[Federal Register Volume 63, Number 16 (Monday, January 26, 1998)]
[Notices]
[Pages 3775-3779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1677]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26815]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

January 16, 1998.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated thereunder. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments thereto is/are available for public 
inspection through the Commission's Office of Public References.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by February 9, 1998, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 20549, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in case of an attorney at law, by 
certificate) should be filed with the request. Any request for hearing 
shall identify specifically the issues of fact or law that are 
disputed. A person who so requests will be notified of any hearing, if 
ordered, and will receive a copy of any notice or order issued in the 
matter. After said date, the application(s) and/or declaration(s), as 
filed or as amended, may be granted and/or permitted to become 
effective.

[[Page 3776]]

National Fuel Gas Company et al. (70-9153)
    National Fuel Gas Company (``NFG''), a gas registered holding 
company, and each of its wholly owned subsidiaries, National Fuel Gas 
Distribution Corporation (``Distribution''), a gas utility company, and 
NFG's nonutility subsidiaries, National Fuel Gas Supply Corporation 
(``Supply''), Utility Constructors, Inc. (``UCI''), Highland Land & 
Minerals, Inc. (``Highland''), Leidy Hub, Inc. (``Leidy''), Horizon 
Energy Development, Inc. (``Horizon''), Data-Track Account Services, 
Inc. (``Data-Track'') and Seneca Independence Pipeline Company 
(``Seneca Independence''), each of 10 Lafayette Square, Buffalo, New 
York 14203, Seneca Resources Corporation (``Seneca Resources''), 
Niagara Independence Marketing Company (``Niagara Marketing'') and 
Niagara Energy Trading Inc. (``Niagara Energy''), each of 1201 
Louisiana Street, Suite 400, Houston, Texas 77002, and National Fuel 
Resources, Inc. (``NFR'') of 165 Lawrence Bell Drive, Suite 120, 
Williamsville, New York 14221 (collectively, ``Applicants''), have 
filed an application-declaration (``Application'') under sections 6(a), 
7, 9(a), 10, 12(b), 12(f), 32 and 33 of the Act, and rule 53 under the 
Act requesting authorization to engage in various financing and related 
transactions for the period from the effective date of an order in this 
matter through December 31, 2002 (``Authorization Period''). The 
Applicants, other than NFG, are sometimes referred to collectively as 
``Subsidiaries.''
    The authorization would be subject to the following conditions: (1) 
with respect to long-term debt financing activities (a) NFG's long-term 
debt must be rated investment grade by at least one nationally 
recognized statistical rating organization, as that term is used in 
Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934 and 
(b) NFG's common equity, as reflected in its most recent Form 10-K or 
Form 10-Q, does not fall below 30% of its consolidated capitalization; 
(2) the effective cost of money for debt may not exceed 300 basis 
points over the interest rate on U.S. Treasury securities of a 
comparable term; (3) the effective cost of money for preferred stock 
and other fixed income securities may not exceed 500 basis points over 
the interest rate on 30-year U.S. Treasury securities; (4) the maturity 
of debt may not be more than 50 years; (5) issuance expenses in 
connection with an offering of securities, including any underwriting 
fees, commissions or other similar compensation, may not exceed 5% of 
the principal or total amount of the securities being issued; and (6) 
the aggregate amount of external debt and equity financing to be issued 
by NFG during the Authorization Period will not exceed (a) $750 million 
of short-term borrowings outstanding at any one time and (b) $2 billion 
of long-term debt and equity outstanding at any one time, excluding any 
common stock issued under the NFG Rights Plan.\1\ The value of debt 
securities will equal the aggregate principal amount of the debt 
securities while the value of equity securities will equal the 
consideration received by NFG at the time the equity securities are 
issued. In addition, proceeds from the sale of securities by NFG in 
external financing transactions will be used by NFG for general 
corporate purposes including (i) the financing of capital expenditures 
of NFG and its Subsidiaries, (ii) the financing of inventories and 
other working capital requirements, (iii) the acquisition, retirement 
or redemption of securities issued by NFG that qualifies for the 
exemption in rule 42 or a successor rule and/or (iv) investments in 
exempt wholesale generators (``EWGs''), as defined in section 32 of the 
Act, foreign utility companies (``FUCOs''), as defined in section 33 of 
the Act, and energy-related companies and gas related companies, each 
as defined in rule 58. Any deviation from these conditions would 
require further Commission approval.
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    \1\ The terms and conditions of this authorization are contained 
in Holding Co. Act Release No. 26532 (June 12, 1996).
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    The proposed transactions and the proposed participation of the 
various Applicants are described below.

1. External Financing by NFG

    NFG proposes to issue and sell short-term securities, with a term 
not to exceed 270 days, aggregating not more than $750 million 
outstanding at any one time during the Authorization Period. NFG also 
proposes to issue and sell long-term securities aggregating not more 
than $2 billion outstanding at any one time through the Authorization 
Period. Securities may be issued through underwriters or dealers, 
directly to a limited number of purchasers or a single purchaser,\2\ 
through agents, in exchange for securities of other companies, the 
acquisition of which is separately authorized by the Commission or 
exempt under section 32, 33 or 34 or rule 58, as applicable, and/or 
through compensation, benefits and incentive plans, customer stock 
purchase plans and dividend reinvestment plans (collectively, ``Stock 
Issuance Plans''). NFG also proposes to engage in interest rate swaps 
and similar hedging instruments.
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    \2\ If underwriters are used in the sale of the securities, 
these securities will be acquired by the underwriters for their own 
account and may be resold from time to time in one or more 
transactions, including negotiated transactions, at a fixed public 
offering price or at varying prices determined at the time of sale. 
The securities may be offered to the public either through 
underwriting syndicates (which may be represented by managing 
underwriters) or directly by one or more underwriters acting alone. 
The securities may be sold directly by NFG or through agents 
designated by NFG from time to time. If dealers are used in the sale 
of any securities, these securities will be sold to the dealers and 
any dealer may then resell the securities to the public at fixed 
prices or varying prices to be determined by the dealer at the time 
of resale. NFG may also sell securities to agents acting as 
principal. These agents may sell the securities to the public at 
fixed prices or varying prices to be determined by the agent at the 
time of resale. If equity securities are being sold in an 
underwritten offering, NFG may grant the underwriters an over-
allotment option permitting the purchase from NFG of additional 
equity securities (an additional 15% under present guidelines), at 
the same price as the equity securities then being offered, for the 
sole purpose of covering over-allotments.
    Securities issued by NFG may be sold under ``delayed delivery 
contracts'' which permit the underwriters or agents to locate buyers 
who will agree to buy the securities at an agreed price on the trade 
date but accept delivery at a later date. Debt securities may also 
be sold through the use of medium-term notes and similar programs or 
in transactions under which securities are sold to initial 
purchasers and then resold by the initial purchasers (typically, 
investment banks or similar institutions) in transactions covered by 
rule 144A or another exemption under the Securities Act of 1933 
(``Securities Act'') or under Regulation S under the Securities Act.
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a. Short-term Debt
    NFG proposes to issue short-term debt, consisting of borrowings 
under its credit facilities and the issuance of commercial paper and/or 
other forms of short-term financing. NFG represents that in no case 
will the outstanding balance of all short-term borrowings exceed $750 
million during the Authorization Period. With respect to its short-term 
borrowings, NFG proposes that the authorizations requested in this 
proceeding supersede the short-term borrowing authorization contained 
in Commission order, dated December 28, 1995 (``December 1995 
Order'').\3\
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    \3\ See Holding Co. Act Release No. 26443.
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    Commercial paper will be sold by NFG in domestic or foreign 
commercial paper markets directly or through dealers and placement 
agents at prevailing discount rates or prevailing coupon rates at the 
date of issuance for commercial paper of comparable quality and terms. 
NFG anticipates that the commercial paper will then be resold at

[[Page 3777]]

a discount to corporate and institutional investors, which may include 
commercial banks, insurance companies, pension funds, investment 
trusts, mutual funds, foundations, colleges and universities, finance 
companies and nonfinancial corporations. Foreign commercial paper may 
also be sold to individual investors.
    Back-up lines of credit for 100% of the outstanding amount of 
commercial paper are generally required by credit rating agencies. NFG 
currently has a committed credit facility which provides support for 
its commercial paper program.
    NFG proposes to establish credit facilities with banks and/or other 
financial institutions and to issue and sell, from time to time, short-
term notes. These notes will bear interest at rates comparable to, or 
lower than, those available through other forms of short-term borrowing 
with similar terms requested in this proceeding, and will have a term 
of not more than 270 days. NFG requests authority to incur, as 
necessary, commitment or similar fees not to exceed one-half of one 
percent (.50%) of the average daily credit facility available, and/or 
compensating balances not to exceed twenty percent (20%) of the credit 
facility established.
    NFG further requests authorization to amend its commercial paper 
program or credit facilities without further Commission authorization, 
provided that the term of any borrowing under the program or facility 
does not extend beyond 270 days from its date of issuance or borrowing.
    NFG states that it may engage in other types of short-term 
financing, which would include bank borrowings and other short-term 
securities issued under a mortgage or indenture, as it deems 
appropriate at the time of issuance. The term of these short-term 
borrowings will not exceed 270 days.
b. Long-term Securities
    NFG proposes to issue and sell long-term securities which would 
consist of any combination of long-term debt, debt having terms in 
excess of 270 days, common stock, preferred stock or other equity 
securities. The aggregate principal amount of long-term debt securities 
and the value of the consideration received from the issuances of 
equity securities under the Application during the Authorization Period 
will not exceed $2 billion at any one time outstanding.
    Long-term debt securities would include, but not be limited to, 
debentures, convertible debt, subordinated debt, medium-term notes, 
bank borrowings and securities with call or put options. Long-term debt 
securities would have the designation, aggregate principal amount, 
maturity, interest rate(s) or methods of determining the same, interest 
payment terms, redemption provisions, non-refunding provisions, sinking 
fund terms, conversion or put terms, U.S. dollar or foreign currency 
denominations, security and subordination provisions, and other terms 
and conditions as NFG may determine at the time of issuance. Medium-
term notes would be issued under the Indenture, dated as of October 15, 
1994, between NFG and The Bank of New York, Trustee, as amended 
(``Indenture''). Debentures and other long-term securities may be 
issued under the Indenture or under a mortgage or other indenture.
    Equity securities would include common stock (including the rights 
with respect to such common stock), including common stock issued by 
Stock Issuance Plans under prior Commission orders \4\ during the 
Authorization Period and future Stock Issuance Plans authorized by the 
Commission, preferred stock, other preferred securities, options and/or 
warrants convertible into common or preferred stock and common and/or 
preferred stock issued upon the exercise of convertible debt, rights, 
options, warrants and/or similar securities.
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    \4\ See Holding Co. Act Release Nos. 26670 (Feb. 18, 1997) 
(``February 1997 ORder''), 26655 (Jan. 24, 1997), 26394 (Oct. 19, 
1995), 26261 (Mar. 30, 1995), 26176 (Nov. 30, 1994), 25753 (Mar. 5, 
1993) and 24793 (Dec. 28, 1988) (collectively, ``Existing Common 
Stock Authorizations'').
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    From time to time during the Authorization Period, NFG may adopt 
other similar Stock Issuance Plans. For instance, a direct stock 
purchase plan with a dividend reinvestment feature that allows sales to 
persons not already shareholders may be implemented. NFG proposes to 
issue shares of common stock under existing plans and similar plans or 
plan funding arrangements it may adopt and to engage in other sales of 
is shares of common stock for reasonable business purposes without the 
requirement of prior Commission authorization during the Authorization 
Period. With respect to issuances of long-term securities, NFG proposes 
that the authorizations requested in this proceeding supersede the 
authorizations contained in the Existing Common Stock Authorizations, 
except that the grants of common stock and rights to purchase common 
stock under the 1997 Award and Option Plan may be issued through 
December 12, 2006.\5\
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    \5\ The 1997 Award and Option Plan under the February 1997 Order 
authorizes awards granting the right to purchase up to 1,900,000 
shares of common stock through December 12, 2006.
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c. Hedging Transactions
    NFG proposes to enter into hedging transactions (``Hedge Program'') 
related to all or a portion of existing or anticipated financing, 
including floating rate debt or fixed rate debt, using interest rate 
swaps, caps, floors, collars, ceilings, options and forwards 
(collectively, ``Derivative Transactions'') with counterparties during 
the Authorization Period, in notional (i.e., principal) amounts 
aggregating not in excess of the amount of debt outstanding at any one 
time.
    NFG proposes to use two different swap strategies. Under one swap 
strategy, NFG would agree to make payments of interest to a 
counterparty, payable periodically. The interest would be payable at a 
variable or floating rate index and would be calculated on a notional 
amount. In return, the counterparty would agree to make payments to NFG 
based upon the same notional amount and at an agreed upon fixed 
interest rate. This would be a ``floating-to-fixed swap'' on NFG's 
part. Under another swap strategy, NFG would pay a fixed interest rate 
and receive a variable interest rate on a notional amount. This would 
be a ``fixed-to-floating swap'' on NFG's part.
    NFG also proposes to enter into an anticipatory interest rate 
hedging program (``Anticipatory Hedge Program'') using Derivative 
Transactions within a limited time prior to the issuance of short- or 
long-term debt securities. The Hedge Program will be used to fix and/or 
limit the interest rate risk exposure of any new issuance through: (1) 
a forward sale of exchange-traded U.S. Treasury futures contracts, U.S. 
Treasury securities and/or a forward swap (each a ``Forward Sale''); 
(2) the purchase of put options on U.S. Treasury securities (``Put 
Options Purchase''); (3) a Put Options Purchase in combination with the 
sale of call options on U.S. Treasury securities (``Zero Cost 
Collar''); or (4) some combination of a Forward Sale, Put Options 
Purchase and/or Zero Cost Collar.
    The program may be executed on-exchange (``On-Exchange Trades'') 
with brokers through the opening of futures and/or options positions 
traded on the Chicago Board of Trade, the opening of over-the-counter 
positions with one or more counterparties (``Off-Exchange Trades'') or 
a combination of On-Exchange-Trades and Off-Exchange-Trades'') or a 
combination of On-Exchange-Trades and Off-Exchange-Trades. NFG will 
determine the optimal

[[Page 3778]]

structure of the Anticipatory Hedge Program at the time of execution. 
NFG may decide to lock in interest rates and/or limit its exposure to 
interest rate increases. All open positions under the Anticipatory 
Hedge Program will be closed on or prior to the date of the new 
issuance and NFG will not, at any time, take possession of the 
underlying U.S. Treasury securities.
    All transactions entered into under the Hedge Program will be bona 
fide hedges and will meet the criteria established by the Financial 
Accounting Standards Board in order to qualify for hedge accounting 
treatment, and NFG will comply with the financial disclosure 
requirements associated with hedging transactions.
    NFG proposes that the authorizations requested in this proceeding 
with respect to hedging transactions, including the Hedge Program and 
the Anticipatory Hedge Program, supersede the authorizations to engage 
in hedging transactions contained in the December 1995 Order.
d. Other Securities
    In addition to the specific securities for which NFG seeks 
authorization in this proceeding, NFG also proposes to issue other 
types of securities (``Other Securities'') that it deems appropriate 
during the Authorization Period. NFG requests that the Commission 
reserve jurisdiction over the issuance of Other Securities. NFG also 
undertakes that it will file a post-effective amendment in this 
proceeding describing the general terms of the proposed Other 
Securities and obtain a supplemental order of the Commission 
authorizing the issuances of Other Securities.

2. Intrasystem Financing by Subsidiaries

    The Subsidiaries propose various financing transactions between NFG 
and the Subsidiaries and among the Subsidiaries.
a. Money Pool
    Under the December 1995 Order, NFG, Distribution, Supply, Seneca 
Resources, Highland, Leidy, Horizon, Data-Track, NFR and UCI (``Current 
Money Pool Participants'') were authorized to engage in a money pool 
arrangement (``Money Pool'') through December 31, 2000. The Current 
Money Pool Participants now propose to continue to participate in, and 
incur short-term borrowings from, the Money Pool through the 
Authorization Period. NFG proposes to add Seneca Independence, Niagara 
Marketing and Niagara Energy as new participants to the Money Pool. NFG 
further proposes that the authorizations requested in this proceeding 
with respect to the Money Pool supersede the authorizations for the 
current Money Pool contained in the December 1995 Order.
    At certain times during the year, NFG and certain Subsidiaries 
generate surplus funds. Each Subsidiary may contribute excess funds to 
the Money Pool from time to time. The Applicants propose that the 
Subsidiaries borrow short-term funds from the Money Pool and that the 
maximum amount of Money Pool borrowings outstanding for each Subsidiary 
will be determined by NFG and the Subsidiaries in accordance with 
business needs. Subsidiary borrowings from the Money Pool would be used 
to provide financing for general corporate purposes, including the 
temporary financing of inventories and other working capital 
requirements and construction spending.
    NFG will administer the Money Pool and coordinate the system's 
short-term borrowings but cannot borrow surplus funds generated by the 
Subsidiaries. NFG will match, to the extent possible, the short-term 
cash surpluses and borrowing requirements of the Subsidiaries.
    The sources of funding for the Money Pool may consist of surplus 
funds of NFG and/or of its Subsidiaries, proceeds from NFG's sale of 
commercial paper, borrowings under credit facilities, borrowings by NFG 
from banks or other financial institutions and/or issuances of other 
securities. Amounts borrowed by NFG under the $750 million short-term 
borrowing authorization requested in this proceeding would be included 
in the Money Pool.
    Subsidiary requests for short-term loans will be met first from 
available surplus funds of the other Subsidiaries, and then from NFG 
corporate funds, if available. In the event these sources of funds are 
insufficient, borrowings outside the system will be made by NFG through 
the issuance and sale of commercial paper, borrowings under credit 
facilities, other borrowing facilities with banks or other financial 
institutions and/or issuances of other securities. These borrowings 
will not exceed $750 million during the Authorization Period.
    The interest rate on Subsidiary borrowings consisting solely of 
internal funds from the Money Pool will be the same rate charged on 
high-grade unsecured 30-day commercial paper sold through dealers by 
major corporate issuers. Borrowings consisting wholly or in part of 
funds obtained through the sale of commercial paper or borrowings from 
banks or other financial institutions will pay interest at a rate equal 
to NFG's net cost for these borrowings.
    The Applicants state that none of the internal subsidiary funds 
(surplus funds of the Subsidiaries available in the Money Pool) will be 
used for the acquisition of an interest in an EWG or a FUCO except (a) 
investment by Horizon of up to $150 million and (b) investment by NFR 
or through a subsidiary, if formed, of up to $25 million.
b. Internal Nonutility Securities
    National requests on behalf of the Subsidiaries, other than 
Distribution (``Nonutility Subsidiaries''), authorization to issue and 
sell securities of any type that are not otherwise exempt or authorized 
by Commission order (``Internal Nonutility Securities'') to NFG and 
other Nonutility Subsidiaries during the Authorization Period. NFG 
requests that the Commission reserve jurisdiction over the issuances of 
Internal Nonutility Securities. NFG also undertakes that it will file a 
post-effective amendment in this proceeding describing the general 
terms of the proposed Internal Nonutility Securities and obtain a 
supplemental order of the Commission authorizing the issuances of 
Internal Nonutility Securities.

3. External Financing by Subsidiaries

    NFG also requests authorization for the Nonutility Subsidiaries to 
issue and sell securities of any type that are not otherwise exempt or 
authorized by Commission order, including guarantees (collectively, 
``External Nonutility Securities''), to persons other than NFG, 
including banks, insurance companies and other financial institutions 
during the Authorization Period. NFG requests that the Commission 
reserve jurisdiction over the issuance of External Nonutility 
Securities. NFG also undertakes that it will file a post-effective 
amendment in this proceeding describing the general terms of the 
proposed External Nonutility Securities and obtain a supplemental order 
of the Commission authorizing the issuances of External Nonutility 
Securities.
    Distribution also proposes to issue and sell debt securities of any 
type that are not otherwise exempt or authorized by Commission order to 
persons other than NFG, including banks, insurance companies and other 
financial institutions, in an aggregate principal amount which will not 
exceed $250 million during the Authorization Period.

[[Page 3779]]

4. Financing Entities

    NFG and the Nonutility Subsidiaries propose to organize new 
corporations, trusts, partnerships or other entities created for the 
purpose of facilitating financings. These entities will issue to third 
parties interests in such entities or other securities authorized or 
issued under an exemption. Additionally, request is made for: (a) The 
issuance of debentures or other evidences of indebtedness by NFG or 
Nonutility Subsidiaries to a financing entity in return for the 
proceeds of the financing, and (b) the acquisition by NFG and 
Nonutility Subsidiaries of voting interests or equity securities issued 
by the financing entity to establish such Applicant's ownership of the 
financing entity. NFG and the Nonutility Subsidiaries also propose to 
enter into guarantees and expense agreements with the corresponding 
financing entities, under which they would agree to pay all amounts 
payable relating to the securities issued by the financing entity. The 
amount of any guarantees provided to financing entities will not exceed 
$250 million in the aggregate at any one time during the Authorization 
Period.

5. Guarantees by National

    NFG is currently authorized to guarantee up to $500 million of 
obligations under Commission order dated November 12, 1993 (HCAR No. 
25922) (``November 1993 Order''). NFG now proposes to guarantee 
securities of, and provide other forms of credit support with respect 
to obligations of, its Subsidiaries in an aggregate amount not to 
exceed $2 billion at any time during the Authorization Period. The $2 
billion of guarantees is in addition to any financing requested in the 
Application. The terms and conditions of any guarantee will be 
negotiated on a case by case basis as the need arises. NFG proposes 
that the guarantee authorization requested in this proceeding supersede 
and replace the guarantee authorization granted in the November 1993 
Order.
    Guarantees and other forms of credit support provided by NFG on 
behalf of any EWG, FUCO or rule 58 company will be subject to the 
limitations of rule 53 or rule 58, as applicable.

6. Acquisition of EWGs, FUCOs and Rule 58 Companies

    NFG proposes to use some or all of the proceeds of the financings 
for which authorization is requested in this proceeding to invest in 
EWGs and FUCOs in an aggregate amount which, when added to NFG's 
aggregate investment, as defined in rule 53(a)(1), would not exceed 50% 
of NFG's consolidated retained earnings, as defined in rule 53(a)(1). 
NFG proposes that the authorization to invest in EWGs and FUCOs 
requested in this Application supersede the authorization applicable to 
EWG and FUCO investments contained in Commission order dated August 29, 
1995 (HCAR No. 26364).
    NFG also proposes to use some or all of the proceeds of the 
financings for which authorization is requested in this proceeding to 
make investments in energy-related companies and gas-related companies 
under rule 58.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-1677 Filed 1-23-98; 8:45 am]
BILLING CODE 8010-01-M