UNITED STATES OF AMERICA
                                      before the
                          SECURITIES AND EXCHANGE COMMISSION

     Securities Exchange Act of 1934
     Release No. 39506 / December 31, 1997

     Accounting and Auditing Enforcement
     Release No.  1002 / December 31, 1997

     Administrative Proceeding
     File No. 3-9521  

                                                          
                                   :
                                   :
     In the Matter of              :    ORDER INSTITUTING 
                                   :    PROCEEDINGS PURSUANT TO 
     New Jersey Resources Corp.,   :    SECTION 21C OF THE
     Laurence M. Downes and        :    SECURITIES EXCHANGE ACT
     Glenn C. Lockwood,            :    OF 1934, MAKING FINDINGS AND 
                                   :    ISSUING CEASE-AND-DESIST ORDER 
     Respondents.                  :
                                   :
                                   :  

                                          I.

          The Commission deems it appropriate and in the public interest that
     public proceedings be, and they hereby are, instituted pursuant to Section
     21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine
     whether New Jersey Resources Corp. ("NJR") violated Sections 10(b), 13(a)
     and 13(b)(2)(A) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-
     13 thereunder, and whether Laurence M. Downes and Glenn C. Lockwood  caused
     NJR's violation of Section 13(a) of the Exchange Act and Rules 13a-1 and
     13a-13 thereunder.

                                         II.

          Simultaneously with the institution of these proceedings, NJR, Downes
     and Lockwood have submitted Offers of Settlement, which the Commission has
     determined to accept.  NJR, Downes and Lockwood, without admitting or
     denying the findings herein, except the jurisdiction of the Commission with
     respect to the matters set forth herein, which is admitted, have consented
     to the issuance of this Order Instituting Proceedings Pursuant to Section
     21C of the Securities Exchange Act of 1934, Making Findings and Issuing
     Cease-and-Desist Order ("Order").  

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                                         III.

          Accordingly, IT IS ORDERED that proceedings pursuant to Section 21C of
     the Exchange Act be, and hereby are, instituted.  On the basis of this
     Order, and the Offer submitted by Respondents, the Commission makes the
     following findings:<(1)>

          A. Summary

          This matter involves a transaction between affiliates that allowed NJR
     to avoid a material writedown.  More specifically, this matter concerns the
     valuation of oil and gas properties on the basis of long-term natural gas
     supply and purchase contracts, which, taken together, provided for the
     delivery of gas between affiliates of the issuer.  The supply contracts
     contained initial prices that were above the then prevailing spot price for
     gas and that subsequently escalated, with seasonal variation, over the 18-
     year life of the supply contracts.  The terms of the supply and purchase
     contracts mirrored each other, so that an unaffiliated middleman inserted
     into the transaction incurred no significant economic risk.  NJR utilized
     the contract prices to avoid a write-down under the full-cost ceiling test
     set out in Regulation S-X.  This improper accounting for the transaction
     caused a material misstatement in NJR's consolidated financial statements.

          B. Respondents

          A.   New Jersey Resources Corporation is a New Jersey holding company. 
     NJR's common stock is registered pursuant to Section 12(b) of the Exchange
     Act and is traded primarily on the New York Stock Exchange. 

          B.   Laurence M. Downes, 39, was, during all relevant times, NJR's
     Chief Financial Officer.  

          C.   Glenn C. Lockwood, 36, a certified public accountant, was, during
     the events described in this Order, NJR's Controller.  

          C. Facts

          During its fiscal year ended September 30, 1992 ("FY 1992"), NJR was
     engaged primarily in natural gas distribution through one of its
     subsidiaries.  Other subsidiaries engaged in oil and gas exploration and
     production, and cogeneration and independent power production.  NJR's sub-
     sidiaries included NJR Energy Corporation ("NJR Energy"), an oil and gas
     exploration and production company, and New Jersey Natural Gas Company
     ("NJNG"), a public utility with over 320,000 customers.  NJR's financial
     statements, as incorporated in its Commission filings, were consolidated
     with those of its subsidiaries, including NJNG and NJR Energy.

                              

          <(1)>  The findings herein are made pursuant to Respondents' Offers
               of Settlement and  are not  binding on any  other person  or
               entity in this or any other proceeding.

                              ======END OF PAGE 2======


          NJR Energy utilized the full-cost method of accounting for oil and gas
     producing activities as set forth in Rule 4-10 of Regulation S-X.<(2)>  In
     essence, this rule permits the capitalization of exploration and
     development costs, subject to a full-cost ceiling test.<(3)>  This ceiling
     test requires a company to perform a calculation in order to test for
     impairment of value of the capitalized costs associated with its oil and
     gas properties.  In performing this quarterly test, the present value of
     estimated future net revenues from the oil and gas properties was to be
     "computed by applying current prices of oil and gas (with consideration of
     price changes only to the extent provided by contractual arrangements)."
     Regulation S-X, 4-10(k)(6)(1992).  If the capitalized costs associated with
     its oil and gas properties are impaired, then the company is required to
     write down the recorded value of these properties by the amount of the
     impairment, with a corresponding charge to operations. 

          During the winter of 1991-92, NJR and NJR Energy learned that valuing
     NJR Energy's oil and gas properties on the basis of spot market prices
     might result in a multimillion dollar write-down of those properties for
     the quarter ending March 31, 1992.  Such an amount would have been material
     to NJR's consolidated financial statements at March 31, 1992.

          NJR avoided this result by implementing a plan under which NJR Energy
     would sell gas to a third party middleman under the terms of a long term
     contract that provided for initial and subsequent prices sufficient to
     avoid a write-down.  The middleman would, in turn, sell the gas to NJNG
     under another long-term contract incorporating a predetermined margin over
     the price at which it had acquired the gas from NJR Energy.

          During the first quarter of calendar 1992, NJNG, NJR Energy and NJR
     concluded such an arrangement with a third party, to begin April 1, 1992
     with respect to certain production and October 1, 1992 with respect to
     other production, and extend for eighteen years.  The arrangement was
     reflected in three contracts; the first two called for NJR Energy and one
     of its subsidiaries to supply a certain quantity of gas to the middleman
     (collectively, the "supply contracts"), and the third provided for the
     further transfer of that and other gas from the middleman to NJNG ("the
     purchase contract").  The initial and subsequent prices enabled NJR Energy
     to avoid recognizing an impairment under the full cost ceiling test at
     March 31, 1992.  The price paid by NJNG to the middleman exceeded, by a set
     margin, the price at which the middleman purchased the gas from NJR Energy.

                              

          <(2)>  Alternatively, oil  and gas companies can  account for their
               exploration  and production activities  under the successful
               efforts   method  of   accounting,  which   requires  failed
               exploration  costs  to   be  reported   as  current   period
               expenditures  and permits the  capitalization of exploration
               and  development  costs   related  to  commercially   viable
               reserves.

          <(3)>  Rule 4-10(i)(4)(1992); now Rule 4-10(c)(4).

                              ======END OF PAGE 3======


          NJR, in its Form 10-Q for the second quarter ended March 31, 1992
     reported total assets of $723,076,000, net income of $20,391,000 and
     earnings per share of $1.43.  Had NJR Energy valued its oil and gas
     properties at spot prices, and recognized an impairment under the full cost
     ceiling test, the company would have been required to write-down the value
     of its assets by what the company calculates to be approximately $6.3
     million.  This would have resulted in the company's reported net income for
     that quarter being reduced by a similar amount and its $1.43 per share
     reported earnings for the quarter being reduced by 44 cents per share to 99
     cents per share.  

          Note 6 to NJR's consolidated financial statements for the second
     quarter ended March 31, 1992 stated: "NJR Energy satisfied the requirements
     of the full-cost ceiling test as of March 31, 1992 due primarily to long-
     term gas contracts covering about 60% of NJR Energy's current production." 
     This note made no reference to the fact that the NJR subsidiaries were
     involved in the transaction, or to the lack of significant risk assumed by
     the middleman.  It did not disclose that one of the agreements was not, at
     that time, performing, because payments and deliveries were not scheduled
     to begin until October.  Similarly, these consolidated financial statements
     contained in NJR's second quarter Form 10-Q did not disclose the magnitude
     of the write-down NJR would have faced had it recognized an impairment of
     assets under the full-cost ceiling test, or what such an effect on net
     income and earnings-per-share would have been.  

          Lockwood and Downes each signed this Form 10-Q, which Lockwood also
     assisted in preparing.  Both were aware that the financial statements
     incorporated in that filing did not reflect any impairment of NJR Energy's
     oil and gas properties and that this was the result of NJR's reliance on
     the arrangement described above to satisfy the requirements of the full-
     cost ceiling test.  Both either knew or should have known that neither in
     the notes to the financial statements, nor elsewhere in that report did the
     company provide appropriate disclosure of the actual nature of the
     arrangement described above.

          NJR's accounting treatment of its subsidiary's oil and gas properties
     also materially affected its year end consolidated financial
     statements.<(4)>  In its annual report on Form 10-K for FY 1992, NJR
     reported total assets of $693,548,000, net income of $23,459,000 and
     earnings per share of $1.64.  NJR Energy's failure to recognize an
     impairment of the carrying value of its oil and gas properties during that
     fiscal year of approximately $6.3 million increased the company's net
     income by the same amount and its earnings per share by 44 cents. 
     Moreover, the disclosure omissions in the March 31, 1992 Form 10-Q
     concerning, among other things, the related party nature of the arrangement
                              

          <(4)>  The consolidated financial statements  included in the  Form
               10-Q for the intervening quarter, that  ended June 30, 1992,
               were  also inaccurate  in  that they  reflected oil  and gas
               properties overstated by $6.3  million.  Downes and Lockwood
               signed the Form 10-Q for that quarter.

                              ======END OF PAGE 4======


     with the middleman were repeated in NJR's 1992 Form 10-K.  Lockwood and
     Downes each signed that report. 

          D.   Violations

               1.   NJR violated Section 13(a) of the Exchange Act and Rules
                    12b-20, 13a-1, 13a-13 thereunder.

          Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13
     thereunder require issuers of securities registered pursuant to Section 12
     of the Exchange Act to file certain annual and quarterly reports with the
     Commission.  Rule 12b-20 under the Exchange Act requires that these reports
     include any material information necessary to make the statements made
     therein not misleading under the circumstances in which they are made. 
     Implicit in these rules is the requirement that the reports be true and
     correct.  SEC v. IMC International, Inc., 384 F. Supp. 889, 893 (N.D.
     Tex.), aff'd mem., 505 F.2d 733 (5th Cir. 1974), cert. denied sub nom.
     Evans v. SEC, 420 U.S. 930 (1975).  

          The financial statements contained in NJR's March 31, 1992 Form 10-Q
     and FY 1992 Form 10-K materially overstated net income and earnings per
     share as a result of the company's failure to recognize the impairment of
     NJR Energy's oil and gas properties, as required by Regulation S-X, Rule 4-
     10.  That rule requires that the value of reserves underlying the oil and
     gas properties be based on current (spot market) prices except "to the
     extent provided by contractual arrangements."  Regulation S-X, Rule 4-
     10(k)(6)(1992).  The contractual arrangements contemplated by the Rule are
     bona fide agreements that shift the risk of changes in gas or oil prices to
     a third party purchaser.  An agreement between different subsidiaries of
     the reporting entity does not achieve this purpose.

          The contracts in this matter, taken together, did no more than provide
     for the delivery from NJR Energy to NJNG of quantities of gas and allowed
     NJR Energy to receive initial and subsequent prices sufficient to avoid a
     write-down.  The terms of the supply contracts mirror those of the purchase
     contract, except as to quantity, so that the middleman assumed no
     significant risk in connection with the arrangement.  Furthermore, perfor-
     mance under one of the contracts with respect to the delivery of certain
     gas production was not to begin until October 1, 1992, so that the contract
     was not fully performing by the end of the March 31, 1992 quarter.  In sum,
     this arrangement, which was entered into for the specific purpose of
     avoiding a write-down under the full cost ceiling test, failed to transfer
     significant risk to a bona fide third party, and therefore did not comport
     with the requirements of Regulation S-X.

          Furthermore, the description of the arrangement for the sale of NJR
     Energy's gas production contained in those filings was materially false and
     misleading in that it did not disclose, among other things, the underlying
     related party nature of the transactions as required by generally accepted

                              ======END OF PAGE 5======


     accounting principles<(5)> and that the effects of the contracts were not
     eliminated in consolidation.  These omissions violated Section 13(a) of the
     Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.

               2.   Downes and Lockwood caused NJR's violations of Section 13(a)
                    of the Exchange Act and Rules 13a-1 and 13a-13 thereunder. 

          By virtue of their involvement in the events described above and their
     training, professional experience, and position within the company, Downes
     and Lockwood knew or should have known that the contractual arrangement did
     not comport with the requirements of Regulation S-X, and was not reported
     in accordance with the periodic reporting requirements of the Exchange Act. 
     As a result, Downes and Lockwood caused NJR's violations of Section 13(a)
     and Rules 13a-1 and 13a-13 thereunder by signing and causing to be filed
     NJR's Form 10-Q for the quarter ended March 31, 1992 and its Form 10-K for
     FY 1992.   

               3.   NJR violated Section 10(b) of the Exchange Act and Rule 10b-
                    5 thereunder.

          A violation of Section 10(b) of the Exchange Act and Rule 10b-5
     thereunder occurs when material misstatements or omissions are made in
     Commission filings and trading occurs thereafter in the securities of the
     filing company.  See Basic, Inc. v. Levinson, 485 U.S. 224, 230 (1988); SEC
     v. Texas Gulf Sulphur Co., 401 F.2d 833, 860-82 (2d Cir. 1968), cert.
     denied, 394 U.S. 976 (1969).  The company violated Section 10(b) and Rule
     10b-5 when it filed the false and misleading reports described above with
     the Commission.

               4.   NJR violated Section 13(b)(2)(A) of the Exchange Act.

          Section 13(b)(2)(A) of the Exchange Act requires every issuer of
     securities registered under Section 12 of the Exchange Act to make and keep
     books, records and accounts, which, in reasonable detail, accurately and
     fairly reflect its transactions and the disposition of its assets.  NJR
     violated this provision by failing to properly record, in the March 31,
     1992 quarter, an impairment of the value of its subsidiary's oil and gas
     properties, as required by Regulation S-X, Rule 4-10. 

                                         IV.

          Based upon the foregoing, the Commission finds that:

          A.   NJR violated Sections 10(b), 13(a), 13(b)(2)(A) of the Exchange
               Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13; and 

          B.   Laurence M. Downes and Glenn C. Lockwood caused NJR's violations
               of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13.

                              

          <(5)>  Statement of Financial Accounting Standards No. 57. 

                              ======END OF PAGE 6======


                                          V.

          In view of the foregoing, the Commission deems it appropriate and in
     the public interest to accept the Respondents' Offers of Settlement.

          VI.

          Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the
     Exchange Act, that 

          A.   NJR cease and desist from committing any violations, and any
               future violations, of Sections 10(b), 13(a), 13(b)(2)(A) of the
               Exchange Act and Rules 10b-5, 12b-20, 13a-1, and 13a-13; and 

          B.   Laurence M. Downes and Glenn C. Lockwood cease and desist from
               causing any violations, and any future violations, of Section
               13(a) of the Exchange Act and Rules 13a-1 and 13a-13.

          By the Commission.

                                             Jonathan G. Katz
                                             Secretary

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