(As filed July 6, 1999)
File No. 70-[____]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
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FORM U-1
APPLICATION-DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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NATIONAL FUEL GAS COMPANY
NATIONAL FUEL GAS SUPPLY CORPORATION
10 Lafayette Square
Buffalo, New York 14203
NATIONAL FUEL RESOURCES, INC.
165 Lawrence Bell Drive, Suite 120
Williamsville, New York 14221
SENECA RESOURCES CORPORATION
UPSTATE ENERGY, INC.
1201 Louisiana Street, Suite 400
Houston, Texas 77002
(Names of companies filing this statement
and addresses of principal executive offices)
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NATIONAL FUEL GAS COMPANY
(Name of top registered holding company)
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Philip C. Ackerman
Senior Vice President
National Fuel Gas Company
10 Lafayette Square
Buffalo, New York 14203
(Name and address of agent for service)
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The Commission is requested to send copies of all
notices, orders and communications in connection with this
Application or Declaration to :
James R. Peterson, Esq. Robert J. Reger, Jr., Esq.
Assistant Secretary Andrew F. MacDonald, Esq.
National Fuel Gas Company Thelen Reid & Priest LLP
10 Lafayette Square 40 West 57th Street
Buffalo, New York 14203 New York, New York 10019
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
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1.1 Description of Applicants' Business.
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National Fuel Gas Company ("National") is a public-utility holding
company registered under the Public Utility Holding Company Act of 1935, as
amended (the "Act"). Through its direct and indirect subsidiaries, National is
engaged in all phases of the natural gas business, namely: exploration,
production, purchasing, gathering, processing, transportation, storage, retail
distribution and wholesale and retail marketing. National owns all of the issued
and outstanding common stock of National Fuel Gas Distribution Corporation
("Distribution"), a gas-utility company which sells natural gas at retail and
provides natural gas transportation services through a local distribution system
to nearly 731,000 customers in western New York and northwestern Pennsylvania.
National's principal gas-related non-utility subsidiaries include National Fuel
Gas Supply Corporation ("Supply"), Seneca Resources Corporation ("Seneca"),
National Fuel Resources, Inc. ("Resources"), and Upstate Energy, Inc. (formerly
Niagara Energy Trading Inc.) ("Upstate Energy"). National also indirectly holds
one-third general partnership interests in Independence Pipeline Company
("Independence Pipeline") and in DirectLink Gas Marketing Company
("DirectLink").
Supply, an interstate pipeline company, transports and stores natural
gas for Distribution and for other utilities, pipelines, marketers and large
industrial customers in the northeastern United States. Supply owns and operates
a 3,136-mile pipeline network that extends generally from southwestern
Pennsylvania to the U.S.-Canada border at Niagara Falls. It is regulated by the
Federal Energy Regulatory Commission ("FERC") as a natural gas company under the
Natural Gas Act of 1938.
Seneca is engaged in the business of exploration and development of
natural gas and oil
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producing reserves, chiefly in the on-shore and off-shore Gulf Coast region of
Texas, Louisiana and Alabama, the Appalachian region, the Rocky Mountain region
(Wyoming) and in California.
Resources markets natural gas, electricity and other forms of energy to
approximately 5,400 industrial, commercial and residential customers under
long-term agreements, and provides other related energy services to these
end-use customers. Upstate Energy, which was formed in 1997,1 engages in
wholesale natural gas marketing and related activities. Neither Resources nor
Upstate Energy owns or operates facilities for the distribution of gas at retail
or for the generation, transmission or distribution of electricity for sale.
Independence Pipeline was formed to construct, own and operate a
370-mile 36-inch diameter pipeline running from Defiance, Ohio to the Leidy,
Pennsylvania hub, where it will interconnect with Supply and other interstate
pipeline carriers. The Independence Pipeline was planned, in large part, to help
move western Canadian gas entering the Chicago market center to New York and
other East Coast markets, including the rapidly expanding gas-fired electric
generation market in the northeast United States. The project has a planned
in-service date of late 2000. DirectLink has agreed to purchase firm
transportation services from Independence Pipeline and other interstate pipeline
companies, and plans to purchase and sell gas and engage in related non-utility
transactions.2
For the twelve months ended March 31, 1999, National had operating
revenues of approximately $1.2 billion, of which $806 million were attributable
to regulated utility gas sales,
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1 Upstate Energy is a "gas-related company" within the meaning of Rule
58. As such, its activities are limited to the United States.
2 See National Fuel Gas Company, et al., Holding Co. Act Rel. No. 26840
(March 13, 1998).
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$169 million to pipeline and storage operations, and $140 million to exploration
and production activities. As of March 31, 1999, National and its subsidiaries
had total assets of approximately $2.85 billion, including $909 million in net
utility (i.e., distribution) plant, $462 million in net pipeline and storage
plant, and $677 million in net exploration and production property, plant and
equipment.
1.2 Proposed Transactions.
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National, through Supply, Seneca, Resources and Upstate Energy
(collectively, the "Non-Utility Subsidiaries"), herein requests authority to
acquire from time to time through December 31, 2003 (the "Authorization
Period"), in one or more transactions, the equity and debt securities of one or
more companies that are engaged in or are formed to engage in certain categories
of non-utility gas-related operations outside the United States ("Foreign Energy
Affiliates"). In general, these operations would be substantially similar to
those that the Non-Utility Subsidiaries now engage in, directly, in the United
States. National proposes to invest up to $300 million in the securities of
Foreign Energy Affiliates (the "Investment Limitation"). In addition, Resources
and Upstate Energy request authority to engage directly in marketing and
brokering and related activities in Canada.
Specifically, Seneca, directly or through one or more intermediate
subsidiaries to be formed by Seneca specifically for such purpose, proposes to
acquire the securities of or other interests in entities that are engaged in
natural gas and oil exploration and production operations ("Exploration &
Production Activities") in Canada and, subject to a request for a reservation of
jurisdiction, other countries as well. Resources and Upstate Energy, also
directly or through one or more intermediate subsidiaries formed for such
purpose, propose to engage in, or to acquire the securities of or other
interests in one or more entities that are engaged in, brokering and marketing
of natural gas and other
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energy commodities and incidental and related activities ("Marketing & Brokering
Activities") in Canada and, subject to a request for a reservation of
jurisdiction, in other countries outside the United States and Canada. Supply
proposes to acquire, directly or indirectly through intermediate subsidiaries,
the securities of or other interests in companies formed to construct and
operate new pipeline and gas storage facilities ("Pipeline & Storage
Activities") in Canada and other foreign countries.
Exploration & Production Activities: As indicated, Seneca is engaged in
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gas and oil exploration and production activities in several major U.S. supply
basins, including the Gulf Coast region, the Appalachian region, the Rocky
Mountain region, and California. Seneca is currently authorized to use proceeds
of National system money pool borrowings to explore for and develop additional
reserves that can be made available as a source of gas for the National system
or that can be transported to or through the National system and sold to
industrial customers and other large end users (including electric generators).3
Subject to the Investment Limitation, Seneca proposes to acquire the securities
of or other interests in one or more Foreign Energy Affiliates that are engaged
or will engage in Exploration & Production Activities in Canada. The operations
of any such companies will be substantially similar to those of Seneca in the
United States. Seneca requests that the Commission reserve jurisdiction over
investments in Foreign Energy Affiliates that are engaged in Exploration &
Production Activities outside of the United States and Canada.
As is the case with its domestic exploration and production activities,
Seneca intends to
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3 See National Fuel Gas Company, et al., Holding Company Act Rel. No.25265
(March 5, 1991); and Holding Company Act Rel. No. 26847 (March 20, 1998). Under
the terms of the Commission's orders, Seneca's exploration and development
activities are not limited to the United States. Seneca's authority for money
pool borrowings extends through December 31, 2002.
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consider investments in entities with operations in areas in Canada where
existing or planned pipeline facilities would permit reserves to be made
available to gas customers of Distribution (including transportation-only
customers of Distribution), or customers of other subsidiaries of National.
Foreign Energy Affiliates may develop a base of reserves or make investments in
new or existing exploration ventures that, through exchanges, displacement or
otherwise, will make additional and/or alternate supplies of gas available to
National's subsidiaries or their customers. Initially, Seneca anticipates that
its efforts will focus on investments in Foreign Energy Affiliates with
operations in the Western Canada Sedimentary Basin. Production in this area
already accounts for approximately 48% of the total gas delivered to Supply for
redelivery to Distribution and other customers. With the completion of the
Independence Pipeline project and/or other similar proposed pipeline projects
that will increase transportation capacity from the Midwest to the Eastern
United States, Canadian gas is likely to account for an increasing percentage of
all deliveries to the National system.
Marketing & Brokering Activities: Resources and Upstate Energy, which,
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as indicated, are both engaged in marketing and brokering of natural gas and
other energy commodities in the United States, request authority to expand their
operations into Canada, either directly or through one or more Foreign Energy
Affiliates. In addition, Resources, Upstate Energy and any Foreign Energy
Affiliates may invest up to $50 million in non-utility facilities in Canada that
are incidental and related to such marketing and brokering activities, including
natural gas or oil storage facilities, natural gas gathering and/or processing
facilities, pipeline spurs to serve industrial customers, and meters,
regulators, and other similar non-utility equipment. Resources and Upstate
Energy request the Commission to reserve jurisdiction over marketing and
brokering activities, directly or indirectly
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through investments in Foreign Energy Affiliates, in countries other than the
United States and Canada.
It is contemplated that marketing and brokering operations of Resources
and Upstate Energy and/or any Foreign Energy Affiliate in Canada will be
substantially identical to the operations of Resources and Upstate Energy in the
United States, allowing, however, for such limitations or restrictions as may be
imposed under applicable regulatory laws of Canada. Brokering transactions will
involve acting as a middle-man, usually for a fee, in structuring transactions
in energy commodities between unrelated parties. Marketing transactions may take
a variety of forms. For example, marketing transactions may consist of purchases
and sales of gas and other energy commodities to wholesale customers, end-use
customers, and to other marketers, where the performance of the parties in most
instances will be by physical delivery of the underlying commodity. Marketing
transactions may also include swaps or exchanges of energy commodities, or the
sale or purchase of options, exchange traded futures contracts or other
derivative products, which may or may not be settled by physical delivery.
Resources and Upstate Energy may utilize, or cause Foreign Energy Affiliates to
utilize, risk mitigation measures designed to minimize price and counterparty
credit risk in all of these transactions and, in addition, certain risks
associated with foreign currency fluctuations. Similar risk mitigation measures
are already utilized in Resources' and Upstate Energy's domestic businesses.
Pipeline & Storage Activities: Supply requests authority to acquire,
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directly or indirectly through special-purpose intermediate subsidiaries, the
securities of or other interests in one or more Foreign Energy Affiliates formed
to construct new pipeline and gas storage projects in Canada and other foreign
countries, and to engage in development activities associated therewith.
Initially,
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Supply anticipates that it will focus on new projects that are planned or under
construction in Canada, Mexico and/or South America.
Supply has not, at this time, identified any foreign pipeline or
storage venture in which it seeks to invest. There are, however, several
Canadian pipeline projects that are in the planning and permitting stages.
Supply requests that the Commission reserve jurisdiction over any investment by
Supply in a Foreign Energy Affiliate and undertakes to file a post-effective
amendment in this proceeding describing any such proposed investment and the
terms and conditions thereof.
1.3 Source of Funds and Credit Support for Foreign Energy Activities.
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National intends to provide the Non-Utility Subsidiaries with funds and
credit support necessary to enable such subsidiaries to acquire the securities
of or other interests in Foreign Energy Affiliates. Any investments in such
subsidiaries by National will be funded by available cash and the proceeds of
external financing previously approved by the Commission by order dated March
20, 1998 (Holding Company Act Rel. No. 26847) (the "Financing Order").
Borrowings by any of the Non-Utility Subsidiaries pursuant to the National
system money pool to fund the activities proposed herein, and any guarantees or
other form of credit provided by National to or on behalf of the Non-Utility
Subsidiaries in connection with such proposed investments, will also be subject
to the terms, conditions and limitations imposed under the Financing Order.
1.4 Protection of Domestic Utility Consumers.
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National undertakes that it will not seek recovery through higher
rates to Distribution's customers to compensate it for any possible loss that
it might sustain by reason of the foreign gas-related activities that it is
proposing to engage in, or for any inadequate return on such investment.
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1.5 Relationship to Other Authorizations.
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By order dated February 12, 1997 in File No. 70-8651,4 Resources was
authorized to expand its wholesale and retail natural gas marketing and
brokering business, which was originally authorized by order dated December 20,
1991 in File No. 70-7833,5 to include electricity and other fuels and related
activities. The Commission authorized Resources to engage in such expanded
activities anywhere in the United States. The Commission reserved jurisdiction
over such activities by Resources outside the United States pending completion
of the record. The Commission's order in this proceeding would have the effect
of modifying the February 12, 1997 order so as to permit Resources to engage in
the expanded activities, directly or indirectly through one or more Foreign
Energy Affiliates, anywhere in the United States and Canada. Resources will
continue to file Rule 24 certificates in the form specified in the Commission's
December 20, 1991 order, as modified by the Commission's February 12, 1997
order, provided that such reports will include a description of Resources'
activities in Canada. Such certificates will also include the name and specific
purpose of any Foreign Energy Affiliate formed or acquired by Resources and a
similar description of any such Foreign Energy Affiliate's activities during the
reporting period.
Upstate Energy, as indicated, is a "gas-related company" within the
meaning of Rule 58. A description of Upstate Energy's direct or indirect
activities in Canada (including the amounts invested in any Foreign Energy
Affiliates) will be included as part of the Form U-9C-3 report filed on its
behalf by National.
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4 See National Fuel Gas Company, et al., Holding Company Act Rel. No.
26666.
5 See National Fuel Gas Company, Holding Company Act Rel. No. 25437.
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ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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The fees and expenses to be incurred by applicants in connection with
this Application-Declaration are estimated not to exceed $10,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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3.1 General.
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Sections 9(a) and 10 of the Act are deemed applicable to the
acquisition of the securities of or other interest in any Foreign Energy
Affiliates. Rules 23 and 54 are also deemed applicable to the proposed
transactions. Sections 2(a) and 2(b) of the Gas Related Activities Act of 1990
("GRAA"), as applicable, would also apply to any direct or indirect investment
in Foreign Energy Affiliates, but are not relied upon in this
Application-Declaration insofar as they would apply to Exploration & Production
and Marketing & Brokering Activities in Canada.
3.2 Analysis of Section 10 and GRAA Issues.
--------------------------------------
The direct or indirect acquisition by the Non-Utility Subsidiaries of
the securities of or other interest in any entity engaged in or formed to engage
in any of the proposed foreign energy activities constitutes the acquisition by
a registered holding company of securities and of an interest in an "other
business" under Sections 9(a)(1) and 10 of the Act.
Under Section 10(c)(1) of the Act, the Commission shall not approve a
transaction meeting the requirements of Section 10(b) if it determines that such
transaction would be "detrimental to the carrying out of the provisions of
section 11 . . .." Under Section 11 (b)(1), the Commission is required to limit
the non-utility operations of a registered holding company to businesses that
are "reasonably incidental, or economically necessary or appropriate to the
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operations" of a registered holding company's integrated pubic-utility system.
The Commission and the courts have interpreted these provisions as expressing a
Congressional policy against non-utility activities that bear no operating or
functional relationship to the utility operations of the registered system.6
The applicants submit that their proposal to engage, directly or
through Foreign Energy Affiliates, in Exploration & Production Activities and
Marketing & Brokering Activities in Canada satisfies the requirements of
Sections 10(c) and 11 (b)(1) of the Act without regard to Section 2(b) of the
GRAA (discussed below). Further, there is no basis for the Commission to make
any negative findings under Section 10(b) with respect to any of the proposed
foreign energy activities.7
Seneca's proposal to invest in Foreign Energy Affiliates engaged in
Exploration & Development Activities in Canada in order to secure additional gas
supplies clearly satisfies the requirements of Section 10(c).8 As indicated,
Canadian gas, chiefly from western Canada, accounts for approximately 48% of the
total gas delivered to Supply for redelivery to Distribution and other customers
in the United States. Canada exports more than half of the gas it produces to
the U.S., and such gas now accounts for about 14% of all U.S. gas consumption.9
Moreover, the pipeline
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6 See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-365 (1970),
aff'd 444 F.2d 913 (D.C.Cir.1971).
7 Most of the requirements of Section 10(b) apply, by their terms, to
acquisitions of utility assets and securities of public-utility companies.
Those provisions are inapplicable in this case.
8 See Consolidated Natural Gas Company, et al., Holding Company Act Rel.
No. 17559 (May 1, 1972).
9 See Inside F.E.R.C.'s Gas Market Report, May 28, 1999, p. 14
(reporting on data released by the National Energy Board of Canada). Also,
in recent cases applying the integration standards of Sections 10(c)(2) and
2(a)(29)(B) of the Act to combinations of gas utility companies, the
Commission has noted the importance of Canadian gas as a "common source of
supply. See NIPSCO Industries, Inc., Holding Company Act Rel. No. 26975
(February 10, 1999); and Energy East Corporation, et al, Holding Company
Act Rel. No. 26976 (February 11, 1999).
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infrastructure needed to transport that gas to National's service area exists,
and projects now under construction, including the Independence Pipeline, will
greatly expand the capacity of the pipeline network from western Canada to
eastern U.S. markets.
The Commission has also held that, because of the integrated nature of
the United States-Canadian energy market, the conduct of energy marketing and
brokering activities in Canada satisfies the functional relationship standard of
Section 11(b)(1) to the same extent as does the conduct of these activities in
the United States.10 Thus, the applicants submit that the proposed Marketing &
Brokering Activities in Canada will satisfy the standards of Section 10(c) of
the Act without regard to Section 2(b) of the GRAA.
Supply submits that, because of the integration of the United
States-Canadian gas markets, investments in pipeline and storage ventures formed
to construct and operate new facilities in Canada would also satisfy the
functional relationship standard of Sections 10(c) and 11 (b)(1) without regard
to Section 2(a) of the GRAA. In this regard, prior to enactment of the GRAA, the
Commission authorized registered gas utility holding companies to acquire
interests in the U.S. segments of pipeline projects built specifically for the
purpose of importing Canadian produced gas.11 Pipeline and storage facilities in
Canada designed to serve the same purpose should be viewed in no different
terms.
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10 See Southern Energy, Inc., Holding Company Act Rel. No. 27020
(May 13, 1999).
11 See Great Lakes Gas Transmission Company, et al., Holding Company Act
Rel. No. 15775 (June 29, 1967); The Columbia Gas System, Inc., et al.,
Holding Company Act Rel. No. 20789 (November 22, 1978).
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Supply's proposal to acquire interests in companies engaged in pipeline
and storage activities is also permitted by Section 2(a) of the GRAA, which
provides, without qualification, that such activities shall be deemed, for
purposes of Section 11(b)(1) of the Act, to be reasonably incidental or
economically necessary or appropriate to the operation of a gas utility
system.12 In Consolidated Natural Gas, the Commission held that the GRAA does
not impose any geographic limitations on where a registered gas utility holding
company may engage in permitted gas-related activities.
The GRAA was intended to permit registered gas holding companies to
compete on an equal footing with other gas companies in the development of new
gas markets. To that end, Section 2(a) of the GRAA provides that the acquisition
by a gas registered company "of any interest in any natural gas company or any
company organized to participate in activities involving the transportation or
storage of natural gas, shall be deemed, for purposes of section 11(b)(1) of the
Act, to be reasonably incidental or economically necessary or appropriate to the
operations of [the system's] gas utility companies."13 The proposed pipeline
investment activities in this matter are thus deemed to satisfy the requirements
of Section 11(b)(1) pursuant to Section 2(a) of the GRAA.
Likewise, under Section 2(b) of the GRAA, a registered holding company
may acquire an interest in any company organized to participate in activities
related to the supply of natural gas, including exploration, development,
production, marketing and similar activities, without regard to the functional
relationship standards of Section 11(b)(1) of the Act, if-
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12 See Consolidated Natural Gas Company, et al., Holding Company Act Rel.
No. 26595 (October 25, 1996).
13 For purposes of Section 2(a) of the GRAA, "natural gas company" means
an individual or corporation engaged in the transportation of natural
gas in interstate commerce or for the sale in interstate commerce of
natural gas for resale.
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(1) the Commission determines, after notice and opportunity for
hearing in which the company proposing the acquisition shall
have the burden of proving, that such acquisition is in the
public interest of consumers of each gas utility company of
such registered holding company or consumers of any other
subsidiary of such registered holding company; and
(2) the Commission determines that such acquisition will not be
detrimental to the interest of consumers of any such gas
utility company or other subsidiary or to the proper
functioning of the registered holding company system.
Section 2(c) of the GRAA provides that any determination by the
Commission under Section 2(b) of the GRAA "shall be made on a case-by-case
basis. . .." Further, the Commission has not heretofore granted blanket or
non-specific authority to any registered holding company to invest in pipeline
or storage companies outside the United States.14 Accordingly, National is
requesting that the Commission reserve jurisdiction over investments by the
Non-Utility Subsidiaries in Foreign Energy Affiliates, other than those engaged
in Exploration & Development and Marketing & Brokering Activities in Canada
which, as stated above, satisfy the standards of Sections 10(c) and 11(b)(1) of
the Act without regard to Section 2(b) of the GRAA.
3.3 Rule 54 Analysis.
----------------
Rule 54 provides that, in determining whether to approve any
transaction by a registered holding company that is unrelated to any "exempt
wholesale generator" ("EWG") or "foreign utility company" ("FUCO"), the
Commission shall not consider the effect of the capitalization or earnings of
any EWG or FUCO on the holding company system if the requirements of Rule 53(a),
(b) and (c) are met. National is currently in compliance with all requirements
of Rule 53(a). Specifically,
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14 In this connection, however, Consolidated Natural Gas Company has filed
an application with the Commission seeking approval for a program of investments
in one or more non-designated foreign pipeline projects (see File No. 70-9321;
Holding Company Act Rel. No. 26992, dated March 19, 1999).
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National's "aggregate investment" (as defined in Rule 53(a)(1)) in all EWGs and
FUCOs is currently $116,651,000, or 25.7% of National's "consolidated retained
earnings" (also as defined in Rule 53(a)(1)) as of March 31, 1999
($454,307,000). National is in compliance with and will continue to comply with
the requirements of Rule 53(a)(2), (a)(3) and (a)(4). Further, none of the
conditions or circumstances described in Rule 53(b) has occurred or is
continuing. Accordingly, Rule 53(c) is by its terms inapplicable.
ITEM 4. REGULATORY APPROVAL.
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No State commission and no Federal commission, other than the
Commission, has jurisdiction over any of the proposed transactions. Acquisitions
undertaken in accordance with the Commission's order in this proceeding may, in
some cases, be subject to pre-merger notification filings with various U.S.
and/or foreign authorities. To the extent applicable, the applicants will comply
with all such requirements before consummating any transaction.
ITEM 5. PROCEDURE.
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Applicants request that the Commission issue a notice of filing of this
Application-Declaration as soon as practicable and that the Commission's order
approving the transactions proposed herein be issued not later than September
30, 1999. If a hearing is ordered, applicants waive a recommended decision by a
Hearing Officer, or any other responsible officer of the Commission, agree that
the Division of Investment Management ("Division") may assist in the preparation
of the Commission's decision, unless the Division opposes the matters proposed
herein, and request that there be no waiting period between the issuance of the
Commission's order and the
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date on which it becomes effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
---------------------------------
The following exhibits and financial statements are made a part of this
Application-Declaration:
(a) Exhibits
F Opinion of counsel. (To be filed by amendment).
G-1 Financial Data Schedule - per books. (Incorporated by
reference to Exhibit 27 to the Quarterly Report of
National and subsidiaries on Form 10-Q for the period
ended March 31, 1999) (File No. 1-3880).
G-2 Financial Data Schedule - pro forma. (Inapplicable).
H Proposed form of Federal Register Notice.
(b) Financial Statements
FS-1 Consolidated Balance Sheets of National and
subsidiaries as of March 31, 1999. (Incorporated by
reference to Quarterly Report on Form 10-Q of National
for the period ended March 31, 1999). (File No.
1-3880).
FS-2 Consolidated Statements of Income and Retained Earnings
of National and subsidiaries for the period ending
March 31, 1999. (Incorporated by reference to Quarterly
Report on Form 10-Q of National for the period ended
March 31, 1999). (File No. 1-3880).
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
---------------------------------------
The proposed transactions outlined herein involve no major action which
will significantly adversely affect the quality of the U.S. environment. No
federal agency has prepared or is preparing an environmental impact statement
with respect to the matters contemplated in this Application-Declaration.
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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/ Philip C. Ackerman
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Title: Senior Vice President
NATIONAL FUEL GAS SUPPLY CORPORATION
By: /s/ Richard Hare
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Title: President
SENECA RESOURCES CORPORATION
By: /s/ William M. Petmecky
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Title: Senior Vice President
and Secretary
NATIONAL FUEL RESOURCES, INC.
By: /s/ William M. Petmecky
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Title: Secretary and Treasurer
UPSTATE ENERGY, INC.
By: /s/ William M. Petmecky
------------------------
Title: Secretary
Date: July 6, 1999
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EXHIBIT INDEX
Exhibit Description
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H Proposed form of Federal Register Notice.
EXHIBIT H
PROPOSED FORM OF FEDERAL REGISTER NOTICE
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-_____)
Filings under the Public Utility Holding Company Act of 1935, as amended ("Act")
July __, 1999
Notice is hereby given that the following filing(s) has/have been made
with the Commission pursuant to provisions of the Act and rules promulgated
thereunder. All interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed transaction(s) summarized
below. The application(s) and/or declaration(s) and any amendments thereto
is/are available for public inspection through the Commission's Office of Public
Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
August __, 1999 to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) as specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate) should be filed
with the request. Any request for hearing shall identify specifically the issues
of fact or law that are disputed. A person who so requests will be notified of
any hearing, if ordered, and will receive a copy of any notice or order issued
in the matter. After August __, 1999, the application(s) and/or declaration(s),
as filed or as amended, may be granted and/or permitted to become effective.
* * * * * *
NATIONAL FUEL GAS COMPANY, ET AL. (70-[____])
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National Fuel Gas Company ("National"), 10 Lafayette Square, Buffalo,
New York 14203, a public-utility holding company registered under the Public
Utility Holding Company Act of 1935, as amended (the "Act"), and certain of its
non-utility subsidiaries named below, have filed an Application-Declaration
pursuant to Sections 9(a) and 10 of the Act and Rules 24 and 54 thereunder, as
well as Sections 2(a) and 2(b) of the Gas Related Activities Act of 1990
("GRAA").
National owns all of the issued and outstanding common stock of
National Fuel Gas
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Distribution Corporation ("Distribution"), a gas-utility company which sells
natural gas at retail and provides natural gas transportation services through a
local distribution system to nearly 731,000 customers in western New York and
northwestern Pennsylvania. National's principal gas-related non-utility
subsidiaries include National Fuel Gas Supply Corporation ("Supply"), Seneca
Resources Corporation ("Seneca"), National Fuel Resources, Inc. ("Resources"),
and Upstate Energy, Inc. (formerly Niagara Energy Trading Inc.) ("Upstate
Energy"). Supply, an interstate pipeline company, transports and stores natural
gas for Distribution and for other customers in the northeastern United States.
Seneca is engaged in exploration and development of natural gas and oil
producing reserves, chiefly in the on-shore and off-shore Gulf Coast region of
Texas, Louisiana and Alabama, the Appalachian region, the Rocky Mountain region
(Wyoming) and in California. Resources markets natural gas, electricity and
other forms of energy to industrial, commercial and residential customers, and
provides other related energy services to these end-use customers. Upstate
Energy, which was formed in 1997,1 engages in wholesale natural gas marketing
and related activities.
For the twelve months ended March 31, 1999, National had operating
revenues of approximately $1.2 billion, of which $806 million were attributable
to regulated utility gas sales, $169 million to pipeline and storage operations,
and $140 million to exploration and production activities. As of March 31, 1999,
National and its subsidiaries had total assets of approximately $2.85 billion,
including $909 million in net utility (i.e., distribution) plant, $462 million
in net pipeline and storage plant, and $677 million in net exploration and
production property, plant and equipment.
National, through Supply, Seneca, Resources and Upstate Energy
(collectively, the "Non-Utility Subsidiaries"), is requesting authority to
acquire from time to time through December 31, 2003 (the "Authorization
Period"), in one or more transactions, the equity and debt securities of one or
more companies that are engaged in or are formed to engage in certain categories
of non-utility gas-related operations outside the United States ("Foreign Energy
Affiliates"). In general, these operations would be substantially similar to
those that the Non-Utility Subsidiaries now engage in, directly, in the United
States. National proposes to invest up to $300 million in the securities of
Foreign Energy Affiliates (the "Investment Limitation"). In addition, Resources
and Upstate Energy request authority to engage directly in marketing and
brokering and related activities in Canada.
Specifically, Seneca proposes to acquire the securities of or other
interests in entities that are engaged in natural gas and oil exploration and
production operations ("Exploration & Production Activities") in Canada and,
subject to a request for a reservation of jurisdiction, other countries as well.
As is the case with its domestic exploration and production activities, Seneca
intends to consider investments in entities with operations in areas in Canada
where existing or planned pipeline facilities would permit reserves to be made
available to gas customers of Distribution (including transportation-only
customers of Distribution), or customers of other
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1 Upstate Energy is a "gas-related company" within the meaning of Rule 58.
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subsidiaries of National. Foreign Energy Affiliates may develop a base of
reserves or make investments in new or existing exploration ventures that,
through exchanges, displacement or otherwise, will make additional and/or
alternate supplies of gas available to National's subsidiaries or their
customers. Initially, Seneca anticipates that its efforts will focus on
investments in Foreign Energy Affiliates with operations in the Western Canada
Sedimentary Basin. It is stated that production in this area already accounts
for approximately 48% of the total gas delivered to Supply for redelivery to
Distribution and other customers.
Resources and Upstate Energy propose to engage in, or to acquire the
securities of or other interests in one or more entities that are engaged in,
brokering and marketing of natural gas and other energy commodities and
incidental and related activities ("Marketing & Brokering Activities") in Canada
and, subject to a request for a reservation of jurisdiction, in other countries
outside the United States and Canada. In addition, Resources, Upstate Energy and
any Foreign Energy Affiliates may invest up to $50 million in non-utility
facilities in Canada that are incidental and related to such marketing and
brokering activities, including natural gas or oil storage facilities, natural
gas gathering and/or processing facilities, pipeline spurs to serve industrial
customers, and meters, regulators, and other similar non-utility equipment. It
is contemplated that marketing and brokering operations of Resources and Upstate
Energy and/or any Foreign Energy Affiliate in Canada will be substantially
identical to the operations of Resources and Upstate Energy in the United
States, allowing, however, for such limitations or restrictions as may be
imposed under applicable regulatory laws of Canada. Brokering transactions will
involve acting as a middle-man, usually for a fee, in structuring transactions
in energy commodities between unrelated parties. Marketing transactions may take
a variety of forms. For example, marketing transactions may consist of purchases
and sales of gas and other energy commodities to wholesale customers, end-use
customers, and to other marketers, where the performance of the parties in most
instances will be by physical delivery of the underlying commodity. Marketing
transactions may also include swaps or exchanges of energy commodities, or the
sale or purchase of options, exchange traded futures contracts or other
derivative products, which may or may not be settled by physical delivery.
Supply proposes to acquire the securities of or other interests in
companies formed to construct and operate new pipeline and gas storage
facilities ("Pipeline & Storage Activities") in Canada and other foreign
countries. Initially, Supply anticipates that it will focus on new projects that
are planned or under construction in Canada, Mexico and/or South America. Supply
states that it has not, at this time, identified any foreign pipeline or storage
venture in which it seeks to invest. Accordingly, Supply requests that the
Commission reserve jurisdiction over any investment by Supply in a Foreign
Energy Affiliate and undertakes to file a post-effective amendment in this
proceeding describing any such proposed investment and the terms and conditions
thereof.
National intends to provide the Non-Utility Subsidiaries with funds and
credit support necessary to enable such subsidiaries to acquire the securities
of or other interests in Foreign Energy Affiliates. Any investments in such
subsidiaries by National will be funded by available
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cash and the proceeds of external financing previously approved by the
Commission by order dated March 20, 1998 (Holding Company Act Rel. No. 26847).
National undertakes that it will not seek recovery through higher rates
to Distribution's customers to compensate it for any possible loss that it might
sustain by reason of the foreign gas-related activities that it is proposing to
engage in, or for any inadequate return on such investment.
The applicants submit that their proposal to engage, directly or
through Foreign Energy Affiliates, in Exploration & Production Activities and
Marketing & Brokering Activities in Canada satisfies the requirements of
Sections 10(c) and 11(b)(1) of the Act without regard to Section 2(b) of the
GRAA, and that there is no basis for the Commission to make any negative
findings under Section 10(b) with respect to any of the proposed foreign energy
activities. In this regard, it is stated that Seneca's proposal to invest in
Foreign Energy Affiliates engaged in Exploration & Development Activities in
Canada will be for the purpose of securing additional gas supplies, and that the
pipeline infrastructure needed to transport that gas to National's service area
exists. Similarly, the applicants state that the Commission has also held that,
because of the integrated nature of the United States-Canadian energy market,
the conduct of energy marketing and brokering activities in Canada satisfies the
functional relationship standard of Section 11(b)(1) to the same extent as does
the conduct of these activities in the United States.2
Supply submits that, because of the integration of the United
States-Canadian gas markets, investments in pipeline and storage ventures formed
to construct and operate new facilities in Canada would also satisfy the
functional relationship standard of Sections 10(c) and 11(b)(1) without regard
to Section 2(a) of the GRAA. Supply's proposal to acquire interests in companies
engaged in pipeline and storage activities is also permitted by Section 2(a) of
the GRAA, which provides, without qualification, that such activities shall be
deemed, for purposes of Section 11(b)(1) of the Act, to be reasonably incidental
or economically necessary or appropriate to the operation of a gas utility
system.3 However, because the Commission has not heretofore granted non-specific
approval for an investment in a foreign pipeline company, the applicants are
requesting that the Commission reserve jurisdiction over investments by Supply
in foreign pipeline affiliates pending completion of the record.
In accordance with Rule 54, National states that it is currently in
compliance with all requirements of Rule 53(a). Specifically, National's
"aggregate investment" (as defined in Rule 53(a)(1)) in all "exempt wholesale
generators" and "foreign utility companies" is currently $116,651,000, or 25.7%
of National's "consolidated retained earnings" (also as defined in Rule
53(a)(1)) as of March 31, 1999 ($454,307,000). National is in compliance with
and will continue
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2 See Southern Energy, Inc., Holding Company Act Rel. No. 27020
(May 13, 1999).
3 See Consolidated Natural Gas Company, et al., Holding Company Act Rel.
No. 26595 (October 25, 1996).
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to comply with the requirements of Rule 53(a)(2), (a)(3) and (a)(4). Further,
none of the conditions or circumstances described in Rule 53(b) has occurred or
is continuing.
5
