================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1996

                                       OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 1-7176


                             THE COASTAL CORPORATION
             (Exact name of registrant as specified in its charter)



           Delaware                                             74-1734212
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)


              Coastal Tower
           Nine Greenway Plaza
             Houston, Texas                                    77046-0995
(Address of principal executive offices)                       (Zip Code)



       Registrant's telephone number, including area code: (713) 877-1400



                           ---------------------------





     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 _____

     As of October 31, 1996, there were outstanding 105,245,620 shares of Common
Stock,  33-1/3 cents par value per share,  and 383,704  shares of Class A Common
Stock, 33-1/3 cents par value per share, of the Registrant.

================================================================================
<PAGE>


                                     PART I

                              FINANCIAL INFORMATION

Item 1.    Financial Statements.

     The financial  statements of The Coastal  Corporation and its  subsidiaries
(the "Company" or "Coastal") are presented herein and are unaudited,  except for
balances  as of  December  31,  1995,  and  therefore  are  subject to  year-end
adjustments;  however,  all adjustments which are, in the opinion of management,
necessary  for a fair  statement  of the results of  operations  for the periods
covered  have been made.  The  adjustments  which have been made are of a normal
recurring nature.  Such results are not necessarily  indicative of results to be
expected for the year due to seasonal variations and market conditions affecting
sales of natural gas and petroleum products.



                    THE COASTAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              (Millions of Dollars)

<TABLE>
<CAPTION>
                                                                                 September 30,      December 31,
                                     ASSETS                                          1996               1995
                                                                                 -------------      ------------
                                                                                  (Unaudited)

<S>                                                                               <C>                <C>
Current Assets:
   Cash and cash equivalents...............................................       $      64.4        $      58.4
   Receivables, less allowance for doubtful accounts of $25.7 million
      (1996) and $22.7 million (1995)......................................           1,463.1            1,192.3
   Inventories.............................................................           1,023.9              781.1
   Prepaid expenses and other..............................................             242.1              218.3
                                                                                  -----------        -----------
      Total Current Assets.................................................           2,793.5            2,250.1
                                                                                  -----------        -----------

Property, Plant and Equipment - at cost:
   Natural gas systems.....................................................           5,973.1            5,866.2
   Refining, crude oil and chemical facilities.............................           2,185.3            1,957.8
   Gas and oil properties - at full-cost...................................           1,656.4            1,450.9
   Other...................................................................             760.9              743.1
                                                                                  -----------        -----------
                                                                                     10,575.7           10,018.0
   Accumulated depreciation, depletion and amortization....................           3,808.0            3,556.1
                                                                                  -----------        -----------
                                                                                      6,767.7            6,461.9
                                                                                  -----------        -----------

Other Assets:
   Goodwill................................................................             512.5              525.7
   Investments - equity method.............................................             538.5              447.4
   Other...................................................................             848.7              973.7
                                                                                  -----------        -----------
                                                                                      1,899.7            1,946.8
                                                                                  -----------        -----------
                                                                                  $  11,460.9        $  10,658.8
                                                                                  ===========        ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.
                                      - 1 -
<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              (Millions of Dollars)


<TABLE>
<CAPTION>
                                                                                 September 30,      December 31,
                      LIABILITIES AND STOCKHOLDERS' EQUITY                          1996                1995
                                                                                 -------------      ------------
                                                                                  (Unaudited)

<S>                                                                               <C>                <C>
Current Liabilities:
   Notes payable...........................................................       $    275.0         $     123.2
   Accounts payable........................................................          2,079.6             1,630.2
   Accrued expenses........................................................            357.3               325.4
   Current maturities on long-term debt....................................              7.0               128.5
                                                                                  ----------         -----------
      Total Current Liabilities............................................          2,718.9             2,207.3
                                                                                  ----------         -----------

Debt:
   Long-term debt, excluding current maturities............................          3,791.7             3,661.7
                                                                                  ----------         -----------

Deferred Credits and Other:
   Deferred income taxes...................................................          1,472.1             1,473.8
   Other deferred credits..................................................            638.4               636.6
                                                                                  ----------         -----------
                                                                                     2,110.5             2,110.4
                                                                                  ----------         -----------

Mandatory Redemption Preferred Stock:
   Issued by subsidiaries..................................................                -                  .6
                                                                                  ----------         -----------

Common Stock and Other Stockholders' Equity:
   Cumulative preferred stock (with aggregate liquidation preference
      of $209.0 million)...................................................              2.7                 2.7
   Class A common stock....................................................               .1                  .1
   Common stock............................................................             36.5                36.4
   Additional paid-in capital..............................................          1,235.3             1,225.0
   Retained earnings.......................................................          1,697.7             1,547.1
                                                                                  ----------         -----------
                                                                                     2,972.3             2,811.3
   Less common stock in treasury - at cost.................................           (132.5)             (132.5)
                                                                                  ----------         -----------
                                                                                     2,839.8             2,678.8
                                                                                  ----------         -----------
                                                                                  $ 11,460.9         $  10,658.8
                                                                                  ==========         ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                      - 2 -
<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                      STATEMENT OF CONSOLIDATED OPERATIONS
                     (Millions of Dollars, Except Per Share)

<TABLE>
<CAPTION>
                                                                    Three Months Ended         Nine Months Ended
                                                                       September 30,             September 30,
                                                                  ----------------------    ---------------------
                                                                     1996        1995         1996         1995
                                                                  ---------   ----------    ---------   ---------
                                                                        (Unaudited)               (Unaudited)

<S>                                                               <C>         <C>           <C>         <C>      
Operating Revenues............................................    $ 2,785.5   $  2,546.2    $ 8,818.6   $ 7,778.0
                                                                  ---------   ----------    ---------   ---------

Operating Costs and Expenses:
   Purchases..................................................      2,089.4      1,862.2      6,702.3     5,640.0
   Operating expenses.........................................        435.0        440.6      1,277.5     1,336.9
   Depreciation, depletion and amortization...................        113.2         91.9        319.5       279.2
                                                                  ---------   ----------    ---------   ---------
                                                                    2,637.6      2,394.7      8,299.3     7,256.1
                                                                  ---------   ----------    ---------   ---------

Operating Profit..............................................        147.9        151.5        519.3       521.9
                                                                  ---------   ----------    ---------   ---------

Other Income - net............................................         27.2         11.6         63.6        35.9
                                                                  ---------   ----------    ---------   ---------

Other Expenses:
   General and administrative.................................         13.8         13.6         42.4        41.5
   Interest and debt expense, less $2.2 million (1996)
      and $1.4 million (1995) three months and $5.5
      million (1996) and $4.6 million (1995) nine
      months capitalized......................................         87.5        102.4        278.2       314.9
   Taxes on income............................................         15.2          2.9         55.1        42.4
                                                                  ---------   ----------    ---------   ---------
                                                                      116.5        118.9        375.7       398.8
                                                                  ---------   ----------    ---------   ---------

Earnings Before Extraordinary Item............................         58.6         44.2        207.2       159.0
   Extraordinary item - loss on early extinguishment
      of debt.................................................            -            -        (12.0)          -
                                                                  ---------   ----------    ---------   ---------

Net Earnings..................................................         58.6         44.2        195.2       159.0
Dividends on Preferred Stock..................................          4.3          4.3         13.0        13.0
                                                                  ---------   ----------    ---------   ---------

   Net Earnings Available
      to Common Stockholders..................................    $    54.3   $     39.9    $   182.2   $   146.0
                                                                  =========   ==========    =========   =========

Earnings Per Share:
   Before extraordinary item..................................    $     .51   $      .38    $    1.83   $    1.39
   Extraordinary item.........................................            -            -         (.11)          -
                                                                  ---------   ----------    ---------   ---------

   Net Earnings Per Common
      and Common Equivalent Share.............................    $     .51   $      .38    $    1.72   $    1.39
                                                                  =========   ==========    =========   =========

Cash Dividends Per Common Share...............................    $     .10   $      .10    $     .30   $     .30
                                                                  =========   ==========    =========   =========
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                      - 3 -
<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
      STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
                  (Thousand of Shares and Millions of Dollars)


<TABLE>
<CAPTION>
                                                                       Nine Months Ended September 30,
                                                           ------------------------------------------------------
                                                                     1996                          1995
                                                           ------------------------      ------------------------
                                                             Shares        Amount          Shares        Amount
                                                           -----------   ----------      -----------   ----------
                                                                                 (Unaudited)

<S>                                                        <C>           <C>             <C>           <C>
Preferred stock, par value
   33-1/3 cents per share, authorized 50,000,000 shares:
      Cumulative convertible preferred:
      $1.19, Series A, redemption or liquidation
         amount of $33 per share:
           Beginning balance...........................             61   $        -               63   $        -
           Converted to common.........................             (1)           -               (1)           -
                                                           -----------   ----------      -----------   ----------
           Ending balance..............................             60            -               62            -
                                                           ===========   ----------      ===========   ----------

      $1.83, Series B, redemption or liquidation
         amount of $50 per share:
           Beginning balance...........................             79           .1               84           .1
           Converted to common.........................             (4)           -               (4)           -
                                                           -----------   ----------      -----------   ----------
           Ending balance..............................             75           .1               80           .1
                                                           ===========   ----------      ===========   ----------

      $5.00, Series C, redemption or liquidation
         amount of $100 per share:
           Beginning balance...........................             33            -               34            -
           Converted to common.........................             (1)           -                -            -
                                                           -----------   ----------      -----------   ----------
           Ending balance..............................             32            -               34            -
                                                           ===========   ----------      ===========   ----------

      Cumulative preferred:
      $2.125, Series H, liquidation amount
         of $25 per share:
           Beginning and ending balance................          8,000          2.6            8,000          2.6
                                                           ===========   ----------      ===========   ----------

Class A common stock, par value 33-1/3 cents per share,
   authorized  2,700,000 shares:
      Beginning balance................................            404           .1              416           .1
      Converted to common..............................            (32)           -              (15)           -
      Conversion of preferred stock and
         exercise of stock options.....................             13            -                7            -
                                                           -----------   ----------      -----------   ----------
      Ending balance...................................            385           .1              408           .1
                                                           ===========   ----------      ===========   ----------

Common stock, par value 33-1/3 cents per share,
   authorized 250,000,000 shares:
      Beginning balance................................        109,168         36.4          108,726         36.2
      Conversion of preferred stock....................             27            -               24            -
      Conversion of Class A common stock...............             32            -               15            -
      Exercise of stock options........................            397           .1              207           .1
                                                           -----------   ----------      -----------   ----------
      Ending balance...................................        109,624   $     36.5          108,972   $     36.3
                                                           ===========   ----------      ===========   ----------
</TABLE>
                 See Notes to Consolidated Financial Statements.

                                      - 4 -
<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
      STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
                  (Thousands of Shares and Millions of Dollars)
                                   (Continued)


<TABLE>
<CAPTION>
                                                                       Nine Months Ended September 30,
                                                           ------------------------------------------------------
                                                                     1996                          1995
                                                           ------------------------      ------------------------
                                                             Shares        Amount          Shares        Amount
                                                           -----------   ----------      -----------   ----------
                                                                                 (Unaudited)

<S>                                                        <C>           <C>             <C>           <C>
Additional paid-in capital:
   Beginning balance...................................                  $  1,225.0                    $  1,214.7
   Exercise of stock options...........................                        10.3                           4.7
                                                                         ----------                    ----------
   Ending balance......................................                     1,235.3                       1,219.4
                                                                         ----------                    ----------

Retained earnings:
   Beginning balance...................................                     1,547.1                       1,336.0
   Net earnings for period.............................                       195.2                         159.0
   Dividends on preferred stock........................                       (13.0)                        (13.0)
   Dividends on common stock...........................                       (31.6)                        (31.4)
                                                                         ----------                    ----------
   Ending balance......................................                     1,697.7                       1,450.6
                                                                         ----------                    ----------
Less treasury stock - at cost..........................          4,395       (132.5)           4,395       (132.5)
                                                           ===========   ----------      ===========   ----------

Total..................................................                  $  2,839.8                    $  2,576.6
                                                                         ==========                    ==========
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                      - 5 -
<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                      STATEMENT OF CONSOLIDATED CASH FLOWS
                              (Millions of Dollars)

<TABLE>
<CAPTION>

                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                                   -------------------------
                                                                                       1996         1995
                                                                                   ---------        --------
                                                                                           (Unaudited)

<S>                                                                                <C>              <C>
Net Cash Flow From Operating Activities:
   Earnings before extraordinary item..........................................    $   207.2        $  159.0
   Add (subtract) items not requiring (providing) cash:
      Depreciation, depletion and amortization.................................        322.5           282.1
      Deferred income taxes....................................................          (.5)            5.7
      Amortization of producer contract reformation costs......................         23.5            22.4
      Distributed earnings from equity investments.............................         17.0            18.8

   Working capital and other  changes, excluding changes relating to cash and
      non-operating activities:
         Accounts receivable...................................................       (294.0)          110.9
         Inventories...........................................................       (240.5)           21.7
         Prepaid expenses and other............................................         (4.7)           (5.1)
         Accounts payable......................................................        478.4          (343.0)
         Accrued expenses......................................................        (22.8)           30.1
         Other.................................................................         85.2            35.3
                                                                                   ---------        --------
                                                                                       571.3           337.9
                                                                                   ---------        --------

Cash Flow From Investing Activities:
   Purchases of property, plant and equipment..................................       (598.1)         (449.7)
   Proceeds from sale of property, plant and equipment.........................         13.0            98.1
   Additions to investments....................................................        (90.7)          (77.2)
   Proceeds from investments...................................................         13.6            32.3
   Recovery of gas supply prepayments..........................................           .2              .4
                                                                                   ---------        --------
                                                                                      (662.0)         (396.1)

Cash Flow From Financing Activities:
   Increase (decrease) in short-term notes ....................................        (48.2)          367.3
   Redemption of mandatory redemption preferred stock..........................          (.6)              -
   Proceeds from issuing common stock..........................................         10.4             4.8
   Proceeds from long-term debt issues.........................................        744.5            98.1
   Payments to retire long-term debt...........................................       (564.8)         (376.5)
   Dividends paid..............................................................        (44.6)          (44.4)
                                                                                   ---------        --------
                                                                                        96.7            49.3
                                                                                   ---------        --------

Net Increase (Decrease) in Cash and Cash Equivalents...........................          6.0            (8.9)

Cash and Cash Equivalents at Beginning of Period...............................         58.4            73.5
                                                                                   ---------        --------

Cash and Cash Equivalents at End of Period.....................................    $    64.4        $   64.6
                                                                                   =========        ========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                      - 6 -
<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Summary of Significant Accounting Policies

     For additional  information  relative to operations and financial position,
reference  is made to the  Company's  Annual  Report on Form 10-K for the fiscal
year ended December 31, 1995.  Certain minor  reclassifications  of prior period
statements  have been made to conform  with  current  reporting  practices.  The
effect of the reclassifications  was not material to the Company's  consolidated
results of operations or financial condition.

     In October 1995, the Financial  Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  123,  "Accounting  for  Stock-Based
Compensation" ("FAS 123"), which establishes  financial accounting and reporting
standards for stock-based  employee  compensation  plans and for transactions in
which an entity issues its equity instruments to acquire goods and services from
nonemployees.  FAS 123 requires,  among other things,  that compensation cost be
calculated for fixed stock options at the grant date by  determining  fair value
using an  optionpricing  model.  The Company has the option of  recognizing  the
compensation  cost over the  vesting  period as an expense in the  statement  of
consolidated  operations  or  making  pro  forma  disclosures  in the  notes  to
financial  statements  as to the effects on net earnings as if the  compensation
cost had been  recognized  in the  statement  of  consolidated  operations.  The
Company adopted FAS 123 in 1996 and will make the required pro forma disclosures
in the notes to the annual financial  statements.  As of September 30, 1996, the
Company had granted  661,500  options in March with an exercise  price of $36.56
and 5,000 options in September  with an exercise  price of $40.56.  The exercise
price was equal to the market price of the stock at the grant dates.

     The Company adopted  Statement of Financial  Accounting  Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of" in 1996.  The  application  of the new  standard did not have a
material effect on the Company's consolidated results of operations or financial
position.

     The interstate  natural gas pipeline and certain storage  subsidiaries  are
subject to the  regulations  and  accounting  procedures  of the Federal  Energy
Regulatory  Commission  ("FERC").  These  subsidiaries  meet the  criteria  and,
accordingly,  follow the reporting and accounting  requirements  of Statement of
Financial  Accounting  Standards No. 71,  "Accounting for the Effects of Certain
Types of  Regulation"  ("FAS 71").  FAS 71 provides that  rate-regulated  public
utilities  account for and report  assets and  liabilities  consistent  with the
economic  effect of the way in which  regulators  establish  rates, if the rates
established are designed to recover the costs of providing the regulated service
and if the competitive environment makes it reasonable to assume that such rates
can be charged and  collected.  Although the  accounting  methods for  companies
subject  to  rate  regulation  may  differ  from  those  used  by  non-regulated
companies, the accounting methods prescribed by the regulatory authority conform
to the  generally  accepted  accounting  principle  of  matching  costs with the
revenue to which they apply.

     Transactions  which  the  subsidiaries  have  recorded  differently  than a
non-regulated   entity  include  the  following:   the   subsidiaries  (i)  have
capitalized  the cost of equity funds used during  construction,  and, (ii) have
deferred purchase gas costs, gas transportation surcharges, contract reformation
costs,  certain  lease costs,  postemployment/postretirement  benefit  costs and
income tax  reductions  related to  changes in federal  income tax rates.  These
items are being,  or are  anticipated  to be,  recovered  or  refunded  in rates
chargeable to customers.

     The  subsidiaries  have applied FAS 71 and evaluate  the  applicability  of
regulatory  accounting  and the  recoverability  of these assets through rate or
other  contractual  mechanisms  on  an  ongoing  basis.  If  FAS  71  accounting
principles  should no longer be applicable to the subsidiaries'  operations,  an
amount would be charged to earnings as an  extraordinary  item. At September 30,
1996,  this amount was  approximately  $79  million,  net of income  taxes.  The
Company  does not expect that its cash flows would be affected by  discontinuing
application  of FAS 71. Any  potential  charge to earnings  would be noncash and
would  have no  direct  effect  on the  subsidiaries'  ability  to  include  the
underlying  deferred items in their future rate  proceedings or on their ability
to collect the rates set thereby.

                                      - 7 -
<PAGE>

     Supplemental  information  relative to the Statement of  Consolidated  Cash
Flows  includes the  following:  The Company made cash payments for interest and
financing fees, net of amounts capitalized, of $284.0 million and $301.6 million
for the nine  months  ended  September  30,  1996 and 1995,  respectively.  Cash
payments for income taxes  amounted to $44.5  million and $31.7  million for the
nine months ended September 30, 1996 and 1995, respectively.

2.   Inventories

     Inventories were as follows (millions of dollars):

<TABLE>
<CAPTION>
                                                                                 September 30,      December 31,
                                                                                    1996                1995
                                                                                -------------      --------------
                                                                                 (Unaudited)


   <S>                                                                           <C>                 <C>       
   Refined products, crude oil and chemicals...............................      $     779.5         $    556.5
   Natural gas in underground storage......................................             69.9               49.9
   Coal, materials and supplies............................................            174.5              174.7
                                                                                 -----------         ----------
                                                                                 $   1,023.9         $    781.1
                                                                                 ===========         ==========
</TABLE>

     The excess of  replacement  cost over the carrying  value of natural gas in
underground  storage carried by the last-in,  first-out method was approximately
$33.2 million at September 30, 1996 and $36.5 million at December 31, 1995.

3.   Common Stock

     On September 30, 1996, 3,270,997 shares of Common Stock of the Company were
reserved  for employee  stock option  plans,  716,789  shares were  reserved for
conversion  of the Series A, B, and C  Preferred  Stocks,  384,731  shares  were
reserved for  conversion of  outstanding  Class A Common Stock and 22,122 shares
were reserved for conversion of Class A Common Stock subject to future issuance.
The Class A Common Stock reserved for future  issuance  consists of 2,280 shares
reserved  for  employee  stock  option  plans and  19,842  shares  reserved  for
conversion of the Series A, B, and C Preferred Stocks.

4.   Income Taxes

     Provisions for income taxes were as follows (millions of dollars):

<TABLE>
<CAPTION>
                                                                    Three Months Ended         Nine Months Ended
                                                                       September 30,             September 30,
                                                                  ----------------------    ---------------------
                                                                     1996        1995         1996         1995
                                                                  ---------   ----------    ---------   ---------
                                                                        (Unaudited)               (Unaudited)

   <S>                                                            <C>         <C>           <C>         <C>      
   Current Income Taxes:
      Federal.................................................    $     9.9   $      8.6    $    42.4   $    31.9
      Foreign.................................................          2.5           .1          3.4          .5
      State...................................................          2.9          1.9          9.8         4.3
                                                                  ---------   ----------    ---------   ---------
                                                                       15.3         10.6         55.6        36.7
                                                                  ---------   ----------    ---------   ---------
   Deferred Income Taxes:
      Federal.................................................            -         (7.2)           -         7.8
      Foreign.................................................           .8            -          2.2           -
      State...................................................          (.9)         (.5)        (2.7)       (2.1)
                                                                  ---------   ----------    ---------   ---------
                                                                        (.1)        (7.7)         (.5)        5.7
                                                                  ---------   ----------    ---------   ---------

                                                                  $    15.2   $      2.9    $    55.1   $    42.4
                                                                  =========   ==========    =========   =========
</TABLE>

     Interim  period  provisions for federal income taxes are based on estimated
effective annual income tax rates.

                                      - 8 -
<PAGE>

5.   Extraordinary Item

     In June  1996,  the  Company  retired  $400.0  million  of  11-3/4%  Senior
Debentures due in 2006. Payment of the redemption premium and the recognition of
deferred costs related to the Debentures  resulted in an  extraordinary  loss of
$12.0 million ($.11 per share), net of income taxes of $6.5 million.

6.   Litigation, Regulatory and Environmental Matters

     Litigation

     A subsidiary of Coastal initiated a suit against  TransAmerican Natural Gas
Corporation  ("TransAmerican")  in the District Court of Webb County,  Texas for
breach of two gas purchase agreements.  In February 1993,  TransAmerican filed a
Third Party  Complaint and a  Counterclaim  in this action  against  Coastal and
certain  subsidiaries.   TransAmerican   alleged  breach  of  contract,   fraud,
conspiracy,  duress,  tortious  interference  and  violations  of the Texas Free
Enterprises and Anti-trust Act arising out of the gas purchase agreements. Final
judgment in this matter was entered April 22, 1994.  The  subsidiary was awarded
approximately $2.0 million,  including  pre-judgment interest and attorney fees.
All of  TransAmerican's  claims and causes of action were  denied.  The Court of
Appeals for the Fourth Judicial  District has denied  TransAmerican's  appeal in
this  case.  TransAmerican  sought a Writ of Error in August  of 1996,  which is
pending before the Texas Supreme Court.

     In December  1992,  certain of Colorado  Interstate  Gas Company's  ("CIG")
natural gas lessors in the West  Panhandle  Field filed a complaint  in the U.S.
District Court for the Northern District of Texas claiming underpayment,  breach
of fiduciary duty, fraud and negligent  misrepresentation.  Management  believes
that CIG has numerous  defenses to the lessors'  claims,  including (i) that the
royalties were properly paid, (ii) that the majority of the claims were released
by written agreement and (iii) that the majority of the claims are barred by the
statute of  limitations.  In March of 1995,  the Trial  Court  granted a partial
summary  judgment  in  favor  of CIG,  holding  that the  four-year  statute  of
limitations had not been tolled, that the releases are valid, and dismissing all
tort claims and claims for breach of any duty of disclosure. The remaining claim
for  underpayment  of  royalties  was tried to a jury which,  in May 1995,  made
findings  favorable to CIG. On June 7, 1995,  the Trial Court entered a judgment
that the lessors recover no monetary damages from CIG and permanently  estopping
the lessors from asserting any claim based on an  interpretation of the contract
different than that asserted by CIG in the litigation. The lessors' motion for a
new  trial is  pending.  On June 7, 1996 the same  plaintiffs  sued CIG in state
court in Amarillo,  Texas for underpayment of royalties.  CIG removed the second
lawsuit to federal  court which  granted a stay of the second  suit  pending the
outcome of the first lawsuit.

     A natural gas producer  has filed a claim on behalf of the U.S.  government
in the U.S.  District Court for the District of Columbia under the federal False
Claims Act. The Second Amended Complaint filed on May 24, 1996,  against seventy
(70)  defendants,  including  ANR Pipeline  Company  ("ANR  Pipeline"),  CIG and
Coastal States Gas Transmission Company, alleges that the defendants' methods of
measuring  the  heating  content  and  volume  of  natural  gas  purchased  from
federally-owned  or Indian  properties have caused  underpayment of royalties to
the U.S. government. Responsive pleadings will be filed.

     Numerous  other  lawsuits  and other  proceedings  which have arisen in the
ordinary course of business are pending or threatened against the Company or its
subsidiaries.

     Although no  assurances  can be given and no  determination  can be made at
this time as to the outcome of any particular lawsuit or proceeding, the Company
believes there are meritorious defenses to substantially all of the above claims
and that any  liability  which  may  finally  be  determined  should  not have a
material  adverse  effect on the Company's  consolidated  financial  position or
results of operations.

     Regulatory Matters

     On January 31, 1996, the FERC issued a "Statement of Policy and Request for
Comments" in Docket Nos. RM95-6 and RM96-7 with respect to a pipeline's  ability
to negotiate and charge rates for individual customers' services which would not
be limited to the "cost-based" rates established by the FERC in traditional rate
making. Under this Policy,

                                      - 9 -
<PAGE>

a pipeline  and a customer  will be allowed to  negotiate a contract for service
which provides for rates and charges that exceed the  pipeline's  posted maximum
tariff rates,  provided that the shipper  agreeing to such negotiated  rates has
the ability to elect to receive  service at the  pipeline's  posted maximum rate
(known as a "recourse rate"). In order to implement this Policy, a pipeline must
make an  initial  tariff  filing  with the FERC to  indicate  that it intends to
contract for services  under this Policy,  and  subsequent  tariff  filings will
indicate  each  instance  where the pipeline  has  negotiated a rate for service
which  exceeds the posted  maximum  tariff  rate.  The FERC is also  considering
comments on whether this  "recourse  rate"  program  should be extended to other
terms and conditions of pipeline transportation  services. On July 31, 1996, the
FERC also  issued a "Notice  of  Proposed  Rulemaking"  in  Docket  No.  RM96-14
requesting  comments on various  aspects of  secondary  market  transactions  on
interstate  natural  gas  pipelines,  including  the  comparability  of pipeline
capacity with released capacity.

     Under ANR Pipeline's Interim Settlement, which became effective November 1,
1992 and  expired on  November  1,  1993,  gas  inventory  demand  charges  were
collected from ANR Pipeline's former resale  customers.  This method of gas cost
recovery  required refunds for any  over-collections  and placed ANR Pipeline at
risk for under-collections.  As required by the Interim Settlement, on April 29,
1994,  ANR  Pipeline  filed  with  the  FERC  a  reconciliation  report  showing
over-collections and proposing refunds totaling $45.1 million. Certain customers
have disputed the level of those  refunds.  Pursuant to a February 27, 1995 FERC
order approving ANR Pipeline's refund allocation methodology,  ANR Pipeline paid
undisputed refunds on March 29, 1995 of $45.1 million,  together with applicable
interest,  subject to further investigation of the claims made by the customers.
The FERC's approval of ANR Pipeline's refund allocation methodology was appealed
by certain  customers to the United States Court of Appeals for the D.C. Circuit
and that appeal was dismissed in an April 24, 1996 Court order.  On May 2, 1995,
the FERC issued an order setting other issues for an  evidentiary  hearing which
concluded on May 29, 1996.  ANR  Pipeline  submitted an adjusted  reconciliation
report on October 31, 1995,  which was also  disputed by certain  customers  and
which was also consolidated with the ongoing evidentiary hearing. Initial briefs
were filed on July 31, 1996, and reply briefs were filed on October 21, 1996.

     On April 8, 1992,  the FERC issued Order 636,  which  required  significant
changes in the  services  provided  by  interstate  natural gas  pipelines.  ANR
Pipeline and numerous  other parties have sought  judicial  review of aspects of
Order 636 before the United  States  Court of Appeals for the D.C.  Circuit.  On
July 16, 1996,  the Court issued its opinion  upholding  the basic  structure of
Order 636, while remanding to the FERC for further consideration certain limited
aspects, such as the basis for its determination relative to the recovery by the
pipelines  of the full  level  of their  prudently  incurred  transition  costs.
Several  persons,  including  ANR Pipeline,  have also  appealed  aspects of the
FERC's orders  approving ANR Pipeline's  restructuring  filings made pursuant to
Order 636 and these appeals are now expected to be scheduled  for briefing.  ANR
Pipeline  placed  its  restructured  services  under  Order  636 into  effect on
November  1, 1993.  On March 24,  1994,  the FERC  issued its  "Fourth  Order on
Compliance  Filing  and Third  Order on  Rehearing,"  which  addressed  numerous
rehearing  issues and  confirmed  that,  after minor tariff  modifications,  ANR
Pipeline would be fully in compliance with Order 636 and the requirements of the
orders on its restructuring filings.

     Under FERC Docket No.  RP94-43,  ANR Pipeline filed a general rate increase
on November 1, 1993.  By a March 23,  1994  order,  the FERC  granted and denied
various requests for summary  disposition and established hearing procedures for
issues remaining to be investigated in the proceeding.  The hearing commenced on
January 31, 1996 and concluded on April 24, 1996.  Initial  briefs were filed on
July 15, 1996,  and reply briefs were filed on September  13, 1996.  The case is
now pending  before a substitute  Administrative  Law Judge  ("ALJ").  Under the
March 23, 1994 order,  certain  costs were reduced or  eliminated,  resulting in
revised  rates that  reflect an $85.7  million  increase  in the cost of service
underlying  that  approved  in the  Interim  Settlement,  and a  $182.8  million
increase over the cost of service  underlying ANR Pipeline's  approved rates for
its Order 636  restructured  services.  On April 29, 1994,  ANR Pipeline filed a
motion with the FERC that placed the new rates into effect May 1, 1994,  subject
to refund.  ANR  Pipeline's  filing was accepted by the FERC in a September  21,
1994 order, subject to further modifications,  including an additional reduction
in cost of service of approximately $5 million.  ANR Pipeline  submitted revised
rates in  compliance  with  this  order on  October  6,  1994,  which  rates are
currently in effect, subject to refund. ANR Pipeline sought rehearing of various
aspects of the March 23, 1994 order and the FERC denied  rehearing in a December
8, 1994 order.  On January 26, 1995,  ANR Pipeline  appealed these orders to the
United States Court of Appeals for the D.C.  Circuit,  and the Court is expected
to schedule the cases for briefing.


                                     - 10 -
<PAGE>

     The FERC has also issued a series of orders and orders on  rehearing in ANR
Pipeline's  rate  proceeding  that  apply a new  policy  governing  the order of
attribution  of revenues  received by ANR Pipeline  related to transition  costs
under  Order 636.  Under that new  policy,  ANR  Pipeline  is  required to first
attribute  the  revenues it  receives  for its  services to the  recovery of its
transition costs under Order 636. In its pending rate  proceeding,  the revenues
ANR Pipeline  receives for its services were first attributed to the recovery of
its base cost of service.  The FERC's change in its revenue  attribution  policy
has the effect of understating ANR Pipeline's  currently effective maximum rates
and has accelerated its amortization of transition costs. In light of the FERC's
policy,  ANR Pipeline has filed with the FERC to increase its discount  recovery
adjustment in its pending rate proceeding. ANR Pipeline has also sought judicial
review of these  orders  before the United  States Court of Appeals for the D.C.
Circuit, and the Court is expected to schedule the case for briefing.

     Claims  were filed in 1990 in the  United  States  District  Court in North
Dakota  by  Dakota  Gasification   Company  ("Dakota")  and  the  United  States
Department of Energy  regarding  ANR  Pipeline's  obligations  under certain gas
purchase and  transportation  contracts with the Great Plains Coal  Gasification
Plant  (the  "Plant").  On  February  16,  1994,  ANR  Pipeline,  Dakota and the
Department  of  Energy   executed  a  Settlement   Agreement  (the   "Settlement
Agreement"),  which,  subject to FERC  approval,  resolves  the  litigation  and
disputes  among the  parties,  amends the gas  purchase  agreement  between  ANR
Pipeline and Dakota and terminates the  transportation  contract with the Plant.
On August 3, 1994, ANR Pipeline filed a petition with the FERC  requesting:  (i)
approval of the  Settlement  Agreement;  (ii) an order  approving ANR Pipeline's
proposed  tariff  mechanism  to recover  the costs  incurred  to  implement  the
Settlement  Agreement;  and  (iii)  an  order  dismissing  a then  pending  FERC
proceeding  wherein  certain of ANR  Pipeline's  customers  challenged  Dakota's
pricing  under the original gas supply  contract.  By an October 18, 1994 order,
the FERC  consolidated ANR Pipeline's  petition with similar  petitions of three
other pipeline  companies.  Hearings were held before the ALJ on the prudence of
the  Settlement  Agreement,  and on December 29, 1995, the ALJ issued an Initial
Decision rejecting the proposed  Settlement  Agreement and determining the level
of Dakota  costs that ANR  Pipeline and the other  pipeline  companies  would be
permitted to recover from their customers  beginning as of May 1993. Because the
amounts ANR Pipeline has billed to its customers since May 1993 are greater than
the Dakota  costs ANR Pipeline  would be permitted to recover  under the Initial
Decision,  ANR Pipeline may be required to refund to its customers the amount of
excess  collections.  At September  30, 1996,  that  potential  refund amount is
approximately $84 million, plus interest. It is ANR Pipeline's position that (i)
the Settlement  Agreement is prudent,  (ii) the FERC has no lawful  authority to
order refunds for past periods and (iii) even if refunds were  ultimately  found
to be lawful,  ANR Pipeline should not lawfully be required to refund amounts in
excess of the amounts it collects  from Dakota.  ANR Pipeline has filed with the
FERC seeking  reversal of the Initial  Decision,  and approval of the Settlement
Agreement.  The FERC  conducted  an oral  argument on  September  25, 1996 and a
decision is expected before the end of 1996.

     Order 636 provides  mechanisms for recovery of transition  costs associated
with  compliance with that Order.  Limited  aspects of those  mechanisms are the
subject of the Court remand  discussed  above.  ANR Pipeline's  transition costs
consist  primarily  of gas supply  realignment  costs and  pricing  differential
costs. As of September 30, 1996, ANR Pipeline  incurred  transition costs in the
amount of $62.3  million.  In  addition,  ANR  Pipeline  recorded  a  contingent
liability  for $64.1  million  representing  future  above-market  gas  purchase
obligations,  including future  obligations of $52.3 million associated with the
Settlement  Agreement,  as discussed above. The charge related to the contingent
liability  has been  deferred  in  anticipation  of future  rate  recovery.  ANR
Pipeline  has filed for  recovery  of  approximately  $59.9  million of incurred
transition  costs.  The FERC has  accepted  $42.7  million of these  filings for
recovery,  of which  $28.6  million  has been  settled  with the  parties to the
respective FERC proceedings. Those filings not settled are subject to refund and
further  proceedings.  Additional  transition  costs filings will be made by ANR
Pipeline in the future.

     In October,  1995, as amended in February and March,  1996,  CIG filed with
the FERC seeking  authority  to transfer to its  affiliate,  CIG Field  Services
Company ("CFS"), substantially all of CIG's facilities as to which there were in
effect  certificates of public  convenience and necessity.  Such facilities were
used to provide "gathering" services (as distinct from "transmission" services).
CIG did not seek to abandon any of its  Panhandle  Field  facilities  under this
filing.  CIG also sought a declaration  that such filed for facilities  would be
considered  "non-jurisdictional"  in the hands of CFS. The net book value of the
facilities  spun-down at October 1, 1996 was approximately $42 million.  On June
26, 1996, the FERC approved CIG's request.  Thereafter,  certain  parties sought
rehearing  of that  order.  Separately,  on August 2,  1996,  the U.S.  Court of
Appeals for the District of Columbia Circuit issued its decision in Conoco, Inc.
v. FERC, 90 F.3d 536 (D.C. Cir. 1996) in which it upheld the FERC's authority to
allow the transfer of certificated gathering facilities to "non-


                                     - 11 -
<PAGE>

jurisdictional"  affiliates  of  the  regulated  pipeline.  The court in Conoco,
however,  rejected the FERC's imposition of a "default contract"  requirement in
such cases as a means to ensure that historic  gathering shippers had assurances
of  continuity  of service for a 2-year  period.  On October 31,  1996,  several
parties  filed a petition for a Writ of  Certiorari  in the U.S.  Supreme  Court
seeking review of the D.C.  Circuit's  Conoco decision,  which is pending.  In a
filing  dated  August  27,  1996,  CIG  informed  the FERC that CIG and CFS were
prepared  to offer to  CIG's  historic  gathering  customers  a 2-year  "default
contract"  irrespective  of the  holding  in  Conoco  that  the FERC  could  not
affirmatively  impose such a requirement as a condition of approving a spin-down
of gathering services from a pipeline to an affiliate.  Thereafter, on September
25,  1996,  the FERC issued an order  denying the  requests  for  rehearing  and
thereby authorizing the abandonment of the certificated  properties to CFS to be
effective  October 1, 1996.  On September  26,  1996,  the FERC issued a related
order  accepting  CIG's filing under Section 4 of the Natural Gas Act confirming
that CIG no longer offered  gathering  services through the  abandoned/spun-down
facilities.

     On March 29,  1996,  CIG filed with the FERC under  Docket No.  RP96-190 to
increase its rates by approximately  $30 million annually and to realign certain
transportation  services.  On April 25,  1996,  the FERC  accepted the filing to
become effective October 1, 1996,  subject to refund.  In this filing,  CIG also
established a new tariff  provision to allow CIG to enter into  negotiated  rate
arrangements.  The FERC has also  accepted  this  provision,  subject to refund,
effective  May 1, 1996.  As of November  11,  1996,  CIG has had two  settlement
conferences  and a third is scheduled  for November 19, 1996.  In the event that
the case  cannot  be  settled  prior  to  hearing,  the  schedule  provides  for
commencement of hearings before an ALJ at the FERC in June 1997.

     CIG, ANR Pipeline, ANR Storage Company and Wyoming Interstate Company, Ltd.
("WIC"),  subsidiaries of the Company, are regulated by the FERC. Certain of the
above  regulatory  matters and other regulatory  issues remain  unresolved among
these companies,  their customers, their suppliers and the FERC. The Company has
made  provisions  which  represent  management's   assessment  of  the  ultimate
resolution  of these issues.  As a result,  the Company  anticipates  that these
regulatory  matters will not have a material  adverse effect on its consolidated
financial  position or results of  operations.  While the Company  estimates the
provisions to be adequate to cover potential  adverse rulings on these and other
issues, it cannot estimate when each of these issues will be resolved.

     Environmental Matters

     The Company's  operations  are subject to extensive  and evolving  federal,
state and local  environmental  laws and  regulations.  The Company  anticipates
capital  expenditures  of  approximately  $55 million in 1996 in order to comply
with  such  laws and  regulations.  The  majority  of the 1996  expenditures  is
attributable to construction projects at the Company's  refineries.  The Company
currently anticipates capital expenditures for environmental  compliance for the
years  1997  through  1999  of  $20  to  $40  million  per  year.  Additionally,
appropriate governmental authorities may enforce the laws and regulations with a
variety of civil and criminal enforcement measures, including monetary penalties
and remediation requirements.

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
also known as "Superfund," as reauthorized, imposes liability, without regard to
fault  or the  legality  of the  original  act,  for  disposal  of a  "hazardous
substance."  Certain  subsidiaries of the Company and a company in which Coastal
owns a 50% interest have been named as a potentially  responsible  party ("PRP")
in several  "Superfund" waste disposal sites. At the 15 sites for which there is
sufficient  information,  total clean-up costs are estimated to be approximately
$337 million, and the Company estimates its pro-rata exposure, to be paid over a
period of several years, is approximately  $4.1 million and has made appropriate
provisions.  At 5 other sites, the  Environmental  Protection  Agency ("EPA") is
currently unable to provide the Company with an estimate of total clean-up costs
and,  accordingly,  the Company is unable to calculate its share of those costs.
Finally,  at 9 other sites, the Company has paid amounts to other PRPs or to the
EPA as its proportional  share of associated  clean-up costs. As to these latter
sites, the Company  believes that its activities were de minimis.  Additionally,
certain  subsidiaries of the Company have been named as PRPs in two state sites.
At one site, the North Carolina  Department of Health,  Environment  and Natural
Resources  has  estimated  the  total  clean-up  costs to be  approximately  $50
million, but the Company believes that the subsidiaries' activities at this site
were  de  minimis.   At  the  other  state  site,  the  Florida   Department  of
Environmental   Protection   has  estimated  the  total  clean-up  costs  to  be
approximately $40,000.

                                     - 12 -
<PAGE>

     There are additional areas of environmental remediation responsibilities to
which the Company  may be subject.  The states  have  regulatory  programs  that
mandate  waste  clean-up.  The  Clean Air Act  Amendments  of 1990  include  new
permitting  regulations which will result in increased  operating  expenditures.
Coastal is also supplying  reduced-emission  reformulated gasoline in all of its
markets where such gasoline is required.

     In October  1996,  the New Jersey  Department of  Environmental  Protection
issued an  administrative  order and notice of civil  administration  assessment
(the  "Order") to Coastal  Eagle Point Oil Company  ("CEPOC"),  a subsidiary  of
Coastal.  The Order  alleges  that  sulphur  dioxide  emissions  from the sulfur
recovery unit and carbon  monoxide from the marine  thermal  oxidizer at CEPOC's
New Jersey refinery  exceeded the permit limits during the last quarter of 1995.
CEPOC will  respond to the Order and seek a hearing  to contest  the  penalty in
November of 1996. The Company believes that this action could result in monetary
sanctions which,  while not material to the Company and its subsidiaries,  could
exceed $100,000.

     Future information and developments will require the Company to continually
reassess  the  expected  impact of these  environmental  matters.  However,  the
Company  has  evaluated  its total  environmental  exposure  based on  currently
available  data,  including  its  potential  joint and  several  liability,  and
believes that compliance with all applicable laws and regulations  will not have
a material  adverse impact on the Company's  liquidity,  consolidated  financial
position or results of operations.

7.   Sale of Western Coal Properties

     On October 24,  1996,  the Company  announced  it will sell its coal mining
operations in the western United States for $615 million in cash,  retaining its
coal properties in the eastern United States. The sale of the western properties
is  expected  to close by  year-end,  contingent  upon  receipt of any  required
regulatory approvals. Proceeds from the sale will enable the Company to pay down
a significant  amount of high-cost  financial  obligations and provide  enhanced
financial  flexibility to take  advantage of  higher-growth  opportunities.  The
Company  will  continue to operate  its coal  properties  in the eastern  United
States.


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

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations includes certain  forwardlooking  statements reflecting the Company's
expectations  in the near future;  however,  many  factors  which may affect the
actual  results,  especially  natural gas prices and changing  regulations,  are
difficult  to predict.  Accordingly,  there is no assurance  that the  Company's
expectations will be realized.

     The Notes to Consolidated  Financial Statements contain information that is
pertinent to the following analysis.

                         Liquidity and Capital Resources

      The Company uses the following  consolidated  ratios to measure  liquidity
and its ability to meet future funding needs and debt service requirements.

<TABLE>
<CAPTION>
                                                                                 Twelve Months Ended
                                                                            ------------------------------
                                                                            September 30,     December 31,
                                                                                1996              1995
                                                                            -------------     ------------
                                                                             (Unaudited)

      <S>                                                                       <C>              <C>  
      Net return on average common stockholders' equity..............           11.5%            10.8%
      Cash flow from operating activities to long-term debt..........           23.3%            17.7%
      Total debt to total capitalization.............................           58.9%            59.4%
      Times interest earned (before tax).............................            1.9              1.8

</TABLE>

                                     - 13 -
<PAGE>

     The above ratios reflect increased earnings in the 1996 nine months period.
Decreases in working capital also  contributed to the increase in cash flow from
operating  activities to long-term debt and reduced interest expense contributed
to the increase in the times interest earned ratio.

     Financing  for capital  expansion,  mandatory  debt  retirements  and other
expenditures  will be provided by internally  generated  funds,  existing credit
lines, proceeds from the sale of selective non-core assets and new financings.

     On October 24,  1996,  the Company  announced  it will sell its coal mining
operations in the western United States for $615 million in cash,  retaining its
coal  properties  in  the  eastern  United  States.  The  sale  of  the  western
properties,  expected  to close  by  year-end  contingent  upon  receipt  of any
required regulatory  approvals,  satisfies the Company's  objectives in offering
its coal  properties for sale. The western coal operations sold 9.8 million tons
of coal in 1995 and include approximately 300 million tons of reserves. Proceeds
from the sale  will  enable  the  Company  to pay down a  significant  amount of
high-cost  financial  obligations and provide enhanced financial  flexibility to
take  advantage of  higher-growth  opportunities.  The Company will  continue to
operate and develop the coal operations in the eastern United States.

     In September 1996, Coastal and Westcoast Energy Inc.  ("Westcoast") jointly
announced plans to form North America's  fourth largest  marketer of natural gas
and electricity  through the merger of the two companies'  related marketing and
services subsidiaries. The merger would create new entities in which Coastal and
Westcoast  will  indirectly  own 50%  each.  The  boards  of  directors  of both
companies  have  approved  the  merger in  principle,  subject  to  further  due
diligence and execution of definitive agreements.

     On June 15, 1996 the Company redeemed all of its 11-3/4% Senior  Debentures
due June 15, 2006,  of which $400 million in principal  amount was  outstanding.
Debentures  in the  principal  amount of $60 million  were  redeemed at par plus
accrued interest to the date of redemption  pursuant to sinking fund provisions,
with the  securities  selected for redemption by lot. The remaining $340 million
in debentures was redeemed at 103.917% of par plus accrued  interest to the date
of redemption.

     The Company  has  approved  an $80  million  increase  in its 1996  capital
expenditures  budget for  Exploration  and  Production.  Recent success in South
Texas and in the Gulf of Mexico  offshore  Texas and Louisiana  have  identified
substantial new opportunities for low-risk,  high potential development drilling
programs.  With  the  increase  in the  1996  program,  natural  gas  equivalent
production  will increase  substantially  from 1995 and per-unit costs should be
reduced.

     Funding for certain proposed projects is anticipated to be provided through
non-recourse project financings in which the projects' assets and contracts will
be  pledged  as  collateral.  Equity  participation  by other  entities  will be
considered.  To the extent required,  cash for equity  contributions to projects
will be from general corporate funds.

     The Company continues to maintain a financial  position that will enable it
to generate and obtain capital for financing  needs in the  foreseeable  future.
Unused  lines of credit at  September  30,  1996 were as  follows  (millions  of
dollars):

         Short-term...................................    $     568.3
         Long-term*...................................          439.9
                                                          -----------
                                                          $   1,008.2

        * As of September 30, 1996, $45.1 million of unused long-term credit
          lines is dedicated to a specific use.

                              Results of Operations

     The changes in the Company's  earnings for the three and nine month periods
ended  September 30, 1996 in comparison to the same periods in 1995 are a result
of the following:

                                     - 14 -
<PAGE>

     Operating  Revenues.  The  operating  revenues  by segment  were as follows
(millions of dollars):

<TABLE>
<CAPTION>
                                                                    Three Months Ended         Nine Months Ended
                                                                       September 30,             September 30,
                                                                  ----------------------    ---------------------
                                                                     1996        1995         1996         1995
                                                                  ---------   ----------    ---------   ---------
                                                                        (Unaudited)               (Unaudited)


     <S>                                                          <C>         <C>           <C>         <C>      
      Natural gas.............................................    $   942.0   $    713.5    $ 2,870.5   $ 2,222.6
      Refining, marketing and chemicals.......................      1,690.8      1,661.9      5,523.7     5,020.6
      Exploration and production..............................        102.8         64.0        303.3       194.7
      Coal....................................................        120.0        115.3        333.5       341.0
      Power...................................................         21.4         13.6         67.4        28.9
      Other...................................................          8.5         40.3         24.7       122.0
      Adjustments and eliminations............................       (100.0)       (62.4)      (304.5)     (151.8)
                                                                  ---------   ----------    ---------   ---------
                                                                  $ 2,785.5   $  2,546.2    $ 8,818.6   $ 7,778.0
                                                                  =========   ==========    =========   =========
</TABLE>

     Operating Profit.  The operating profit by segment was as follows (millions
of dollars):

<TABLE>
<CAPTION>
                                                                    Three Months Ended         Nine Months Ended
                                                                       September 30,             September 30,
                                                                  ----------------------    ---------------------
                                                                     1996        1995         1996         1995
                                                                  ---------   ----------    ---------   ---------
                                                                        (Unaudited)               (Unaudited)

      <S>                                                         <C>         <C>           <C>         <C>      
      Natural gas.............................................    $    76.4   $     86.7    $   276.3   $   302.5
      Refining, marketing and chemicals.......................         17.5         29.3         75.8       125.8
      Exploration and production..............................         23.0          5.8         78.1        13.2
      Coal ...................................................         25.5         25.4         67.8        75.4
      Power...................................................          2.1          3.9         12.3         3.8
      Other...................................................          3.4           .4          9.0         1.2
                                                                  ---------   ----------    ---------   ---------
                                                                  $   147.9   $    151.5    $   519.3   $   521.9
                                                                  =========   ==========    =========   =========
</TABLE>

     Natural Gas. The increase in operating  revenues of $228.5  million for the
third quarter and $647.9  million for the nine months ended  September 30, 1996,
can be attributed to increased prices and volumes, primarily for the unregulated
gas  marketing  companies.  Transportation  revenues  decreased in both periods,
reflecting  the  continued,  intensified  competition  across the United  States
natural gas industry.

     Purchases  increased  by $262.0  million  for the three  months  and $700.3
million for the nine months ended  September 30, 1996,  due to increased  prices
and volumes.  Gross profit  decreased by $33.5 million and $52.4 million for the
three months and nine months periods, respectively.

     The operating profit decrease of $10.3 million in the third quarter results
from  reduced  transportation  and storage  revenues of $36.4  million and lower
margins of $10.8 million offset by reduced operating  expenses of $16.8 million,
increased  volumes of $10.2  million and other  increases of $9.9  million.  The
operating  profit  decrease of $26.2  million for the nine month period  results
from reduced  transportation  and storage  revenues of $62.4 million and reduced
margins of $23.4 million offset by increased  volumes of $14.2 million,  reduced
operating  expenses of $31.8 million and other  increases of $13.6 million.  The
transportation  and storage revenue reductions are primarily due to decreases of
$33.5  million  and  $41.7  million  in  the  three  and  nine  month   periods,
respectively,  for revenue received in 1995 related to contract  settlements and
increases in provisions for rate related contingencies.  Operating expenses were
lower for both periods due to reduced transportation services provided by others
and lower salaries and benefits due to an early retirement  incentive program in
1995.

     Refining,  Marketing and Chemicals.  Operating  revenues increased by $28.9
million in the third quarter as a result of higher volumes and $503.1 million in
the nine  months  ended  September  30,  1996 as a result of higher  volumes and
increased  prices.  Purchases  for the segment  increased  by $15.4  million and
$517.5 million in the three and nine


                                     - 15 -
<PAGE>

month  periods,  respectively,  resulting  in a gross  profit  increase of $13.5
million for the third  quarter and a gross profit  decrease of $14.4 million for
the nine month  period.  The  amounts  for both  periods  reflect  significantly
improved  refining  gross  profit,  offset  by  substantially  lower  paraxylene
margins. In addition, the nine month period includes reduced gross profit due to
the sale of certain liquid pipeline assets in 1995.

     The  operating  profit  decrease  of $11.8  million  for the third  quarter
results from increased  operating  expenses of $23.0 million and other decreases
of $.9 million offset by increased volumes of $2.4 million and higher margins of
$9.7 million.  For the nine month period,  operating  profit  decreased by $50.0
million due to reduced margins of $78.8 million;  a non-recurring gain of $ 17.0
million  from the  sale of  certain  liquid  pipeline  assets  noted  above  and
increased  operating  expenses of $30.2  million  which were offset by increased
volumes of $62.8  million;  increased  gross  profit from the sale,  trading and
exchanging of third party  products of $12.5 million and other  increases of $.7
million. The increased operating expenses for both periods result from increased
fuel costs;  expanded retail  operations and the acquisition of a chemical plant
in the first quarter of 1996.

     Exploration and Production.  Operating  revenues increased by $38.8 million
and $108.6 million in the three month and nine month periods ended September 30,
1996,  respectively,  as a result of  improved  production  volumes  and  higher
prices. The production volume increase results from Coastal's ongoing successful
drilling program,  especially offshore in the Gulf of Mexico and in the Bob West
and Jeffress fields in South Texas.

     Operating  profit  increased  by $17.2  million in the three  months  ended
September  30, 1996 as increased  volumes of $26.5  million and higher prices of
$24.3  million were  partially  offset by increased  operating  expenses of $5.3
million;  the  net  effects  of  hedging  activities  of  $8.0  million;  higher
depreciation, depletion and amortization of $16.9 million and other decreases of
$3.4 million.  For the nine month period,  operating  profit  increased by $64.9
million as higher prices of $57.9 million and increased volumes of $57.7 million
were partially  offset by higher  depreciation,  depletion and  amortization  of
$26.5 million; increased operating expenses of $18.3 million and other decreases
of $5.9 million. The increased operating expenses for both periods are primarily
due  to  higher  costs  associated  with  increased  volumes  at  the  Company's
processing   plants.   Operating   expenses  related  to  producing  wells  also
contributed to the nine month increase. Depreciation, depletion and amortization
increased  in the  three  month  and  nine  month  periods  due to the  improved
production volumes.

     Coal.  Operating revenues increased by $4.7 million in the three months and
decreased  by  $7.5  million  in the  nine  months  ended  September  30,  1996,
respectively. The three month increase results from increased coal sales volumes
and other revenue  increases offset by lower prices;  while the decrease for the
nine month period is attributable to lower prices and reduced coal sales volumes
partially  offset by other revenue  increases.  The other revenue  increases for
both periods  result from sales in 1996 of coke from the  Company's  refinery in
Aruba,  improved  revenues  from the  brokering  of coal for  others  and higher
royalty revenues.

     Operating  profit  increased  by $.1 million in the three  month  period as
increased  volumes of $1.4  million and other  increases  of $3.1  million  were
partially  offset by lower prices of $4.4  million.  For the nine month  period,
operating  profit decreased by $7.6 million as lower volumes of $9.2 million and
reduced  prices of $13.3 million were  partially  offset by decreased  operating
expenses  of $5.2  million  and  other  increases  of $9.7  million.  The  other
increases  for both  periods are  primarily  attributable  to the other  revenue
increases  noted above.  The volume  decrease for the nine month period includes
the deferments of deliveries by certain customers.  Operating expenses decreased
in the nine month period as a result of the reduced sales volumes.

     Power.  The operating  revenue  increases of $7.8 million and $38.5 million
for  the  three  month  and  nine  month  periods  ended   September  30,  1996,
respectively,  result  primarily from the power plant in El Salvador which began
operations late in the third quarter of 1995. Operating profit decreased by $1.8
million in the third quarter of 1996 due to a development  fee of  approximately
$5.0 million  recognized in the third quarter of 1995. For the nine months ended
September 30, 1996,  operating  profit  increased by $8.5 million as a result of
the El Salvador operations.

     Other.  The  decreases  in  operating  revenues of $31.8  million and $97.3
million  for the  three  months  and  nine  months  ended  September  30,  1996,
respectively,  are due to the trucking activities,  which were merged into a new
company in which Coastal has a 50% interest in November 1995.  Operating  profit
increased by $3.0 million and $7.8

                                     - 16 -
<PAGE>

million for the three and nine month periods, respectively, due primarily to the
losses from trucking operations in 1995 not recurring.

     Other Income-Net.  The increases of $15.6 million for the third quarter and
$27.7 million for the nine months ended September 30, 1996 result primarily from
increased equity earnings from unconsolidated subsidiaries.

     Interest and Debt  Expense.  Interest  and debt expense  decreased by $14.9
million in the third  quarter  and $36.7  million  in the nine month  period due
primarily to reduced effective interest rates.

     Taxes on Income.  Federal  income  taxes  increased  by $8.5 million in the
third quarter as a result of increased  earnings and a higher effective  federal
income tax rate,  while the nine month  increase of $2.7  million  results  from
increased  earnings  before  extraordinary  item  partially  offset  by a  lower
effective  federal income tax rate.  State and foreign income taxes increased by
$3.8  million  and $10.0  million  in the three  month and nine  month  periods,
respectively.

                              Environmental Matters

     The Company's  operations  are subject to extensive  and evolving  federal,
state and local  environmental  laws and  regulations.  The Company  anticipates
capital  expenditures  of  approximately  $55 million in 1996 in order to comply
with  such  laws and  regulations.  The  majority  of the 1996  expenditures  is
attributable to construction projects at the Company's  refineries.  The Company
currently anticipates capital expenditures for environmental  compliance for the
years  1997  through  1999  of  $20  to  $40  million  per  year.  Additionally,
appropriate governmental authorities may enforce the laws and regulations with a
variety of civil and criminal enforcement measures, including monetary penalties
and remediation requirements.

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
also known as "Superfund," as reauthorized, imposes liability, without regard to
fault  or the  legality  of the  original  act,  for  disposal  of a  "hazardous
substance."  Certain  subsidiaries of the Company and a company in which Coastal
owns a 50%  interest  have  been  named as a PRP in  several  "Superfund"  waste
disposal sites. At the 15 sites for which there is sufficient information, total
clean-up costs are estimated to be approximately  $337 million,  and the Company
estimates its pro-rata  exposure,  to be paid over a period of several years, is
approximately  $4.1  million  and has made  appropriate  provisions.  At 5 other
sites,  the EPA is  currently  unable to provide the Company with an estimate of
total  clean-up costs and,  accordingly,  the Company is unable to calculate its
share of those costs. Finally, at 9 other sites, the Company has paid amounts to
other PRPs or to the EPA as its proportional share of associated clean-up costs.
As to these latter  sites,  the Company  believes  that its  activities  were de
minimis.  Additionally,  certain  subsidiaries of the Company have been named as
PRP's in two state sites. At one site, the North Carolina  Department of Health,
Environment  and Natural  Resources has estimated the total clean-up costs to be
approximately  $50  million,  but the Company  believes  that the  subsidiaries'
activities  at this site were de minimis.  At the other state site,  the Florida
Department of Environmental Protection has estimated the total clean-up costs to
be approximately $40,000.

     There are additional areas of environmental remediation responsibilities to
which the Company  may be subject.  The states  have  regulatory  programs  that
mandate  waste  clean-up.  The  Clean Air Act  Amendments  of 1990  include  new
permitting  regulations which will result in increased  operating  expenditures.
Coastal is also supplying  reduced-emission  reformulated gasoline in all of its
markets where such gasoline is required.

     Future information and developments will require the Company to continually
reassess  the  expected  impact of these  environmental  matters.  However,  the
Company  has  evaluated  its total  environmental  exposure  based on  currently
available  data,  including  its  potential  joint and  several  liability,  and
believes that compliance with all applicable laws and regulations  will not have
a material  adverse impact on the Company's  liquidity,  consolidated  financial
position or results of operations.


                                     - 17 -
<PAGE>

Item 2.B.  Other Developments.

     In October  1996,  the Company  announced its agreement to sell its western
coal  operations,  which  consist of the Utah mines and a 9% interest in the Los
Angeles  Export  Terminal  Co.,  Inc.,  for $615  million  in cash to a  limited
liability  company jointly owned by  subsidiaries of Atlantic  Richfield Co. and
ITOCHU Corp. The sale is expected to close by the end of 1996,  contingent  upon
receipt of any required  regulatory  approvals.  It is anticipated that proceeds
from  the  sale  will be used to pay  down a  significant  amount  of  Coastal's
high-cost  financial  obligations and provide enhanced financial  flexibility to
take  advantage  of  higher-growth  opportunities.  Coastal will retain its coal
operations  in  the  eastern   United  States  and  continue  to  develop  those
businesses.  These  subsidiaries  operate mines and processing plants and market
coal from extensive reserves located in West Virginia, Virginia and Kentucky.

     On October 25, 1996,  ANR Pipeline  filed an  application  with the FERC to
construct  and operate 37 miles of offshore  and onshore  pipeline  looping at a
cost of $51.2 million.  The project is to be located between Eugene Island Block
63 and  Patterson,  Louisiana,  providing  ANR Pipeline  with the  capability to
access a significant  portion of gas being produced from new deep-water  regions
in the Gulf of Mexico.  The proposed  facilities  would add up to a total of 461
MMcf  per  day to the  offshore  Louisiana  production  ANR  Pipeline  currently
delivers and could be in service by August 1998, subject to receipt of necessary
federal regulatory approvals.

     In September 1996, Coastal and Westcoast Energy Inc.  ("Westcoast") jointly
announced plans to form North America's  fourth largest  marketer of natural gas
and electricity  through the merger of the two companies'  related marketing and
services subsidiaries. The merger would create new entities in which Coastal and
Westcoast  will  indirectly  own 50% each,  and the new  entities  would  handle
aggregate  physical  sales  volumes of  approximately  seven  billion cubic feet
("Bcf") of natural gas per day. The boards of directors of both  companies  have
approved the merger in principle, subject to further due diligence and execution
of definitive agreements.

     American Natural Resources Company,  a subsidiary of Coastal,  acquired the
common stock of Primark Storage Leasing Corporation  ("Primark") in September of
1996.   Primark  (now  named  Mid  Michigan  Gas  Storage  Company)  owns  eight
underground  natural gas storage fields as well as certain related  pipeline and
compressor facilities.  Located near Big Rapids,  Michigan,  these fields, which
are leased to and  operated by ANR  Pipeline,  provide a total  working  storage
capacity of approximately 77 Bcf and 1.4 Bcf per day of deliverability.

     In September  1996,  Coastal  Baltica Holding Company Ltd., a joint venture
owned by a Coastal subsidiary and Baltica Finance N.V.,  commenced operations at
its terminal and new port  facilities  near Tallinn,  Estonia on the Baltic Sea.
The joint venture  recently  completed the  construction of a 4.6-mile  pipeline
connecting the terminal with the Port of Muuga,  one of the deepest ports on the
Baltic.  The terminal operation will import and export almost 2.5 million metric
tons (16 million barrels) of petroleum products annually,  primarily from Russia
and the former  republics  of the Soviet  Union to markets in Europe,  North and
South America and the Caribbean.

     On March 29, 1996, CIG filed an application  with the FERC for authority to
expand  the  capacity  of the Wind  River  Lateral  by 68 MMcf per day above the
current  capacity of 195,000 Mcf per day. The cost of the expansion is estimated
to be  approximately  $10.8  million.  On September 11, 1996, the FERC issued an
order granting CIG a certificate to construct and operate facilities to increase
capacity on the Wind River Lateral.  The projected  in-service  date of the full
expansion is during the third quarter of 1997.


                                     - 18 -
<PAGE>

                                     PART II

                                OTHER INFORMATION

Item 1.   Legal Proceedings.

          The information  required  hereunder is incorporated by reference into
Part II of this  Report  from  Note 6 of the  Notes  to  Consolidated  Financial
Statements  and  from  Item  2.A.,  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Environmental Matters" set forth
in Part I of this Report.

Item 2.   Changes in Securities.

          None.

Item 3.   Defaults Upon Senior Securities.

          None.

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

          None.

Item 5.   Other Information.

          None.

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

          (a) Exhibits.

              10.16 -  Pension   Plan   for   Employees   of   The   Coastal
                       Corporation as of January 1, 1993, as further amended
                       by the Twelfth  Amendment  dated  August 29, 1996 and
                       the Thirteenth Amendment dated September 16, 1996.
              11    -  Statement re Computation of Per Share Earnings.
              27    -  Financial Data Schedule.

          (b) Reports on Form 8-K.

              No reports on Form 8-K were filed during the quarter  ended
              September 30, 1996.



                                   SIGNATURES

     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.

                                                 THE COASTAL CORPORATION
                                                       (Registrant)

Date:  November 13, 1996                   By:         COBY C. HESSE
                                               -----------------------------
                                                       Coby C. Hesse
                                                   Senior Vice President
                                                       and Controller
                                                (As Authorized Officer and
                                                 Chief Accounting Officer)


                                     - 19 -
<PAGE>

                                INDEX TO EXHIBITS


Exhibit
Number                              Description
-----------------------------------------------------------------------------

10.16      Pension  Plan  for  Employees  of The  Coastal  Corporation  as of
           January 1, 1993, as further amended by the Twelfth Amendment dated
           August 29, 1996 and the Thirteenth  Amendment  dated September 16,
           1996.

11         Statement Re Computation of Per Share Earnings

27         Financial Data Schedule



                                     - 20 -
<PAGE>

                                                                 EXHIBIT 10.16


                      TWELFTH AMENDMENT TO THE PENSION PLAN

                    FOR EMPLOYEES OF THE COASTAL CORPORATION


     THIS  AMENDMENT  is made the  29th  day of  August,  1996,  by The  Coastal
Corporation,  a Delaware corporation  (hereinafter referred to as the "Company")
and  Coastal  Refining  &  Marketing,  Inc.,  a Delaware  corporation  ("Coastal
Refining").


                                   WITNESSETH:


     WHEREAS,  Coastal Refining  acquired certain assets known as the St. Helens
Facility from Chevron Chemical Company ("Chevron") on or about January 24, 1996;
and

     WHEREAS,  in conjunction  with the acquisition of the St. Helens  Facility,
certain  individuals who were formerly  employees of Chevron became employees of
Coastal Refining or a Related Employer on or about January 24, 1996; and

     WHEREAS,  as part of the terms of the acquisition,  Coastal Refining agreed
(i) to recognize the prior service of the former Chevron  employees for purposes
of eligibility to participate, vesting and benefit eligibility under the pension
plan which Coastal  Refining  adopted;  and (ii) to adopt for a five-year period
the Chevron  pension  plan  benefit  formula as a minimum  benefit,  including a
recognition  of  the  prior  service  and  compensation  of the  former  Chevron
employees; and

     WHEREAS, Coastal Refining has adopted the Pension Plan for Employees of The
Coastal Corporation (the "Plan"); and

     WHEREAS,  the Company and Coastal  Refining would like to amend the Plan to
include  as a  supplement  the  provisions  which  apply to the  former  Chevron
employees; and

     WHEREAS,  the  Company  wishes  to amend  the Plan to  clarify  the  Social
Security offset language; and

     WHEREAS,  the Company wishes to amend the Plan  provisions  with respect to
the amendment procedure to conform the language to recent case law; and

     WHEREAS,   the  Company  wishes  to  amend  the  Plan  to  clarify  various
provisions;

     NOW, THEREFORE, the Plan is amended as follows:

1.    A  St. Helens Facility Supplement is added as a Twelfth Supplement to  the
Plan to read in its entirety as follows:

                               TWELFTH SUPPLEMENT

                         ST. HELENS FACILITY SUPPLEMENT


                                    ARTICLE I

                                  INTRODUCTION


             This  Supplement  is referred to as the "St.  Helens  Facility
    Supplement."  The purpose of this  Supplement  is to provide a separate
    minimum  benefit  structure for a five-year  period within the Plan for
    Participants who were formerly employees of Chevron Chemical Company at
    the St. Helens Facility located in St. Helens, Oregon.


                                     - 21 -

<PAGE>

             The provisions of the St. Helens Facility  Supplement apply in
    lieu of  inconsistent  or  contrary  provisions  contained  in the Plan
    (excluding  this  Supplement)  with  respect  to  persons  to whom this
    Supplement applies.


                                   ARTICLE II

                                   DEFINITIONS


             Terms used in this  Supplement  which are  defined in the Plan
    have the same meaning in this Supplement  unless such terms are defined
    differently  for purposes of this  Supplement.  The definition of terms
    defined in this  Supplement  apply only to this  Supplement  and not to
    other parts of the Plan.

    2.1  "Coastal Refining" means Coastal Refining & Marketing, Inc., a
    Delaware corporation.

    2.2  "Chevron" means Chevron Chemical Company, a Delaware corporation.

    2.3  "Chevron Plan" means the Chevron  Corporation  Retirement  Plan, as
    amended and restated effective January 1, 1995.


                                   ARTICLE III

                                    BENEFITS


           3.1   Five-Year  Minimum Benefit.  With respect to the five-year
    period  commencing  January  24,  1996  and  ending  January  23,  2001
    ("Five-Year  Period"),  the Retirement  Income of a Participant who was
    formerly an employee of Chevron at its St. Helens,  Oregon facility and
    who became an Employee on or about January 24, 1996 in conjunction with
    the acquisition of the St. Helens, Oregon facility by Coastal Refining,
    shall be the greater of (i) the age 65 benefit  accrued,  as determined
    under the Chevron  Plan  formula,  recognizing  both the  Participant's
    Years of Credited Service with Chevron (as defined in the Chevron Plan)
    and Years of Service during the Five-Year  Period with the Company or a
    Related  Employer  (as  defined in the Plan) and Regular  Earnings  (as
    defined  in the  Chevron  Plan,  but  including  Compensation  from the
    Company and Related Employers during the Five-Year Period),  reduced by
    the  amount of the age 65  benefit  accrued  which is  attributable  to
    service with Chevron before the Five-Year  Period,  or (ii) the Accrued
    Benefit  determined  under the Plan,  excluding the  provisions of this
    Supplement.  For  purposes of  determining  the amount of the offset in
    clause (i), age 65 benefits accrued under the Plan and the Chevron Plan
    shall be expressed in the form of a single-life  annuity  commencing at
    age sixty-five.

             3.2 There shall be no  duplication  of benefits  from the Plan
    with  respect to the  five-year  minimum  benefit  provided  for in the
    Retirement  Income  calculations  described  in  this  Supplement.  The
    Retirement  Income  calculated  pursuant  to this  Supplement  shall be
    reduced by the Actuarial  Equivalent of any Retirement  Income or other
    benefit which is paid or  distributed  pursuant to other  provisions of
    the Plan. For purposes of the Plan, the benefit calculated  pursuant to
    this Supplement  shall be frozen at the end of the Five-Year Period and
    any frozen  benefit  payable to a Participant  pursuant to the terms of
    this Supplement shall be payable pursuant to provisions of the Plan and
    not pursuant to provisions of the Chevron Plan."

3.  The first sentence of Section 1.15A is amended to read in its entirety as
    follows:

             "1.15A "Normal  Retirement Age" means the date the Participant
    attains  the age of  sixty-five  years  except  that,  in the case of a
    Participant who commences participation in the Plan after attainment of
    sixty years of age, Normal  Retirement Age is the later of the date the
    Participant   attains  the  age  of  sixty-five  years  or,  the  fifth
    anniversary of the date such Participant commenced participation in the
    Plan."

                                     - 22 -
<PAGE>

4.  The  introductory section of  Section 11.1  is hereby amended to read in its
    entirety as follows:

             "11.1  Amendment.  Coastal  reserves the right at any time and
    from time to time to modify or amend,  in whole or in part,  any or all
    of the provisions of the Plan, by resolution of the Board, as evidenced
    by a written  instrument  executed by an authorized officer of Coastal,
    and all Employees and persons claiming any interest  hereunder shall be
    bound  thereby;  provided  however,  that no  amendment  shall have the
    effect of:"

5.  Section 12.15 is amended to read in its entirety as follows:

             "12.15  Expenses  of  Administration.   The  Company,  Related
    Employers  and  Subsidiaries  may  pay  all  expenses  incurred  in the
    establishment and  administrations of the Plan,  including expenses and
    fees of the Trustee, but they shall not be obligated to do so. Any such
    expenses  not so paid may be paid  from the  Trust  Fund to the  extent
    permitted by applicable laws, including ERISA."

6.  Except for the preceding,  all of the terms of the Plan shall remain in full
    force and effect.

     IN WITNESS  WHEREOF,  the  Company and  Coastal  Refining  have caused this
instrument to be executed by their duly authorized  officers and their corporate
seals to be affixed  hereto as of the date  indicated  above and this  Amendment
shall be effective as of the date indicated  above,  unless  otherwise stated or
required by law.


ATTEST:                                THE COASTAL CORPORATION
(Seal)


AUSTIN M. O'TOOLE                      By: DAVID A. ARLEDGE
----------------------------------         ------------------------------------
Austin M. O'Toole                          David A. Arledge
Senior Vice President                      President and Chief Executive Officer
and Secretary

ATTEST:                                COASTAL REFINING & MARKETING, INC.
(Seal)


DALE V. SHULTZ                         By:  AUSTIN M. O'TOOLE
----------------------------------          ------------------------------------
Dale V. Shultz                              Austin M. O'Toole
Assistant Secretary                         Senior Vice President and Secretary


                                     - 23 -
<PAGE>

                    THIRTEENTH AMENDMENT TO THE PENSION PLAN
                    FOR EMPLOYEES OF THE COASTAL CORPORATION


      (AMENDMENT TO THE NINTH SUPPLEMENT - PACIFIC REFINING/ WESTERN FUEL)


     THIS  AMENDMENT  is made the 16th day of  September,  1996,  by The Coastal
Corporation,  a Delaware corporation  (hereinafter referred to as the "Company")
and  Pacific  Refining  Company,  a  California  General  Partnership  ("Pacific
Refining").


                                   WITNESSETH:


     WHEREAS,  the Pension  Plan for  Employees of The Coastal  Corporation  was
restated  as of January  1, 1989,  and has since been  amended  (such  plan,  as
restated and amended,  is hereinafter  referred to as the "Plan" or the "Coastal
Plan"); and

     WHEREAS,  as of January 1, 1989,  Pacific  Refining  adopted  the Plan as a
separate plan (the "Pacific  Refining Plan") and a Ninth Supplement was added to
the Coastal Plan to provide benefit accruals for Hours of Service after December
31, 1991 for the participants of the Pacific Refining Plan; and

     WHEREAS,   effective  as  of  June  1,  1996,  Pacific  Refining  became  a
wholly-owned, indirect subsidiary of the Company; and

     WHEREAS,  the  Company  and  Pacific  Refining  wish to merge  the  Pacific
Refining Plan into the Coastal Plan effective as of June 1, 1996; and

     NOW,  THEREFORE,  the Pacific Refining Plan is merged into the Coastal Plan
and the Plan is amended in the following respects:

1.   The  "INTRODUCTION"  of the Plan is amended to add the following before the
     section entitled "Termination of Service."

                             "PACIFIC REFINING PLAN

             As of January  1, 1989,  Pacific  Refining  Company  ("Pacific
    Refining")  adopted the Plan as a separate  benefit plan (the  "Pacific
    Refining Plan"), and the Plan was subsequently amended to add the Ninth
    Supplement  which  provided  for  benefits  which  were  applicable  to
    participants of the Pacific Refining Plan.

             As of June 1, 1996, the Pacific Refining Plan was merged into
    the Plan."

2.  The Ninth  Supplement  is amended and  restated to read in its  entirety as
    follows:

                      "NINTH SUPPLEMENT - PACIFIC REFINING
                             (Amended and Restated)

             This  Supplement  is  referred  to as  the  "Pacific  Refining
    Supplement."  This  Supplement   includes   provisions   applicable  to
    Employees of Pacific Refining Company ("Pacific  Refining") and Western
    Fuel Oil Company  ("Western"),  a subsidiary of Pacific  Refining,  who
    have been  credited  with an Hour of  Service  due to  employment  with
    Pacific  Refining  or  Western  with  respect  to periods of time after
    December 31, 1991 and before October 1, 1996.

             The  provisions of the Pacific  Refining  Supplement  apply in
    lieu of  inconsistent  or  contrary  provisions  contained  in the Plan
    (excluding  this  Supplement)  with  respect  to  persons  to whom this
    Supplement   applies.   Plan  provisions  which  are  not  modified  or
    superseded by the provisions of this Pacific Refining  Supplement shall
    apply to this  Supplement in their entirety and as such Plan provisions
    may be amended from time to time.

                                     - 24 -
<PAGE>

             The  formula  used to  determine  the  Retirement  Income of a
    Participant  pursuant  to  Section  5.1  of the  Plan  is  modified  by
    inserting  "three  hundred  sixty  dollars"  in lieu  of  "forty-eight"
    dollars in item (ii) of subsection (a) of Section 5.1."

3.  Except for the preceding, all of the terms of the Plan shall remain in full
    force and effect.

     IN WITNESS  WHEREOF,  the  Company and  Pacific  Refining  have caused this
instrument to be executed by their duly  authorized  officers and their seals to
be affixed  hereto as of the date  indicated  above and the  provisions  of this
Amendment shall be effective as of the date indicated  above,  unless  otherwise
stated or required by law.


ATTEST:                                THE COASTAL CORPORATION
(Seal)


AUSTIN M. O'TOOLE                      By: DAVID A. ARLEDGE
-----------------------------------         -----------------------------------
Austin M. O'Toole                          David A. Arledge
Senior Vice President and Secretary        President and Chief Executive Officer


ATTEST:                                PACIFIC REFINING COMPANY
(No Seal)                                 By:  Coastal West Ventures, Inc.,
                                               a general partner


DALE V. SHULTZ                         By:  AUSTIN M. O'TOOLE
----------------------------------          -----------------------------------
Dale V. Shultz                              Austin M. O'Toole
Assistant Secretary                         Senior Vice President and Secretary


                                     - 25 -
<PAGE>

                                                                     EXHIBIT 11


                    THE COASTAL CORPORATION AND SUBSIDIARIES
                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                 (Millions of Dollars, Except Per Share Amounts,
                            and Thousands of Shares)

<TABLE>
<CAPTION>

                                                                    Three Months Ended         Nine Months Ended
                                                                       September 30,             September 30,
                                                                  ----------------------    ---------------------
                                                                     1996        1995         1996         1995
                                                                  ---------   ----------    ---------   ---------
                                                                        (Unaudited)               (Unaudited)

<S>                                                               <C>         <C>           <C>         <C>
COMMON STOCK AND EQUIVALENTS:
Net earnings applicable to common stock and
   common stock equivalents...................................    $    54.3   $     39.9    $   182.2   $   146.0
                                                                  =========   ==========    =========   =========

Average number of common shares outstanding...................      105,189      104,499      105,041     104,422
Class A common shares.........................................          387          413          392         412
Common share equivalents:
   $1.19 Cumulative Convertible Preferred, Series A*..........          223          231          223         231
Dilutive effect of outstanding stock options after
   application of treasury stock method*......................          600          371          574         288
                                                                  ---------   ----------    ---------   ---------
Average common and common equivalent shares...................      106,399      105,514      106,230     105,353
                                                                  =========   ==========    =========   =========

Net earnings per average common and common
 equivalent share outstanding:
   Earnings before extraordinary item.........................    $     .51   $      .38    $    1.83   $    1.39
   Extraordinary item.........................................            -            -         (.11)          -
                                                                  ---------   ----------    ---------   ---------
   Net earnings...............................................    $     .51   $      .38    $    1.72   $    1.39
                                                                  =========   ==========    =========   =========

ASSUMING FULL DILUTION:
Net earnings applicable to common stock and
   common stock equivalents...................................    $    54.3   $     39.9    $   182.2   $   146.0
Dividends applicable to dilutive preferred stock:
   Series B...................................................            -            -           .1          .1
   Series C...................................................            -            -           .1          .1
                                                                  ---------   ----------    ---------   ---------
Adjusted net earnings assuming full dilution..................    $    54.3   $     39.9    $   182.4   $   146.2
                                                                  =========   ==========    =========   =========

Average number of common shares outstanding...................      105,189      104,499      105,041     104,422
Class A common shares.........................................          387          413          392         412
Common and Class A common share equivalents:
   Series A Preferred Stock*..................................          223          231          223         231
Equivalent common and Class A shares from
   Series B and C Preferred Stock*............................          514          543          514         543
Dilutive effect of outstanding stock options after
   application of treasury stock method*......................          617          456          630         456
                                                                  ---------   ----------    ---------   ---------
Fully diluted shares..........................................      106,930      106,142      106,800     106,064
                                                                  =========   ==========    =========   =========

Fully diluted earnings per share:
   Earnings before extraordinary item.........................    $     .51   $      .38    $    1.82   $    1.38
   Extraordinary item.........................................            -            -         (.11)          -
                                                                  ---------   ----------    ---------   ---------
   Net earnings**.............................................    $     .51   $      .38    $    1.71   $    1.38
                                                                  =========   ==========    =========   =========

<FN>
*    Convertible  securities and options are not considered in the  calculations
     if the effect of the conversion is anti-dilutive.

**   Reporting not required by generally accepted accounting  principles because
     of small  variances from earnings on average  common and common  equivalent
     shares.

</FN>
</TABLE>

                                     - 26 -