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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended December 31, 1996 or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from __________ to __________

Commission file number 1-7320


                              ANR PIPELINE COMPANY
             (Exact name of registrant as specified in its charter)

            Delaware                                           38-1281775
(State or other jurisdiction of                              (I.R.S Employer
 incorporation or organization)                            Identification No.)

        500 Renaissance Center,
           Detroit, Michigan                                    48243-1902
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (313) 496-0200
                           ---------------------------


Securities registered pursuant to Section 12(b) of the Act:


                                                      Name of each exchange
         Title of each class                           on which registered
         -------------------                          ---------------------

     9-5/8% Debentures, due 2021
     7-3/8% Debentures, due 2024                 }    New York Stock Exchange
     7% Debentures, due 2025

Securities registered pursuant to Section 12(g) of the Act:  None
                           ---------------------------


     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 _____

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of March 12, 1997, there were  outstanding  1,000 shares of common stock
of the  Registrant,  $100 par value per share,  its only class of common  stock.
None of the voting stock of the Registrant is held by nonaffiliates.

Documents incorporated by reference: None

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<PAGE>

                                TABLE OF CONTENTS

Item No.                                                                  Page

              Glossary................................................... (ii)

                                     PART I

       1.     Business.....................................................  1
                  Introduction.............................................  1
                  Natural Gas System.......................................  1
                      Operations...........................................  1
                          General..........................................  1
                          Transportation Services..........................  1
                          Gas Storage......................................  2
                          Gas Sales and Gas Purchases......................  2
                          Competition......................................  2
                      Producing Area Deliverability........................  3
                      Regulations Affecting Gas System.....................  3
                          General..........................................  3
                          Rate Matters.....................................  4
                      Environmental........................................  5
                      Other Developments...................................  6
       2.     Properties...................................................  6
       3.     Legal Proceedings............................................  6
       4.     Submission of Matters to a Vote of Security Holders..........  6

                                     PART II

       5.     Market for the Registrant's Common Equity and Related
              Stockholder Matters..........................................  7
       6.     Selected Financial Data......................................  7
       7.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations..........................  7
       8.     Financial Statements and Supplementary Data..................  7
       9.     Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure..........................  7

                                    PART III

       10.    Directors and Executive Officers of the Registrant...........  8
       11.    Executive Compensation....................................... 10
       12.    Security Ownership of Certain Beneficial Owners and
              Management................................................... 18
       13.    Certain Relationships and Related Transactions............... 21

                                     PART IV

       14.    Exhibits, Financial Statement Schedules and Reports
              on Form 8-K.................................................. 22



                                       (i)

<PAGE>

                                    GLOSSARY



"ANR" means American Natural Resources Company
"ANR Pipeline" or the "Company" means ANR Pipeline Company
"ANR Storage" means ANR Storage Company
"Bcf" means billion cubic feet
"Coastal" means The Coastal Corporation
"Coastal Natural Gas" means Coastal Natural Gas Company
"Colorado" means Colorado Interstate Gas Company
"Empire" means Empire State Pipeline
"EPA" means Environmental Protection Agency
"FAS" means Statement of Financial Accounting Standards
"FAS No. 71" means Statement of Financial Accounting Standards No. 71,
     "Accounting for the Effects of Certain Types of Regulation"
"FASB" means Financial Accounting Standards Board
"FERC" means Federal Energy Regulatory Commission
"HIOS" means High Island Offshore System
"MMcf" means million cubic feet
"NGA" means Natural Gas Act of 1938, as amended
"Order 636" means FERC Order No. 636 which required significant changes
      in services provided by interstate natural gas pipelines, including
      the unbundling of services.
"UTOS" means U-T Offshore System
"working gas" means that volume of gas available for withdrawal and use by
      the Company's customers


--------
NOTE:   Unless  otherwise  noted,  all natural gas  volumes  presented  in this
        Annual  Report are stated at a pressure base of 14.73 pounds per square
        inch absolute and 60 degrees Fahrenheit.


                                      (ii)

<PAGE>

                                     PART I

Item 1.     Business.

                                  INTRODUCTION

     ANR  Pipeline  is a  Delaware  corporation  organized  in 1945.  All of ANR
Pipeline's  outstanding  common  stock  is  owned  by  ANR.  ANR  is  a  direct,
wholly-owned  subsidiary of Coastal  Natural Gas, and an indirect  subsidiary of
Coastal.  ANR  Pipeline  owns and  operates an  interstate  natural gas pipeline
system.  At December 31, 1996,  the Company had 1,846  employees  engaged in the
operation of ANR Pipeline and 144  employees  engaged in the  operation of HIOS,
UTOS and Empire.



                               NATURAL GAS SYSTEM

OPERATIONS

General

     The Company is  involved  in the  transportation,  storage,  gathering  and
balancing  of natural  gas. ANR  Pipeline  provides  these  services for various
customers through its facilities located in Arkansas,  Illinois,  Indiana, Iowa,
Kansas, Kentucky,  Louisiana,  Michigan,  Mississippi,  Missouri,  Nebraska, New
Jersey, Ohio, Oklahoma,  Tennessee,  Texas,  Wisconsin,  Wyoming and offshore in
federal waters.  The Company  operates two offshore gas pipeline  systems in the
Gulf of Mexico which are owned by HIOS and UTOS, general  partnerships  composed
of ANR Pipeline  subsidiaries and  subsidiaries of other companies.  The Company
also operates  Empire,  an intrastate  pipeline  extending from Niagara Falls to
Syracuse, New York, in which an affiliate of the Company has a 50% interest.

     The Company's two interconnected,  large-diameter multiple pipeline systems
transport  gas to the Midwest and  increasingly  to the  Northeast  from (a) the
Hugoton Field and other fields in the Anadarko Basin in Texas and Oklahoma,  (b)
the  Louisiana  onshore  and  Louisiana  and  Texas  offshore  areas and (c) gas
originating in other basins received through interconnections located throughout
its system.

     The Company's  principal pipeline facilities at December 31, 1996 consisted
of 10,600 miles of pipeline and 75 compressor  stations with 1,030,069 installed
horsepower.  At December 31, 1996, the design peak day delivery  capacity of the
transmission   system,   considering  supply  sources,   storage,   markets  and
transportation for others, was approximately 5.7 Bcf per day.

Transportation Services

     The  Company  offers an array of  "unbundled"  transportation,  storage and
balancing  service options under Order 636.  Additional  information  concerning
Order 636 is set forth in "Regulations  Affecting Gas System" and  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included herein.

     ANR Pipeline  transports  gas to markets on its system and also  transports
gas  to  other  markets  off  its  system  under   transportation  and  exchange
arrangements  with  other  companies,  including  distributors,  intrastate  and
interstate   pipelines,   producers,   brokers,   marketers   and   end   users.
Transportation  service  revenues  amounted to $510 million for 1996 compared to
$572 million for 1995 and $555 million for 1994. During 1996,  approximately 30%
of the Company's  transportation  service revenues were contributed by its three
largest customers:  Wisconsin Gas Company, Wisconsin Electric Power Company Inc.
and  Michigan  Consolidated  Gas  Company.  Wisconsin  Gas  Company  serves  the
Milwaukee  metropolitan  area  and  numerous  other  communities  in  Wisconsin.
Wisconsin  Electric  Power  Company Inc.  serves the cities of Racine,  Kenosha,
Appleton and their  surrounding  areas in Wisconsin.  Michigan  Consolidated Gas
Company serves the city of Detroit and certain  surrounding areas, the cities of
Grand Rapids and Muskegon, the


                                        1

<PAGE>

communities  of Ann  Arbor and  Ypsilanti  and  numerous  other  communities  in
Michigan. In 1996, ANR Pipeline provided  approximately 70% and 30% of the total
gas requirements of Wisconsin and Michigan, respectively.

     ANR Pipeline's  system deliveries for the years 1996, 1995 and 1994 were as
follows:

                            Total System                 Daily Average
        Year                 Deliveries                System Deliveries
                               (Bcf)                         (MMcf)

        1996                   1,517                          4,145
        1995                   1,404                          3,847
        1994                   1,371                          3,756

Gas Storage

     ANR Pipeline has approximately  209 Bcf of underground  working gas storage
capacity,  with a maximum day  delivery  capacity of 3 Bcf as late as the end of
February.  Working gas storage  capacity  operated by ANR Pipeline of 133 Bcf is
available from seven owned and eight leased  underground  storage  facilities in
Michigan.  In  addition,  the  Company has the  contracted  rights for 76 Bcf of
working  gas  storage  capacity  of which 46 Bcf is  provided  by Blue  Lake Gas
Storage Company and 30 Bcf is provided by ANR Storage. Excluded from the 209 Bcf
is 62.1 Bcf of working gas storage  capacity which the Company has  reclassified
to  recoverable  base  gas,  subject  to  approval  by the  FERC  as part of the
Company's general rate proceeding discussed below. Gas storage revenues amounted
to $131 million for both 1996 and 1995 as compared to $150 million for 1994.

Gas Sales and Gas Purchases

     With the Company's  implementation of Order 636 effective November 1, 1993,
ANR  Pipeline  is no  longer  engaged  in the sale for  resale of  natural  gas.
However,  the  Company  auctions  gas on the open  market to  handle a  residual
quantity of gas purchased under certain remaining gas purchase contracts pending
expiration  of such  contracts.  The  Company's  Order 636  restructured  tariff
provides mechanisms for recovering from its transportation customers the pricing
differential  between costs  incurred to purchase gas under these  contracts and
the amounts recovered through the auctioning of such gas on the open market. Gas
sales revenues realized by ANR Pipeline from the auctioning of such gas amounted
to $39 million  during 1996,  compared to $46 million in 1995 and $91 million in
1994.  The  remainder  of gas  sales  revenues  for 1995 and 1994 was  primarily
attributable to the recovery of purchased gas adjustment costs incurred prior to
the implementation of Order 636.

Competition

     Natural gas competes  with other forms of energy  available  to  customers,
primarily on the basis of price paid by end users.  These  competitive  forms of
energy  include  electricity,  coal,  propane  and  fuel  oils.  Changes  in the
availability  or  price of  natural  gas or other  forms of  energy,  as well as
changes  in  business  conditions,  conservation,  legislation  or  governmental
regulations,   capability  to  convert  to  alternate  fuels,  changes  in  rate
structure,  taxes and other factors may affect the demand for natural gas in the
areas served by ANR Pipeline.

     ANR Pipeline competes with interstate and intrastate  pipeline companies in
the  transportation  and  storage  of gas and  with  independent  producers  and
gathering  companies in the  gathering of gas. On November 1, 1993,  the Company
implemented Order 636 on its system. The implementation of Order 636 resulted in
capacity  release,  secondary  delivery  point  options and  segmentation;  thus
allowing the Company's firm transportation customers to compete with the Company
for transportation  services. This is particularly true in the Midwest region in
which the Company primarily operates.  Additional  information on the impacts of
Order 636 is set forth in "Regulations  Affecting Gas System" and  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included herein.




                                        2

<PAGE>

     ANR  Pipeline's   transportation,   storage  and  balancing   services  are
influenced by its  customers'  access to alternative  service  providers and the
price of such services.  The Company  competes  directly with Panhandle  Eastern
Pipe Line Company,  Trunkline Gas Company, Northern Natural Gas Company, Natural
Gas  Pipeline  Company of  America,  Michigan  Consolidated  Gas Company and CMS
Energy Company in its historical  market areas of Wisconsin and Michigan for its
transportation,   storage  and  balancing  business.  ANR  Pipeline  also  faces
competition in the Northeast markets from Tennessee Gas Pipeline Company,  Texas
Eastern Transmission  Corporation,  CNG Transmission  Corporation,  Columbia Gas
Transmission    Corporation,    Iroquois   Gas   Transmission    System,   L.P.,
Transcontinental  Gas  Pipe  Line  Corporation  and  National  Fuel  Gas  Supply
Corporation  in  serving  electric  generation  plants  and  local  distribution
companies.  Increasingly,  ANR Pipeline also competes with independent producers
and other  pipeline  companies  seeking  to  construct  interstate  transmission
facilities and with a number of marketing  companies  which  aggregate  capacity
released by firm shippers for the purpose of managing gas  requirements  for end
users.


PRODUCING AREA DELIVERABILITY

     Shippers on ANR Pipeline  have direct  access to the two most  prolific gas
producing  areas in the  United  States,  the Gulf  Coast and the  Midcontinent.
Statistics published by the Energy Information Agency, Office of Oil and Gas, U.
S. Department of Energy,  indicate that  approximately 80% of all natural gas in
the lower 48 states is produced from these two areas.  Interconnecting pipelines
provide  shippers  with  access to all other  major gas  producing  areas in the
United States and Canada.

     Gas deliverability  available to shippers on ANR Pipeline's system from the
Midcontinent  and Gulf Coast  producing  areas through  direct  connections  and
interconnecting  pipelines and gatherers is approximately 4,700 MMcf per day. Of
the 4,700 MMcf per day, 200 MMcf per day is attributable to sources connected to
facilities  in the  Southwest  gathering  area,  which  were  sold  to  GPM  Gas
Corporation ("GPM") in December 1996. Another 390 MMcf per day of deliverability
associated with facilities in the Southwest  gathering area was spun down to ANR
Field  Services  Company (a wholly owned  subsidiary of ANR  Pipeline),  also in
December 1996. All deliverability  associated with mainline contiguous Southwest
gathering  facilities  sold in 1996 remains  accessible to ANR Pipeline  through
interconnections  with GPM. An additional 335 MMcf per day of  deliverability is
accessible to shippers on Company-owned,  or partially-owned,  pipeline segments
not directly connected to an ANR Pipeline mainline.

     The  Company  remains  active in  locating  and  connecting  new sources of
natural  gas to  facilitate  transportation  arrangements  made  by  third-party
shippers.  During  1996,  field  development,  newly  connected  gas wells,  gas
production facilities and pipeline interconnections  contributed over 1,380 MMcf
per day to total deliverability accessible to shippers on the Company's pipeline
system.


REGULATIONS AFFECTING GAS SYSTEM

General

     Under  the  NGA,  the  FERC  has  jurisdiction  over  ANR  Pipeline  as  to
transportation,  storage,  sales,  gathering  and  balancing  of gas,  rates and
charges, construction of new facilities, extension or abandonment of service and
facilities,  accounts and records,  depreciation and  amortization  policies and
certain other matters. ANR Pipeline holds certificates of public convenience and
necessity issued by the FERC covering its jurisdictional facilities,  activities
and services.

     ANR  Pipeline  is  also  subject  to  regulation  with  respect  to  safety
requirements  in the design,  construction,  operation  and  maintenance  of its
interstate  gas  transmission  and  storage  facilities  by  the  Department  of
Transportation. Operations on United States government land are regulated by the
Department of the Interior.

     On January 31, 1996, the FERC issued a "Statement of Policy and Request for
Comments" 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, a
pipeline and a customer will be allowed to negotiate a contract  which  provides
for rates and charges that exceed the pipeline's posted maximum tariff


                                        3

<PAGE>

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"). 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 time the
pipeline negotiates a rate for service which exceeds the recourse rate. The FERC
is also considering comments on whether this "negotiated 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"
requesting  comments on various  aspects of  secondary  market  transactions  on
interstate  natural  gas  pipelines,  including  the  comparability  of pipeline
capacity with released capacity.

Rate Matters

     All of the Company's  service options are subject to rate regulation by the
FERC. Under the NGA, ANR Pipeline must file with the FERC to establish or adjust
its service rates. The FERC may also initiate  proceedings to determine  whether
the Company's rates are "just and reasonable."

     From  November 1, 1992 to November 1, 1993,  gas inventory  demand  charges
were collected from the Company's  former resale  customers.  This method of gas
cost recovery  required  refunds for any  over-collections.  In April 1994,  the
Company  filed  with the  FERC a  refund  report  showing  over-collections  and
proposing refunds totaling $45.1 million.  Certain customers  disputed the level
of those refunds. The FERC approved the Company's refund allocation  methodology
and the  Company,  in March  1995,  paid  undisputed  refunds of $45.1  million,
together  with  applicable  interest,   subject  to  further   investigation  of
customers'  claims.  The FERC's  approval  of the  Company's  refund  allocation
methodology  was  upheld by the  United  States  Court of  Appeals  for the D.C.
Circuit in April 1996. Disputed issues related to the refunds are the subject of
further proceedings before the FERC.

     In July 1996,  the United  States  Court of  Appeals  for the D.C.  Circuit
upheld the basic  structure  of the FERC's  Order 636 (issued in April 1992) and
remanded to the FERC, for further consideration,  certain limited aspects of the
Order,  such as the basis for its determination of the recovery by the pipelines
of the full level of their prudently incurred transition costs. Several persons,
including ANR  Pipeline,  have appealed the rate and other aspects of the FERC's
orders approving the Company's Order 636 restructuring filings and those appeals
are the subject of further proceedings before the Court.

     The Company  filed a general  rate  increase  on  November 1, 1993.  Issues
related to the general  rate  increase  are the subject of  continuing  FERC and
judicial  proceedings.  Under a March 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 and a $182.8 million increase over
the cost of service  underlying  the Company's  approved rates for its Order 636
restructured services. In September 1994, the FERC accepted the Company's filing
to  place  the  new  rates  into   effect  May  1,  1994,   subject  to  further
modifications. The Company submitted revised rates in compliance with this order
in October  1994,  which rates are  currently in effect,  subject to refund.  In
January  1997,  an Initial  Decision was issued on the issues set for hearing by
the March 1994 Order. That Initial Decision,  which accepted some but not all of
the Company's rate change proposals,  does not take effect until reviewed by the
FERC. ANR Pipeline will file  exceptions as to some of the negative  findings in
the Initial Decision.

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



                                        4

<PAGE>

     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  the  Company's  obligations  under certain gas
purchase and  transportation  contracts with the Great Plains Coal  Gasification
Plant (the "Plant").  In February 1994, ANR Pipeline,  Dakota and the Department
of Energy  executed a Settlement  Agreement,  which,  subject to FERC  approval,
resolves the litigation and disputes among the parties,  amends the gas purchase
agreement  between  the  Company and Dakota and  terminates  the  transportation
contract with the Plant.  In August 1994,  the Company 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.  In December 1996, the
FERC issued an Opinion and Order  Reversing  Initial  Decision in which it found
that the  pipelines,  including  the Company,  were prudent in entering into the
Settlement  Agreement.  No appeals were taken of the FERC's  decision and it has
become final.

     Certain of the above regulatory  matters and other regulatory issues remain
unresolved  among the Company,  its  customers,  its suppliers and the FERC. The
Company has made  provisions  which  represent  management's  assessment  of the
ultimate  resolution of the above issues. As a result,  the Company  anticipates
that these  regulatory  matters will not have a material  adverse  effect on its
consolidated financial position,  results of operations or cash flows. 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

     The Company's  operations  are subject to extensive  and evolving  federal,
state  and local  environmental  laws and  regulations  which  may  affect  such
operations and costs as a result of their effect on the construction,  operation
and maintenance of its pipeline facilities. The Company spent approximately $2.5
million in 1996 on environmental capital projects and anticipates annual capital
expenditures  of  approximately  $4 million per year over the next several years
aimed at maintaining  compliance with such laws and  regulations.  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."  The Company has been named as a  potentially  responsible  party in
five  Superfund  waste  disposal  sites.  At these  sites,  there is  sufficient
information to estimate total cleanup costs of approximately $30 million and the
Company  estimates  its pro-rata  exposure,  to be paid over a period of several
years, is approximately $.2 million.

     There are additional areas of environmental  investigation  and remediation
responsibilities  to which the  Company  may be  subject.  The states  also have
regulatory  programs that mandate  environmental  investigation and cleanup.  In
Michigan,  where the  Company has  extensive  operations,  the  recently-revised
Environmental  Response Act requires owners or operators of property  containing
contamination above regulatory  thresholds to diligently pursue remedial actions
and  exercise  due care so that  the  property  does not pose a threat  to human
health or the  environment.  The Company has  designated  internal staff and has
retained  environmental  consultants  to assess  sites for which the Company may
have due diligence or due care obligations.

     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.



                                        5

<PAGE>

OTHER DEVELOPMENTS

     In February  1997,  ANR Pipeline and  Transcontinental  Gas Pipe Line Corp.
("Transco"),  a subsidiary of The Williams Companies,  signed a letter of intent
to form a joint venture known as the  Independence  Pipeline Co., which plans to
build and operate a new  interstate  natural  gas  pipeline  (the  "Independence
Pipeline") to serve markets for natural gas in the Eastern  United  States.  The
proposed  Independence  Pipeline  would  consist of  approximately  370 miles of
36-inch  diameter  pipe,  with an initial  capacity of up to 900 MMcf of gas per
day. It would extend from the Company's existing compressor station at Defiance,
Ohio, to Transco's facilities at Leidy, Pennsylvania.  Along the proposed route,
interconnections  with numerous other  pipelines  serving the  Mid-Atlantic  and
Northeast regions are anticipated.  Affiliates of ANR Pipeline and Transco would
each  own 50  percent  of the new  project,  with  an  estimated  total  project
investment  of $630  million.  The  Independence  Pipeline  is  planned to be in
service November 1999, subject to receipt of satisfactory regulatory approvals.

     On January 6, 1997,  the Company  announced an open season to gauge shipper
interest in a proposed  extension of its interstate  natural gas pipeline system
between Katy,  Texas,  and Eunice,  Louisiana.  This 224-mile project would make
additional  supplies of Texas  natural gas  available  for transport to multiple
markets  via  ANR   Pipeline's   southeast   mainline,   as  well  as  at  other
interconnections.

     Funding for certain pending and proposed  natural gas pipeline  projects is
anticipated to be provided through  non-recourse  financings in which certain of
the projects'  assets and contracts will be pledged as collateral.  This type of
financing  typically  requires  the  participants  to  make  equity  investments
totaling approximately 20% to 30% of the cost of the project, with the remainder
financed on a long-term basis. Equity  participation by other entities will also
be considered.

Item 2. Properties.

     Information  on  properties  of ANR  Pipeline  is in  Item  1,  "Business,"
included herein.

     The real property owned by the Company in fee consists principally of sites
for compressor and metering stations and microwave and terminal facilities. With
respect to the seven  owned  storage  fields,  the  Company  holds  title to gas
storage rights  representing  ownership of, or has long-term  leases on, various
subsurface  strata and  surface  rights and also holds  certain  additional  gas
rights.  Under the NGA,  the Company may acquire by the exercise of the right of
eminent domain, through proceedings in United States District Courts or in state
courts, necessary rights-of-way to construct, operate and maintain pipelines and
necessary land or other property for compressor and other stations and equipment
necessary to the operation of pipelines.

Item 3. Legal Proceedings.

     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, 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. ANR Pipeline,  together with the other pipeline defendants,
has filed a motion to dismiss.

     In October 1996,  the Company,  along with certain of its  affiliates,  was
named as a  defendant  in a suit filed by several  former  and  current  African
American  employees in the United States  District Court,  Southern  District of
Texas.  The  suit  alleges  racially  discriminatory   employment  policies  and
practices  and seeks damages in the amount of at least $100 million and punitive
damages of at least three times that amount.  Plaintiffs' counsel are seeking to
have the suit  certified  as a class  action.  The  Company  and its  affiliates
vigorously deny these allegations and have filed responsive pleadings.

     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 such claims
and that any  liability  which  may  finally  be  determined  should  not have a
material  adverse  effect  on the  Company's  consolidated  financial  position,
results of operations or cash flows.

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

     None.


                                        6

<PAGE>

                                     PART II


Item 5. Market for the Registrant's Common Equity and
        Related Stockholder Matters.

     All common stock of ANR Pipeline is owned by ANR.

Item 6. Selected Financial Data.

     The  following  selected  financial  data (in  millions of dollars) for the
periods indicated is derived from the Consolidated Financial Statements included
herein  and Item 6 of the  Company's  Annual  Report on Form 10-K for the fiscal
year  ended  December  31,  1995,  as  adjusted  for  minor   reclassifications.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations and the Notes to Consolidated  Financial  Statements  included herein
contain information relating to this data.

<TABLE>
<CAPTION>
                                                         1996        1995        1994         1993        1992
                                                      ---------   ---------    ---------   ---------   ---------

<S>                                                   <C>         <C>          <C>         <C>         <C>      
Operating Revenues:
   Storage and transportation.......................  $   641.7   $   702.8    $   706.3   $   634.7   $   534.0
   Gas sales........................................       39.1        59.2        106.1       603.5       634.5
   Other revenues...................................       81.7        58.7         29.7        33.6        23.3
                                                      ---------   ---------    ---------   ---------   ---------
         Total......................................  $   762.5   $   820.7    $   842.1   $ 1,271.8   $ 1,191.8
                                                      =========   =========    =========   =========   =========
Earnings Before Extraordinary Item..................  $   140.3   $   151.3    $   152.1   $   157.0   $   151.0
                                                      =========   =========    =========   =========   =========
*Net (Loss) Earnings................................  $(  23.6)   $   151.3    $   152.1   $   157.0   $   151.0
                                                      ========    =========    =========   =========   =========
Dividends Declared on Common Stock..................  $   300.0   $    30.1    $   331.0   $    33.7   $    28.6
                                                      =========   =========    =========   =========   =========

*Total Assets.......................................  $ 1,675.9   $ 2,049.4    $ 1,858.6   $ 1,920.3   $ 1,968.0
                                                      =========   =========    =========   =========   =========
Capital Structure:
   Common stock and other stockholder's
      equity........................................  $   586.1   $   909.7    $   788.5   $   969.3   $   850.1
   Mandatory redemption cumulative
      preferred stock...............................          -           -            -        26.0        36.1
   Long-term debt and capital lease
      obligations...................................      506.4       509.3        437.0       374.0       435.1
                                                      ---------   ---------    ---------   ---------   ---------
         Total......................................  $ 1,092.5   $ 1,419.0    $ 1,225.5   $ 1,369.3   $ 1,321.3
                                                      =========   =========    =========   =========   =========
</TABLE>

     Since all of the outstanding  common stock of ANR Pipeline is owned by ANR,
earnings and cash  dividends per common share have no  significance  and are not
presented.

     *Effective  November 1, 1996, the Company  discontinued  the application of
regulatory  accounting  principles  under FAS No. 71. As a result,  the  Company
recorded  an  extraordinary  charge  to income  of  $163.9  million.  Additional
information  is set forth in  Management's  Discussion and Analysis of Financial
Condition  and  Results  of  Operations  and  Note 5 of  Notes  to  Consolidated
Financial Statements included herein.

Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations is presented on pages F-1 through F-5 herein.

Item 8. Financial Statements and Supplementary Data.

     The Financial  Statements  and  Supplementary  Data required  hereunder are
included in this Annual Report as set forth in Item 14(a) herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

     None.


                                        7

<PAGE>

                                    PART III


Item 10. Directors and Executive Officers of the Registrant.

     The directors and executive  officers of ANR Pipeline as of March 12, 1997,
were as follows:

     Name (Age), Year First Elected            Positions and Offices with the
      Director and/or Officer                            Registrant
---------------------------------------      ----------------------------------

Jeffrey A. Connelly (50), 1988 and 1983      President, Chief Executive Officer
                                               and Director
David A. Arledge (52), 1994                  Director
Harold Burrow (82), 1994                     Director
Richard A. Lietz (51), 1994 and 1984         Executive Vice President, Chief
                                               Operating Officer and Director
Jon R. Whitney (52), 1996                    Director
Coby C. Hesse (49), 1994                     Executive Vice President
Stanley A. Babiuk (45), 1989                 Senior Vice President
Daniel F. Collins (55), 1986                 Senior Vice President
Donald H. Gullquist (53), 1994               Senior Vice President
Wilbur A. Hitchcock (48), 1994               Senior Vice President
John P. Lucido (49), 1988                    Senior Vice President
Rebecca H. Noecker (45), 1989                Senior Vice President and General
                                               Counsel
Austin M. O'Toole (61), 1985                 Senior Vice President and Assistant
                                               Secretary
Scott P. Anger (52), 1990                    Vice President
Michael J. Armiak (49), 1996                 Vice President
Daniel M. Ives (49), 1995                    Vice President
T. E. Jackson, Jr. (57), 1994                Vice President
William L. Johnson (39), 1991                Vice President and Controller
Richard H. Leehr (47), 1991                  Vice President
Michael B. Lobin (47), 1991                  Vice President
Ronald D. Matthews (49), 1994                Vice President and Treasurer
Lynn M. Nichols (50), 1995                   Vice President
Dennis J. Paruch (51), 1984                  Vice President
Ann E. Raden (40), 1996                      Vice President
Elias A. Shaptini (66), 1981                 Vice President
Michael J. Whims (50), 1996                  Vice President
Michael J. Williams (50), 1996               Vice President
Frederick H. Clark (68), 1984                Secretary

     The above named persons bear no family  relationship to each other,  except
that  Wilbur A.  Hitchcock  and  Rebecca H.  Noecker  are first  cousins.  Their
respective terms of office expire  coincident with ANR Pipeline's Annual Meeting
of the Sole  Stockholder and Annual Meeting of the Board of Directors to be held
in May 1997.  Each of the directors and officers named above have been directors
or  officers of ANR  Pipeline,  Colorado  and/or  Coastal for five years or more
except for the following:

     Mr. Armiak was elected Vice President of the Company in January 1996. Prior
thereto, he has served in various capacities with the Company since 1971.

     Mr. Gullquist was elected Senior Vice President of the Company in September
1994.  From  1988  to  1989  he  served  as Vice  President,  Finance  at  Enron
Corporation;  from  1989  to  1990 he  served  as  President  of  Enron  Finance
Corporation.



                                        8

<PAGE>

     Mr.  Hitchcock was elected a Senior Vice President of ANR Pipeline in March
1994.  He  previously  served as a Vice  President  of Northern  Indiana  Public
Service  Company,  where he had been employed since 1990.  From 1984 to 1990, he
was employed by Natural Gas Pipeline Company in various positions.

     Mr. Ives was elected Vice President of the Company in September 1995. Prior
to  joining  the  Company,  he was  General  Manager - Rates for  Algonquin  Gas
Transmission  Company, a unit of PanEnergy Corp since 1992 and prior thereto, he
was Director of Rates and  Regulatory  Affairs for  Washington Gas Light Company
since 1976.

     Ms. Nichols was elected Vice  President in January 1995.  Most recently she
served as Director - Application  and  Maintenance  for  Whirlpool  Corporation,
where she worked for more than four years. Prior thereto,  she served in various
capacities for the Pillsbury Corporation for 21 years.

     Ms.  Raden was  elected  Vice  President,  Human  Resources  and  Community
Affairs,  of the Company in April 1996.  Prior to joining the  Company,  she was
employed by First of America Bank Corporation, Kalamazoo, Michigan, for 17 years
where she held a series of human resources management positions, the most recent
of which  was the  position  of  Senior  Vice  President  and  Manager  of Human
Resources Administration.

     Mr. Whims was elected Vice President of the Company in January 1996. He has
served in various capacities with ANR Storage since 1979.

     Mr.  Williams was elected Vice President of the Company in January 1996. He
has served in various capacities with the Company since 1969.



                                        9

<PAGE>

Item 11. Executive Compensation.

     ANR  Pipeline  is  an  indirect,   wholly-owned   subsidiary   of  Coastal.
Information  concerning the cash compensation and certain other  compensation of
the directors and officers of Coastal is contained in this section.

     The  following  table sets forth  information  for the fiscal  years  ended
December 31, 1996, 1995 and 1994 as to cash compensation paid by Coastal and its
subsidiaries,  as well as certain other  compensation  paid or accrued for those
years,  to Coastal's  Chief  Executive  Officer  ("CEO") and its four other most
highly compensated executive officers (the "Named Executive Officers").

                           Summary Compensation Table
<TABLE>
<CAPTION>

                                                                             Long Term Compensation
                                                                         ------------------------------
                                     Annual Compensation<F1>                Awards           Payouts
                             -------------------------------------       ------------     ------------
                                                                          Securities                          All Other
                                                                          Underlying          LTIP             Compen-
Name and                                                                   Options/          Payouts            sation
Principal Position           Year       Salary ($)    Bonus ($)<F2>        SARs (#)<F3>        ($)<F4>           $<F5>
------------------           ----       ----------    ------------       ------------     -------------       ---------

<S>                          <C>          <C>             <C>                    <C>                            <C>   
O. S. Wyatt, Jr.,            1996         849,093         300,000               -0-                             67,928
Chairman of the Board        1995         849,093         300,000               -0-                             67,928
                             1994         849,093         200,000               -0-                             67,928

David A. Arledge,            1996         707,194         300,000           150,000                             56,576
President, CEO               1995         622,867         300,000            50,000          85,875             49,829
and Director                 1994         553,873         150,000               -0-                             44,310

James F. Cordes,<F6>         1996         592,223             -0-               -0-                             12,000
Executive V.P.               1995         592,223         135,000            15,000          42,937             47,378
and Director                 1994         592,223         130,000               -0-                             47,378

James A. King,               1996         343,823          80,000            10,000                             13,572
Executive V.P.               1995         343,823          80,000            10,000                             10,141
                             1994         343,823          75,000               -0-                              6,877

Jerry D. Bullock,            1996         249,147         160,000            10,000                              6,383
Senior V.P.                  1995         249,147          75,000            10,000                              6,766
                             1994         249,147          65,000               -0-                              3,383
<FN>
------------------------

<F1> Does not  include  the value of  perquisites  and other  personal  benefits
     because the aggregate amount of such compensation,  if any, does not exceed
     the lesser of  $50,000  or 10  percent  of annual  salary and bonus for any
     named individual.

<F2> Bonuses are based on the following factors: the individual's  position; the
     individual's  responsibility;   and  the  individual's  ability  to  impact
     Coastal's financial success.

<F3> The options do not carry any stock appreciation rights.

<F4> During 1995, Messrs.  Arledge and Cordes received one-time cash payments in
     the  amounts  indicated  in  connection  with  awards  made in  1987  under
     Coastal's  Performance  Unit Plan.  No further  awards have been made under
     this Plan.



                                       10

<PAGE>

<F5> All Other  Compensation for 1996 consists of: (i) Coastal  contributions to
     the  Coastal  Thrift  Plan (O. S.  Wyatt,  Jr.  $12,000;  David A.  Arledge
     $12,000;  James F.  Cordes  $12,000;  James A.  King  $6,000;  and Jerry D.
     Bullock  $6,000);  and  (ii)  certain  payments  in  lieu  of  Thrift  Plan
     contributions (O. S. Wyatt, Jr. $55,927; David A. Arledge $44,576; James F.
     Cordes  $-0-;  James A. King  $7,572;  and Jerry D.  Bullock  $383);  these
     payments  are made to all  employees  of Coastal and its  subsidiaries  who
     participate  in the Thrift  Plan who must  discontinue  their  Thrift  Plan
     participation due to federal statutory limits.

<F6> Mr. Cordes retired as an officer of Coastal effective March 7, 1997.
</FN>
</TABLE>

Stock Options

     The following  table sets forth  information  with respect to stock options
granted on March 1, 1996 for the  fiscal  year ended  December  31,  1996 to the
Named Executive Officers.

                  Option/SAR Grants in Last Fiscal Year (1996)

<TABLE>
<CAPTION>
                                Number of       Percent of Total
                               Securities         Options/SARs
                               Underlying          Granted to          Exercise                      Grant Date
                              Options/SARs        Employees in           Price       Expiration        Present
           Name                  Granted<F1>        Fiscal Year<F2>      ($/Sh)          Date         Value ($)<F3>
           ----             ----------------- ---------------------   ----------   --------------  --------------

<S>                              <C>                    <C>             <C>             <C>           <C>      
O. S. Wyatt, Jr.                    -0-                  -0-              -0-              -0-              -0-

David A. Arledge                 150,000                22.6            36.56           2/28/06       1,848,108

James F. Cordes                     -0-                  -0-              -0-              -0-              -0-

James A. King                     10,000                 1.5            36.56           2/28/06         123,207

Jerry D. Bullock                  10,000                 1.5            36.56           2/28/06         123,207

<FN>
---------------------

<F1> Options  expire ten years from the date of issuance  and are granted at the
     fair  market  value of the  Common  Stock of  Coastal on the date of grant.
     Options  vest  cumulatively  at a rate of 20% of the option  shares on each
     anniversary   date  of  the  date  of  grant   beginning  with  the  second
     anniversary.

<F2> The options do not carry any stock appreciation rights.

<F3> Based on the Black-Scholes option pricing model expressed as a ratio .337 x
     exercise price x number of shares.  The actual value,  if any, an executive
     may realize  will depend on the excess of the stock price over the exercise
     price on the date the option is  exercised,  so that there is no  assurance
     the value realized by an executive  will be at or near the value  estimated
     by the Black-Scholes model. The estimated values under that model are based
     on  assumptions  that  include  (i) a  stock  price  volatility  of  .1925,
     calculated  using  monthly  stock  prices for the three  years prior to the
     grant date, (ii) an interest rate of 6.25%, (iii) a dividend yield of 1.40%
     and (iv) an expected  option holding period of eight years.  No adjustments
     were made for the non-transferability of the options or to reflect any risk
     of forfeiture  prior to vesting.  The  Securities  and Exchange  Commission
     ("S.E.C.") requires disclosure of the potential realizable value or present
     value of each grant.  Coastal's use of the Black-Scholes  model to indicate
     the present value of each grant is not an endorsement of this valuation.
</FN>
</TABLE>


                                       11

<PAGE>

Option/SAR Exercises and Holdings

     The  following  table  sets  forth  information  with  respect to the Named
Executive  Officers,  concerning  the exercise of options during the last fiscal
year and  unexercised  options and SARs held as of the fiscal year ("FY")  ended
December 31, 1996.

               Aggregated Option/SAR Exercises In Last Fiscal Year
                       And FY-End Option/SAR Values (1996)

<TABLE>
<CAPTION>
                                                                           Number of
                                                                          Securities              Value of
                                                                          Underlying             Unexercised
                                                                          Unexercised           In-the-Money
                                                                         Options/SARs           Options/SARs
                                                                         at FY-End (#)        at FY-End ($)<F1>

                           Shares Acquired                               Exercisable/           Exercisable/
        Name               on Exercise (#)      Value Realized ($)       Unexercisable          Unexercisable
--------------------    -------------------    --------------------    ----------------    ------------------
<S>                            <C>                  <C>               <C>        <C>        <C>          <C>   
O. S. Wyatt, Jr.                 -0-                     -0-             -0-   /  -0-         -0-     /     -0-
David A. Arledge               55,000               1,118,737         187,373  / 228,000   3,943,307  /  3,595,560
James F. Cordes                30,000                 234,914            -0-   /  35,000      -0-     /    754,500
James A. King                    -0-                     -0-           26,000  /  24,000     599,800  /    432,200
Jerry D. Bullock                6,000                  69,920           2,000  /  27,000      41,760  /    491,860

<FN>
------------------
<F1>   $-based on the market price of $49.44 at December 31, 1996.
</FN>
</TABLE>

                COMPENSATION AND EXECUTIVE DEVELOPMENT COMMITTEE
                        REPORT ON EXECUTIVE COMPENSATION

     The  following  report  has  been  provided  by The  Coastal  Corporation's
Compensation and Executive  Development Committee (the "Committee") of the Board
of Directors  in  accordance  with current  S.E.C.  proxy  statement  disclosure
requirements.  The members of the Committee include John M. Bissell  (Chairman),
Roy D. Chapin, Jr., and Jerome S. Katzin.

     This material states Coastal's current overall compensation  philosophy and
program objectives. Detailed descriptions of Coastal's compensation programs are
provided as well as the information on Coastal's 1996 pay levels for the CEO.

Overall Objectives of the Executive Compensation Program

     Coastal's  compensation  philosophy and program  objectives are directed by
two primary guiding principles.  First, the program is intended to provide fully
competitive  levels of  compensation  - at expected  levels of  performance - in
order to attract,  motivate and retain talented executives.  Second, the program
is intended to create an alignment of interests between Coastal's executives and
stockholders such that a significant portion of each executive's compensation is
directly linked to maximizing stockholder value.

     In  support  of this  philosophy,  the  executive  compensation  program is
designed to reward performance that is directly relevant to Coastal's short-term
and long-term success.  As such, Coastal attempts to provide both short-term and
long-term   incentive  pay  that  varies  based  on  corporate  and   individual
performance.



                                       12

<PAGE>

     To accomplish these objectives,  the Committee has structured the executive
compensation  program with three  primary  underlying  components:  base salary,
annual incentives, and long-term incentives (i.e., stock options). The following
sections  describe  Coastal's plans by element of  compensation  and discuss how
each component relates to Coastal's overall compensation philosophy.

     In  reviewing  this  information,  reference  is  often  made to the use of
competitive  market  data as criteria  for  establishing  targeted  compensation
levels.  Coastal targets the market 50th  percentile for its total  compensation
program  and  actual  total  compensation  rates in 1996  were at or  below  the
targeted  level.  (However,  Coastal's  competitive  pay  posture  varies by pay
element,  as described  below.) Several market data sources are used by Coastal,
including energy industry norms for the publicly traded peer companies  included
in  Coastal's  shareholder  return  performance  graph,  as  reflected  in these
companies' proxy statements.  In addition,  we utilize published survey data and
data  obtained  from  independent  consultants  that  are for  general  industry
companies  similar in size (i.e.,  revenues) to Coastal.  The published  surveys
include data on over 50 companies of comparable size to Coastal,  as measured by
revenues.  Greater  emphasis is placed on the  published  data and data obtained
from consultants than on the data for proxy peers,  since the published data and
consulting data are reflective of company size.

Base Salary Program

     Coastal's  base salary  program is based on a philosophy of providing  base
pay levels  that fall  between  the market  50th and 75th  percentiles.  Coastal
periodically  reviews its  executive pay levels to assure  consistency  with the
external  market.  Generally,  Coastal's  actual base salary levels for 1996 for
executives as a group were consistent with the targeted percentiles.  We believe
it is crucial to provide  strongly  competitive  salaries  over time in order to
attract and retain executives who are highly talented.

     Annual salary adjustments for Coastal are based on several factors: general
levels of market salary  increases,  individual  performance,  competitive  base
salary  levels,  and  Coastal's  overall  financial  results.   Coastal  reviews
performance  qualitatively  considering total shareholder  returns, the level of
earnings, return on equity, return on total capital and individual business unit
performance. These criteria are assessed qualitatively and are not weighted. All
base salary  increases  are based on a  philosophy  of  pay-for-performance  and
perceptions  of  an  individual's  long-term  value  to  Coastal.  As a  result,
employees  with higher levels of  performance  sustained  over time will be paid
correspondingly higher salaries.

The Annual Bonus Plan

     Coastal's  Annual Bonus Plan is intended to (1) reward key employees  based
on company/business unit and individual performance; (2) motivate key employees;
and  (3)  provide   competitive   cash   compensation   opportunities   to  plan
participants.  Under the plan,  target award  opportunities  vary by  individual
position and are expressed as a percent of base salary.  The  individual  target
award  opportunities,  which are slightly below market median  levels,  are then
aggregated  into a total target pool which is adjusted as described  below.  The
amount a particular executive may earn is directly dependent on the individual's
position, responsibility, and ability to impact our financial success.

     The actual bonus pool is established each year by modifying the target pool
based on Coastal's  overall  performance  against  measures  established  by the
Committee.  In fiscal year 1996,  the key  performance  measure  considered  was
earnings  before  interest and taxes  ("EBIT")  against  plan.  This measure was
weighted 50% of the total bonus program.  In 1996 Coastal's EBIT performance was
above  threshold  standards  (minimum  performance  level for bonus payment) but
below a very  aggressive  plan,  resulting in the EBIT portion of the bonus paid
being below target. The remaining 50% of the annual bonus opportunity in 1996 is
a discretionary  annual bonus pool. As a result, no formula performance measures
were used in  establishing  the size of awards  under this  portion of the plan.
However, in establishing the size of the discretionary bonus pool, the Committee
considered Coastal's Return on Equity relative to industry peers (using the same
peers  included  in the  shareholder  return  graph),  Return  on Total  Capital
compared to industry peers, the EBIT performance of each business unit, progress
made toward improving Coastal's operational and financial  performance,  and the
need to reward unique individual contributions. These measures were not formally
weighted by the Committee.  The size of the discretionary bonus pool element was
established above threshold but below target based on the


                                       13

<PAGE>

qualitative  performance  assessment described above. As a result,  actual bonus
payments for 1996 were below target and median market levels.

     Individual awards from the established bonus pool are recommended by senior
management,  with advice and consent from the Committee.  Individual awards from
the pool are based on business unit and individual employee performance,  future
potential,   and   competitive   considerations.   All  individual   performance
assessments  are  conducted  in a  non-formula  fashion  without  specific  goal
weightings.  The total  bonus  awards made may not exceed the amount of funds in
the bonus pool.

Long-Term Incentive Plan

     Coastal's  Long-Term Incentive Plan ("LTIP") is designed to focus executive
efforts on the  long-term  goals of Coastal and to maximize  total return to our
shareholders.  While  Coastal's  LTIP allows the  Committee  to use a variety of
long-term  incentive  devices,  the  Committee has relied solely on stock option
awards to provide long-term incentive opportunities in recent years.

     Stock  options  align  the  interests  of  employees  and  shareholders  by
providing  value to the executive  through stock price  appreciation  only.  All
stock options have a ten-year term before  expiration and are fully  exercisable
within 6 years of the grant date.

     Stock  options were granted to certain of the Named  Executive  Officers in
1996 and it is anticipated that stock option awards will be made periodically at
the discretion of the Committee in the future.  As in past years,  the number of
shares actually  granted to a particular  participant is also based on Coastal's
financial success, its future business plans, and the individual's  position and
level of  responsibility  within  Coastal.  All of these  factors  are  assessed
subjectively and are not weighted. Stock options granted by Coastal in 1996 were
overall below market median levels.

1996 Chief Executive Officer Pay

     As  previously  described,  the  Committee  considers  several  factors  in
developing  an  executive's  compensation  package.  For the CEO,  these include
competitive market practices (consistent with the philosophy described for other
executives),  experience,  achievement  of strategic  goals,  and the  financial
success of Coastal  (considering  the factors  described  under the annual bonus
plan above).

David A. Arledge

     Mr.  Arledge's annual salary was increased to $725,000 in 1996. This action
moved his salary closer to, but still below,  the market median levels of salary
for the CEO position in companies of comparable size.

     Mr. Arledge's bonus for 1996 was $300,000,  payable in 1997. This award was
below targeted levels (and below market median levels) since Coastal's aggregate
performance on the measures described in the annual bonus section of this report
were below the aggressive Coastal targets.

     The Committee  granted stock options for 150,000  shares to Mr.  Arledge in
1996 in  recognition  of his  performance  and as an  incentive  to continue his
efforts to increase  shareholder  value. These awards are tied to performance in
that the executive  only  realizes  income from stock options if the stock price
rises. The grant is below market median levels for the executive  positions held
by him.

$1 Million Pay Deductibility Cap

     Under Section  162(m) of the Internal  Revenue Code,  public  companies are
precluded  from  receiving a tax  deduction  on  compensation  paid to executive
officers  in excess of $1 million.  To address the $1 million pay  deductibility
cap issue,  Coastal's 1996 LTIP is structured so that stock option awards (which
are intended to be the primary long-term incentive vehicle for the present time)
qualify for an exemption from the $1 million pay deductibility limit.



                                       14

<PAGE>

     Also, at the present  time,  the Chairman of the Board of Directors and the
CEO are the only  executives  whose base  salary plus  target  bonus  exceeds $1
million. In order to preserve Coastal's tax deduction for base salary plus bonus
for  these  individuals,   Coastal  has  established  a  nonqualified   deferred
compensation program. Under this program, any annual incentive awards that bring
cash  compensation  to a level over $1 million may be deferred so that  payments
occur  after  the  individual  is no  longer  a Named  Executive  Officer,  thus
preserving the deductibility of the pay for Coastal.

                                Compensation and Executive Development Committee

                                John M. Bissell, Chairman
                                Roy D. Chapin, Jr.
                                Jerome S. Katzin



                                       15

<PAGE>

Pension Plan

     The following table shows for  illustration  purposes the estimated  annual
benefits  payable  currently  under the Pension Plan and  Coastal's  Replacement
Pension Plan described below upon retirement at age 65 based on the compensation
and years of credited service indicated.

                               Pension Plan Table

<TABLE>
<CAPTION>
                                                              Years of Credited Service
                                       --------------------------------------------------------------------
      5-Year Final
      Average Pay                      15 Years       20 Years        25 Years       30 Years      35 Years
      -----------                      --------------------------------------------------------------------

      <S>                            <C>             <C>            <C>             <C>           <C>      
      $    125,000.................  $   33,920      $  45,226      $   56,533      $  67,840     $  67,044
           150,000.................      41,420         55,226          69,033         82,840        82,044
           200,000.................      41,420         55,226          69,033         82,840        82,044
           250,000.................      41,420         55,226          69,033         82,840        82,044
           300,000.................      41,420         55,226          69,033         82,840        82,044
           350,000.................      41,420         55,226          69,033         82,840        82,044
           400,000.................      41,420         55,226          69,033         82,840        82,044
           500,000.................      41,420         55,226          69,033         82,840        82,044
           600,000.................      41,420         55,226          69,033         82,840        82,044
         1,000,000.................      41,420         55,226          69,033         82,840        82,044
         1,200,000.................      41,420         55,226          69,033         82,840        82,044

<FN>
(A)  Compensation  covered  under the Pension Plan for  employees of Coastal and
     the Coastal  Replacement  Pension Plan generally  includes only base salary
     and is limited to $150,000 for 1996.

(B)  Federal  legislation  has reduced  the  benefit  which may be earned due to
     future service;  however, benefits previously earned may not be reduced. At
     December 31, 1996 each of the individuals named in the Summary Compensation
     Table had covered  salary for future  benefit  accrual of $150,000  and the
     following  years of  credited  service  and  pension  payable at age 65 (or
     current age, if over 65): Mr. Wyatt, 41 years,  $460,768;  Mr. Arledge,  16
     years,  $59,289;  Mr. Cordes, 19 years,  $81,059; Mr. King, 4 years $14,798
     (not vested);  and Mr. Bullock,  4 years,  $14,132 (not vested).  Mr. Wyatt
     reached  age  70 1/2 in  January,  1995  and  because  of IRS  requirements
     concerning  Coastal's  qualified  pension plan, he began receiving  pension
     payments in April 1996. These payments amounted to $282,775 in 1996.

(C)  The normal form of retirement  income is a straight life annuity.  Benefits
     payable  under the Pension Plan are subject to offset by 1.5% of applicable
     monthly  social  security  benefits  multiplied  by the  number of years of
     credited service (up to 331/3 years).
</FN>
</TABLE>

     The  Employee  Retirement  Income  Security  Act of  1974,  as  amended  by
subsequent  legislation,  limits  the  retirement  benefits  payable  under  the
tax-qualified  Pension Plan. Where this occurs,  Coastal will provide to certain
executives,   including  persons  named  in  the  Summary   Compensation  Table,
additional  nonqualified retirement benefits under a Coastal Replacement Pension
Plan. These benefits,  plus payments under the Pension Plan, will not exceed the
maximum  amount  which  Coastal  would have been  required to provide  under the
Pension  Plan  before  application  of  the  legislative  limitations,  and  are
reflected in the above table and footnote (B).



                                       16

<PAGE>

             PERFORMANCE GRAPH - SHAREHOLDER RETURN ON COMMON STOCK

                                    [GRAPH]

<TABLE>
<CAPTION>
                                            Five-Year Cumulative Values
                                              $100 Invested 12/31/91
                                               Dividends Reinvested

                                                      DOLLAR VALUE OF $100 INVESTMENT AT DECEMBER 31,
                                       -----------------------------------------------------------------------
                                        1991          1992         1993         1994         1995         1996
                                        ----          ----         ----         ----         ----         ----

<S>                                  <C>             <C>          <C>          <C>          <C>          <C> 
Coastal                              $   100         $  99        $ 118        $ 109        $ 157        $ 207
S&P 500                                  100           108          118          120          165          203
Index<F1><F2>                            100           112          132          119          128          196

<FN>
<F1> The  Index is based on Value  Line's  Diversified  Natural  Gas Group - the
     Performance Graph reflects total shareholder return weighted to reflect the
     market  capitalization  of the peer companies.  The peer group is comprised
     of:  Burlington  Res.,  Cabot,  Columbia,  Consolidated  Nat. Gas,  Eastern
     Enterprises,  Enron, Enserch,  Equitable Res., KN Energy,  Mitchell Energy,
     National  Fuel Gas,  Noram  Energy,  Panhandle  Eastern,  Questar,  Seagull
     Energy, Sonat, Southwestern Energy, Valero and Williams Cos.

<F2> Coastal is excluded from the Index.
</FN>
</TABLE>


Transactions with Management and Others

     In 1987,  Coastal Mart,  Inc.  ("Coastal  Mart"),  a subsidiary of Coastal,
entered into a ten-year  lease/purchase  agreement with Pester Marketing Company
("Pester Marketing") for 220 gasoline service stations  (subsequently reduced to
182 stations through  disposition of assets) located in the midwestern region of
the United States.  Jack Pester,  a principal  stockholder  and Chief  Executive
Officer  of Pester  Marketing,  subsequently  became an  employee,  officer  and
director of Coastal Mart and was elected a Senior Vice President of Coastal. Mr.
Pester is no longer active in the management of Pester Marketing,  and his stock
interest  in that  company  has  been  placed  in  trust.  In  1994,  the  lease
transaction  was  terminated  pursuant to an agreement  under which Coastal Mart
acquired  ownership  of and title to 175 of the  gasoline  service  stations and
Pester Marketing retained the seven remaining stations.

     During 1996, Coastal and/or its subsidiaries sold approximately  14,576,400
gallons of gasoline to Pester  Marketing at prevailing  market  prices  totaling
approximately $10,036,200.



                                       17

<PAGE>

     The following  table sets forth  ownership of units of limited  partnership
interests in the Coastal  1987  Drilling  Program,  Ltd.,  by directors  and all
directors and executive officers as a group.

Directors                                                                Units

O. S. Wyatt, Jr. ..................................................        750
Harold Burrow .....................................................        100
David A. Arledge ..................................................          -
John M. Bissell ...................................................          -
George L. Brundrett, Jr. ..........................................          -
Roy D. Chapin, Jr. ................................................         20
James F. Cordes ...................................................          -
Roy L. Gates ......................................................          -
Kenneth O. Johnson ................................................          -
Jerome S. Katzin ..................................................          -
Thomas R. McDade...................................................          -
L. D. Wooddy, Jr...................................................          -
All directors and executive
  officers as a group (31 persons,
  including the above) .............................................       890

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

    (a)   Security ownership of certain beneficial owners.

    The following is information,  as of March 12, 1997, on each person known or
believed by ANR Pipeline to be the  beneficial  owner of 5% or more of any class
of its voting securities:

<TABLE>
<CAPTION>
                                                                                Amount and Nature
                                            Name and Address                      of Beneficial          Percent
Title of Class                             of Beneficial Owner                      Ownership           of Class
--------------                             -------------------                 -------------------      --------

<S>                              <C>                                           <C>                        <C> 
Common Stock,                    American Natural Resources Company            1,000 shares direct        100%
$100 par value per share         One Woodward Avenue
                                 Detroit, Michigan 48226
</TABLE>

     (b) Security ownership of management.

     ANR  Pipeline  is  an  indirect,   wholly-owned   subsidiary   of  Coastal.
Information  concerning the security  ownership of certain beneficial owners and
management of Coastal is contained in this section.

     The total number of shares of stock of Coastal  outstanding as of March 12,
1997 is 105,995,018 consisting of: 59,068 shares of $1.19 Cumulative Convertible
Preferred  Stock,  Series A (the "Series A Preferred  Stock"),  72,398 shares of
$1.83 Cumulative  Convertible Preferred Stock, Series B (the "Series B Preferred
Stock"),  and 31,940 shares of $5.00  Cumulative  Convertible  Preferred  Stock,
Series C (the "Series C Preferred Stock") (the Series A Preferred Stock,  Series
B  Preferred  Stock  and  Series  C  Preferred  Stock  are  referred  to  herein
collectively as the "Preferred Stock"),  105,451,513 shares of Common Stock, and
380,099 shares of Class A Common Stock.

     Each voting share of Common Stock or Preferred Stock entitles the holder to
one vote with  respect to all  matters to come before a  shareholders'  meeting,
while  each  share of Class A Common  Stock  entitles  the  holder to 100 votes.
However, 25% of Coastal's directors standing for election at each annual meeting
will be  determined  solely by holders of the Common Stock and voting  Preferred
Stock voting as a class.



                                       18

<PAGE>

     The  following  table sets forth  information,  as of March 12, 1997,  with
respect to each person known or believed by Coastal to be the beneficial  owner,
who has or  shares  voting  and/or  investment  power  (other  than as set forth
below), of more than five percent (5%) of any class of its voting securities.

<TABLE>
<CAPTION>
      Name and Address                                                                                 Percent (%)
     of Beneficial Owner                       Title of Class             Number of Shares            of Class <F1>
     -------------------                       --------------             ----------------            ------------

<S>                                       <C>                                  <C>                        <C>  
O. S. Wyatt, Jr.                            Class A Common Stock               154,577  <F2>               40.4
Chairman of the Board
of Coastal
Nine Greenway Plaza
Houston, Texas 77046-0995

Trustee/Custodian under the                     Common Stock                12,344,644  <F3>               11.7
Thrift Plan, ESOP and                       Class A Common Stock                64,429  <F3>               16.8
Pension Plan of Coastal
and its subsidiaries
Texas Commerce Bank
 National Association
600 Travis, 10th Floor
Houston, Texas  77002

FMR Corp.                                       Common Stock                 7,411,815                      7.0
82 Devonshire Street
Boston, Massachusetts 02109

Isabel H. Long                            Series A Preferred Stock              28,976                     49.1
485 S. Parkview Ave.,
Columbus, Ohio  43209-1075

The DeZurik Family                        Series C Preferred Stock              31,940  <F4>              100.0
c/o David DeZurik
2460 S.E. 8th St.
Pompano Beach, Florida 33062
<FN>
----------

<F1> Class includes  presently  exercisable  stock options held by directors and
     executive officers.

<F2> Includes 7,354 shares of Class A Common Stock owned by the spouse and a son
     of Mr. Wyatt, as to which shares beneficial ownership is disclaimed.

<F3> The  Trustee/Custodian is the record owner of these shares; and also is the
     record owner of 742 shares of the Series B Preferred  Stock,  each of which
     is convertible  into 3.6125 shares of Common Stock and 0.1 share of Class A
     Common Stock.  Voting  instructions  are requested from each participant in
     the  Thrift  Plan and ESOP and from the  trustees  under a  Pension  Trust.
     Absent timely voting instructions,  the Trustee is permitted to vote Thrift
     Plan and ESOP shares on any matter,  but has no  authority  to vote Pension
     Plan shares. Nor does the  Trustee/Custodian  have any authority to dispose
     of shares  except  pursuant to  instructions  of the  administrator  of the
     Thrift Plan and ESOP or pursuant to  instructions  from the trustees  under
     the Pension Trust.

<F4> Members of the DeZurik  family  acquired  the Series C  Preferred  Stock in
     connection  with a 1972  Agreement of Merger  involving the  acquisition of
     Colorado, a subsidiary of Coastal.
</FN>
</TABLE>


                                       19

<PAGE>

     The following table sets forth information, as of March 12, 1997, regarding
each of the  current  directors,  including  Class  II  directors  standing  for
election, and all directors and executive officers as a group. Each director has
furnished  the  information  with  respect  to  age,  principal  occupation  and
ownership of shares of stock of Coastal. Messrs. Arledge,  Brundrett, Wooddy and
Wyatt are Class II directors whose terms expire in 1997; Messrs.  Cordes, Gates,
Johnson  and McDade are Class III  directors  whose  terms  expire in 1998;  and
Messrs.  Bissell,  Burrow,  Chapin and Katzin are Class I directors  whose terms
expire in 1999.

<TABLE>
<CAPTION>
                                                                                                  Number of Shares
   Name, (Age), Year          Offices with Coastal                                                  Beneficially         Percent (%)
 First Became Director     and/or Principal Occupation                    Title of Class              Owned<F1>           of Class*
 ---------------------     ---------------------------                    --------------          ----------------      -----------

<S>                                                                                                  <C>                    <C>
O. S. Wyatt, Jr.          Chairman of the Board                           Common Stock               2,858,863  <F2>         2.7
(72), 1955                                                                Class A Common Stock         154,577  <F2>        40.4

Harold Burrow             Vice Chairman of the Board;                     Common Stock                 137,127  <F2>
(82), 1973                Chairman of Colorado and ANR                    Class A Common Stock          13,601               3.6

David A. Arledge          President and                                   Common Stock                 181,112
(52), 1988                Chief Executive Officer                         Class A Common Stock           2,352

John M. Bissell           Chairman of the Board                           Common Stock                   5,080
(66), 1985                of Bissell Inc.                                 Class A Common Stock             -0-

George L. Brundrett, Jr.  Attorney                                        Common Stock                   4,910
(75), 1973                                                                Class A Common Stock           2,290

Roy D. Chapin, Jr.        Former Chairman and                             Common Stock                   3,250  <F2>
(81), 1988                Chief Executive Officer                         Class A Common Stock             -0-
                          of American Motors Corporation

James F. Cordes           Retired; former Executive Vice                  Common Stock                  18,708
(56), 1985                President of Coastal                            Class A Common Stock             -0-

Roy L. Gates              Ranching and Investments                        Common Stock                   4,095
(68), 1969                                                                Class A Common Stock           2,736

Kenneth O. Johnson        Senior Vice President                           Common Stock                  40,020
(76), 1988                                                                Class A Common Stock           9,604               2.5

Jerome S. Katzin          Retired Investment Banker                       Common Stock                  41,803
(78), 1983                                                                Class A Common Stock             -0-

Thomas R. McDade          Senior Partner, Law Firm of McDade,             Common Stock                     500
(64), 1993                Fogler, Maines & Lohse L.L.P., Houston          Class A Common Stock             -0-

L. D. Wooddy, Jr.         Retired; Former President of Exxon              Common Stock                   3,000
(70), 1992                Pipeline Company                                Class A Common Stock             -0-

All directors and executive officers as a group                           Common Stock               3,711,260  <F3>         3.5
(33 persons, including the above)                                         Class A Common Stock         186,568  <F3>        48.8

                        (See footnotes on following page)

<FN>
      *    Less than one percent  unless  otherwise  indicated.  Class  includes
           outstanding  shares and presently  exercisable  stock options held by
           directors and executive  officers.  Excluding  presently  exercisable
           stock options,  directors and executive officers as a group would own
           184,288 shares of Class A Common Stock,  which would constitute 48.5%
           of the shares of such class.

     <F1> Except  for the  shares  referred  to in Notes 2 and 3 below,  and the
          shares represented by presently exercisable stock options, the holders
          are believed by Coastal to have sole voting and investment power as to
          the shares  indicated.  Amounts  include  shares in  Coastal  ESOP and
          Thrift Plan, and presently  exercisable  stock options held by Messrs.
          Arledge  (162,093  shares of Common  Stock and 2,280 shares of Class A
          Common  Stock),  Cordes  (8,000 shares of Common  Stock),  and Johnson
          (7,848 shares of Common Stock).



                                       20

<PAGE>

     <F2>  Includes  shares owned by  the spouse and a son of Mr. Wyatt (266,895
           shares of Common Stock and 7,354  shares of Class A Common Stock), by
           the spouse of Mr. Burrow (5,000  shares  of Common  Stock) and by the
           spouse of Mr. Chapin (1,000  shares  of Common  Stock), as  to  which
           shares beneficial ownership is disclaimed.

     <F3>  Includes  presently  exercisable  stock  options to purchase  453,829
           shares of Common Stock and 2,280 shares of Class A Common Stock; also
           includes  280,928  shares of Common Stock and 7,354 shares of Class A
           Common  Stock  owned by  spouses  and  children,  as to which  shares
           beneficial  ownership  is  disclaimed.  In  addition,  one  executive
           officer owns 8 shares of Series B Preferred  Stock,  each of which is
           convertible into 3.6125 shares of Common Stock and 0.1 share of Class
           A Common Stock.
</FN>
</TABLE>

     No incumbent director is related by blood,  marriage or adoption to another
director  or to  any  executive  officer  of  Coastal  or  its  subsidiaries  or
affiliates.

     Except as  hereafter  indicated,  the above table  includes  the  principal
occupation  of each of the  directors  during  the past five  years.  The listed
executive officers have held various executive positions with Coastal,  ANR, ANR
Pipeline and/or Colorado during the five-year period.

     Mr.  Bissell is a member of the Boards of Directors  of Old Kent  Financial
Corporation and Batts Inc.

     Mr. Cordes is a member of the Board of Directors of Comerica Inc.

     Mr. Katzin is a member of the Board of Directors of Qualcomm Incorporated.

     Mr. McDade is a trial lawyer and the founding senior partner of the Houston
law firm of McDade,  Fogler,  Maines & Lohse  L.L.P.  Prior to  forming  McDade,
Fogler,  Maines & Lohse L.L.P.,  he was a senior partner in the Houston law firm
of  Fulbright &  Jaworski.  He is a member of the Board of  Directors  of Equity
Corporation International.

     Messrs. Arledge and Burrow are directors of Colorado and ANR Pipeline. Both
of these  subsidiaries  of Coastal are subject to the reporting  requirements of
the Securities Exchange Act of 1934, as amended.

Item 13. Certain Relationships and Related Transactions.

     (a) Transactions with management and others.

     ANR  Pipeline  participates  in a program  which  matches  short-term  cash
excesses  and   requirements  of  participating   affiliates,   thus  minimizing
borrowings from outside sources.  At December 31, 1996, the Company had advanced
$168.7  million to an  associated  company at a market  rate of  interest.  Such
amount is repayable on demand.

     Additional  information called for by this item is set forth under Item 11,
"Executive  Compensation,"  and  Note  10 of  Notes  to  Consolidated  Financial
Statements included herein.

     (b) Certain business relationships.

         None.

     (c) Indebtedness of management.

         None.

     (d) Transactions with promoters.

         Not applicable.


                                       21

<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)  The  following  documents  are  filed  as  part  of  this  Annual Report or
     incorporated herein by reference:

     1. Financial Statements.

               The following Consolidated Financial Statements of ANR Pipeline
         and  Subsidiaries  are  included  in response to Item 8 hereof on the
         attached pages as indicated:

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----

       <S>                                                                                                 <C>
       Independent Auditors' Report......................................................................  F-6
       Consolidated Balance Sheet at December 31, 1996 and 1995..........................................  F-7
       Statement of Consolidated Earnings for the Years Ended December 31, 1996, 1995 and 1994...........  F-9
       Statement of Consolidated Retained Earnings for the Years Ended December 31, 1996, 1995
          and 1994.......................................................................................  F-9
       Statement of Consolidated Cash Flows for the Years Ended December 31, 1996, 1995 and
          1994...........................................................................................  F-10
       Notes to Consolidated Financial Statements........................................................  F-11
</TABLE>

     2. Financial Statement Schedules.

                 Schedules are omitted as not applicable or not required, or the
           required   information  is  shown  in  the   Consolidated   Financial
           Statements or Notes thereto.

      3.   Exhibits.

            (3.1)+      Composite Certificate of Incorporation of  ANR  Pipeline
                        effective  as of  December  31, 1987.  (Filed as  Module
                        ANRCertIncorp on March 29, 1994.)

            (3.2)+       Amended  By-laws  of  ANR  Pipeline   effective  as  of
                         September  21,  1994.  (Filed  as  Exhibit  3.2  to ANR
                         Pipeline's  Annual  Report on Form 10-K for the  fiscal
                         year ended December 31, 1994.)

              (4)        With  respect  to  instruments  defining  the rights of
                         holders of long-term  debt, the Company will furnish to
                         the  Securities   and  Exchange   Commission  any  such
                         document on request.

            (4.1)+       Board Resolution dated September 22, 1975  establishing
                         the $2.675 Series of Cumulative Preferred Stock. (Filed
                         as Module BoardRes_092275 on March 29, 1994.)

            (4.2)+       Board  Resolution  dated October 26, 1976  establishing
                         the $2.12 Series of Cumulative  Preferred Stock. (Filed
                         as Module BoardRes_102676 on March 29, 1994.)

            (4.3)+       Board  Resolution  dated May 12, 1980  establishing the
                         $12.00 Series of Cumulative  Preferred Stock. (Filed as
                         Module BoardRes_051280 on March 29, 1994.)

            (4.4)+       Indenture  dated as of  February  15,  1994  and  First
                         Supplemental  Indenture  dated as of February  15, 1994
                         for the $125 million of 7-3/8%  Debentures due February
                         15,  2024.  (Filed  as  Exhibit  4.4 to ANR  Pipeline's
                         Annual  Report on Form 10-K for the  fiscal  year ended
                         December 31, 1993.)

           (10.1)+       Form of Employment  Agreement  between ANR Pipeline and
                         certain of  its  executive  officers.  (Filed as Module
                         ANREmployAgree on March 29, 1994.)


                                       22

<PAGE>

           (10.2)+       Form  of  Employment   Agreement  between  Coastal  and
                         certain  Company  executive  officers. (Filed as Module
                         TCCEmployAgree on March 29, 1994.)

           (10.3)+       Agreement for Consulting  Services between ANR Pipeline
                         and Harold Burrow,  dated as of January 1, 1996. (Filed
                         as Exhibit 10.3 to ANR Pipeline's Annual Report on Form
                         10-K for the fiscal year ended December 31, 1995.)

             (21)*   Subsidiaries of the Company.

             (24)*   Power of Attorney (included on signature pages herein).

             (27)*   Financial Data Schedule.

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


          Note:

          +   Indicates documents incorporated by reference from the prior
              filings indicated.
          *   Indicates documents filed herewith.

(b)   Reports on Form 8-K.

      No reports on Form 8-K were filed  during the quarter  ended  December 31,
1996.



                                       23

<PAGE>

                                POWER OF ATTORNEY

      Each person whose  signature  appears below hereby appoints Coby C. Hesse,
William L. Johnson and Austin M.  O'Toole and each of them,  any one of whom may
act without the joinder of the others,  as his  attorney-in-fact  to sign on his
behalf  and in the  capacity  stated  below and to file all  amendments  to this
Annual Report on Form 10-K,  which amendment or amendments may make such changes
and  additions   thereto  as  such   attorney-in-fact   may  deem  necessary  or
appropriate.


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

     ANR PIPELINE COMPANY
     (Registrant)


By:  JEFFREY A. CONNELLY
     --------------------------------------
     Jeffrey A. Connelly
     President and Chief Executive Officer
     March 27, 1997

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


By:  DAVID A. ARLEDGE
     -----------------------------------------
     David A. Arledge
     Principal Financial Officer and Director
     March 27, 1997


By:  WILLIAM L. JOHNSON
     -----------------------------------------
     William L. Johnson
     Principal Accounting Officer
     March 27, 1997


By:  HAROLD BURROW
     -----------------------------------------
     Harold Burrow
     Director
     March 27, 1997


By:  JEFFREY A. CONNELLY
     -----------------------------------------
     Jeffrey A. Connelly
     Director
     March 27, 1997


By:  RICHARD A. LIETZ
     -----------------------------------------
     Richard A. Lietz
     Director
     March 27, 1997


By:  JON R. WHITNEY
     -----------------------------------------
     Jon R. Whitney
     Director
     March 27, 1997




                                       24

<PAGE>

                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 forward-looking statements reflecting the Company's
expectations  in the near future;  however,  many  factors  which may affect the
actual  results,  including  natural gas  prices,  market  conditions,  industry
competition  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

     Overview.  Internally  generated funds have been the primary source to meet
mandatory debt and preferred stock  retirements  and other cash  requirements of
the Company over the past three years.

     In February  1994,  the Company  completed  an offering of $125  million in
principal amount of 7-3/8% 30-year  Debentures due on February 15, 2024. On June
1, 1995, the Company completed an offering of $75 million in principal amount of
7% Debentures due June 1, 2025,  putable by the holders for redemption at par on
June 1, 2005. The net proceeds from the sale of the Debentures were used for the
payment of common stock  dividends  and for the repayment of  outstanding  Swiss
franc bonds which matured in October 1995. The 125 million Swiss franc bonds had
a dollar  equivalence of $58.1 million and an effective  interest rate of 10.7%.
The remaining net proceeds from the  Debentures  were added to the general funds
of the  Company  and were used for capital  expenditures  and for other  general
corporate purposes.

     On June 16, 1994, the Company redeemed all of the outstanding shares of its
Cumulative  Preferred Stock. For additional  information  regarding this matter,
see Note 2 of Notes to Consolidated Financial Statements included herein.

     The Company  paid  dividends  of $300  million on its common stock in 1996.
These dividends were financed from internally generated funds.

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

<TABLE>
<CAPTION>
                                                                                 1996         1995        1994
                                                                               ---------    --------    --------

      <S>                                                                          <C>         <C>         <C>
      Cash flows from operating activities to long-term debt
       and capital lease obligations..........................................     46.2%       42.5%       56.3%

      Long-term debt and capital lease obligations to total capitalization....     46.4%       35.9%       35.7%
</TABLE>

     The  increase  in 1996 as  compared to 1995 in the ratio of cash flows from
operating  activities to long-term debt and capital lease  obligations  resulted
from higher cash flows provided by operating activities in 1996. The increase in
1996 as  compared  to 1995 in the  ratio of  long-term  debt and  capital  lease
obligations  to  total  capitalization  resulted  from a  decrease  in  retained
earnings due to dividends paid on common stock.

     The  decrease  in 1995 as  compared to 1994 in the ratio of cash flows from
operating  activities to long-term debt and capital lease  obligations  resulted
from an  increase  in  long-term  debt due to the  issuance  of $75  million  of
Debentures in 1995, as discussed  above. A reduction in accounts payable in 1995
also contributed to the decrease.  The ratio of long-term debt and capital lease
obligations to total  capitalization  in 1995  approximated that of 1994, due to
the increase in long-term debt being offset by an increase in retained  earnings
during 1995.

     Management  believes  that the  Company's  stable  financial  position  and
earnings  ability will enable it to continue to generate and obtain  capital for
financing needs in the foreseeable future.


                                       F-1

<PAGE>

     Expenditures  for each of the years 1994  through  1996 and the  sources of
capital used to finance these  expenditures  are summarized in the "Statement of
Consolidated Cash Flows."

     Capital  Expenditures.  Capital expenditures were $70.3 million in 1996 and
$50.1  million in 1995.  Capital  expenditures  for 1997 are  budgeted at $104.9
million. These expenditures are primarily for completion of projects in process,
development  of  information  systems,  operational  necessities,  environmental
requirements, expansion projects and increased efficiency.

     Funding for budgeted capital  expenditures  will be accomplished by the use
of  internally  generated  funds.  Funding  for  certain  proposed  projects  is
anticipated  to be provided  through  non-recourse  project  financing  in which
certain of the  projects'  assets and contracts  will be pledged as  collateral.
Equity  participation  by other entities will also be considered.  To the extent
required,  cash for equity  contributions  to projects  will be  generated  from
general  corporate funds.  Information  concerning  certain of these projects is
contained in Part I herein under Item 1, "Business - Other Developments."

     Investment  in Related  Parties - Other.  In  December  1996,  the  Company
invested  $78  million in an  affiliate,  Coastal  Medical  Services,  Inc.  The
affiliate has assumed the  responsibility  for  facilitating the management of a
portion  of  the  medical   obligations   of  the  Company  and  other   Coastal
subsidiaries.

     Extraordinary Item. The decreases in "Assets related to excess gas supply,"
"Order 636 transition costs," and "Deferred charges and other" in 1996 primarily
resulted from the discontinued application of FAS No. 71. Additional information
concerning  FAS No. 71 is set forth in Results of Operations and Note 5 of Notes
to Consolidated Financial Statements included herein.

     Financing  Alternatives.  Alternatives  to finance  additional  capital and
other  expenditures  are  limited  principally  by the  terms  of  certain  debt
instruments of the Company and certain affiliates. Under the most restrictive of
such instruments,  as of December 31, 1996, ANR Pipeline and certain  affiliates
could  incur  in  the  aggregate   approximately   $1.6  billion  of  additional
indebtedness.  For the Company and these  affiliates to incur  indebtedness  for
borrowed money in excess of this amount, $444 million of indebtedness of Coastal
Natural Gas would need to be retired.

     The  Company  participates  in a  program  which  matches  short-term  cash
excesses  and   requirements  of  participating   affiliates,   thus  minimizing
borrowings from outside sources.  At December 31, 1996, the Company had advanced
$168.7  million to an  associated  company at a market  rate of  interest.  Such
amount is repayable upon demand.

     Environmental.  The  Company's  operations  are  subject to  extensive  and
evolving federal,  state and local  environmental laws and regulations which may
affect  such   operations  and  costs  as  a  result  of  their  effect  on  the
construction,  operation and maintenance of its pipeline facilities. The Company
spent  approximately $2.5 million in 1996 on environmental  capital projects and
anticipates  annual capital  expenditures of  approximately  $4 million per year
over the next several years aimed at maintaining  compliance  with such laws and
regulations.  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."  The Company has been named as a  potentially  responsible  party in
five  Superfund  waste  disposal  sites.  At these  sites,  there is  sufficient
information to estimate total cleanup costs of approximately $30 million and the
Company  estimates  its pro-rata  exposure,  to be paid over a period of several
years, is approximately $.2 million.

     There are additional areas of environmental  investigation  and remediation
responsibilities  to which the  Company  may be  subject.  The states  also have
regulatory  programs that mandate  environmental  investigation and cleanup.  In
Michigan,  where the  Company has  extensive  operations,  the  recently-revised
Environmental  Response Act requires owners or operators of property  containing
contamination above regulatory  thresholds to diligently pursue remedial actions
and  exercise  due care so that  the  property  does not pose a threat  to human
health or the environment. The


                                       F-2

<PAGE>

Company has designated internal staff and has retained environmental consultants
to  assess  sites  for  which the  Company  may have due  diligence  or due care
obligations.

     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.

Results of Operations

     ANR  Pipeline  operates  primarily in the Midwest and  increasingly  in the
Northeast  regions of the United States under FERC Order 636, which  promulgated
the use of the straight  fixed  variable  ("SFV") rate setting  methodology.  In
general,  SFV  provides  that all  fixed  costs  of  providing  service  to firm
customers (including an authorized return on rate base and associated taxes) are
to be  received  through  fixed  monthly  reservation  charges,  which are not a
function of volumes  transported,  while including within the commodity  billing
component the pipeline's  variable  operating costs. The Company auctions gas on
the open market to handle a residual  quantity of gas  purchased  under  certain
remaining  gas purchase  contracts  pending  expiration of such  contracts.  The
Company's Order 636 restructured  tariff provides mechanisms for recovering from
its transportation  customers the pricing differential between costs incurred to
purchase  gas under  these  contracts  and the  amounts  recovered  through  the
auctioning of such gas on the open market.  In addition,  Order 636 has resulted
in the  incurrence of other  transition  costs and provides  mechanisms  for the
recovery of all such costs  within a  reasonable  time  period.  At December 31,
1996,  the  Company  had  eliminated  through  sale  and  refunctionalization  a
substantial  portion of its Southwest  gathering  facilities  previously used to
provide bundled services.  The gain resulting from the sale is included in other
revenues.

     Effective  November 1, 1996, the Company  discontinued  the  application of
regulatory  accounting  principles  under FAS No. 71. As a result,  ANR Pipeline
recorded an  extraordinary  charge to income of $163.9  million,  net of related
income taxes of $91.6 million.  The Company believes this accounting change will
result in financial reporting which better reflects the results of operations in
the economic environment in which it operates. The charge to earnings is noncash
and has no direct  effect on either  the  Company's  ability  to  include  these
deferred items in future rate proceedings or on its ability to collect the rates
set thereby.  Elimination  of the deferral of expenses and the  amortization  of
regulatory assets is not expected to have a material adverse impact on financial
results in future periods.

     FAS No. 71 provides that rate regulated  enterprises 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. As a
result of FERC Order 636 (which  unbundled  pipeline  services giving  customers
more options for  transporting  their gas), the effect of discounted  rates, and
new competitive  developments on the horizon, the Company has concluded that the
competitive  environment  is no longer  consistent  with the form of  regulation
contemplated by FAS No. 71. Additional  information concerning FAS No. 71 is set
forth in Note 5 of Notes to Consolidated Financial Statements included herein.

     The revenue  decline since the adoption of Order 636 reflects the increased
competition  in the  natural gas  industry.  Although  the firm  capacity on the
Company's  major  interstate  pipelines is sold out, the Company has  instituted
reengineering  projects  and  cost-cutting  efforts  to remain  competitive  and
improve operating profits.

     Revenues. Storage and transportation revenues decreased by $61.1 million in
1996 as compared to 1995.  Contributing  to this  decrease was lower storage and
transportation  revenues of $15.2 million resulting from continued,  intensified
competition  across the United States natural gas industry,  particularly in the
Midwest region in which the Company  operates.  Additional items which decreased
revenues were (a) revenue received in 1995 related to storage and transportation
contract   settlements  of  $22.5  million,  (b)  reduced  surcharge  and  other
pass-through  recoveries of $19.7  million,  which are offset in cost of gas and
operation and  maintenance,  and (c)  increases in  provisions  for rate related
contingencies of $8.6 million.  Provisions for rate related  contingencies  were
$45.6 million and $37 million in 1996 and 1995, respectively.

                                       F-3

<PAGE>

     Storage and  transportation  revenues  decreased by $3.5 million in 1995 as
compared to 1994.  The primary  factor  contributing  to the  decrease was lower
storage and  transportation  revenues of $14.7 million resulting from continued,
intensified   competition   across  the  United  States  natural  gas  industry,
particularly in the Midwest region in which the Company  operates.  The decrease
in storage and  transportation  revenues is  partially  offset by an increase in
contract settlements of $10.6 million.

     Gas sales revenues  decreased by $20.1 million in 1996 as compared to 1995.
This trend will continue,  with a  corresponding  decrease in cost of gas, until
the termination of the Company's remaining gas purchase contracts,  as discussed
above. The reduction in the quantity of gas auctioned on the open market, offset
in part by  increased  spot market  prices,  reduced gas sales  revenues by $6.6
million.  Purchased Gas Adjustment  ("PGA")  recoveries  recorded in 1995, which
were  associated with purchase  periods prior to Order 636,  resulted in reduced
revenues of $13.2 million in 1996.  Such  recoveries  were largely  completed in
1995.

     Gas sales  revenues  decreased by $46.9 million in 1995 as compared to 1994
primarily  due to a  decrease  of $37  million  related  to a  reduction  in the
quantity of gas  auctioned  on the open  market.  Lower spot market  prices also
resulted in a decrease in revenues of $7.8 million.

     Other  revenues  increased  by $23  million  in  1996 as  compared  to 1995
primarily  due to a $28.7  million  gain  related  to the  1996  sale of a major
portion of the Company's Southwest gathering facilities.

     Other revenues  increased by $29 million in 1995 as compared to 1994.  This
increase  includes  increased  interest  income  from a  related  party of $11.2
million and adjustments to revenue reserves  associated with certain  transition
cost recovery mechanisms of $8.7 million.

     Cost  of  Gas.  Cost  of gas  includes  purchases  required  under  certain
remaining gas purchase  contracts and the  amortization  of PGA recoveries  from
customers.  Collectively,  decreases in the cost of gas were offset in revenues,
as discussed  above.  Cost of gas decreased by $28.2 million in 1996 as compared
to 1995. The variance  primarily  results from decreases in the  amortization of
previously  deferred costs  associated  with above market gas purchases of $17.6
million and  reductions  in the quantity of gas  purchased  under the  Company's
remaining gas purchase  contracts of $5.5 million.  Additionally,  reductions in
the amortization of PGA costs decreased the cost of gas by $15.9 million.

     Cost of gas  decreased  by $27.3  million in 1995 as compared to 1994.  The
variance primarily results from a decrease of $43.8 million due to reductions in
the  quantity  of gas  purchased  under the  Company's  remaining  gas  purchase
contracts.  This  decrease  in cost was  partially  offset by an increase in the
amortization  of  previously  deferred  costs  associated  with above market gas
purchases of $19.2 million,  partially as a result of the  implementation of the
FERC's policy  governing the order of  attribution  of revenues  received by the
Company  related to  transition  costs  under  Order 636 (see Note 6 of Notes to
Consolidated Financial Statements).

     Operation and Maintenance.  Operation and maintenance expenses decreased by
$23.1  million in 1996 as compared to 1995.  The decrease was  primarily  due to
reduced transportation  services provided by others of $18.3 million, which were
offset in revenues,  as discussed above.  Also contributing to the decrease were
lower  salary  and  benefit  expenses  of $8.8  million  mainly  due to an early
retirement incentive program which became effective December 31, 1995. Decreases
in ad valorem  taxes of $3.2  million in 1995,  largely due to  adjustments  for
prior periods, offset the above mentioned variances.

     Operation  and  maintenance  expenses  decreased by $4.1 million in 1995 as
compared to 1994. The decrease primarily results from a reduction of $13 million
in storage and transportation  services provided by others,  partially offset by
an $8.3  million  benefit  included  in 1994  related  to  revisions  of certain
estimated costs.

     Interest  Expense.  Interest  expense  increased by $5.9 million in 1995 as
compared to 1994 largely due to an increase in expense  associated  with changes
in provisions for regulatory matters.



                                       F-4

<PAGE>

Recent Authoritative Accounting Pronouncements

     The FASB has issued FAS No. 125, "Accounting for Transfers and Servicing of
Financial  Assets and  Extinguishments  of  Liabilities"  ("FAS No. 125"), to be
effective  in 1997.  Under  FAS No.  125,  which  uses a  "financial  components
approach," an entity recognizes the financial assets it controls and liabilities
it has incurred, derecognizes financial assets when control has been surrendered
and  derecognizes  liabilities  when  extinguished.  The  application of the new
standard is not expected to have a material  effect on the Company's  results of
operations, consolidated financial position or cash flows in 1997.

     The Accounting  Standards  Executive Committee of the American Institute of
Certified Public  Accountants  issued Statement of Position 96-1 ("SOP 96-1") on
Environmental Remediation Liabilities to be effective in 1997. SOP 96-1 provides
additional  guidance on accrual  measurement and the disclosure of environmental
liabilities. The Company is currently evaluating the impact of SOP 96-1.


                                       F-5

<PAGE>






                          INDEPENDENT AUDITORS' REPORT



Board of Directors and Stockholder
ANR Pipeline Company
Detroit, Michigan


     We  have  audited  the  accompanying  consolidated  balance  sheets  of ANR
Pipeline   Company  (an  indirect,   wholly-owned   subsidiary  of  The  Coastal
Corporation)  and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated  statements of earnings,  retained earnings and cash flows for each
of the three  years in the period  ended  December  31,  1996.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  such consolidated  financial statements present fairly, in
all  material  respects,  the  financial  position of ANR  Pipeline  Company and
subsidiaries  as of  December  31,  1996  and  1995,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.






DELOITTE & TOUCHE LLP




Detroit, Michigan
January 31, 1997




                                       F-6

<PAGE>

                      ANR PIPELINE COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              (Millions of Dollars)
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                           ----------------------
                                                                                              1996         1995
                                                                                           ----------   ---------

                                ASSETS

<S>                                                                                        <C>          <C>      
Current Assets:
   Cash and cash equivalents.............................................................  $     34.2   $    22.9
   Notes receivable:
      Other..............................................................................        18.5           -
      Related party......................................................................       168.7       384.8
   Accounts receivable:
      Others.............................................................................        50.6        73.5
      Related parties....................................................................        14.9        14.0
   Materials and supplies, at average cost...............................................        30.1        34.4
   Other.................................................................................          .6          .6
                                                                                           ----------   ---------
                                                                                                317.6       530.2
                                                                                           ----------   ---------

Property, Plant and Equipment, at cost...................................................     3,314.2     3,468.5
   Less - Accumulated depreciation.......................................................     2,110.0     2,273.0
                                                                                           ----------   ---------
                                                                                              1,204.2     1,195.5
                                                                                           ----------   ---------

Other Assets:
   Assets related to excess gas supply...................................................           -        78.3
   Investment in related parties:
      Pipeline partnerships..............................................................        47.6        35.2
      Other..............................................................................        78.1         2.0
   Order 636 transition costs............................................................           -       127.6
   Deferred charges and other............................................................        28.4        80.6
                                                                                           ----------   ---------
                                                                                                154.1       323.7
                                                                                           ----------   ---------

                                                                                           $  1,675.9   $ 2,049.4
                                                                                           ==========   =========
</TABLE>



                 See Notes to Consolidated Financial Statements.


                                       F-7

<PAGE>

                      ANR PIPELINE COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              (Millions of Dollars)
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                            ----------------------
                                                                                              1996         1995
                                                                                            ----------   ---------

                 STOCKHOLDER'S EQUITY AND LIABILITIES

<S>                                                                                        <C>          <C>      
Current Liabilities:
   Capital lease obligations with related party..........................................  $      3.0   $     3.0
   Accounts payable:
      Others.............................................................................       114.5       131.0
      Related parties....................................................................        12.0         6.0
   Taxes on income.......................................................................  (     34.5)  (    14.0)
   Other taxes...........................................................................        21.2        21.5
   Provision for regulatory matters......................................................       140.7        79.2
   Other.................................................................................        21.6        30.4
                                                                                           ----------   ---------
                                                                                                278.5       257.1
                                                                                           ----------   ---------

Long-Term Debt...........................................................................       497.8       497.7
                                                                                           ----------   ---------

Capital Lease Obligations with Related Party.............................................         8.6        11.6
                                                                                           ----------   ---------

Deferred Credits and Other:
   Accumulated deferred income taxes.....................................................       151.2       223.0
   Other deferred credits:
      Others.............................................................................       130.5       133.1
      Related parties....................................................................        23.2        17.2
                                                                                           ----------   ---------
                                                                                                304.9       373.3
                                                                                           ----------   ---------

Common Stock and Other Stockholder's Equity:
   Common stock, $100 par value, authorized, issued and
      outstanding 1,000 shares...........................................................          .1          .1
   Additional paid-in capital............................................................       466.2       466.2
   Retained earnings.....................................................................       119.8       443.4
                                                                                           ----------   ---------
                                                                                                586.1       909.7
                                                                                           ----------   ---------

                                                                                           $  1,675.9   $ 2,049.4
                                                                                           ==========   =========
</TABLE>



                 See Notes to Consolidated Financial Statements.


                                       F-8

<PAGE>

                      ANR PIPELINE COMPANY AND SUBSIDIARIES
                       STATEMENT OF CONSOLIDATED EARNINGS
                              (Millions of Dollars)
<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                              -----------------------------------
                                                                                 1996         1995         1994
                                                                              ---------    ----------   ---------
<S>                                                                           <C>          <C>          <C>      
Revenues:
   Storage and transportation:
      Others................................................................  $   618.7    $    695.5   $   689.0
      Related parties.......................................................       23.0           7.3        17.3
   Gas sales:
      Others................................................................       11.1          21.4        23.9
      Related parties.......................................................       28.0          37.8        82.2
   Other revenues:
      Others................................................................       42.9          25.7        12.1
      Related parties.......................................................       38.8          33.0        17.6
                                                                              ---------    ----------   ---------
                                                                                  762.5         820.7       842.1
                                                                              ---------    ----------   ---------

Costs and Expenses:
   Operation and maintenance:
      Others................................................................      251.1         275.6       277.3
      Related parties.......................................................      101.5         100.1       102.5
   Cost of gas:
      Others................................................................       66.6          84.9       108.6
      Related parties.......................................................        2.1          12.0        15.6
   Depreciation and amortization............................................       54.4          50.6        50.5
   Interest expense.........................................................       60.2          59.4        53.5
   Taxes on income..........................................................       86.3          86.8        82.0
                                                                              ---------    ----------   ---------
                                                                                  622.2         669.4       690.0
                                                                              ---------    ----------   ---------

Earnings Before Extraordinary Item..........................................      140.3         151.3       152.1
Extraordinary item-loss on discontinuance of FAS No. 71,
   net of income taxes......................................................  (   163.9)            -           -
                                                                              ---------    ----------   ---------

Net (Loss) Earnings.........................................................  ($   23.6)   $    151.3   $   152.1
                                                                              =========    ==========   =========
</TABLE>


                   STATEMENT OF CONSOLIDATED RETAINED EARNINGS
                              (Millions of Dollars)
<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                              -----------------------------------
                                                                                 1996         1995         1994
                                                                              ---------    ----------   ---------
<S>                                                                           <C>          <C>          <C>      
Balance - Beginning of Year.................................................  $   443.4    $    322.2   $   503.0

Net (Loss) Earnings.........................................................  (    23.6)        151.3       152.1

Preferred Stock Redemption Premium Adjustment...............................          -             -   (      .3)

Dividends:
   Common stock.............................................................  (   300.0)   (     30.1)  (   331.0)
   Preferred stock..........................................................          -             -   (     1.6)
                                                                              ---------    ----------   ---------

Balance - End of Year.......................................................  $   119.8    $    443.4   $   322.2
                                                                              =========    ==========   =========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                       F-9

<PAGE>

                      ANR PIPELINE COMPANY AND SUBSIDIARIES
                      STATEMENT OF CONSOLIDATED CASH FLOWS
                              (Millions of Dollars)
<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                 --------------------------------
                                                                                   1996        1995        1994
                                                                                 --------    --------    --------

<S>                                                                              <C>         <C>         <C>     
Cash Flows from Operating Activities:
   Earnings before extraordinary item..........................................  $  140.3    $  151.3    $  152.1
   Adjustments to reconcile net earnings to net cash provided by operating
    activities:
      Depreciation and amortization............................................      57.7        53.2        52.9
      Increase (decrease) in deferred income taxes.............................      21.4    (    6.2)       12.4
      Increase in provision for regulatory matters.............................      61.5        41.1        35.7
      Producer contract reformation cost recoveries............................      26.3        28.3        30.2
      Undistributed equity in earnings of pipeline partnerships................  (    8.9)   (    7.0)   (    5.3)
      Gain on sale of plant....................................................  (   29.1)          -           -
   Changes in other  assets  and  liabilities  affecting  operating  activities:
      Decrease (increase) in accounts receivable:
         Others................................................................      22.9    (    8.1)        7.8
         Related parties.......................................................  (     .9)        9.5    (   14.2)
      (Decrease) increase in accounts payable and other accruals:
         Others................................................................  (   42.7)   (   55.0)       11.6
         Related parties.......................................................       6.0    (    1.4)   (    5.9)
      Net (decrease) increase in other assets/liabilities......................  (   20.3)        9.3    (   30.8)
                                                                                 --------    --------    --------
         Total adjustments.....................................................      93.9        63.7        94.4
                                                                                 --------    --------    --------

         Net cash provided by operating activities.............................     234.2       215.0       246.5
                                                                                 --------    --------    --------

Cash Flows from Investing Activities:
   (Increase) decrease in notes receivable from related party..................     216.1    (  149.6)       50.3
   Investment in related parties...............................................  (   76.1)          -           -
   Proceeds from sale of plant.................................................      10.4         2.0          .8
   Capital expenditures........................................................  (   70.3)   (   50.1)   (   62.8)
                                                                                 --------    --------    --------

         Net cash provided by (used in) investing activities...................      80.1    (  197.7)   (   11.7)
                                                                                 --------    --------    --------

Cash Flows from Financing Activities:
   Net proceeds from issuance of long-term debt................................         -        74.6       123.0
   Retirement of long-term debt and capital lease obligations..................  (    3.0)   (   60.9)   (    2.9)
   Redemptions and early retirement of preferred stock.........................         -           -    (   34.0)
   Common stock dividends paid.................................................  (  300.0)   (   30.1)   (  331.0)
   Preferred stock dividends paid..............................................         -           -    (    1.8)
                                                                                 --------    --------     -------

         Net cash used in financing activities.................................  (  303.0)   (   16.4)   (  246.7)
                                                                                 --------    --------    --------

Net Increase (Decrease) in Cash and Cash Equivalents...........................      11.3          .9    (   11.9)

Cash and Cash Equivalents at Beginning of Period...............................      22.9        22.0        33.9
                                                                                 --------    --------    --------

Cash and Cash Equivalents at End of Period.....................................  $   34.2    $   22.9    $   22.0
                                                                                 ========    ========    ========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                      F-10

<PAGE>

                      ANR PIPELINE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Summary of Significant Accounting Policies

-  Basis of Presentation

     ANR  Pipeline  is a  subsidiary  of ANR,  which is a direct  subsidiary  of
Coastal  Natural  Gas and an  indirect  subsidiary  of  Coastal.  The  financial
statements  presented herewith are presented on the basis of historical cost and
do not reflect the basis of cost to Coastal  Natural  Gas.  The  preparation  of
these financial  statements,  in conformity with generally  accepted  accounting
principles,  requires estimates and assumptions that affect the reported amounts
of assets, liabilities,  revenues and expenses. Actual results could differ from
the estimates and assumptions used.

-  Reclassifications

     Certain  reclassifications  of prior  period  statements  have been made to
conform with current reporting practices.  The effect of these reclassifications
was not material to the Company's  consolidated financial position or results of
operations.

-  Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and  its   wholly-owned   subsidiaries,   after   eliminating   all  significant
intercompany  transactions.   The  equity  method  of  accounting  is  used  for
investments in which the Company has a 20% to 50% voting  interest and exercises
significant influence. The equity method has also been used for an investment in
a limited partnership in which the Company has an interest of more than 5%.

-  Statement of Financial Accounting Standards No. 71, "Accounting
   for the Effects of Certain Types of Regulation" ("FAS No. 71")

     The Company is subject to the regulations and accounting  procedures of the
FERC and has historically followed the reporting and accounting  requirements of
FAS No. 71. Effective November 1, 1996, ANR Pipeline discontinued application of
FAS  No.  71.  Additional  information  is  set  forth  in  Note 5 of  Notes  to
Consolidated Financial Statements included herein.

-  Property, Plant and Equipment

     In accordance  with the accounting  requirements of the FERC and as allowed
under the  provisions of FAS No. 71, an allowance for equity and borrowed  funds
used  during  construction  was  included  in the  cost of the  Company's  major
additions to gas plant through  October 31, 1996.  These costs  amounted to $1.7
million in 1996 and $1.2 million in each of the years 1995 and 1994. As a result
of the Company's  discontinued  application of FAS No. 71, effective November 1,
1996,  the Company  records  capitalized  interest  based on the  provisions  of
Statement of Financial Accounting Standards No. 34,  "Capitalization of Interest
Cost." These costs amounted to $.1 million in 1996.

     The Company's annual  provisions for depreciation of gas plant are computed
on a  straight-line  basis  using  rates of  depreciation  which vary by type of
property.  The annual  composite  depreciation  rate for 1994  through  1996 was
approximately 1.7%.

     Costs of minor property units (or components  thereof) retired or abandoned
are charged or credited,  net of salvage, to accumulated  depreciation.  Gain or
loss on sales of major property units is credited or charged to income.

     The  Company  adopted  FAS  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, financial position or cash flows.



                                      F-11

<PAGE>

-  Income Taxes

     The Company is a member of a consolidated  group which files a consolidated
federal  income tax  return.  Members  of the  consolidated  group with  taxable
incomes are charged  with the amount of income  taxes as if they filed  separate
federal income tax returns,  and members providing  deductions and credits which
result in income tax savings are allocated credits for such savings.

-  Statement of Cash Flows

     For purposes of these financial  statements,  cash equivalents include time
deposits,  certificates  of  deposit  and all  highly  liquid  instruments  with
original  maturities of three months or less. The Company made cash payments for
interest, net of interest capitalized, of $52.4 million, $55.7 million and $50.2
million in 1996,  1995 and 1994,  respectively.  Cash  payments for income taxes
amounted to $100.6  million,  $110.4 million and $54.9 million in 1996, 1995 and
1994, respectively.

-  Nature of Operations and Concentrations of Credit Risk

     ANR Pipeline is involved in the  transportation,  storage and  balancing of
natural gas primarily in the Midwest and  increasingly in the Northeast  regions
of the  United  States.  The  Company  operates  under  arrangements  with other
companies   including   distributors,   intrastate  and  interstate   pipelines,
producers,  brokers,  marketers and  end-users.  As a result,  the Company has a
concentration  of  receivables  due from  these  customers.  This may affect the
Company's overall credit risk in that the customers may be similarly affected by
changes  in  economic,  regulatory  and other  factors.  Trade  receivables  are
generally not  collateralized;  however,  the Company analyzes customers' credit
positions prior to extending credit.

-  Statement of Financial Accounting Standards No. 125, "Accounting for
   Transfers and Servicing of Financial Assets and Extinguishments of
   Liabilities" ("FAS No. 125")

     The FASB has issued FAS No. 125 to be effective in 1997. Under FAS No. 125,
which uses a "financial-components approach," an entity recognizes the financial
assets it controls  and  liabilities  it has  incurred,  derecognizes  financial
assets when  control has been  surrendered  and  derecognizes  liabilities  when
extinguished.  The  application  of the new  standard is not  expected to have a
material effect on the Company's  results of operations,  financial  position or
cash flows in 1997.

-  Statement of Position 96-1 ("SOP 96-1")

     The Accounting  Standards  Executive Committee of the American Institute of
Certified  Public  Accountants  issued  SOP  96-1 on  Environmental  Remediation
Liabilities  to be effective in 1997. SOP 96-1 provides  additional  guidance on
accrual measurement and the disclosure of environmental liabilities. The Company
is currently evaluating the impact of SOP 96-1.

2. Common Stock and Other Stockholder's Equity

     All of ANR Pipeline's common stock is owned by ANR.

     On June 16,  1994,  the  Company  redeemed  all  outstanding  shares of its
Cumulative  Preferred  Stock. A $328,000  premium paid in excess of par value to
redeem  the  remaining  outstanding  preferred  stock was  charged  directly  to
retained earnings in accordance with FERC accounting procedures.



                                      F-12

<PAGE>

3. Long-Term Debt

   Balances at December 31 were as follows (millions of dollars):
<TABLE>
<CAPTION>
                                                                                               1996        1995
                                                                                             --------    --------

      <S>                                                                                    <C>         <C>     
      Debentures:
         9-5/8% series, due 2021..........................................................   $  300.0    $  300.0
         7-3/8% series, due 2024..........................................................      125.0       125.0
         7% series, due 2025..............................................................       75.0        75.0

      Unamortized discount related to outstanding debt, net of premium....................   (    2.2)   (    2.3)
                                                                                             --------    --------

                                                                                             $  497.8    $  497.7
                                                                                             ========    ========
</TABLE>

     None of the above debt issuances have maturity or sinking fund requirements
prior to their retirement due dates.

     Alternatives  to finance  additional  capital  and other  expenditures  are
limited  principally by the terms of certain debt instruments of the Company and
certain  affiliates.  Under  the most  restrictive  of such  instruments,  as of
December  31,  1996,  ANR  Pipeline  and certain  affiliates  could incur in the
aggregate approximately $1.6 billion of additional indebtedness. For the Company
and these affiliates to incur  indebtedness for borrowed money in excess of this
amount,  $444 million of  indebtedness  of Coastal  Natural Gas would need to be
retired.

4. Value of Financial Instruments

     The estimated  fair value amounts of the  Company's  financial  instruments
have been determined by the Company,  using appropriate  market  information and
valuation  methodologies.  Considerable  judgment  is  required  to develop  the
estimates of fair value, thus, the estimates provided herein are not necessarily
indicative  of the amounts that the Company  could  realize in a current  market
exchange.

<TABLE>
<CAPTION>
                                                                December 31, 1996             December 31, 1995
                                                           --------------------------    --------------------------
                                                             Carrying        Fair          Carrying        Fair
                                                              Amount         Value          Amount         Value
                                                           ------------   -----------    -----------    -----------
                                                                             (millions of dollars)

      <S>                                                     <C>           <C>             <C>           <C>    
      Nonderivatives:
         Financial assets:
           Cash and cash equivalents...................       $    34.2     $    34.2       $   22.9      $   22.9
           Marketable security of a related party......               -             -            2.0           2.1
           Note receivable from a related party........           168.7         168.7          384.8         384.8
           Note receivable - other.....................            18.5          17.2              -             -

         Financial liabilities:
           Long-term debt..............................           500.0         571.6          500.0         589.5
</TABLE>

     The estimated fair value of the marketable  security of a related party was
based on market quotes at December 31, 1995. The note  receivable from a related
party is at a floating  market  rate of interest  and  therefore,  the  carrying
amount is a reasonable  estimate of its fair value.  The estimated fair value of
the note  receivable - other is calculated  based on the market rate of interest
at December 31, 1996. The estimated  values of the Company's  long-term debt are
based on interest  rates at December  31, 1996 and 1995,  respectively,  for new
issues with similar remaining maturities.

5. Discontinuation of Regulatory Accounting Principles

     ANR Pipeline is subject to the regulations and accounting procedures of the
FERC, and has historically followed the reporting and accounting requirements of
FAS No. 71. Effective November 1, 1996, the Company discontinued the application
of regulatory  accounting principles under FAS No. 71. As a result, ANR Pipeline
recorded an  extraordinary  charge to income of $163.9  million,  net of related
income taxes of $91.6 million.



                                      F-13

<PAGE>

     FAS No. 71 provides that rate regulated  enterprises 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. As a
result of FERC Order 636 (which  unbundled  pipeline  services giving  customers
more options for  transporting  their gas), the effect of discounted  rates, and
new competitive  developments on the horizon, the Company has concluded that the
competitive  environment  is no longer  consistent  with the form of  regulation
contemplated by FAS No. 71.

     Under FAS No. 71,  transactions which the Company had recorded  differently
than  a  non-regulated  entity  include  the  following:  the  Company  (i)  had
capitalized  the costs of equity  funds used during  construction,  and (ii) had
deferred     purchase     gas     costs,     contract     reformation     costs,
postemployment/postretirement benefit costs and income tax reductions related to
changes  in  federal  and state  income  tax  rates.  Pursuant  to the  guidance
contained in Statement of Financial  Accounting  Standards  No. 101,  "Regulated
Enterprises  -  Accounting  for  the  Discontinuation  of  Application  of  FASB
Statement  No. 71," the Company has  eliminated  from its  consolidated  balance
sheet  the  effects  of  actions  of  regulators  which had been  recognized  as
regulatory  assets  and  liabilities  recorded  pursuant  to FAS No. 71, and has
revalued certain other assets.  The Company believes this accounting change will
result in financial reporting which better reflects the results of operations in
the economic  environment  in which it  operates.  The major  components  of the
extraordinary charge were as follows (millions of dollars):

                         Description                           Amount
   ------------------------------------------------          ---------

   Regulatory assets:
        Assets related to excess gas supply                  $    52.6
        Order 636 transition costs                                95.0
        Upstream transportation costs                             25.0
        Above market gas purchases                                13.2
        Postemployment/postretirement benefit costs               14.3
        Federal and state tax differential                        12.3
        Other regulatory assets                                   36.3
   Adjustments to plant, materials and supplies                    6.8
                                                             ---------

   Total extraordinary charge before taxes                   $   255.5
                                                             ---------

   Income taxes                                                   91.6
                                                             ---------

   Total extraordinary charge, net of taxes                  $   163.9
                                                             =========

     This  charge to  earnings  was  noncash  and will have no direct  effect on
either the  Company's  ability to include  these  deferred  items in future rate
proceedings or on its ability to collect the rates set thereby.

6. Litigation, Environmental and Regulatory Matters

- Litigation Matters

     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, 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.  ANR Pipeline, together with the other pipeline defendants,
has filed a motion to dismiss.

     In October 1996,  the Company,  along with certain of its  affiliates,  was
named as a  defendant  in a suit filed by several  former  and  current  African
American  employees in the United States  District Court,  Southern  District of
Texas.  The  suit  alleges  racially  discriminatory   employment  policies  and
practices  and seeks damages in the amount of at least $100 million and punitive
damages of at least three times that amount.  Plaintiffs' counsel are seeking to
have the suit  certified  as a class  action.  The  Company  and its  affiliates
vigorously deny these allegations and have filed responsive pleadings.


                                      F-14

<PAGE>

     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 such claims
and that any  liability  which  may  finally  be  determined  should  not have a
material  adverse  effect  on the  Company's  consolidated  financial  position,
results of operations or cash flows.

- Environmental Matters

     The Company's  operations  are subject to extensive  and evolving  federal,
state  and local  environmental  laws and  regulations  which  may  affect  such
operations and costs as a result of their effect on the construction,  operation
and maintenance of its pipeline facilities. The Company spent approximately $2.5
million in 1996 on environmental capital projects and anticipates annual capital
expenditures  of  approximately  $4 million per year over the next several years
aimed at maintaining  compliance with such laws and  regulations.  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."  The Company has been named as a  potentially  responsible  party in
five  Superfund  waste  disposal  sites.  At these  sites,  there is  sufficient
information to estimate total cleanup costs of approximately $30 million and the
Company  estimates  its pro-rata  exposure,  to be paid over a period of several
years, is approximately $.2 million.

     There are additional areas of environmental  investigation  and remediation
responsibilities  to which the  Company  may be  subject.  The states  also have
regulatory  programs that mandate  environmental  investigation and cleanup.  In
Michigan,  where the  Company has  extensive  operations,  the  recently-revised
Environmental  Response Act requires owners or operators of property  containing
contamination above regulatory  thresholds to diligently pursue remedial actions
and  exercise  due care so that  the  property  does not pose a threat  to human
health or the  environment.  The Company has  designated  internal staff and has
retained  environmental  consultants  to assess  sites for which the Company may
have due diligence or due care obligations.

     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.

- Regulatory Matters

     On January 31, 1996, the FERC issued a "Statement of Policy and Request for
Comments" 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, a
pipeline and a customer will be allowed to negotiate a contract  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").  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 time the
pipeline negotiates a rate for service which exceeds the recourse rate. The FERC
is also considering comments on whether this "negotiated 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"
requesting  comments on various  aspects of  secondary  market  transactions  on
interstate  natural  gas  pipelines,  including  the  comparability  of pipeline
capacity with released capacity.

     From  November 1, 1992 to November 1, 1993,  gas inventory  demand  charges
were collected from the Company's  former resale  customers.  This method of gas
cost recovery  required  refunds for any  over-collections.  In April 1994,  the
Company  filed  with the  FERC a  refund  report  showing  over-collections  and
proposing refunds totaling $45.1

                                      F-15

<PAGE>

million.  Certain  customers  disputed  the  level  of those  refunds.  The FERC
approved the Company's refund allocation  methodology and the Company,  in March
1995,  paid  undisputed  refunds  of $45.1  million,  together  with  applicable
interest,  subject to further  investigation  of customers'  claims.  The FERC's
approval of the Company's refund allocation methodology was upheld by the United
States  Court of Appeals  for the D.C.  Circuit in April 1996.  Disputed  issues
related to the refunds are the subject of further proceedings before the FERC.

     In July 1996,  the United  States  Court of  Appeals  for the D.C.  Circuit
upheld the basic  structure  of the FERC's  Order 636 (issued in April 1992) and
remanded to the FERC, for further consideration,  certain limited aspects of the
Order,  such as the basis for its determination of the recovery by the pipelines
of the full level of their prudently incurred transition costs. Several persons,
including ANR  Pipeline,  have appealed the rate and other aspects of the FERC's
orders approving the Company's Order 636 restructuring filings and those appeals
are the subject of further proceedings before the Court.

     The Company  filed a general  rate  increase  on  November 1, 1993.  Issues
related to the general  rate  increase  are the subject of  continuing  FERC and
judicial  proceedings.  Under a March 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 and a $182.8 million increase over
the cost of service  underlying  the Company's  approved rates for its Order 636
restructured services. In September 1994, the FERC accepted the Company's filing
to  place  the  new  rates  into   effect  May  1,  1994,   subject  to  further
modifications. The Company submitted revised rates in compliance with this order
in October  1994,  which rates are  currently in effect,  subject to refund.  In
January  1997,  an Initial  Decision was issued on the issues set for hearing by
the March 1994 Order. That Initial Decision,  which accepted some but not all of
the Company's rate change proposals,  does not take effect until reviewed by the
FERC. ANR Pipeline will file  exceptions as to some of the negative  findings in
the Initial Decision.

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

     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  the  Company's  obligations  under certain gas
purchase and  transportation  contracts with the Great Plains Coal  Gasification
Plant (the "Plant").  In February 1994, ANR Pipeline,  Dakota and the Department
of Energy  executed a  Settlement  Agreement  which,  subject to FERC  approval,
resolves the litigation and disputes among the parties,  amends the gas purchase
agreement  between  the  Company and Dakota and  terminates  the  transportation
contract with the Plant.  In August 1994,  the Company 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.  In December 1996, the
FERC issued an Opinion and Order  Reversing  Initial  Decision in which it found
that the  pipelines,  including  the Company,  were prudent in entering into the
Settlement  Agreement.  No appeals were taken of the FERC's  decision and it has
become final.

      Certain of the above regulatory matters and other regulatory issues remain
unresolved  among the Company,  its  customers,  its suppliers and the FERC. The
Company has made  provisions  which  represent  management's  assessment  of the
ultimate  resolution of the above issues. As a result,  the Company  anticipates
that these  regulatory  matters will not have a material  adverse  effect on its
consolidated financial position,  results of operations or cash flows. 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.



                                      F-16

<PAGE>

7. Lease Commitments

     The Company is the lessee of eight storage fields under capital leases.  On
September 30, 1996,  ANR acquired  100% of the common stock of the lessor.  As a
result,   capital  lease   obligations  are  now  classified  as  related  party
transactions.  The storage  field  leases  expire on May 1, 2003.  However,  the
Company  has the option to extend  each of the  leases for up to two  successive
five-year periods. The net present value of the future minimum lease payments is
included  as  part  of  "Property,   Plant  and   Equipment"  in  the  Company's
Consolidated Balance Sheet as follows (millions of dollars):

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                   --------------------
                                                                                      1996      1995
                                                                                   ---------  ---------

              <S>                                                                  <C>        <C>      
              Storage property................................................     $   122.1  $   122.1
              Less:  Accumulated depreciation.................................         110.5      107.5
                                                                                   ---------  ---------

                                                                                   $    11.6  $    14.6
                                                                                   =========  =========
</TABLE>

     The annual  provision for  depreciation  included as a part of depreciation
and amortization expense was $3 million for 1996, 1995 and 1994.

     Future  minimum  lease  payments  under  capital  leases  together with the
present value of the net minimum  lease  payments as of December 31, 1996 are as
follows (millions of dollars):

     Year ending December 31:
       1997.................................................  $    8.9
       1998.................................................       8.1
       1999.................................................       7.6
       2000.................................................       6.5
       2001.................................................       5.3
       2002 through 2004....................................       5.6
                                                              --------
       Total minimum lease payments.........................      42.0

       Less:  Amount representing executory costs...........      13.2
                                                              --------

       Net minimum lease payments...........................      28.8

       Less:  Amount representing interest..................      17.2
                                                              --------

       Present value of net minimum lease payments..........  $   11.6
                                                              ========

     Operating  lease  rentals  included in  operating  expenses  totaled  $15.0
million  for both 1996 and 1995 and $13.7  million for 1994.  Aggregate  minimum
lease payments under existing noncapitalized,  long-term leases are estimated to
be $13.0  million for each of the years 1997 through  2001,  and $100.7  million
thereafter.



                                      F-17

<PAGE>

8.    Taxes On Income

     Provisions  for income  taxes are  composed of the  following  (millions of
dollars):

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                 --------------------------------
                                                                                   1996        1995        1994
                                                                                 --------    --------     -------

      <S>                                                                        <C>         <C>         <C>
      Federal:
         Currently payable...................................................    $   93.3    $   98.6    $   85.6
         Deferred ...........................................................    (   18.7)   (   17.2)   (    8.1)
                                                                                 --------    --------     -------
                                                                                     74.6        81.4        77.5
                                                                                 --------    --------    --------
      State and City:
         Currently payable...................................................        13.2         6.8         5.2
         Deferred ...........................................................    (    1.5)   (    1.4)   (     .7)
                                                                                 --------    --------     -------
                                                                                     11.7         5.4         4.5
                                                                                 --------    --------    --------

           Total income taxes................................................    $   86.3    $   86.8    $   82.0
                                                                                 ========    ========    ========
</TABLE>

     Provisions  for income  taxes were  different  from the amount  computed by
applying the statutory U.S.  federal income tax rate to earnings before tax. The
reasons for these differences are (millions of dollars):

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                 --------------------------------
                                                                                   1996        1995        1994
                                                                                 --------    --------     -------

      <S>                                                                        <C>         <C>         <C>     
      Tax expense computed by applying the U.S. federal income tax rate
         of 35%..............................................................    $   79.3    $   83.3    $   81.9

      Increases (reductions) in taxes resulting from:
         State and city income taxes reduced by federal income tax benefit...         7.6         3.5         2.9
         Normalization adjustment for liberalized depreciation...............    (    1.1)          -    (    2.8)
         Other...............................................................          .5           -           -
                                                                                 --------    --------    --------
             Taxes on income.................................................    $   86.3    $   86.8    $   82.0
                                                                                 ========    ========    ========
</TABLE>

     Deferred tax  liabilities  (assets)  which are recognized for the estimated
future tax effects  attributable  to  temporary  differences  are  (millions  of
dollars):

<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                             --------------------
                                                                                               1996        1995
                                                                                             --------    --------

      <S>                                                                                    <C>         <C>     
      Depreciation........................................................................   $  192.4    $  166.5
      Other...............................................................................       12.0        15.1
                                                                                             --------    --------
         Deferred tax liabilities.........................................................      204.4       181.6
                                                                                             --------    --------

      Provision for regulatory matters....................................................   (   54.0)   (   30.3)
      Inventory capitalization............................................................   (    1.6)   (    1.6)
      Purchased gas and other recoverable costs...........................................   (   33.3)       43.5
      Benefit plans and accrued expenses..................................................   (   12.3)   (    5.1)
      Certain lease costs.................................................................   (    9.0)          -
      Other...............................................................................   (   11.0)   (    8.4)
                                                                                             --------    --------
         Deferred tax assets..............................................................   (  121.2)   (    1.9)
                                                                                             --------    --------

         Deferred income taxes............................................................   $   83.2    $  179.7
                                                                                             ========    ========
</TABLE>

     Coastal  and the  Internal  Revenue  Service  ("IRS")  Appeals  Office have
concluded a tentative  settlement of all adjustments proposed through early 1997
to federal  income tax returns filed for the years 1985 through 1987.  Coastal's
federal  income  tax  returns  filed for the years 1988  through  1990 have been
examined by the IRS and Coastal has received  notice of proposed  adjustments to
the returns for each of those years. Coastal currently is contesting certain


                                      F-18

<PAGE>



of these  adjustments  with the IRS Appeals  Office.  Examination  of  Coastal's
federal  income tax  returns  for 1991,  1992,  and 1993 is expected to begin in
1997.  It is the opinion of  management  that  adequate  provisions  for federal
income  taxes  have  been  reflected  in the  Company's  consolidated  financial
statements.

9. Benefit Plans

     The  Company  participates  with  its  affiliates  in the  non-contributory
pension plan of Coastal (the "Plan") which covers  substantially  all employees.
The Plan provides benefits based on final average monthly compensation and years
of  service.  As of  December  31,  1996,  the  Plan  did not  have an  unfunded
accumulated benefit  obligation.  ANR Pipeline made no contributions to the Plan
for 1996,  1995 or 1994.  Assets of the Plan are not segregated or restricted by
its  participating  subsidiaries and pension  obligations for Company  employees
would remain the obligation of the Plan if the Company were to withdraw.

     The Company  offered an early  retirement  incentive  program to all of its
eligible  employees (age 55 before January 1, 1996 and having five or more years
of service before January 1, 1996), who were employed through December 31, 1995.
All benefits  provided  under this program are being funded by the Plan and will
not have a material impact on the Company's  consolidated cash flow or financial
position.

     ANR  Pipeline  also  makes  contributions  to a  thrift  plan,  which  is a
trusteed, voluntary and contributory plan for eligible employees of the Company.
The Company's contributions, which are based on matching employee contributions,
amounted to $6.2 million, $6.0 million and $6.3 million for 1996, 1995 and 1994,
respectively.

     The Company  provides  certain health care and life insurance  benefits for
substantially  all of its  retired  employees.  The  estimated  costs of retiree
benefit  payments are accrued during the years the employee  provides  services.
Certain costs have been deferred and were being  amortized  through  October 31,
1996 to reflect the impact of rate regulation. Effective November 1, 1996, these
costs  are no  longer  deferred  and  amortized  as a  result  of the  Company's
discontinued  application of FAS No. 71. Additional  information  concerning FAS
No.  71 is set  forth in Note 5 of Notes to  Consolidated  Financial  Statements
included herein.

     The  following  tables  set forth the  accumulated  postretirement  benefit
obligation recognized in the Company's Consolidated Balance Sheet as of December
31, 1996 and 1995 and the benefit  cost for the years ended  December  31, 1996,
1995 and 1994 (millions of dollars):

<TABLE>
<CAPTION>
                                                                                               1996        1995
                                                                                             --------    --------
      <S>                                                                                    <C>         <C>     
      Accumulated postretirement benefit obligation:

         Retirees.........................................................................   $(  43.8)   $(  42.7)
         Fully eligible plan participants.................................................   (     .1)   (     .5)
         Other active plan participants...................................................   (    8.6)   (   13.1)
                                                                                             --------    --------
                                                                                             (   52.5)   (   56.3)

      Plan assets at fair value...........................................................       18.1        17.0
                                                                                             --------    --------

      Accumulated postretirement benefit obligation in excess of plan assets..............   (   34.4)   (   39.3)
      Unrecognized net transition obligation..............................................       47.7        53.2
      Unrecognized net gain from past experience different from
         that assumed.....................................................................   (   15.8)   (   12.3)
                                                                                             --------    --------

      Postretirement benefit (obligation) prepayment included in
         Consolidated Balance Sheet.......................................................   $(   2.5)   $    1.6
                                                                                             ========    ========
</TABLE>




                                      F-19

<PAGE>

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                 --------------------------------
                                                                                   1996        1995        1994
                                                                                 --------    --------     -------

      <S>                                                                        <C>         <C>         <C>    
      Net periodic  postretirement  benefit  cost  consisted  of  the  following
         components:

           Service cost - benefits earned during the period..................    $     .5    $     .5    $     .5
           Interest cost on accumulated postretirement benefit obligation....         3.6         4.1         4.2
           Amortization of transition obligation.............................         3.0         3.1         3.1
           Return on assets, net of deferrals................................    (    1.2)   (    1.3)   (     .4)
                                                                                 --------    --------     -------
           Net periodic postretirement benefit cost..........................         5.9         6.4         7.4
           Deferred regulatory amounts.......................................          .3    (    1.2)   (     .3)
                                                                                 --------    --------     -------
         Net postretirement benefit cost recognized in Statement of
            Consolidated Earnings............................................    $    6.2    $    5.2    $    7.1
                                                                                 ========    ========    ========
</TABLE>

     The assumed  health care cost trend rate used in measuring the  accumulated
postretirement benefit obligation was 10.4% in 1996, declining gradually to 6.0%
by the year 2004.  The assumed health care cost trend rate used in measuring the
accumulated  postretirement  benefit  obligation was 11.2% and 12.0% in 1995 and
1994,  respectively.  A one percentage point increase in the assumed health care
cost trend rate for each year would increase both the accumulated postretirement
benefit  obligation and the net  postretirement  health care cost as of December
31, 1996 by  approximately  5.2%. The assumed  discount rate used in determining
the accumulated postretirement benefit obligation was 7.5%.

10. Transactions with Major Customers and Related Parties

-   Major Customers:

     The  Statement  of  Consolidated  Earnings  includes  revenues  from  major
customers as follows (millions of dollars):

<TABLE>
<CAPTION>
                                                           1996                  1995                  1994
                                                    ------------------    ------------------    -----------------
                                                               Percent               Percent              Percent
                                                    Amount    of Total    Amount    of Total    Amount   of Total
                                                    ------    --------    ------    --------    ------   --------

<S>                                                 <C>          <C>      <C>          <C>      <C>         <C>  
      Wisconsin Gas Company......................   $   83.9     11.0%    $   94.6     11.5%    $  100.8    12.0%
      Michigan Consolidated Gas Company..........       55.2      7.2         70.3      8.6         65.7     7.8
</TABLE>

-   Related Parties:

     "Operation and  maintenance"  expenses within the Statement of Consolidated
Earnings  includes  affiliate and other related  party  transactions  as follows
(millions of dollars):

<TABLE>
<CAPTION>
                                                                                   1996        1995        1994
                                                                                 --------    --------    --------

      <S>                                                                        <C>         <C>         <C>     
      Storage and transportation expense - affiliates........................    $   13.7    $   18.0    $   20.9
      Storage and transportation expense - other related parties.............        40.6        41.2        39.9
      Services provided at cost - affiliates.................................        28.3        24.4        26.8
      Facilities rental expense - affiliates.................................        18.9        16.5        14.9
</TABLE>

     Services provided by the Company at cost for affiliated companies were $9.9
million for 1996, $10.3 million for 1995 and $9.9 million for 1994. The services
provided  by the  Company  to  affiliates,  and by  affiliates  to the  Company,
primarily  reflect the allocation of costs relating to the sharing of facilities
and administrative functions, characteristic of group operations. Such costs are
allocated  using a  three-factor  formula  consisting of revenues,  property and
payroll, which is reasonable and has been applied on a consistent basis.

     The Company has lease  agreements  with Coastal and its  affiliates for the
rental  of office  space,  natural  gas  storage  fields  and  certain  pipeline
facilities. One such lease with Coastal, for pipeline facilities, was terminated
during 1994 in  conjunction  with the terms of the lease.  In December 1996, the
Company invested $78 million in an affiliate, Coastal


                                      F-20

<PAGE>

Medical  Services,  Inc.  The  affiliate  has  assumed  the  responsibility  for
facilitating  the  management  of a portion of the  medical  obligations  of the
Company and other Coastal subsidiaries.

     ANR  Pipeline  participates  in a program  which  matches  short-term  cash
excesses  and   requirements  of  participating   affiliates,   thus  minimizing
borrowings from outside sources.  At December 31, 1996, the Company had advanced
$168.7  million to an  associated  company at a market  rate of  interest.  Such
amount is repayable on demand.

11. Quarterly Results of Operations (Unaudited)

     The results of operations by quarter for the years ended  December 31, 1996
and 1995 were (millions of dollars):

<TABLE>
<CAPTION>
                                                                                1996 Quarter Ended
                                                                --------------------------------------------------
                                                                March 31,      June 30,     Sept. 30,    Dec. 31,
                                                                ---------      --------     ---------    ---------

      <S>                                                       <C>           <C>           <C>          <C>      
      Revenues................................................  $   214.8     $   173.5     $  160.3     $   213.9
      Cost of gas.............................................       22.7          14.1         14.3          17.6
                                                                ---------     ---------     --------     ---------
         Revenues less cost of gas............................      192.1         159.4        146.0         196.3
      Other costs and expenses................................      146.8         130.5        124.5         151.7
                                                                ---------     ---------     --------     ---------
         Earnings before extraordinary item...................       45.3          28.9         21.5          44.6
         Extraordinary item*..................................          -             -            -     (   163.9)
                                                                ---------     ---------     --------     ---------
         Net earnings (loss)..................................  $    45.3     $    28.9     $   21.5     $(  119.3)
                                                                =========     =========     ========     =========
</TABLE>


<TABLE>
<CAPTION>
                                                                                1995 Quarter Ended
                                                                --------------------------------------------------
                                                                March 31,      June 30,     Sept. 30,    Dec. 31,
                                                                ---------      --------     ---------    ---------

      <S>                                                       <C>           <C>           <C>          <C>      
      Revenues................................................  $   220.8     $   194.8     $  213.6     $   191.5
      Cost of gas.............................................       32.3          21.5         25.2          17.9
                                                                ---------     ---------     --------     ---------
         Revenues less cost of gas............................      188.5         173.3        188.4         173.6
      Other costs and expenses................................      139.6         141.2        154.0         137.7
                                                                ---------     ---------     --------     ---------
         Net earnings.........................................  $    48.9     $    32.1     $   34.4     $    35.9
                                                                =========     =========     ========     =========

<FN>
*     Effective  November 1, 1996, ANR Pipeline  discontinued the application of
      regulatory  accounting  principles  under FAS No.  71.  As a  result,  the
      Company  recorded  an  extraordinary  charge to income of $163.9  million.
      Additional  information concerning FAS No. 71 is set forth in Management's
      Discussion  and Analysis of Financial  Condition and Results of Operations
      and Note 5 of Notes to Consolidated Financial Statements included herein.
</FN>
</TABLE>



                                      F-21

<PAGE>

                                  EXHIBIT INDEX


Exhibit
Number                                Document
-------   ---------------------------------------------------------------------

 (3.1)+   Composite Certificate of Incorporation of ANR Pipeline effective as
          of December 31, 1987. (Filed  as Module  ANRCertIncorp on March 29,
          1994.)

 (3.2)+   Amended  By-laws of ANR Pipeline  effective  as of  September  21,
          1994.  (Filed as Exhibit 3.2 to ANR  Pipeline's  Annual  Report on
          Form 10-K for the fiscal year ended December 31, 1994.)

   (4)    With  respect  to  instruments  defining  the rights of holders of
          long-term  debt,  the Company will furnish to the  Securities  and
          Exchange Commission any such document on request.

 (4.1)+   Board  Resolution dated September 22, 1975 establishing the $2.675
          Series of Cumulative Preferred Stock.
          (Filed as Module BoardRes_092275 on March 29, 1994.)

 (4.2)+   Board  Resolution  dated  October 26, 1976 establishing  the $2.12
          Series of Cumulative Preferred Stock.
          (Filed as Module BoardRes_102676 on March 29, 1994.)

 (4.3)+   Board Resolution dated May 12, 1980 establishing the $12.00 Series
          of Cumulative Preferred Stock.
          (Filed as Module BoardRes_051280 on March 29, 1994.)

 (4.4)+   Indenture  dated as of February  15,  1994 and First  Supplemental
          Indenture  dated as of February  15, 1994 for the $125  million of
          7-3/8%  Debentures due February 15, 2024. (Filed as Exhibit 4.4 to
          ANR  Pipeline's  Annual  Report on Form 10-K for the  fiscal  year
          ended December 31, 1993.)

(10.1)+   Form of Employment  Agreement  between ANR Pipeline and certain of
          its executive officers. (Filed  as  Module ANREmployAgree on March
          29, 1994.)

(10.2)+   Form of Employment  Agreement  between Coastal and certain Company
          executive officers. (Filed as Module  TCCEmployAgree  on March 29,
          1994.)

(10.3)+   Agreement for Consulting  Services between ANR Pipeline and Harold
          Burrow, dated as of January 1, 1996. (Filed as Exhibit 10.3 to ANR
          Pipeline's  Annual  Report on Form 10-K for the fiscal  year ended
          December 31, 1995.)

  (21)*   Subsidiaries of the Company.

  (24)*   Power of Attorney (included on signature pages herein).

  (27)*   Financial Data Schedule.

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


Note:

+     Indicates documents incorporated by reference from the prior filings
      indicated.
*     Indicates documents filed herewith.