Exhibit 10.16

                    DIRECTORS' DEFERRED COMPENSATION PLAN
                                      OF
                            MARKETSPAN CORPORATION
                             D/B/A KEYSPAN ENERGY




      On June 26, 1998 the Board of Directors of  MarketSpan  Corporation  d/b/a
KeySpan Energy adopted this Directors'  Deferred  Compensation Plan (the "Plan")
effective June 1, 1998. The terms of the Plan are set forth below.

1.    PURPOSE OF THE PLAN

      The purpose of the Plan is to provide a method for  Directors  who are not
currently  employees  of  MarketSpan   Corporation  d/b/a  KeySpan  Energy  (the
"Corporation")  to acquire a  proprietary  interest  in the  Corporation  and to
further   align  the  interests  of  the   directors   with  the   Corporation's
shareholders.  It is intended that the Plan will meet the  requirements  of Rule
(b-3) promulgated under Section 16(b) of the Securities Exchange Act of 1934, as
amended, and the Plan shall be interpreted accordingly.

2.    PARTICIPATION

      Non-employee  directors of the  Corporation  or of The Brooklyn  Union Gas
Company, a subsidiary of the Corporation shall participate in the Plan as of the
Effective Date. All future  non-employee  directors of the Corporation or of The
Brooklyn Union Gas Company shall commence  participation in the Plan immediately
upon  becoming  a  director.   Employee  directors  shall  not  be  eligible  to
participate in this Plan.

3.    DEFINITIONS

      (a) "Annual Stock Grant" shall mean the number of shares of KeySpan Energy
common stock awarded to each  Participant  on an annual basis and deferred under
this Plan.

      (b)  "Beneficiary"  shall  mean a person  or entity  determined  to be the
Participant's beneficiary pursuant to Section 11 hereof.

      (c) "Board of  Directors"  or "Board" shall mean the Board of Directors of
MarketSpan Corporation d/b/a KeySpan Energy.

      (d) "Cash  Equivalent  Account" shall mean the bookkeeping  account set up
for each director electing to defer amounts not converted into stock equivalents
hereunder.

      (e) "Code" shall mean the Internal Revenue Code of 1986.


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      (f)  "Compensation"  shall mean the cash remuneration as determined by the
Board  to be a paid to a  Participant  in  consideration  of such  Participant's
service as a  non-employee  director  including the annual  retainer,  committee
chairman  retainer and meeting  fees,  but not  including  amounts  representing
reimbursement of expenses.

      (g)  "Corporation" or "KeySpan  Energy" shall mean MarketSpan  Corporation
d/b/a KeySpan Energy , the sponsor of this Plan or its successors or assigns.

      (h) "Effective Date" shall mean June 1, 1998.

      (i)  "Exchange  Act" shall mean the  Securities  Exchange Act of 1934,  as
amended.

      (j)  "Participant  " shall  mean a member  of the  Board of  Directors  of
MarketSpan  Corporation  d/b/a KeySpan  Energy or The Brooklyn Union Gas Company
(or any  affiliated  corporation  which by action of its Board of Directors  may
adopt and join this Plan on behalf of its eligible directors after the Effective
Date) and who is not at the time of reference an employee of those  companies or
any company affiliated with those companies.

      (k) "Plan" shall mean this  MarketSpan  Corporation  d/b/a KeySpan  Energy
Directors' Deferred Compensation Plan.

      (l) "Prior Deferred Plan" shall mean the Directors' Deferred  Compensation
Plan of KeySpan Energy Corporation or the Directors' Stock Unit Retainer Plan of
the Long Island Lighting Company as in effect prior to May 28, 1998.

      (m) "Stock  Equivalent  Account " shall mean a book account  maintained by
KeySpan Energy reflecting the shares of KeySpan Energy common stock allocated to
the  Participant  as a result of the  deferral of  Compensation  or Annual Stock
Grant and any such additional  shares of KeySpan Energy common stock as shall be
credited  thereto in respect of dividends  paid on KeySpan  Energy  common stock
pursuant to Section 4(d).

4.  MANDATORY  DEFERRAL,  STOCK  EQUIVALENT  ACCOUNT,  AND  MAINTENANCE OF STOCK
EQUIVALENT ACCOUNTS

      (a) Each  Participant  shall defer a minimum of fifty percent (50%) of the
amount of the  Participant's  Compensation and one hundred percent (100%) of the
Annual Stock Grant,  or determined by the Board of Directors  from time to time.
Such amounts shall be credited to an account in the name of such  Participant on
the last  trading  date of the  calendar  month in which the  amounts  are paid.
Amounts so deferred shall be credited to the purchase of stock equivalents. Each
stock  unit  shall be in the form of an  unfunded  bookkeeping  entry  and shall
represent one full or fractional  share of the common stock of the  Corporation.
No shares of common stock or certificates  thereof shall be held under the Plan.
Any shares of common stock issued and distributed pursuant to Section 9 shall be
purchased by the  Corporation on the open market,  or shall be taken from shares
of common stock previously acquired by the Corporation and held in its treasury.


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      (b) The number of stock  equivalents  credited  pursuant  to Section  4(a)
shall be  determined  by  reference to the average of the high and low price per
share of  KeySpan  Energy  common  stock  reported  on New York  Stock  Exchange
Composite  Transactions on the first trading day of the calendar month following
the month in which such credit shall have occurred, such stock equivalents to be
computed to three decimal places.

      (c) The Stock  Equivalent  Account of each Participant will be credited as
of the  pertinent  date with a  Dividend  Equivalent  in the  amount of any cash
dividends  paid  from time to time in  respect  of  KeySpan  Energy  issued  and
outstanding  common stock for each stock equivalent or fraction of an equivalent
in the Participant's Stock Equivalent Account as of such date.

      (d)  Dividends  Equivalents  as described in paragraph  (c) above shall be
credited  to the  Participant's  Stock  Equivalent  Account  as of the  dividend
payment  date in the  form of as many  additional  stock  equivalents  (and  any
fractions  of an  equivalent  computed  to  three  decimal  points)  as could be
purchased with such Dividend Equivalents based on the closing price per share of
KeySpan  Energy  common  stock  reported  on New York Stock  Exchange  Composite
Transactions  on such  dividend  payment  date or, if no trading  occurs on such
stock on the dividend  payment  date, on the trading day  immediately  preceding
such date.

      (e) In the event that the number of  outstanding  shares of KeySpan Energy
common  stock  shall be  changed  by  reason of stock  split-ups,  combinations,
recapitalizations,  mergers,  consolidations,  spin-offs or the like,  the Board
shall  make such  adjustments  as it deems  appropriate  in the  number of units
credited to the Stock Equivalent Accounts hereunder.

5.    DEFERRAL ELECTIONS

      Each Participant  shall execute a deferral election form for each calendar
year in which the Plan is in force.  Each deferral election form shall state the
percentage by which the  Compensation  shall be reduced and converted into stock
equivalents  hereunder (subject to the mandatory deferral provided herein),  and
credited to the Participant's Stock Equivalent  Account.  Such deferral election
shall also state the  percentage  if any,  which shall be deferred into the Cash
Equivalent  Account  hereunder.  The  deferral  election  shall  be in the  form
required by the  Corporation  and shall be delivered to the Corporation no later
than  December 31 of the calendar year  immediately  preceding the calendar year
for which the deferral election is made. With respect to deferral  elections for
the 1998 calendar year,  such deferral  election shall be made no later than the
date 30 days after the Plan is adopted.  Deferral elections may be in amounts up
to 100% of the Participants' Compensation.

6.    CASH EQUIVALENT ACCOUNT, INTEREST

      (a)  Deferral  amounts  elected to be  deferred  into the Cash  Equivalent
Account shall be accrued by KeySpan  Energy to a  bookkeeping  account as of the
date  payment  of such  amounts  would  have been made by the  Corporation.  The
establishment of such Cash Equivalent Account is solely for bookkeeping purposes
and shall not represent  amounts held in trust or a segregation of the assets of
the  Corporation  or any form of  funding  of the  deferred  compensation.  Each
Participant shall receive periodic reports setting forth the amounts credited to
his or her Cash Equivalent

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Account.

      (b) An amount representing interest into the Cash Equivalent Account shall
be accrued  monthly at a rate equal to the prime  interest  rate as set forth by
Chase Manhattan Bank (or any successor thereto) effective as of the first day of
such calendar  month.  Such amount shall be credited to the  Participant's  Cash
Equivalent Account.

7.    PRIOR DEFERRED PLANS

      Each Participant who was a participant in a Prior Deferred Plan shall have
an allocation made to the Participant's  Stock Equivalent Account of a number of
stock units of KeySpan  Energy stock  determined as if such  Participant  were a
shareholder  of either  the Long  Island  Lighting  Company  or  KeySpan  Energy
Corporation,  as the case may be, on May 28, 1998 with  respect to the number of
stock  equivalents  credited in such Prior Deferred  Plans.  Any amounts of cash
equivalents with respect to a Participant held in a Prior Deferred Plan shall be
allocated to the Cash Equivalent  Account of the Participant  under this Plan as
of the Effective Date.

8.    TRANSFER BETWEEN CASH EQUIVALENT ACCOUNT AND STOCK EQUIVALENT ACCOUNT

      Prior to the first day of each  calendar  year, a  Participant,  by giving
written  notice to the  Corporation,  may  transfer  all or any  portion  of the
balance in his or her Cash Equivalent  Account into his or her Stock  Equivalent
Account  using the price for the  Corporation's  common stock  determined  under
Section 4(b).

9.    FORM AND TIMING OF PAYMENT

      (a)  No  payments  shall  be  made  to  Participants  hereunder  prior  to
retirement, death or termination of service as a director.

      (b) Upon  retirement,  death or termination of service as a director,  all
stock  equivalents  in  the  Participant's  Stock  Equivalent  Account  will  be
converted to cash based on the closing price of the  Corporation's  common stock
reported  on the New York  Stock  Exchange  Composite  Transactions  on the last
trading day of the month in which the event that  determines  the  Participant's
right to receive payment occurs.

      (c)  Payment of the  amount  determined  under (b)  above,  along with any
balance in the Participant's Cash Equivalent Account shall be made in a lump sum
in cash to the Participant as soon as administratively  feasible after the event
that  determines the  Participant's  right to receive  payment.  If the Director
elects on a form  acceptable  to the  Corporation  no later  than the end of the
calendar year preceding the calendar year in which the event that determines the
Participant's right to receive payment occurs, distribution of the Participant's
account may be deferred for up to but no later than 5 years after said event.

      (d) If  elected  by the end of the  calendar  year prior to the event that
determines the Participant's right to receive payment, the Participant may elect
to receive payment in equal annual

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installments,  the  number  of  which  shall  be  specified  in  writing  by the
Participant  by the date stated above,  but in no event shall such number exceed
10.

      (e)  Interest  shall be  credited  on the  unpaid  balance  accrued to any
Participant  monthly at a rate equal to the prime rate as set forth by the Chase
Manhattan  Bank (or any  successor  bank)  effective as of the first day of such
calendar quarter and credited to the Participant's Cash Equivalent Account.

10.   NO FORFEITURES

      Each Participant's benefits hereunder shall be non-forfeitable.

11.   BENEFICIARY

      Each Participant shall have the right to designate in writing from time to
time a  Beneficiary  or  Beneficiaries  by  filing  a  written  notice  of  such
designation  with the Corporation.  In the event of a Beneficiary  designated by
the Participant does not survive the Participant and no successor Beneficiary is
selected, or in the event no valid designation has been made, such Participant's
Beneficiary shall be such  Participant's  estate. In the event the Participant's
Beneficiary  is the  Participant's  estate,  no payment shall be made unless the
Corporation  shall have been furnished with such evidence as the Corporation may
deem necessary to establish the validity of the payment.

12.   FUNDING OF THE PLAN

      The Plan in unfunded, and the amounts credited to each Participant's Stock
Equivalent  Account  and Cash  Equivalent  Account and the  benefits  payable in
respect thereof represent merely unfunded,  unsecured promises of KeySpan Energy
pay a sum of money to the Participant in the future.

13.   ALIENATION OF BENEFITS PROHIBITED

      No transfer  (other than a transfer made by will or by the laws of descent
and  distribution)  by a  Participant  of any  right to any  payment  hereunder,
whether voluntary or involuntary,  by operation of law or otherwise, and whether
by means of alienation by anticipation, sale, transfer, assignment,  bankruptcy,
pledge,  attachments,  charge,  or  encumbrance  of any  kind,  shall  vest  the
transferee  with any  interest  or right and any attempt to so  alienate,  sell,
transfer, assign, pledge, attach, charge, or otherwise encumber any such amount,
whether  presently  or  thereafter  payable,  shall  be void  and of no force or
effect.

14.   COUNTERPARTS

      Any direction to defer amounts  associated  with this Plan may be executed
in two or more  counterparts,  any one of which  shall  be  deemed  an  original
without reference to the others.



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15.   TERMINATION OR AMENDMENT

      The Plan may be terminated at any time by the Board of Directors. The Plan
may be  amended  by the Board of  Directors  from  time to time in any  respect;
PROVIDED,  HOWEVER,  except to the extent any  amendment  is necessary to assure
continued  exemption  under  Rule  16b-3  promulgated  under  Section  16 of the
Exchange  Act and that each of the  Participants  remain an  "outside  director"
within the meaning of Section  162(m) of the Code, no such  amendment may reduce
the  amounts  accrued  to any  Participant's  Stock  Equivalent  Account or Cash
Equivalent Account without the affected Participant's prior written consent.

16.   CHOICE OF LAW

      The Plan and all rights  hereunder  shall be subject to and interpreted in
accordance  with the laws of the State of New  York,  without  reference  to the
principles of conflicts of law.

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