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KENNEDY TO STEP DOWN AS CEO OF NATIONAL FUEL

Bernard J. Kennedy, who guided National Fuel Gas Co. during the last 13 years of its transformation from a local natural gas utility to a broad-based energy company, said Wednesday that he will retire at the end of the month.

Kennedy, 70, will be replaced as National Fuel's chief executive officer by Philip C. Ackerman, whose position as Kennedy's heir apparent was solidified two years ago, when Kennedy gave up his duties as president of the Buffalo-based company and handed those responsibilities to Ackerman.

Kennedy will continue to be National Fuel's chairman through the end of the year and will remain on the company's board of directors.

Both executives stressed that they expected few major changes to result from the change in National Fuel's leadership.

"This is, I think, a seamless transition that has been in the works for a long, long time," said Ackerman, who has held top executive positions at all of the company's four main businesses. "I don't think we intend to make any dramatic changes."

Kennedy, a former chairman of the Buffalo Niagara Partnership who has been an active member of Buffalo's business community for many years, said Ackerman's 33 years of experience at National Fuel should smooth the transition. "Phil and I have worked together so closely and for so long, there will not be so much as a missed beat," he said.

When Kennedy joined National Fuel in 1958 as a lawyer fresh out of the University of Michigan Law School, the company was a regional utility, providing natural gas service to customers in Western New York and northwestern Pennsylvania.

But the company, under the direction of former chief executive Louis R. Reif, began to push into other aspects of the natural gas business during the 1970s to reduce the company's dependence on the weather and economic conditions.

Since Kennedy became National Fuel's president in 1987 and its chief executive officer in 1988, the company has continued with that diversification strategy, expanding its pipeline and storage operations and making an aggressive move to build up its oil and natural gas drilling business.

That exploration and production business, built up through a series of acquisitions, now is the biggest portion of National Fuel's operations, accounting for about 38 percent of company's gross assets and about 40 percent of its profits.

"That's all part of not having all of your eggs in one basket," Ackerman said.

Indeed, Ackerman is inheriting the reins at National Fuel at a uniquely challenging time. Natural gas prices, which soared to record highs last winter, have plummeted this year and now are back at levels not seen since late 1999. In addition, the already weakening economy has reduced demand for energy and last week's terrorist hijackings have prompted a wave of layoffs and cutbacks that have raised fears of a recession.

At the same time, longer term forecasts are predicting that demand for natural gas should rise sharply, especially as new gas-fired power plants are built in the electricity-starved Northeast, putting National Fuel in a good position to capitalize on that trend, both with its pipeline operations and its expanded gas drilling business in western Canada.

"It's always something," Ackerman said. "But that's why one of the things we've tried to do is diversify the company."

Kennedy, who won executive of the year awards from the management schools at Canisius College in 1990 and the University at Buffalo in 1994, said he will continue to serve as chairman of Associated Electric & Gas Insurance Services Ltd. as well as on the boards of several other groups, including HSBC Bank USA and Merchants Mutual Insurance Co.

e-mail: drobinson@buffnews.com

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