UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


      [X]   Quarterly Report Pursuant to Section 13 or 15(d) of the
            Securities Exchange Act of 1934

                 For the quarterly period ended June 30, 2001


                                       or


      [   ] Transition Report Pursuant to Section 13 or 15(d) of the
            Securities Exchange Act of 1934





 Commission     Registrant, State of Incorporation,      I.R.S Employer
 File Number        Address and Telephone Number         Identification
                                                             Number
--------------  -------------------------------------  -------------------

   1-7297       Nicor Inc.                                 36-2855175
                (An Illinois Corporation)
                1844 Ferry Road
                Naperville, Illinois 60563-9600
                (630) 305-9500


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

Shares of common stock, par value $2.50, outstanding at June 30, 2001, were
45,238,763.











<PAGE>


Nicor Inc.                                                              Page i

Table of Contents

Part I - Financial Information

   Item 1. Financial Statements (Unaudited) ...............................  1

           Consolidated Statements of Operations:
            Three and six months ended
            June 30, 2001 and 2000 ........................................  2

           Consolidated Statements of Cash Flows:
            Six months ended
            June 30, 2001 and 2000 ........................................  3

           Consolidated Balance Sheets:
            June 30, 2001 and 2000, and
            December 31, 2000 .............................................  4

           Notes to the Consolidated Financial Statements .................  5

   Item 2. Management's Discussion and Analysis of Financial
            Condition and Results of Operations ........................... 10

   Item 3. Quantitative and Qualitative Disclosures about Market Risk ..... 17


Part II - Other Information

   Item 4. Submission of Matters to a Vote of Security Holders ............ 17

   Item 6. Exhibits and Reports on Form 8-K ............................... 17

           Signature ...................................................... 18

           Exhibit Index .................................................. 19


Glossary

Degree day.....The extent to which the daily average temperature falls
               below 65 degrees Fahrenheit. Normal weather for Nicor Gas'
               service territory is about 6,100 degree days per year.
ICC............Illinois Commerce Commission, the agency that regulates
               investor-owned Illinois utilities.
Mcf,MMcf,Bcf...Thousand cubic feet, million cubic feet, billion cubic feet.
PBR............Performance-based rate, a plan that provides economic
               incentives based on performance.
TEU............Twenty-foot equivalent unit, a measure of volume in
               containerized shipping equal to one 20-foot-long container.



<PAGE>


Nicor Inc.                                                              Page 1

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

The following condensed unaudited financial statements of Nicor Inc. have been
prepared by the company pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to SEC rules and regulations. The condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the company's latest Annual Report on Form 10-K.

The information furnished reflects, in the opinion of the company, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair statement of the results for the interim periods presented. Results for the
interim periods presented are not necessarily indicative of the results to be
expected for the full fiscal year due to seasonal and other factors.


<PAGE>



Nicor Inc.                                                              Page 2
-------------------------------------------------------------------------------

Consolidated Statements of Operations (Unaudited)
(millions, except per share data)

                                  Three months ended         Six months ended
                                       June 30                   June 30
                                  -------------------     ---------------------
                                    2001       2000          2001        2000
                                  --------   --------      --------    --------

Operating revenues                $  373.0   $  348.4      $1,846.7    $1,007.7
                                  --------   --------      --------    --------

Operating expenses
   Cost of gas                       181.2      146.8       1,355.8       537.0
   Operating and maintenance          90.4       97.9         191.8       192.3
   Depreciation                       25.8       25.1          84.4        81.9
   Taxes, other than income taxes     24.8       23.2          95.9        70.9
   Other                              (2.1)         -          (2.1)          -
                                  --------   --------      --------    --------

                                     320.1      293.0       1,725.8       882.1
                                  --------   --------      --------    --------

Operating income                      52.9       55.4         120.9       125.6

Other income (expense), net            (.3)       1.2           4.2         3.5
                                  --------   --------      --------    --------

Income before interest on debt
   and income taxes                   52.6       56.6         125.1       129.1

Interest on debt, net of amounts
   capitalized                        11.9        9.8          26.1        22.0
                                  --------   --------      --------    --------

Income before income taxes            40.7       46.8          99.0       107.1

Income taxes                          14.0       16.2          33.5        37.7
                                  --------   --------       --------    --------

Net income                            26.7       30.6          65.5        69.4

Dividends on preferred stock            .1         .1            .1          .1
                                  --------   --------      --------    --------

Earnings applicable to
 common stock                     $   26.6   $   30.5      $   65.4    $   69.3
                                  ========   ========      ========    ========

Average shares of common stock
   outstanding
     Basic                            45.4       46.3          45.4        46.5
     Diluted                          45.5       46.4          45.5        46.6

Earnings per average share of
   common stock
     Basic                        $    .59   $    .66      $   1.44    $   1.49
     Diluted                           .59        .66          1.44        1.49

Dividends declared per share of
   common stock                      0.440      0.415         0.880       0.830


The accompanying notes are an integral part of these statements.




Nicor Inc.                                                              Page 3
-------------------------------------------------------------------------------

Consolidated Statements of Cash Flows (Unaudited)
(millions)

                                                             Six months ended
                                                                  June 30
                                                           --------------------
                                                             2001        2000
                                                           --------    --------
Operating activities
   Net income                                              $   65.5    $   69.4
   Adjustments to reconcile net income to net cash flow
     provided from operating activities:
       Depreciation                                            84.4        81.9
       Deferred income tax expense                             18.4         6.5
       Change in assets and liabilities:
         Receivables, less allowances                         251.7       128.9
         Gas in storage                                         6.3         2.0
         Deferred/accrued gas costs                           191.9       (25.6)
         Accounts payable                                    (332.5)       32.1
         Temporary LIFO liquidation                            29.1       105.7
         Postretirement benefits                              (16.7)      (14.4)
         Other                                                  5.3        16.2
                                                           --------    --------
   Net cash flow provided from operating activities           303.4       402.7
                                                           --------    --------

Investing activities
   Capital expenditures                                       (73.4)      (71.0)
   Short-term investments                                      (3.1)       (3.2)
   Other                                                       (4.9)       (4.8)
                                                           --------    --------
   Net cash flow used for investing activities                (81.4)      (79.0)
                                                           --------    --------

Financing activities
   Net proceeds from issuing long-term debt                   123.5        49.9
   Disbursements to retire long-term debt                     (50.0)      (50.2)
   Short-term borrowings (repayments), net                   (290.0)     (288.2)
   Dividends paid                                             (39.0)      (37.8)
   Disbursements to reacquire stock                           (10.7)      (31.8)
   Other                                                        (.1)         .9
                                                           --------    --------
   Net cash flow used for financing activities               (266.3)     (357.2)
                                                           --------    --------

Net decrease in cash and cash equivalents                     (44.3)      (33.5)

Cash and cash equivalents, beginning of period                 55.8        42.5
                                                           --------    --------

Cash and cash equivalents, end of period                   $   11.5    $    9.0
                                                           ========    ========


The accompanying notes are an integral part of these statements.



Nicor Inc.                                                          Page 4
---------------------------------------------------------------------------

Consolidated Balance Sheets (Unaudited)
(millions)


                                              June 30    December 31   June 30
                                               2001         2000         2000
                                             ---------   -----------  ---------
              Assets

Current assets
   Cash and cash equivalents                 $    11.5    $    55.8   $     9.0
   Short-term investments, at cost which
     approximates market                          46.1         43.0        32.9
   Receivables, less allowances of $19.1,
     $14.5 and $9.7, respectively                408.3        660.0       230.9
   Gas in storage                                 25.5         31.8        29.0
   Deferred income taxes                          48.1         57.6        20.9
   Deferred gas costs                                -         49.2        41.5
   Other                                          17.2         17.2        13.4
                                             ---------    ---------   ---------
                                                 556.7        914.6       377.6
                                             ---------    ---------   ---------

Property, plant and equipment, at cost
   Gas distribution                            3,340.6      3,292.8     3,240.3
   Shipping                                      289.7        281.8       291.3
   Other                                           2.2          2.0         1.9
                                             ---------    ---------   ---------
                                               3,632.5      3,576.6     3,533.5
   Less accumulated depreciation               1,920.7      1,847.0     1,813.1
                                             ---------    ---------   ---------
                                               1,711.8      1,729.6     1,720.4
                                             ---------    ---------   ---------
Other assets                                     258.6        241.2       228.9
                                             ---------    ---------   ---------
                                             $ 2,527.1    $ 2,885.4   $ 2,326.9
                                             =========    =========   =========

   Liabilities and Capitalization


Current liabilities
   Long-term obligations due within one year $   125.0    $   125.0   $    74.2
   Short -term borrowings                        152.0        442.0        56.0
   Accounts payable                              274.1        606.6       314.5
   Accrued gas costs                             142.7            -           -
   Accrued mercury-related costs                  54.2         78.0           -
   Temporary LIFO liquidation                     29.1            -       105.7
   Other                                          74.7         59.9        51.4
                                             ---------    ---------   ---------
                                                 851.8      1,311.5       601.8
                                             ---------    ---------   ---------

Deferred credits and other liabilities
   Deferred income taxes                         313.5        296.6       278.4
   Regulatory income tax liability                68.4         70.4        72.8
   Unamortized investment tax credits             40.1         41.1        41.9
   Other                                         103.4        104.6       102.1
                                             ---------    ---------   ---------
                                                 525.4        512.7       495.2
                                             ---------    ---------   ---------

Capitalization
   Long-term debt                                421.1        347.1       435.9
   Preferred stock                                 6.1          6.3         6.3
   Common equity
     Common stock                                113.1        113.7       115.0
     Retained earnings                           609.7        594.2       672.7
     Accumulated other comprehensive income        (.1)         (.1)          -
                                             ---------    ---------   ---------
                                               1,149.9      1,061.2     1,229.9
                                             ---------    ---------   ---------
                                             $ 2,527.1    $ 2,885.4   $ 2,326.9
                                             =========    =========   =========

The accompanying notes are an integral part of these statements.




Nicor Inc.                                                              Page 5

Notes to the Consolidated Financial Statements (Unaudited)

ACCOUNTING POLICIES

Depreciation.  Depreciation for the gas distribution segment is calculated
using a straight-line method for the calendar year.  For interim periods,
depreciation is allocated based on gas deliveries.

Gas in storage. The gas distribution segment's inventory is carried at cost on a
last-in, first-out (LIFO) method on a calendar-year basis. For interim periods,
the difference between current replacement cost and the LIFO cost for quantities
of gas temporarily withdrawn from storage is recorded in cost of gas and in
current liabilities as a temporary LIFO liquidation.

Reclassifications.  Certain reclassifications have been made to conform the
prior years' financial statements to the current year's presentation.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets.  FAS 141 is effective for business
combinations completed after June 30, 2001 and FAS 142 is effective for
fiscal year 2002.  Implementation of these standards is not expected to have
a material impact on the company's financial position or results of
operations.

REGULATORY MATTERS

Performance-based rate plan. Under Nicor Gas' performance-based rate (PBR) plan,
Nicor Gas' total gas supply costs are compared to a market-sensitive benchmark.
Savings and losses relative to the benchmark are shared equally with customers.
After 2001, the plan will be subject to Illinois Commerce Commission (ICC)
review.

Results of the company's PBR plan are determined annually. On an interim basis,
the company records an estimate of results attributable to the period. Nicor
recorded $1.7 million and $4.2 million of estimated PBR results as operating
revenue for the three- and six-month periods, respectively, compared to $1.0
million and $2.2 million in the prior year periods.

Horizon Pipeline. In July 2001, Horizon Pipeline received final approval from
the Federal Energy Regulatory Commission for the construction and operation of a
74-mile, 36-inch pipeline that will run from Joliet, Illinois to near the
Wisconsin/Illinois border. Horizon Pipeline is a 50/50 joint venture between
Nicor and Natural Gas Pipeline Company of America, a subsidiary of Kinder
Morgan, Inc. Construction of the pipeline is scheduled to commence in late
summer 2001, and the pipeline is expected to be operational in the spring of
2002.

Customer choice of commodity supplier. Also in July 2001, the company received
approval from the ICC to permanently expand the Customer Select(R) program to
include all of its customers. The order is subject to rehearing by the ICC and
possible appeal. The program is currently available to all industrial and
commercial customers and about 14 percent of Nicor Gas' residential customers.
Under the program, customers are able to acquire their natural gas supplies from
third-party marketers. The choice of another natural gas commodity supplier has
no direct impact on Nicor Gas' distribution margin because natural gas costs are
passed directly through to customers without a markup. Nicor Gas continues to
deliver the natural gas, maintain its distribution system and respond to
emergencies.


Nicor Inc.                                                              Page 6

Notes to the Consolidated Financial Statements (Unaudited) (continued)


BUSINESS SEGMENT INFORMATION

Financial data by major business segment is presented below:


                                    Three months ended     Six months ended
                                          June 30               June 30
                                    ------------------     ------------------
(millions)                            2001      2000         2001      2000
                                    --------  --------     --------  --------
Operating revenues
   Gas distribution                 $  273.5  $  263.1     $1,620.1  $  836.7
   Shipping                             54.3      61.2        113.0     120.5
   Other energy ventures                48.4      24.2        141.8      50.7
   Corporate and eliminations           (3.2)      (.1)       (28.2)      (.2)
                                    --------  --------     --------  --------
                                    $  373.0  $  348.4     $1,846.7  $1,007.7
                                    ========  ========     ========  ========

Operating income (loss)
   Gas distribution                 $   49.1  $   47.5     $  113.7  $  112.5
   Shipping                              3.6       5.9          6.9      11.5
   Other energy ventures                 1.0       3.6          1.9       3.6
   Corporate and eliminations            (.8)     (1.6)        (1.6)     (2.0)
                                    --------  --------     --------  --------
                                    $   52.9  $   55.4     $  120.9  $  125.6
                                    ========  ========     ========  ========

2001 operating revenues of other energy ventures include $2.7 million and $27.0
million from the sale of natural gas to Nicor Gas for the three- and six- month
periods, respectively.


COMPREHENSIVE INCOME

At June 30, 2001, Nicor held agreements that hedge the risk-free interest rate
of an anticipated debt issuance of $75 million in August 2001. The change in the
fair market value of the agreements is reported as a component of other
comprehensive income. Comprehensive income consisted of the following:

                                     Three months ended      Six months ended
                                          June 30                June 30
                                     ------------------     ------------------
(millions)                             2001      2000         2001      2000
                                     --------  --------     --------  --------

Net income                           $   26.7  $   30.6     $   65.5  $   69.4
Unrealized gain on hedge,
  net of tax                              1.0         -            -         -
                                     --------  --------     --------  --------
Comprehensive income                 $   27.7  $   30.6     $   65.5  $   69.4
                                     ========  ========     ========  ========

LONG-TERM DEBT

Nicor Gas has $350 million of First Mortgage Bonds remaining available for
issuance under a July 2001 shelf registration filing.


<PAGE>



Nicor Inc.                                                             Page 7

Notes to the Consolidated Financial Statements (Unaudited) (continued)

In May 2001, Nicor Gas issued $50 million of First Mortgage Bonds due in 2016 at
7.2%. A portion of the net proceeds replenished corporate funds used previously
to redeem $25 million of 6.25% First Mortgage Bonds due in 1999. The remainder
of the net proceeds replenished a portion of corporate funds used previously to
redeem $50 million of 8.25% First Mortgage Bonds due in 2024.

In February 2001, Nicor Gas issued $75 million of First Mortgage Bonds due in
2011 at 6.625%. A portion of the net proceeds replaced $50 million of 5.875%
First Mortgage Bonds due May 1, 2000 that had been temporarily refinanced
through the issuance of unsecured notes. The remainder of the net proceeds
replenished a portion of corporate funds used previously to redeem $50 million
of 8.25% First Mortgage Bonds due in 2024.

CONTINGENCIES

Mercury program. Nicor Gas has incurred, and expects to continue to incur,
significant costs related to its historical use of mercury in various kinds of
company equipment.

Prior to 1961, gas regulators containing small quantities of mercury were
installed in homes. These gas regulators reduce the pressure of natural gas flow
from the service line to the inside of the home. During the third quarter of
2000, the company learned that in certain instances some mercury was spilled or
left in residences.

As a result, in September 2000, Nicor Gas was named as a defendant in a civil
lawsuit brought by the Illinois Attorney General and the State's Attorneys of
Cook, DuPage and Will Counties seeking, among other things, to compel the
company to inspect and clean up all homes and other sites that may have been
affected by mercury from company equipment. The Circuit Court of Cook County
hearing this action has entered two preliminary injunctions requiring Nicor Gas,
among other things, to conduct inspections and, where necessary, to clean up
mercury, to pay for relocating residents until cleanup is completed, and to pay
for medical screening of potentially affected persons. It is not possible to
determine the likelihood that the plaintiffs will seek and obtain fines or
penalties.

Nicor Gas is also the subject of an Administrative Order, and an amendment
thereto, issued during the third quarter of 2000 by the U.S. Environmental
Protection Agency (EPA) pursuant to Section 106 of the Comprehensive
Environmental Response, Compensation and Liabilities Act. The order requires the
company, among other things, to develop and implement work plans to address
mercury spills at recycling centers where mercury regulators may have been
taken, at company facilities where regulators and mercury may have been
temporarily stored and at commercial/industrial sites where mercury-containing
equipment may have been used in metering facilities.

Pursuant to the injunctions and the EPA Administrative Order, Nicor Gas has
completed the work described above for all affected recycling centers,
commercial/industrial sites and company facilities. On July 12, 2001, Nicor Gas
received a Notice of Completion letter from the EPA regarding this work
performed under the Section 106 Administrative Order. Potentially affected homes
are being inspected using mercury vapor analyzers. Nicor Gas had called on every
such home by December 31, 2000, although it still has been unable to gain access
to some homes. Approximately 1,050 homes have been found to have traces of
mercury requiring cleanup.



Nicor Inc.                                                              Page 8

Notes to the Consolidated Financial Statements (Unaudited) (continued)

Nicor Gas charged $148 million to other operating expense in the third quarter
of 2000 for estimated obligations related to the previously described work and
for legal defense costs. Through June 30, 2001, the company has incurred $94
million in associated costs, leaving a $54 million current liability. The
remaining liability represents management's best estimate of future costs based
on an evaluation of currently available information, and actual costs may vary
from this estimate. The company will continue to reassess its estimated
obligation and will record any necessary adjustment, which could be material to
operating results in the period recorded.

In addition to the matters described above, Nicor Gas has been named a defendant
in several private lawsuits, all in the Circuit Court of Cook County, claiming a
variety of unquantified damages (including bodily injury, property and punitive
damages) allegedly caused by mercury-containing regulators. One of the lawsuits
involves five previous class actions that have been consolidated before a single
judge. At this stage in the litigation, it is not possible to estimate what
liability, if any, may result to the company from these lawsuits. While no
amount has been recorded for this potential liability, a loss contingency for an
unfavorable outcome of these lawsuits will be accrued if it becomes probable and
can be reasonably estimated. Any such accrual could be material to operating
results in the period in which it is recorded.

The company has certain insurance policies, has notified its insurers, and will
vigorously pursue recovery of mercury-related costs pursuant to its insurance
coverage. In January 2001, the company filed suit in the Circuit Court of Cook
County against certain of its insurance carriers for a declaration that the
company's mercury-related losses are covered, and for the recovery of those
losses. In addition, some of the removals of mercury-containing regulators were
conducted by independent contractors working for the company. In November 2000,
the company filed suit in the Circuit Court of Cook County seeking
indemnification and contribution from these contractors. In the second quarter
of 2001, Nicor Gas recovered, net of related expenses, $2.1 million from certain
insurance carriers of the company and its independent contractors. At this
stage, it is not possible to estimate the likelihood of additional recoveries
from insurance carriers or other third parties related to the mercury spills,
and therefore Nicor Gas has not recorded any such amounts as assets in its
financial statements.

Nicor Gas will not seek recovery of the costs associated with these mercury
spills from its customers, and any proceeds from insurance carriers or third
parties will be retained by the company to offset costs incurred.

It is management's opinion, taking into account the above information and
uncertainties, including currently available information concerning the
company's existing and potential obligations, insurance coverage, possible
recoveries from other third parties and available financial resources, that
costs associated with the mercury spills will not have a material adverse effect
on the liquidity or financial position of the company.

Manufactured gas plant sites. Current environmental laws may require cleanup of
certain former manufactured gas plant sites. To date, Nicor Gas has identified
about 40 properties for which it may, in part, be responsible. The majority of
these properties are not presently owned by the company. Information regarding
preliminary site reviews has been presented to the Illinois Environmental
Protection Agency. More detailed investigations and remedial activities are
either in progress or planned at many of these sites. The results of continued
testing and analysis should determine to what extent additional remediation is
necessary and may provide a basis for estimating any additional future costs



Nicor Inc.                                                              Page 9

Notes to the Consolidated Financial Statements (Unaudited) (concluded)

which, based on industry experience, could be significant. In accordance with
ICC authorization, the company has been recovering these costs from its
customers.

In December 1995, Nicor Gas filed suit in the Circuit Court of Cook County
against certain insurance carriers seeking recovery of environmental cleanup
costs of certain former manufactured gas plant sites. Nicor Gas reached a
settlement with one of the insurance carriers, and in February 2000, the court
dismissed the company's case on summary judgment motions by certain other
defendants. The company filed an appeal in March 2000. In the second quarter of
2001, Nicor Gas reached a settlement with certain insurance carriers who were
involved in this appeal. Management cannot predict the outcome of the lawsuit
against the remaining insurance carriers. Recoveries are refunded to the
company's customers.

Since costs and recoveries relating to the cleanup of these manufactured gas
plant sites are passed directly through to customers, the final disposition of
these matters is not expected to have a material impact on the company's
financial condition or results of operations.

Other.  The company is involved in legal or administrative proceedings before
various courts and agencies with respect to rates, taxes and other matters.

Although unable to determine the outcome of these contingencies, management
believes that appropriate accruals have been recorded. Final disposition of
these matters is not expected to have a material impact on the company's
financial condition or results of operations.



<PAGE>


Nicor Inc.                                                             Page 10

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations

The following discussion should be read in conjunction with the Management's
Discussion and Analysis section of the Nicor 2000 Annual Report on Form 10-K.

SUMMARY

Nicor's diluted earnings per share for the three- and six-month periods ended
June 30, 2001, were $.59 and $1.44, respectively, compared to diluted earnings
per share of $.66 and $1.49, respectively, for the same periods in 2000. Second
quarter net income was $26.7 million in 2001 compared to $30.6 million in 2000.
Net income for the six-month period decreased to $65.5 million from $69.4
million a year ago. Operating income for both 2001 periods includes income from
partial insurance recovery relating to the gas distribution segment's mercury
inspection and repair program. Excluding the mercury-related recoveries, a
decline in operating income for both periods occurred in the company's two major
business segments and in Nicor's other energy ventures. Lower results from the
company's nonregulated retail energy marketing joint venture and higher interest
expense also contributed to the decrease in net income for the three- and
six-month periods. Per share results in both periods were favorably affected by
the company's common stock repurchase program.

Operating income. Operating income (loss) by major business segment was:

                                Three months ended      Six months ended
                                      June 30                June 30
                                ------------------     ------------------
   (millions)                     2001      2000         2001      2000
                                --------  --------     --------  --------

   Gas distribution             $   49.1  $   47.5     $  113.7  $  112.5
   Shipping                          3.6       5.9          6.9      11.5
   Other energy ventures             1.0       3.6          1.9       3.6
   Corporate and eliminations        (.8)     (1.6)        (1.6)     (2.0)
                                --------  --------     --------  --------
                                $   52.9  $   55.4     $  120.9  $  125.6
                                ========  ========     ========  ========

The following summarizes operating income comparisons for major business
segments:

o  Gas distribution operating income increased for the three- and six-month
   periods by $1.6 million to $49.1 million and $1.2 million to $113.7 million,
   respectively. Second quarter results for 2001 include a slight decrease in
   margin compared to last year that was more than offset by a $2.1 million
   insurance recovery, net of expenses, related to the company's mercury
   inspection and repair program. The year-to-date improvement was primarily due
   to increased margin and the second quarter mercury-related cost recovery,
   partially offset by higher operating and maintenance expenses. Factors
   impacting margin are discussed on page 12.

o  Containerized shipping operating income decreased about 40 percent for the
   three- and six-month periods ended June 30, 2001 due to lower volumes shipped
   which more than offset the positive effect of slightly higher average rates
   for both periods. Lower volumes were primarily attributable to a slowdown in
   the economy.


Nicor Inc.                                                             Page 11


Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

o  Operating income from Nicor's other energy ventures decreased $2.6 million
   and $1.7 million for the three- and six-month periods. Improved operating
   results from Nicor's wholesale natural gas marketing and residential
   energy-related products and services businesses were more than offset by a
   decline in operating income from Nicor's technology business.

Nonoperating items. Other income (expense) for the quarter was $(.3) million,
compared to $1.2 million a year ago. For the six months ended June 30, other
income increased to $4.2 million in 2001 from $3.5 million in 2000. Nicor's
nonregulated retail energy marketing joint venture posted lower results in both
periods. The improvement for the six-month period was due primarily to increased
interest income from higher short-term investment balances.

Interest expense for the three- and six-month periods increased $2.1 million to
$11.9 million and $4.1 million to $26.1 million, respectively, due to higher
average borrowing levels. Higher gas procurement costs, costs associated with
the mercury inspection and repair program and a new customer deferred payment
plan contributed to the higher borrowing levels.

Earnings for both periods of 2001 were also favorably impacted by a reduction in
Nicor's effective income tax rate related to the shipping segment. Beginning in
2001, deferred taxes are no longer recorded on undistributed foreign earnings
that are indefinitely reinvested offshore.

2001 Outlook. Excluding any charges or credits related to the mercury inspection
and repair program and assuming normal weather for the remainder of the year,
management currently expects 2001 annual diluted earnings to be in the range of
$3.00 to $3.10 per share and anticipates that third quarter diluted earnings
will be in the range of $.50 to $.60 per share. Although management believes the
foregoing forward-looking statements about its earnings expectations are based
on reasonable assumptions, actual results may vary materially from stated
expectations. Factors that could cause materially different results include, but
are not limited to, natural gas prices, interest rates, borrowing needs, weather
conditions, economic and market conditions, energy conservation, legislative and
regulatory actions, asset sales, PBR plan results and any future mercury-related
charges or credits.

RESULTS OF OPERATIONS

Details of various financial and operating information by segment can be found
in the tables on pages 15 and 16. The following discussion summarizes the major
items impacting Nicor's earnings.

Operating revenues. Operating revenues by major business segment were:

                                 Three months ended       Six months ended
                                     June 30                 June 30
                                 ------------------      ------------------
   (millions)                      2001      2000          2001      2000
                                 --------  --------      --------  --------

   Gas distribution              $  273.5  $  263.1      $1,620.1  $  836.7
   Shipping                          54.3      61.2         113.0     120.5
   Other energy ventures             48.4      24.2         141.8      50.7
   Corporate and eliminations        (3.2)      (.1)        (28.2)      (.2)
                                 --------  --------      --------  --------
                                 $  373.0  $  348.4      $1,846.7  $1,007.7
                                 ========  ========      ========  ========

Gas distribution revenues increased slightly in the three-month period and
nearly doubled for the six-month period due primarily to higher natural gas
prices, which are passed directly through to customers


Nicor Inc.                                                           Page 12

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

without markup. For the quarter, the impact of higher natural gas prices was
partially offset by the effect of warmer weather than in 2000. For both periods,
the decline in shipping revenues reflects fewer volumes shipped compared to a
year ago partially offset by slightly higher average rates. Reduced volumes were
due to a slowdown in the economy, which has resulted in lower construction- and
tourist- related shipments in the Carribean region. Revenues generated from
Nicor's wholesale natural gas marketing business accounted for the increase in
other energy ventures. The elimination of natural gas sales from Nicor's
wholesale natural gas marketing business to Nicor Gas is reflected in corporate
and eliminations.

Gas distribution margin. Gas distribution margin, defined as operating revenues
less cost of gas and revenue taxes, which are both passed directly through to
customers, decreased in the second quarter to $110.3 million compared to $111.3
million a year ago, and for the six months ended June 30, 2001, gas distribution
margin increased to $280.0 million compared to $274.5 million in 2000.
Positively affecting margin for both periods were higher customer financing
charges, larger contributions from gas supply related services and improved
results from the performance-based rate plan. Both the three- and six-month
comparisons were adversely affected by the higher cost of natural gas used to
operate company equipment and facilities, customer conservation and the absence
of income relating to a large construction project recorded in the second
quarter of last year. The three-month comparison was also negatively impacted by
lower deliveries due to warmer weather than a year ago, while the six-month
comparison benefited from colder weather during the first quarter.

Operating and maintenance. Operating and maintenance expense for 2001 decreased
$7.5 million to $90.4 million, and $.5 million to $191.8 million, in the three-
and six-month periods, respectively. Decreased volumes and actions taken by
management to respond to the economic slowdown resulted in lower operating and
maintenance expenses in the shipping segment for both periods. For the
year-to-date period, lower expenses in the shipping segment and at Nicor's other
energy ventures essentially offset increased gas distribution operating
expenses. Bad debt and customer service expenses both rose in the gas
distribution segment as an indirect result of higher natural gas prices.

FINANCIAL CONDITION AND LIQUIDITY

Operating cash flows. Net cash flow from operating activities decreased $99.3
million to $303.4 million for the six months ended June 30, 2001, due primarily
to changes in working capital items in the gas distribution segment. Working
capital can swing sharply due to certain gas distribution factors including
weather, the price of gas, the timing of collections from customers and gas
purchasing practices. The company generally relies on short-term financing to
meet temporary increases in working capital needs.

Financing activities. Nicor and its gas distribution subsidiary maintain
short-term line of credit agreements with major domestic and foreign banks. At
June 30, 2001, these agreements, which serve as backup for the issuance of
commercial paper, totaled $522.5 million and the company had $152.0 million of
commercial paper outstanding.

Nicor Gas has $350 million of First Mortgage Bonds remaining available for
issuance under a July 2001 shelf registration filing.

In May 2001, Nicor Gas issued $50 million of First Mortgage Bonds due in 2016 at
7.2%. A portion of the net proceeds replenished corporate funds used previously
to redeem $25 million of 6.25% First Mortgage Bonds due in 1999. The remainder
of the net proceeds replenished a portion of corporate funds used to redeem
$50 million of 8.25% First Mortgage Bonds due in 2024.



Nicor Inc.                                                           Page 13

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

In February 2001, Nicor Gas issued $75 million of First Mortgage Bonds due in
2011 at 6.625%. A portion of the net proceeds replaced $50 million of 5.875%
First Mortgage Bonds due May 1, 2000 that had been temporarily refinanced
through the issuance of unsecured notes. The remainder of the net proceeds
replenished a portion of corporate funds used previously to redeem $50 million
of 8.25% First Mortgage Bonds due in 2024.

Under an existing common stock repurchase program, Nicor purchased and retired
168,000 common shares during the second quarter of 2001 at an aggregate cost of
$6.5 million. For the six-month period, Nicor purchased 258,000 common shares at
an aggregate cost of $10.0 million. Purchases are being made as market
conditions permit through open market transactions and to the extent cash flow
is available after other investment opportunities.

Effective with the dividend paid on May 1, 2001, Nicor's quarterly dividend on
common stock was increased to 44 cents per share. This payment represents an
annual rate of $1.76 per share, which is 6 percent higher than the $1.66 rate
established with the May 1, 2000 dividend.

OTHER

Weather hedging. Beginning in 2000, Nicor Gas began hedging the impact of
significant weather fluctuations. For 2001 Nicor Gas entered into an agreement
with a third party to protect the company's earnings if weather is warmer than
5,700 degree days, which is about 7 percent warmer than normal. To partially
offset the cost of this earnings protection, Nicor Gas has also agreed to pay
this party if weather for 2001 is colder than 6,100 degree days, which is
approximately normal. Under the terms of these agreements the maximum payout or
receipt is limited to $17.5 million which is equivalent to approximately 900
degree days, or about 15 percent of normal.

Horizon Pipeline. Horizon Pipeline is a 50/50 joint venture between Nicor and
Natural Gas Pipeline Company of America, a subsidiary of Kinder Morgan, Inc. The
joint venture will construct and operate a 74-mile, 36-inch pipeline from
Joliet, Illinois to near the Wisconsin/Illinois border at an estimated cost of
about $80 million. The project has received final Federal Energy Regulatory
Commission approval. The pipeline capacity is nearly fully subscribed under
10-year agreements, with Nicor Gas having contracted for approximately 80
percent of the 380 MMcf per day initial capacity. Construction of the pipeline
is scheduled to commence in late summer 2001, and the pipeline is expected to be
operational in the spring of 2002.

Customer choice of commodity supplier. In July 2001, the company received
approval from the ICC to permanently expand the Customer Select(R) program to
include all of its customers. The order is subject to rehearing by the ICC and
possible appeal. The program is currently available to all industrial and
commercial customers and about 14 percent of Nicor Gas' residential customers.
Under the program, customers are able to acquire their natural gas supplies
from third-party marketers. The choice of another natural gas commodity
supplier has no direct impact on Nicor Gas' distribution margin because natural
gas costs are passed directly through to customers without a markup. Nicor Gas
continues to deliver the natural gas, maintain its distribution system and
respond to emergencies.



Nicor Inc.                                                           Page 14

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

Market risk. The company is exposed to market risk in the normal course of its
business operations, including the risk of loss arising from adverse changes in
natural gas commodity prices and interest rates. There has been no material
change in the company's exposure to market risk since December 31, 2000.



Nicor Inc.                                                           Page 15
-----------------------------------------------------------------------------

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

GAS DISTRIBUTION STATISTICS

Operating revenues, deliveries, customers and other statistics are presented
 below.

                                    Three months ended       Six months ended
                                         June 30                  June 30
                                    ------------------      ------------------
                                      2001      2000          2001      2000
                                    --------  --------      --------  --------
Operating revenues (millions):
   Sales
     Residential                    $  171.3  $  171.1      $1,164.5  $  558.4
     Commercial                         33.5      30.1         222.0     106.0
     Industrial                          4.0       4.3          33.9      15.4
                                    --------  --------      --------  --------
                                       208.8     205.5       1,420.4     679.8
                                    --------  --------      --------  --------
   Transportation
     Residential                         2.0       1.3           4.9       2.2
     Commercial                         14.6      15.6          42.4      40.4
     Industrial                         11.0      10.9          23.0      22.8
     Other                               2.0       1.4           6.0       3.7
                                    --------  --------      --------  --------
                                        29.6      29.2          76.3      69.1
                                    --------  --------      --------  --------

   Other revenues
     Revenue taxes                      20.6      18.5          87.1      60.8
     Performanced-based rate plan        1.7       1.0           4.2       2.2
     Chicago Hub                         2.8       1.0           5.5       2.3
     Weather insurance                     -        .4             -       7.3
     Other                              10.0       7.5          26.6      15.2
                                    --------  --------      --------  --------
                                        35.1      28.4         123.4      87.8
                                    --------  --------      --------  --------
                                    $  273.5  $  263.1      $1,620.1  $  836.7
                                    ========  ========      ========  ========

Deliveries (Bcf):
   Sales
     Residential                        23.5      28.7         125.9     118.9
     Commercial                          5.0       5.2          24.3      22.3
     Industrial                           .7        .7           3.8       3.4
                                    --------  --------      --------  --------
                                        29.2      34.6         154.0     144.6
                                    --------  --------      --------  --------
   Transportation
     Residential                          .7        .5           3.8       1.4
     Commercial                         11.8      13.5          52.7      50.2
     Industrial                         31.5      37.2          71.1      81.4
                                    --------  --------      --------  --------
                                        44.0      51.2         127.6     133.0
                                    --------  --------      --------  --------
                                        73.2      85.8         281.6     277.6
                                    ========  ========      ========  ========

Customers at end of period (thousands):
   Sales
     Residential                     1,746.2   1,722.9
     Commercial                         97.5      93.0
     Industrial                          6.4       6.2
                                    --------  --------
                                     1,850.1   1,822.1
                                    --------  --------
   Transportation
     Residential                        63.3      55.9
     Commercial                         69.4      72.5
     Industrial                          7.4       7.7
                                    --------  --------
                                       140.1     136.1
                                    --------  --------
                                     1,990.2   1,958.2
                                    ========  ========

Other statistics:
   Degree days                           535       619         3,639     3,204
   Colder (warmer) than normal*        (22)%     (10)%          (5)%     (17)%
   Average gas cost per Mcf sold      $ 4.84    $ 3.80        $ 8.11    $ 3.44


*  The company holds weather derivitive instruments to limit the earnings impact
   of weather fluctuations. See Weather hedging on page 13.




Nicor Inc.                                                           Page 16
-----------------------------------------------------------------------------

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (concluded)

SHIPPING STATISTICS

                                    Three months ended      Six months ended
                                         June 30                June 30
                                    ------------------     ------------------
                                      2001      2000         2001      2000
                                    --------  --------     --------  --------

TEUs shipped (thousands):
   Southbound                           28.5      34.5         59.5      67.7
   Northbound                            4.5       4.5          9.1       8.6
   Interisland                           1.6       1.7          3.1       3.6
                                    --------  --------     --------  --------
                                        34.6      40.7         71.7      79.9
                                    ========  ========     ========  ========

Other statistics:
   Revenue per TEU                  $  1,568  $  1,488     $  1,576  $  1,496
   Ports served                           23        24
   Vessels operated                       16        18



Nicor Inc.                                                             Page 17

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

For disclosures about market risk, see Market Risk on page 14, which is
incorporated herein by reference.

PART II - OTHER INFORMATION

Item 4.        Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of the company was held on April 19, 2001,
for the purpose of electing the Board of Directors. Proxies for the meeting were
solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and
there has been no solicitation in opposition to the board of directors'
solicitation. Voting results reported below are for shares eligible to vote as
of the record date, February 21, 2001. There were no "broker nonvotes."

Nominees for directors, as listed in the proxy statement, were elected as
indicated below:


                                                 Shares           Shares
                                                 Voted             Voted
                       Nominee                    FOR            WITHHELD
          --------------------------          -------------     ------------

          Robert M. Beavers, Jr.               38,373,620         383,680
          Bruce P. Bickner                     38,355,036         404,307
          John H. Birdsall, III                38,389,738         379,749
          Thomas A. Donahoe                    38,376,509         383,461
          Thomas L. Fisher                     38,354,821         412,940
          John E. Jones                        38,356,798         398,105
          Dennis J. Keller                     38,378,112         381,393
          William A. Osborn                    38,378,267         382,548
          John Rau                             38,348,875         404,133
          Patricia A. Wier                     38,345,417         406,988


Item 6.  Exhibits and Reports on Form 8-K

   (a)   See Exhibit Index on page 19 filed herewith.

   (b)   The company did not file a report on Form 8-K during the second quarter
         of 2001.



<PAGE>


Nicor Inc.                                                             Page 18

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                             Nicor Inc.




Date  August 1, 2001                     By  /S/ KATHLEEN L. HALLORAN

                                             Kathleen L. Halloran
                                             Executive Vice President
                                             Finance and Administration




<PAGE>


Nicor Inc.                                                             Page 19

Exhibit Index

  Exhibit
  Number                          Description of Document

   4.01     * Supplemental Indenture, dated May 15, 2001, of Nicor Gas to BNY
            Midwest Trust Company, Trustee, under Indenture dated as of January
            1, 1954. (File No. 333-65486, Form S-3, Exhibit 4.18.)


   *  This exhibit has been previously filed with the Securities and Exchange
      Commission as an exhibit to registration statements or to other filings
      with the Commission and is incorporated herein as an exhibit by reference.
      The file number and exhibit number of the exhibit is stated, in
      parentheses, in the description of the exhibit.