NICOR Inc.
                                                             Form 10-K
                                                             Exhibit 10.18



                                     1997
                      NI-GAS INCENTIVE COMPENSATION PLAN


A.  Purpose

    The purpose of this Plan is to provide an annual incentive plan which
    supports the longer-term strategic planning process.  This is done by
    linking pay to the performance of tasks which focus on objectives of
    strategic importance.  The Plan also encourages teamwork among officer
    areas and among line and staff groups.

B.  Eligible Group

    Officers of NI-Gas in Salary Grades EX-1 or higher.  Participation should
    be limited to those employees in positions which enable them to make
    significant contributions to the performance and growth of the company.

C.  Components of Plan
    
    Compensation Objective
    Bonus Targets
    Performance Targets
    Goal Setting Guidelines
    Program Schedule
    Form of Payment

    Compensation Objective

    Base Salary + Bonus Target = Short-Term Compensation Objective

    An individual's short-term compensation objective will be based on salary
    plus a bonus, expected to be earned if agreed-upon performance targets are
    met.  Under certain conditions, short-term compensation above or below
    targets may be paid.



    Standards for base salaries will be managed at the appropriate industry
    quartile which will be determined by survey data.  Bonus targets will be
    set based on the individual's grade level and compensation objective, such
    that total compensation objectives are managed at the level as determined
    by the Compensation Committee to remain competitive with industry.

    Bonus Target

    The bonus target amount varies according to pay and salary grade.  The
    higher responsibility, the greater the dollars at risk.

    Performance Targets

    Performance criteria focus on the achievement of agreed-upon and
    documented strategic goals.  Performance targets may include measures of
    financial performance, defined group objectives or individual performance
    objectives.  Each particular performance target will be assigned weighting
    reflected as a percentage of bonus target.

    Goal Setting Guidelines

    The most important aspect of this Plan will be in establishing effective
    goals.  In addition to the goals which will be measured by company
    financial performance, realistic, operational management goals must be
    established.  As well as being realistic, the goals should be measurable
    wherever possible by quantifiable performance criteria.  It is recognized
    that measurement of some goals will require subjective assessments of
    performance.  Goals must be consistent with the longer-term strategic
    plan.

    Amount of bonus payment for financial/budget related goals can vary above
    and below target based upon results achieved.  For targets met, bonus
    amount will be 100% of bonus target.  When targets are exceeded or are not
    reached, bonus will be proportionately more or less than the target.

    Project goals which are not quantifiable will be evaluated by the NI-Gas
    CEO based on performance and will fall into one of five categories of
    achievement:  unsatisfactory; less than expected, but acceptable given
    facts and circumstances; expected; more than expected, but less than
    outstanding; and outstanding performance.  Accordingly, performance at,
    below or above expected performance will result in awards relative to
    performance.

    The Compensation Committee may make appropriate upward or downward
    adjustments if, after taking into consideration all of the facts and
    circumstances of the performance period, it determines that adjustments
    are warranted.

    Plan Schedule

    The 1997 NI-Gas Incentive Compensation Plan runs on a calendar year basis,
    with the strategic planning cycle and budgeting process the primary link
    to performance and bonus targets.  Responsibility for determination of
    financial results will be with the Accounting Department.  A program for
    review will be established and project or company goal performance will be
    reviewed at least twice each performance year.

    Year-end results should be available and evaluated in January of the
    following year.  Following approval of the Compensation Committee and
    Board at the January meeting, bonuses will be payable to participants.

    Form of Payment

    All awards will be paid in cash, except that a participant in the Stock
    Deferral Plan may elect to defer up to 50% of their award into that plan. 
    Deferral elections must meet the guidelines and timing of the Stock
    Deferral Plan to be effective.  Appropriate taxes for the entire award
    amount will be withheld from the portion of the award being paid in cash.

D.  Integration with Existing Programs

    Base salaries will be managed with range standards at the appropriate
    industry quartile for comparable positions, with total compensation
    objectives to be managed at a level appropriate with the performance of
    the company within industry, as determined by the Compensation Committee. 
    Salaries will be monitored each year and increases granted based on merit
    and range standard.  Bonus targets will be set as a percentage of base
    salary.  A change, other than the annual salary review, in the
    compensation objective will customarily occur during the year only through
    promotion to various levels, at which time the base salary and bonus
    target are also likely to change.

    Promotion of an employee during the year or reassignment to
    responsibilities in which new performance objectives apply will result in
    proration of the existing performance objectives and bonus target and
    assignment of new performance objectives and if appropriate, a new bonus
    target as the Compensation Committee shall determine.

    Promotion into an Executive Salary Grade would create eligibility for
    bonus at an amount prorated on a monthly basis (i.e., eligible for the
    plan 9 months - 9/12 of an annual bonus).

    If a participant voluntarily terminates or is terminated for cause prior
    to the end of the performance period, then the participant will be
    entitled to no award.  In the event a participant shall die, become
    disabled, or retire before the end of the performance period, an award is
    payable prorated on a monthly basis or the Compensation Committee may
    authorize payment of an award to the participant, or beneficiary, in such
    other amount as the Committee deems appropriate.

E.  Responsibility


    Acceptance and success of this Plan will depend on documented, realistic
    goals that are fair, understandable and measurable.  Considerable
    management focus and involvement will be required for goals to be
    established, communicated and monitored.

    The Human Resources Department will be responsible for the administration
    of the system for the company.  This will include:

    1)  monitoring industry salary and total compensation levels,

    2)  recommending structural changes in base salary and compensation
        objective adjustments, and,

    3)  assisting the NI-Gas CEO in progress and exception reporting to the
        Compensation Committee.

    The NI-Gas CEO shall be responsible for:

    1)  reviewing industry salary and compensation levels and approving
        recommendations before presentation to the Compensation Committee,

    2)  approving structural changes in base salary and compensation objective
        adjustments before presentation to the Compensation Committee,

    3)  recommending eligibility, performance targets and goals to the
        Compensation Committee,

    4)  monitoring performance targets through the Accounting Department and
        other sources of necessary documentation,

    5)  communicating progress reports to the participants, and,

    6)  reporting performance results and making award recommendations to the
        Compensation Committee.

    The company's 1997 NI-Gas Incentive Compensation Plan and changes to its
    performance targets and measurement criteria will be reviewed and approved
    by the Compensation Committee.

    In establishing the actual bonus awards to be made, the Compensation
    Committee may take into account all of the facts and circumstances which
    exist during the year and may make appropriate upward or downward
    revisions in performance criteria, add or delete objectives, or change the
    relative percentages assigned to the various performance objectives.

F.  Amendment and Termination

    The Board of Directors may amend or terminate the Plan at any time without
    the consent of the participants.  No such amendment or termination shall
    negatively impact any participant's amount which accrued under the Plan
    prior to the calendar year in which the amendment is made.

    Summary

    The primary focus of this Plan is to link company performance and
    participant performance through an incentive plan.  It enables people to
    gain personally through the accomplishment of defined objectives which are
    expected to contribute to the achievement of shareholder value and to the
    company's present and future success.



                                               NICOR Human Resources
                                               February 1997