any federal commission (other than
the Commission under the Act and the Securities Act of 1933) is
required with respect to the transactions proposed herein. By
agreement of the parties, Cunningham's obligation to consummate the
Exchange is contingent upon its receipt of a ruling from the
Internal Revenue Service that the Exchange will qualify as a
tax-free reorganization pursuant to Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended. On February 3, 1998,
Cunningham submitted a request to the Internal Revenue Service
seeking such ruling.
These transactions concern the acquisition of one natural gas
well permitted by the New York State Department of Environmental
Conservation, and one permitted by the Pennsylvania Department of
Environmental Protection. The only state commission approvals
necessary in regard to the proposed transactions are that each of
these environmental agencies must approve the transfer of the well
permits related to the wells located in their respective
jurisdictions. There are no approvals necessary from any state
commissions that regulate public utilities.
Item 5. Procedure
The Commission is requested to issue an order permitting the
declaration to become effective as soon as practicable so that the
Exchange may be consummated on or before June 1, 1998. The
Agreement provides that the Exchange is contingent upon a closing
occurring on or before June 1, 1998. There is a possibility that
the Exchange will not be consummated if it does not close by that
time.
Applicant-Declarants respectfully request that the Commission's
Order 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 Commission, agree that the Division of Investment Management may
assist in the preparation of the Commission's decision and request
that there be no waiting period between the issuance of the
Commission's Order and the date on which it becomes effective.
Applicant-Declarants hereby request that certain information
contained in the Exhibits hereto, as indicated in the index of
Exhibits (the "Information") be kept confidential pursuant to Rule
104(b) [17 CFR Section 250.104(b)].
Public disclosure of the Information is not necessary or
appropriate in the public interest or for the protection of
investors or consumers. The Information describes the consideration
to be paid to Cunningham for its gas production properties and the
effect of the Exchange on the financial statements of National,
Supply, and the National Fuel Gas System. As disclosed above, this
consideration is only one component of a total consideration that
represents a small fraction of 1% of both National's issued and
outstanding shares and the assets of the National Fuel Gas System,
too small an amount to be material to investors or consumers. The
Agreement was the product of confidential negotiations concerning
the settlement of pending litigation between the parties. Public
disclosure of this consideration may prejudice either or both
parties in the litigation if the Exchange is not consummated due to
unsatisfied closing conditions. In addition, Supply may be
prejudiced if its competitors are able to learn the value it places
on the gas production properties to be acquired before the closing
occurs.
Item 6. Exhibits and Financial Statements
The following exhibits and financial statements are filed as
part of this application-declaration:
(a) Exhibits:
A-1 Common Stock Shares to be issued by National (to be
filed by amendment).
B-1 Asset Purchase and Reorganization Agreement between
Supply and Cunningham. THIS AGREEMENT IS SUBJECT TO A
REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 104(b).
C-1 Form S-4 Registration Statement under the Securities
Act of 1933 regarding the issuance of the Shares by
National (to be filed by amendment).
D-1 Request by Cunningham for a ruling by the Internal
Revenue Service that the Exchange qualifies as a tax-free
reorganization under Section 368(a)(1)(C) of the Internal
Revenue Code of 1986. THIS EXHIBIT IS SUBJECT TO A
REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 104(b).
E-1 Map showing generally the location of the natural gas
production properties to be acquired in relation to the
facilities of Supply. THIS EXHIBIT IS SUBJECT TO A REQUEST
FOR CONFIDENTIAL TREATMENT UNDER RULE 104(b).
F-1 Opinion of New Jersey counsel for National (to be
filed by amendment).
F-2 Opinion of Pennsylvania counsel for Supply (to be
filed by amendment).
G-1 Financial Data Schedules. THIS EXHIBIT IS SUBJECT TO
A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 104(b).
H-1 Proposed form of public notice (designated as Exhibit
EX-99 for Edgar purposes).
I-1 The discussion of consideration originally appearing
as Exhibit I-1 is hereby withdrawn.
(b) Financial Statements
S-1 Pro forma consolidated financial statements for
National Fuel Gas Company and adjusting journal entries.
THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 104(b).
S-2 Pro forma financial statements for National Fuel Gas
Company and adjusting journal entries. THIS EXHIBIT IS
SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE
104(b).
S-3 Pro forma financial statements for National Fuel Gas
Supply Corporation and adjusting journal entries. THIS
EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER RULE 104(b).
S-4 Notes to consolidated financial statements of
National Fuel Gas Company. THIS EXHIBIT IS SUBJECT TO A
REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 104(b).
Item 7. Information as to Environmental Effects
The proposed transactions involve the change in ownership of
existing properties and therefore involve no major action which will
significantly affect the quality of the human environment. No
federal agency has prepared or is preparing an environmental impact
statement with respect to the transactions proposed in this
application-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.
Dated: March 18, 1998 NATIONAL FUEL GAS COMPANY
By: /s/James R. Peterson
James R. Peterson
Assistant Secretary
NATIONAL FUEL GAS SUPPLY
CORPORATION
By: /s/ John R. Pustulka
John R. Pustulka
Vice President
Exhibit H-1 (Designated as EX-99 for EDGAR purposes)
PROPOSED FORM OF PUBLIC NOTICE
National Fuel Gas Company ("National"), a registered holding
company, and its wholly-owned non-utility subsidiary, National Fuel
Gas Supply Corporation ("Supply"), both located at 10 Lafayette
Square, Buffalo, New York 14203, have filed an
application-declaration under sections 6(a), 7, 9(a) and 10 of the
Public Utility Holding Company Act and Rule 43 thereunder.
National and Supply propose a transaction whereby Supply would
acquire substantially all the assets of Cunningham Natural Gas
Corporation ("Cunningham") in exchange for registered shares of
National's common voting stock, $1 par value ("Shares"), in a manner
intended to qualify the exchange for non-recognition of gain or loss
under Section 368 of the Internal Revenue Code. The proposed
transaction is set forth in an Asset Purchase and Reorganization
Agreement between Supply and Cunningham ("Agreement"). Cunningham is
engaged in the business of producing natural gas in Western New York
State and Northern Pennsylvania. Cunningham also operates various
oil wells in Northern Pennsylvania, which will not be acquired by
Supply in the exchange.
Under the Agreement, Supply will exchange Shares for (1)
Cunningham's two natural gas wells, and related pipelines, equipment,
vehicles, leases, sales agreements and other property used in the
production of natural gas; (2) cash, cash equivalents and
receivables, (3) approximately 640 acres of undeveloped timber
property in Allegany County, New York; and (4) any marketable
securities that remain in Cunningham's investments accounts at the
time of the closing. The number of Shares exchanged will be less
than 0.2% of the number of issued and outstanding shares of
National's common stock.
In order to effectuate the exchange, National will issue an
equal number of Shares to Supply. Supply, in turn, will pay National
the issue date market value of the Shares. Supply will then exchange
the Shares for Cunningham's assets.
