Plains Petroleum Company and Subsidiaries - Page 3




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          I.   Petitioner and Tri-Power Before the Acquisition                        
               A.   Petitioner                                                        
                    1.   Organization and Operations                                  
               Petitioner was incorporated on November 30, 1983, as a                 
          wholly owned subsidiary of KN Energy, Inc. (KN Energy), a                   
          publicly traded company.1  Effective October 1, 1984, KN Energy             
          assigned its ownership interests in substantially all of its                
          then-remaining oil and natural gas producing properties to                  
          petitioner.2  On September 13, 1985, as the result of a spinoff,            
          petitioner became an independent, publicly owned company.  Stock            


          1    KN Energy, Inc. (KN Energy), was formed in 1936 as a                   
          pipeline company to purchase supplies of natural gas in the Otis            
          field in central Kansas and deliver those supplies through a                
          single transmission line to markets in northern Kansas and                  
          central Nebraska.                                                           
          2    KN Energy had previously spun off a portion of its assets              
          pursuant to a plan to thwart a 1983 takeover attempt.  During               
          1983, KN Energy had two types of natural gas reserves, (1) "old"            
          natural gas reserves (natural gas reserves associated with wells            
          drilled before July 1, 1978), and (2) "new" natural gas reserves            
          (natural gas reserves associated with wells drilled on or after             
          July 1, 1978).                                                              
               As a defensive mechanism to the 1983 takeover attempt, KN              
          Energy decided to spin off its oil and natural gas reserves.  KN            
          Energy accomplished the spinoff using two subsidiaries, Midlands            
          Energy Co. (Midlands) and petitioner.  The first spinoff took               
          place on Dec. 13, 1983, after KN Energy transferred its new                 
          natural gas reserves and undeveloped properties to Midlands.  The           
          second spinoff was delayed because transfer of KN Energy's old              
          natural gas reserves, which were subject to regulation by the               
          Federal Energy Regulatory Commission (FERC), required FERC                  
          approval which had not yet been sought.  On Jan. 29, 1985, FERC             
          issued an order approving the Oct. 1, 1984, transfer of the                 
          remaining oil and old natural gas reserves to petitioner.                   





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