AGREEMENT PURSUANT TO RULE 45 (c)
UNDER THE PUBLIC UTILITY HOLDING ACT OF 1935
WHEREAS, National Fuel Gas Company ("National"), a corporation
organized under the laws of the State of New Jersey and a registered holding
company under the Public Utility Holding Company Act of 1935 ("Act"), together
with its wholly-owned domestic subsidiaries, listed below:
National Fuel Gas Distribution Corporation
National Fuel Gas Supply Corporation
Seneca Resources Corporation
Xxxxx Hub, Inc.
Highland Forest Resources, Inc.
Data-Track Account Services, Inc.
National Fuel Resources, Inc.
Horizon Energy Development, Inc.
Seneca Independence Pipeline Company
Upstate Energy Inc.
Niagara Independence Marketing Company
Horizon Energy Holdings, Inc., a wholly-owned subsidiary of Horizon
Energy Development, Inc.
NFR Power, Inc.
join annually in the filing of a consolidated federal income tax return; and
WHEREAS, it is the intention of National and its subsidiaries
(hereinafter collectively referred to as the "System"), to enter into a Tax
Agreement for the allocation of current federal income taxes; and
WHEREAS, Rule 45 (c) of the Act has been adopted by the Securities and
Exchange Commission with the specific intention of providing a method of
allocation of consolidated federal income taxes by a registered holding company
and its subsidiaries;
NOW, THEREFORE, the System does hereby covenant and agree with one
another that the consolidated current federal income tax liability of the System
shall be allocated pursuant to Rule 45 (c) of the Act, so that each company of
the System will benefit mutually from the application of said Rule, as follows:
FIRST: There shall be allocated and preserved to each company the tax
effects of its own capital gains or losses which shall be subject to the capital
gains rate, if applicable, its tax credits, investment tax credit recapture and
the effects of any other material items taxed at different rates or involving
special benefits or limitations as may result from an unexpected event,
including changes to the Internal Revenue Code which may be applicable to a
particular company, including its carry-over amounts to the extent those amounts
are absorbed in the taxable year.
SECOND: After giving effect to the special allocations described in
paragraph First above, the balance of the current tax liability of the System
shall be allocated to each System company on the basis of each of their
respective contributions of corporate taxable income to the total consolidated
taxable income of the System, excluding income subject to taxation at the
capital gains rate, if applicable. The tax attributable to such income will have
been separately allocated pursuant to paragraph First above. However, so long as
National has negative corporate taxable income, no portion of the current tax
liability shall be allocated to National as a corporate tax credit. Instead, the
negative corporate taxable income of National shall be allocated to those System
companies which have positive corporate taxable income, on the basis of each of
these companies' contribution of positive corporate taxable income to the total
positive corporate taxable income of the System. The tax allocated to a company
under this paragraph, which may be either positive or negative (except for
National) shall be equal to the consolidated tax liability multiplied by a
fraction, the numerator of which is the positive corporate taxable income of the
Company (as adjusted by National's negative corporate taxable income described
in this paragraph Second above and in paragraph Third); or the negative
corporate taxable income of the Company (as adjusted in paragraph Third),
including any carry-over loss attributable to the Company to the extent absorbed
in the taxable year, and the denominator of which is the consolidated taxable
income of the System (as adjusted in paragraphs First and Third). Companies with
taxable income will be allocated a tax liability under this method while
companies with net operating losses (except National) will be allocated a tax
benefit or credit.
THIRD: The tax effect of intercompany transactions eliminated in the
calculation of consolidated taxable income shall be eliminated from the
corporate taxable income of the companies involved in such transactions in the
calculations provided in paragraph Second.
FOURTH: Any consolidated alternative minimum income tax and
environmental tax arising from consolidated alternative minimum taxable income
(AMTI) will be allocated among the companies on the basis of each of their
respective contributions of positive AMTI to the total positive AMTI of the
System.
FIFTH: Under the method of allocation described in paragraphs First
through Fourth above, the companies agree that the tax allocated to each company
(except National) shall not exceed the amount of tax of such company based upon
a separate return computed as if such company had always filed its tax returns
on a separate return basis. However, in computing the separate return tax
liability of a company, items of carry-forward, carry-back and intercompany
transactions, to the extent that any or all of these items have been utilized by
the System in a prior taxable year's allocation, will be disregarded in order to
comply with the separate return limitation provisions set forth in Rule 45 (c)
of the Act and regulations promulgated under Section 1552 of the Internal
Revenue Code. Thus, to the extent that a company receives a tax benefit or
credit pursuant to paragraph Second above, such benefit or credit would be
applied to reduce any tax credits in future years to which such company might
otherwise become entitled under the separate return limitation provisions of
Rule 45 (c) of the Act and regulations promulgated under Section 1552 of the
Internal Revenue Code.
IT IS FURTHER AGREED by and among the System as follows:
I. PAYMENTS: It is agreed that those companies allocated a current
federal income tax liability under this agreement will pay the Internal Revenue
Service a portion of that liability in the amounts and on the dates directed by
National, as determined and pursuant to the applicable sections of the Internal
Revenue Code. Another portion of the current federal income tax liability of
those companies shall be paid by them to the other companies which were
allocated a tax benefit. Such payments will also be made in the amounts and on
the dates directed by National.
II. SEPARATE RETURN LIABILITY: The System intends that the result of
the proposed method of allocation and payment will be: (a) No company
will pay more than its separate return liability as if it had always
filed separate returns. However, the qualifications set out in
paragraph Fifth above concerning the calculation of a separate return
tax shall apply; (b) Each company having a net operating loss or other
net tax benefit will receive in current cash payments the benefit of
its own net operating loss (except as described in paragraph Second) or
other net tax benefits to the extent that the other companies can
utilize such items to offset the tax liability they would otherwise
have on a separate return basis. III. EFFECTIVE DATE: This Tax
Agreement will be effective for allocation of the current income tax
liability of the system for
the fiscal year 1999 and all subsequent years until this Tax Agreement shall be
amended in writing by each of the companies which is a party thereto.
IV. APPROVAL AND AMENDMENTS: Any amendments to this Tax Agreement may
be made only with the unanimous written consent of all the parties hereto. A
copy of this Tax Agreement is being filed as an exhibit to National's Form U5S
Annual Report to the Securities and Exchange Commission for the year ended
September 30, 2000. Any amendments to this Tax Agreement will be filed as an
exhibit to National's Form U5S for the year when the amendment becomes
effective. It is contemplated that any additional companies which hereafter
become associated with the System shall have the option of joining in and
becoming a party to this Tax Agreement by amendment thereto.
V. PRIOR AGREEMENTS SUPERSEDED: Any prior agreements relating to the
allocation of income tax liability among the System are superseded.
IN WITNESS WHEREOF, each of the parties hereto have caused this Tax
Agreement to be executed in its name and on its behalf by one of its officers
duly authorized, and its corporate seal to be affixed hereto by its Secretary on
this 29th day of January 2001.
NATIONAL FUEL GAS COMPANY
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxx
Treasurer
NATIONAL FUEL GAS DISTRIBUTION
CORPORATION
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxx
Treasurer
NATIONAL FUEL GAS SUPPLY
CORPORATION
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxx
Treasurer
SENECA RESOURCES CORPORATION
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxx
Xxxxxxxxx
XXXXX HUB, INC.
By: /s/Xxxxxx X. Xxxxxxx
------------------------
Xxxxxx X. Xxxxxxx
Treasurer
HIGHLAND FOREST RESOURCES, INC.
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxx
Xxxxxxxxx
DATA-TRACK ACCOUNT SERVICES,
INC.
By: /s/Xxxxxxx X. Xxxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxxx
Treasurer
NATIONAL FUEL RESOURCES, INC.
By: /s/Xxxxxxx X. Xxxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxxx
Treasurer
HORIZON ENERGY DEVELOPMENT,
INC.
By: /s/Xxxxxx X. Xxxxxx
-----------------------
Xxxxxx X. Xxxxxx
Treasurer
SENECA INDEPENDENCE PIPELINE
COMPANY
By: /s/Xxxxxx X. XxXxxxxx
-----------------------
Xxxxxx X. XxXxxxxx
Treasurer
UPSTATE ENERGY INC.
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxx
Xxxxxxxxx
NIAGARA INDEPENDENCE
MARKETING COMPANY
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxxx
Xxxxxxxxx
HORIZON ENERGY HOLDINGS, INC.
By: /s/Xxxxxx X. Xxxxxx
-----------------------
Xxxxxx X. Xxxxxx
Treasurer
NFR POWER, INC.
By: /s/Xxxxxxx X. Xxxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxxx
Treasurer
