Edgar Filing: NATIONAL FUEL GAS CO

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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|_| Preliminary Proxy Statement |_| Confidential, For Use of the Commission
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|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12

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National Fuel Gas Company
(Name of Registrant as Specified in its Charter)

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NATIONAL FUEL GAS COMPANY

Notice of Annual Meeting
and
Proxy Statement

Annual Meeting of Stockholders
to be held on
February 20, 2003

NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203

January 10, 2003

Dear Stockholder:

We are pleased to invite you to join us at the Annual Meeting of
Stockholders of National Fuel Gas Company. The meeting will be held at 10:00
A.M. local time on Thursday, February 20, 2003, at The Houstonian Hotel, 111 N.
Post Oak Lane, Houston, Texas, 77024. The matters on the agenda for the meeting
are outlined in the enclosed Notice of Meeting and Proxy Statement.

So that you may elect Company directors and secure the representation of
your interests at the Annual Meeting, we urge you to vote your shares. The
preferred method of voting is by telephone as described on the proxy card. This
method is both convenient for you and reduces the expense of soliciting proxies
for the Company. If you prefer not to vote by telephone, please complete, sign
and date your proxy card and mail it in the envelope provided. The Proxies are
committed by law to vote your proxy as you designate.

If you plan to be present at the Annual Meeting, please respond to the
question if you vote by telephone, or check the "WILL ATTEND MEETING" box on the
proxy card. Whether or not you plan to attend, please vote your shares by
telephone or complete, sign, date and promptly return your proxy card so that
your vote may be counted. If you do attend and wish to vote in person, you can
revoke your proxy by giving written notice to the Secretary of the meeting
and/or the Trustees (as described on the first page of this Proxy Statement),
and/or by casting your ballot at the meeting.

Coffee will be served at 9:30 A.M. and I look forward to meeting you at
that time.

Please review the proxy statement and take advantage of your right to vote.

Sincerely yours,

PHILIP C. ACKERMAN
Chairman of the Board of Directors,
Chief Executive Officer and
President

NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be Held on February 20, 2003

To the Stockholders of National Fuel Gas Company:

Notice is hereby given that the Annual Meeting of Stockholders of National
Fuel Gas Company will be held at 10:00 A.M. local time on Thursday, February 20,
2003, at The Houstonian Hotel, 111 N. Post Oak Lane, Houston, Texas, 77024. At
the meeting, action will be taken with respect to:

(1) the election of directors;

(2) the appointment of independent accountants;

(3) adoption of, if presented at the meeting, a shareholder proposal which
the Board of Directors OPPOSES;

(4) adoption of, if presented at the meeting, another shareholder proposal
which the Board of Directors OPPOSES;

and such other business as may properly come before the meeting or any
adjournment thereof.

Stockholders of record at the close of business on December 23, 2002, will
be entitled to vote at the meeting.

BY ORDER OF THE BOARD OF DIRECTORS

ANNA MARIE CELLINO
Secretary

January 10, 2003

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

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the meeting, and whatever the number of
shares you own, please vote your shares by telephone as described on the proxy/
voting instruction card and reduce National Fuel Gas Company's expense in
soliciting proxies. Alternatively, you may complete, sign, date and promptly
return the enclosed proxy/voting instruction card. Please use the accompanying
envelope, which requires no postage if mailed in the United States.

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

NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203

PROXY STATEMENT

This proxy statement is furnished to the holders of National Fuel Gas
Company ("Company") common stock ("Common Stock") in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Annual Meeting of Stockholders to be held on February 20, 2003, or
any adjournment thereof. This proxy statement and the accompanying proxy/voting
instruction card are first being mailed to stockholders on or about January 10,
2003.

All costs of soliciting proxies will be borne by the Company. Morrow & Co.,
Inc., 445 Park Avenue, New York, New York 10022, has been retained to assist in
the solicitation of proxies and will be compensated in the estimated amount of
$6,500 plus reasonable out-of-pocket expenses. In addition to solicitation by
that firm and by mail, a number of regular employees of the Company and its
subsidiaries may solicit proxies in person, by telephone or by other methods.

Only stockholders of record at the close of business on December 23, 2002,
will be eligible to vote at this meeting. As of that date, 80,441,119 shares of
Common Stock were issued and outstanding.

Each share of Common Stock entitles the holder thereof to one vote with
respect to each matter that is subject to a vote at the meeting. All shares that
are represented by effective proxies received by the Company in time to be voted
will be voted at the meeting or any adjournment thereof. Where stockholders
direct how their votes shall be cast, shares will be voted in accordance with
such directions. Proxies submitted with abstentions and broker non-votes will be
included in determining whether or not a quorum is present. Abstentions shall be
counted in the number of shares represented and voting, and shall have the same
effect as a vote against the proposal.

The proxy also confers discretionary authority to vote on all matters that
may properly come before the Annual Meeting of Stockholders, or any adjournment
thereof, respecting (i) matters of which the Board is not currently aware but
that may be presented at the meeting, (ii) any shareholder proposal omitted from
this proxy statement pursuant to Rule 14a-8 or 14a-9 of the Securities and
Exchange Commission's proxy rules, and (iii) all matters incident to the conduct
of the meeting.

Any stockholder giving a proxy may revoke it at any time prior to the
voting thereof by mailing a revocation or a subsequent proxy to Anna Marie
Cellino at the above address, by filing written revocation at the meeting with
Mrs. Cellino, Secretary of the meeting, or by casting a ballot.

If you are a participant in the Company's Employee Stock Ownership Plan,
Employees' Thrift Plan or Tax-Deferred Savings Plans, and the accounts are
registered in the same name, the proxy card will also serve as a voting
instruction for the Trustees of those Plans. All shares of Company Stock for
which the Trustee has not received timely directions shall be voted by the
Trustee in the same proportion as the shares of Company Stock for which the
Trustee received timely directions, except in the case where to do so would be
inconsistent with the provisions of Title I of ERISA. If this card is returned
signed but without directions marked for one or more items, regarding the
unmarked items you are instructing the Trustee(s) and the Proxies to vote FOR
items 1 and 2 and vote AGAINST items 3 and 4. Participants in the Plan(s) may
also provide those voting instructions by telephone. These instructions may be
revoked by written notice to JPMorganChase Bank, Trustee for the Company's
Employees' Thrift Plan, or Vanguard Fiduciary Trust Company, Trustee for the
Company's Tax-Deferred Savings Plans and the Employee Stock Ownership Plan, on
or before February 18, 2003. Addresses are as follows:

JPMorganChase Bank Vanguard Fiduciary Trust Company
c/o Computershare Investor Services, LLC c/o Computershare Investor
Attn: Proxy Unit Services, LLC
7600 S. Grant Street Attn: Proxy Unit
Burr Ridge, IL 60521 7600 S. Grant Street
Burr Ridge, IL 60521

Enclosed is a copy of the Company's Annual Report and Form 10-K for the
fiscal year ended September 30, 2002, which includes financial statements.

1. ELECTION OF DIRECTORS

Four directors are to be elected at this Annual Meeting. The nominees for
the four directorships are: R. Don Cash, Rolland E. Kidder, George L. Mazanec
and John F. Riordan. Messrs. Kidder, Mazanec and Riordan are currently directors
of the Company.

On September 12, 2002, as permitted by the Company's Certificate of
Incorporation and By-laws, Rolland E. Kidder was elected to the Board for a term
to expire at the 2003 Annual Meeting. Also, on December 12, 2002, Mr. Cash was
nominated as a Director to be elected at this year's shareholder meeting.

The Company's Certificate of Incorporation provides that the Board of
Directors shall be divided into three classes, and that these three classes
shall be as nearly equal in number as possible. (A class of directors is the
group of directors whose terms expire at the same annual meeting of
stockholders.) In order to satisfy this requirement, all four nominees will not
stand for full three-year term.

Messrs. Cash, Mazanec and Riordan have been nominated to serve for terms of
three years until the 2006 Annual Meeting and until their successors are duly
elected and qualified. Mr. Kidder has been nominated to serve for a term of two
years until the 2005 Annual Meeting and until his successor is duly elected and
qualified. As a result of these actions, there will be three classes of
directors with three directors in each class with terms that will expire in
2004, 2005 and 2006, respectively.

The service of William J. Hill and Eugene T. Mann as directors will end at
the 2003 Annual Meeting. They are not candidates for reelection given that it is
the policy of the Board that no person be designated or elected for a term as
Director that would extend beyond such person's 72nd birthday, except that a
person less than 72 years of age may be designated or elected with the specific
understanding that such person will resign from the Board, or not serve beyond
the first Annual Meeting following such person's 72nd birthday. Both Mr. Hill
and Mr. Mann turned age 72 following the 2002 annual meeting. The Board is
deeply appreciative of their many valuable contributions to the Company over the
years.

It is intended that the Proxies will vote for the election of Messrs. Cash,
Kidder, Mazanec and Riordan as directors, unless they are otherwise directed by
the stockholders. Although the Board of Directors has no reason to believe that
any of the nominees will be unavailable for election or service, stockholders'
proxies confer discretionary authority upon the Proxies to vote for the election
of another nominee for director in the event any nominee is unable to serve or
for good cause will not serve. Messrs. Cash, Kidder, Mazanec and Riordan have
consented to being named in this proxy statement and to serve if elected.

The affirmative vote of a plurality of the votes cast by the holders of
shares of Common Stock entitled to vote is required to elect each of the
nominees for director.

Pages 3 through 5 contain information concerning Mr. Cash and the eight
directors of the Company whose terms will continue after the 2003 Annual
Meeting, including information with respect to their principal occupations and
certain other positions held by them.

The Board of Directors Recommends a Vote FOR the Election of
Messrs. Cash, Mazanec, Riordan and Kidder

Name and Year
Became a Director
of the Company Age(1) Principal Occupation
--------------------------------------- ------ -----------------------------------------------------------

Nominees for Election as Directors
for Three-Year Terms to Expire in 2006

R. Don Cash ............................ 60 Chairman of Questar Corporation (Questar), an integrated
natural gas company headquartered in Salt Lake City,
since May 1985. Chief Executive Officer of Questar from
May 1984 to May 2002 and President of Questar from May
1984 to February 1, 2001. Director of Zions Bancorporation,
Texas Tech Foundation and Associated Electric and Gas
Insurance Services Limited; and former trustee, until
September 2002, of the Salt Lake Organizing Committee
for the Olympic Winter Games of 2002.

George L. Mazanec, 1996 ................ 66 Former Vice Chairman, from 1989 until October 1996, of
PanEnergy Corporation, a diversified energy company
(now part of Duke Energy). Advisor to the Chief
Operating Officer of Duke Energy Corporation August
1997-2000. Board member since October 1996. Director
of TEPPCO, LP 1992-1997, Director of Northern Border
Pipeline Company Partnership 1993-1998 and Director
of Westcoast Energy Inc. 1996-2002. Director of the
Northern Trust Bank of Texas, NA and Associated
Electric and Gas Insurance Services, Ltd. Former
Chairman of the Management Committee of Maritimes
& Northeast Pipeline, L.L.C.

John F. Riordan, 2000 .................. 67 President and CEO since April, 2000 of the Gas Technology
Institute, a not-for-profit research and educational
institution, Des Plaines, Illinois. Vice Chairman of KN
Energy, Inc. from February, 1998 to February, 1999.
President and CEO of MIDCON Corporation from October,
1988 to January, 1998. Director of Nicor, Inc., Niagara
University and the Oral and Maxillofacial Surgery
Foundation.

Nominee for Election as Director
for Two-Year Term to Expire in 2005

Rolland E. Kidder, 2002 ................ 62 Executive Director of the Robert H. Jackson Center for
Justice in Jamestown, New York. Former Chairman and
President of Kidder Exploration, Inc., an independent oil
and gas company. An elected member of the New York
State Assembly from 1975 to 1982. Trustee of the New
York Power Authority from 1983 to 1993. Appointed in
1996 to the Dean's Advisory Council of the University of
Buffalo School of Law. From 1994 until 2001, Vice
President and investment advisor for P.B. Sullivan & Co.,
Inc.

------------
(1) As of February 20, 2003.

Name and Year
Became a Director
of the Company Age(1) Principal Occupation
--------------------------------- ----- ------------------------------------------------------------

Directors Whose Terms Expire in 2004

Philip C. Ackerman, 1994 ........ 59 Chief Executive Officer of the Company since October
2001. Appointed as Chairman of the Board effective
January 3, 2002. President of the Company since July
1999. Senior Vice President of the Company from June
1989 until July 1999 and Vice President from 1980 to
1989. President of National Fuel Gas Distribution
Corporation(2) from October 1995 until July 1999 and
Executive Vice President from June 1989 to October
1995. Executive Vice President of National Fuel Gas
Supply Corporation(2) from October 1994 to March 2002.
President of Seneca Resources Corporation(2) from June
1989 to October 1996. President of Horizon Energy
Development, Inc.(2) since September 1995 and certain
other nonregulated subsidiaries of the Company since
prior to 1992.

James V. Glynn, 1997 ............ 68 Chairman and Chief Executive Officer, since November
2001, of Maid of the Mist Corporation, which offers scenic
boat tours of the American and Canadian waterfalls,
Niagara Falls, New York. President of Maid of the Mist
Corporation from 1971 to November 2001. Director of
M&T Bank Corporation, M&T Bank, and Chairman
Emeritus of Niagara University Board of Trustees.

Bernard S. Lee, Ph.D., 1994 ..... 68 Former President, from prior to 1992 until December 31,
1999, of the Institute of Gas Technology (IGT), a not-for-
profit research and educational institution, Des Plaines,
Illinois. IGT Board member since 1994. Presently a director
of NUI Corporation and Peerless Manufacturing Company.

------------
(1) As of February 20, 2003.

(2) Wholly owned subsidiary of the Company.

Name and Year
Became a Director
of the Company Age(1) Principal Occupation
--------------------------- ------ --------------------------------------------------------

Directors Whose Terms Expire in 2005

Robert T. Brady, 1995 ..... 62 Chairman of Moog Inc., a manufacturer of motion control
systems and components, since February 1996. President
and Chief Executive Officer of Moog Inc. since 1988 and
Board member since 1995. Director of Astronics
Corporation, M&T Bank Corporation, M&T Bank and
Seneca Foods Corporation. Director of Acme Electric
Corporation from 1989 to November, 2001.

Bernard J. Kennedy, 1978 .. 71 Chairman of the Board of the Company from March 1989
to January 2, 2002. Chief Executive Officer from August
1988 to October 2001, President from January 1987 until
July 1999. Chairman of the Board of Associated Electric
& Gas Insurance Services Limited.

------------
(1) As of February 20, 2003.

Meetings of the Board of Directors and Standing Committees

During the Company's fiscal year ended September 30, 2002 ("fiscal 2002"),
there were five meetings of the Board of Directors. In addition, certain
directors attended meetings of standing or pro tempore committees. At its
September 12, 2002 meeting, the Board designated a Nominating/ Corporate
Governance Committee. Prior to that designation, the entire Board of Directors
acted as a nominating committee. Four standing committees are described below.

Audit Committee. The Audit Committee held four meetings during fiscal 2002
in order to review the scope and results of the annual audit, to receive reports
of the Company's independent public accountants and chief internal auditor, and
to prepare a report of the committee's findings and recommendations to the Board
of Directors. The committee consists of Messrs. Hill, Glynn, Kidder (as of
September 12, 2002), Lee, and Riordan. The members of the committee are
independent as defined in Sections 303.01(B)(2)(a) and (3) of the New York Stock
Exchange's listing standards, as applicable and as modified and supplemented.

Compensation Committee. The Compensation Committee, all of the members of
which are non-employee independent directors, held seven meetings during fiscal
2002 in order to review and determine the compensation of Company officers, to
review reports and to award stock options, restricted stock and At Risk Program
awards. The committee administers the Company's 1983 Incentive Stock Option
Plan, 1984 Stock Plan, 1993 Award and Option Plan, 1997 Award and Option Plan,
and Annual At Risk Compensation Incentive Program. The committee consists of
Messrs. Brady, Mann, Mazanec and Riordan (as of September 12, 2002).

Executive Committee. The Executive Committee held no meetings during fiscal
2002. The committee has and may exercise the authority of the full Board except
as prohibited by New Jersey corporate law (N.J.S.A. ss. 14A:6-9). The Executive
committee consists of Messrs. Ackerman, Brady, Hill, Mann and Mazanec.

Nominating/Corporate Governance Committee. The committee, originally
designated the Policy/Corporate Governance Committee, held one meeting during
fiscal 2002, plus one meeting to nominate directors after it was renamed the
Nominating/Corporate Governance Committee in September 2002. The committee will
consider nominees recommended by security holders. Recommendations identifying
the proposed nominee and setting out his or her qualifications

should be delivered to the Secretary at the Company's principal office no later
than September 22, 2003 to be considered for the February 2004 Annual Meeting of
Stockholders. The committee makes recommendations to the full Board on nominees
for the position of director. It shall also have duties regarding corporate
governance matters as required by law, regulation or stock exchange rules. The
committee consists of Messrs. Brady, Glynn, Hill, Kennedy and Mann.

During fiscal 2002, all incumbent directors attended at least 75% of the
aggregate of meetings of the Board and of the committees of the Board on which
they served.

Compensation Committee Interlocks and Insider Participation

There are no "Compensation Committee interlocks" or "insider participation"
which Securities and Exchange Commission (SEC) regulations would require to be
disclosed in this proxy statement.

Directors' Compensation

The Retainer Policy for Non-Employee Directors (the "Retainer Policy")
which replaced the Board's preexisting retainer policy and the Retirement Plan
for Non-Employee Directors (the "Directors' Retirement Plan"), was approved at
the 1997 Annual Meeting of Stockholders. Directors who are not Company employees
or retired employees do not participate in any of the Company's employee benefit
or compensation plans. Directors who are current employees receive no
compensation for serving as directors. Only non-employee directors are covered
by the Retainer Policy.

In fiscal 2002 pursuant to the Retainer Policy adopted on June 15, 2000,
non-employee directors were paid an annual retainer of $14,000 and 960 shares of
Common Stock. Common Stock issued to non-employee directors under the Retainer
Policy is nontransferable until the latter of two years from issuance or six
months after the recipient's cessation of service as a director of the Company.

Non-employee directors were paid a fee of $1,200 for each Board meeting and
$800 for each Committee meeting attended ($500 if participating by telephone).
Non-employee directors were paid an additional annual retainer fee of $3,000 if
appointed as Chairman of any committee; accordingly, Messrs. Brady, Lee and
Mazanec each received an additional annual retainer fee of $3,000 during fiscal
2002. Non-employee directors were also paid $600 for special consultation as
directors that were with or at the request of the Company's chief executive
officer. In fiscal 2002 Messrs. Lee and Mann received payments of $1,800 and
$600, respectively, for additional consultations.

Effective January 1, 2003, non-employee directors will receive an annual
retainer of $20,000 and 1,200 shares of Common Stock, as well as $1,500 per
Board meeting and $1,200 per committee meeting attended. In addition, there will
no longer be a different level of payment for attendance at a meeting
telephonically and the special consultation fee will be eliminated. Non-employee
chairmen of committees will also receive a retainer fee of $7,500.

Benefit accruals under the Directors' Retirement Plan ceased for each
current non-employee director on December 31, 1996. All such directors who were
eligible vested in their Directors' Retirement Plan benefits at that time, and
will receive their accrued Directors' Retirement Plan benefits under its terms
(normally at age 72). People who first become directors after February 1997 are
not eligible to receive benefits under the Directors' Retirement Plan.

INDEPENDENT AUDITOR'S FEES

In addition to retaining PricewaterhouseCoopers LLP to report upon the
annual consolidated financial statements of the Company for 2002, the Company
retained PricewaterhouseCoopers LLP to provide various non-audit services in
2002. The aggregate fees billed for professional services by
PricewaterhouseCoopers LLP in 2002 for these various services were: Audit Fees
-- $450,000 for services rendered for the annual audit of the Company's
consolidated financial statements for 2002 and the quarterly reviews of the
financial statements included in the Company's Forms 10-Q; Financial Information
Systems Design and Implementation Fees -- $0; and All Other Fees -- $1,077,500.

AUDIT COMMITTEE REPORT

The Company's Board of Directors has adopted a written charter for the
Audit Committee of the Board of Directors. A copy of that charter was included
as an appendix to the proxy statement for the February 2001 Annual Meeting of
Stockholders.

The Audit Committee has reviewed and discussed the Company's audited
financial statements for fiscal 2002 with management. The Audit Committee has
discussed with the independent auditors the matters required to be discussed by
SAS 61 (Codification of Statements on Auditing Standards, AU 380), as amended or
supplemented. The Audit Committee has received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as modified or supplemented, and has
discussed with the independent auditors the independent auditor's independence.
The Audit Committee also has considered whether the independent auditor's
provision of non-audit services to the Company and its affiliates is compatible
with the independent auditor's independence.

Based on the review, discussions and considerations referred to in the
preceding paragraph, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual Report
on Form 10-K (17 CFR 249.310) for the last fiscal year for filing with the
Securities and Exchange Commission.

AUDIT COMMITTEE

BERNARD S. LEE, PH.D., CHAIRMAN
JAMES V. GLYNN
WILLIAM J. HILL
ROLLAND E. KIDDER
JOHN F. RIORDAN

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth for each current director, each nominee for
director, each of the executive officers named in the Summary Compensation
Table, and for all directors and officers as a group, information concerning
beneficial ownership of Common Stock. Unless otherwise stated, to the best of
the Company's knowledge, each person has sole voting and investment power with
respect to the shares listed.

Number of Shares
of Common Stock Percent of
Beneficially Owned as Common Stock
Name of September 30, 2002 Owned
----------------------------------------- ----------------------- -------------

Philip C. Ackerman (1)(2)(3)(4) ......... 2,726,371 3.40%
James A. Beck (1)(2)(3) ................. 341,422 *
Robert T. Brady ......................... 5,160 *
R. Don Cash (5) ......................... 3,000 *
James V. Glynn .......................... 4,606 *
William J. Hill ......................... 70,482 *
Bernard J. Kennedy (2)(6)(7) ............ 4,392,942 5.47%
Rolland E. Kidder (8) ................... 28,650 *
Bernard S. Lee .......................... 7,360 *
Eugene T. Mann .......................... 6,660 *
George L. Mazanec (9) ................... 5,960 *
John F. Riordan ......................... 4,160 *
Dennis J. Seeley (1)(2)(3)(10) .......... 414,245 *
David F. Smith (1)(2)(3) ................ 414,486 *
Gerald T. Wehrlin (1)(2)(11) ............ 432,087 *
Directors and Officers as a Group
(22 individuals) (12)(13) .............. 10,739,139 13.38%

------------
* Represents beneficial ownership of less than 1% of issued and outstanding
Common Stock on September 30, 2002.

(1) Includes shares held in the Company's Thrift Plan, Employee Stock Ownership
Plan for Supervisory Employees ("ESOP") and Tax-Deferred Savings Plan for
Non-Union Employees ("TDSP"), respectively, as follows: Philip C. Ackerman,
8,681, 11,020 and 12,190 shares; Dennis J. Seeley, 9,055, 4,187 and 7,186
shares; David F. Smith, 0, 1,696 and 8,233 shares; James A. Beck, 260, 0,
and 2,686 shares; Gerald T. Wehrlin, 1,520, 8,128 and 9,243 shares; and all
current directors and officers as a group (22 individuals), 28,299, 53,155
and 101,336 shares. The beneficial owners of the shares have sole voting
power with respect to shares held in the Thrift Plan, ESOP and TDSP, but do
not have investment power respecting those shares until they are
distributed.

(2) Includes shares with respect to which each of the named individuals, and
all current directors and officers as a group (22 individuals), have the
right to acquire beneficial ownership within 60 days of September 30, 2002,
through the exercise of stock options granted under the 1983 Incentive
Stock Option Plan, the 1984 Stock Plan, the 1993 Award and Option Plan, and
the 1997 Award and Option Plan as follows: 3,649,222 shares for Mr.
Kennedy, 2,401,076 shares for Mr. Ackerman, 354,000 shares for Mr. Seeley,
351,500 shares for Mr. Smith, 311,698 shares for Mr. Beck, 354,000 shares
for Mr. Wehrlin, and 9,016,348 shares for all current directors and
officers as a group (22 individuals).

(3) Includes shares of restricted stock, certain restrictions on which had not
lapsed as of September 30, 2002, as follows:, 101,328 shares for Mr.
Ackerman, 6,000 shares for Mr. Seeley,

6,000 shares for Mr. Smith, 18,000 shares for Mr. Beck, and 143,328 shares
for all current directors and officers as a group (22 individuals). Owners
of restricted stock have power to vote the shares, but have no investment
power with respect to the shares until the restrictions lapse.

(4) Includes 1,000 shares held by Mr. Ackerman's wife in trust for her mother,
as to which shares Mr. Ackerman disclaims beneficial ownership, and 440
shares with respect to which Mr. Ackerman shares voting and investment
power with his wife.

(5) Includes 2,000 shares held by the Don Kay Clay Cash Foundation, a Utah
not-for-profit corporation, of which Mr. Cash, his wife, son and
daughter-in-law are directors. Mr. Cash disclaims beneficial ownership of
these shares.

(6) Includes 76,766 shares owned by Mr. Kennedy's wife, as to which Mr. Kennedy
shares voting and investment power.

(7) Includes 8,200 shares held by the Kennedy Family Foundation, a New York
not-for-profit corporation, of which Mr. Kennedy, his wife and son are
directors. Mr. Kennedy disclaims beneficial ownership of these shares.

(8) Includes 20,000 shares owned by Mr. Kidder's wife, as to which Mr. Kidder
shares voting and investment power.

(9) Includes 600 shares owned by Mr. Mazanec's wife, as to which Mr. Mazanec
shares voting and investment power.

(10) Includes 17,910 shares owned by Mr. Seeley's wife, as to which Mr. Seeley
shares voting and investment power.

(11) Includes 5,200 shares held jointly with his wife, as to which Mr. Wehrlin
shares voting and investment power.

(12) See notes (1) through (11) above.

(13) Includes 16,748 shares with respect to which one or another of the officers
of the Company, not including the executive officers named in the Summary
Compensation Table, shares voting and investment power with his wife.

As of September 30, 2002, the Company knows of no one who beneficially
owns in excess of 5% of a class of the Company's common stock except as set
forth in the table below.

Amount and
Nature of
Name and Address of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
---------------------- ------------------------------------------ ------------------ ---------

Common stock ......... Massachusetts Financial Services Company 7,100,471(1) 8.83%
500 Boylston Street, 15th Floor
Boston, MA 02116

Common stock ......... Vanguard Fiduciary Trust Company 5,054,984(2) 6.3%
100 Vanguard Boulevard
Malvern, PA 19355

Common stock ......... Bear Stearns & Co. Inc. 4,300,200(3) 5.35%
115 South Jefferson Road
Whippany, NJ 07981

------------
(1) According to its Form 13F filed with the Securities and Exchange Commission
for the quarter ended September 30, 2002, Massachusetts Financial Services
Company had sole investment discretion with respect to 6,790,111 shares,
shared investment discretion with non-managers with respect to 310,360
shares; sole voting power with respect to 5,796,440 shares, and no voting
power with respect to 1,304,031 shares.

(2) According to its Schedule 13G filed with the Securities and Exchange
Commission for the period ended December 31, 2001, Vanguard Fiduciary Trust
Company in its capacity as trustee for certain employee benefit plans held
3,994,717 shares on behalf of the plans, all of which have been allocated
to plan participants. The number of shares held within the Plans as of
November 29 is 5,054,984. The plan trustee votes the shares allocated to
participant accounts as directed by those participants. Shares held by the
trustee on behalf of the plans as to which participants have made no timely
voting directions are voted by the Trustee in the same proportion as the
shares of Company stock for which the Trustee received timely directions,
except in the case where to do so would be inconsistent with provisions of
Title I of ERISA. Vanguard Fiduciary Trust Company disclaims beneficial
ownership of all shares held in trust by the trustee that have been
allocated to the individual accounts of participants in the plans for which
directions have been received, pursuant to Rule 13d-4 under the Securities
Exchange Act of 1934. The Vanguard Group, which is affiliated with Vanguard
Fiduciary Trust Company, also has sole investment and voting discretion
with respect to an additional 754,179 shares of Company common stock,
according to its Form 13F for the period ended September 30, 2002.

(3) According to its Form 13F filed with the Securities and Exchange Commission
for the quarter ended September 30, 2002, Bear Stearns & Co., Inc., had
sole investment discretion with respect to 4,300,000 shares; shared
investment discretion with non-managers with respect to 200 shares; sole
voting power with respect to 4,300,000 shares, and no voting power with
respect to 200 shares.

EXECUTIVE COMPENSATION

Report of the Compensation Committee

General

The Compensation Committee (the "Committee") sets the base salaries and
bonuses (if any) of the Company's executive officers, makes awards and sets
goals for certain executive officers under the Annual At Risk Compensation
Incentive Program (the "At Risk Program"), and makes awards to executive
officers and others under various compensation plans as described below. The
Committee consists exclusively of non-employee independent directors, appointed
by resolution of the entire Board of Directors. No member of the Committee is
permitted to receive any award under any plan administered by the Committee.

The Committee's objective is to set executive compensation at levels which
(i) are fair and reasonable to the stockholders, (ii) link executive
compensation to long-term and short-term interests of the stockholders, and
(iii) are sufficient to attract, motivate, and retain outstanding individuals
for executive positions. The executive officers' compensation is linked to the
interests of the stockholders by making a significant part of each executive
officer's potential compensation depend on the price of the Company's Common
Stock on the open market, the Company's earnings per share, and the officer's
own performance. The retention of officers is encouraged by making a substantial
portion of the compensation package in the form of awards which either increase
in value, or only have value, if the executive officer remains with the Company
for specified periods of time.

Specific components of executive officers' compensation earned or paid in
fiscal 2002 are discussed below. The Company's five most highly compensated
executive officers are identified on the Summary Compensation Table on page 14,
and are sometimes referred to as the "named executive officers."

Base Salary

The Committee annually reviews base salaries for the Company's officers
and adjusts them on a calendar year basis and as promotions occur. The Committee
generally uses a range of the 50th percentile to the 75th percentile of its
survey data as the starting point. The Committee also takes into account an
individual's specific responsibilities, experience and effectiveness.

The fiscal 2002 base salaries of the named executive officers are shown on
the Summary Compensation Table on page 14 in the "Base Salary" column.

Annual At Risk Incentive and Bonus

Under the At Risk Program, the Committee makes At Risk Awards which grant
for certain named executive officers the opportunity to earn cash payments
depending on the achievement of goals set within the first quarter of each
fiscal year. Performance goals can be both financial (for example, Company
earnings per share or subsidiary earnings) and non-financial (for example,
customer service).

For fiscal 2002 Mr. Ackerman was the only participant in the At Risk
Program. At Risk Program goals for Mr. Ackerman, as Chief Executive Officer,
were a specified level of Company earnings per share (weighted as 75% of the
formula) and other goals (weighted as 25% of the formula). Company earnings per
share (exclusive of non-cash asset write downs, non-cash cumulative effect of
changes in accounting methods, and certain other special items) must reach a
pre-determined target to trigger the maximum annual incentive award to Mr.
Ackerman.

The Summary Compensation Table on page 14 includes in the "LTIP (Long-Term
Incentive Plan) Payouts" column the amounts earned by Mr. Ackerman in fiscal
2002 under the At Risk

Program and as a bonus. The At Risk Award is considered by the SEC to be a
"long-term" incentive because payment is based on the rolling average of
performance during the two fiscal years most recently completed. The range of
potential At Risk Program awards for fiscal 2002 for Mr. Ackerman is set out in
the Long-Term Incentive Plan Table on page 16. In addition, the Committee
awarded Mr. Ackerman a bonus for his performance of responsibilities added
subsequent to the setting of At Risk Program goals.

In furtherance of the Committee's goal of emphasizing incentive-based
compensation for the Company's other executive officers, most of the executive
officers, including Messrs. Beck, Seeley, Smith and Wehrlin were paid amounts as
bonuses in December 2002 (for performance in fiscal 2002). Following a review of
survey data, the Compensation Committee set bonus parameters for Messrs. Beck,
Seeley and Smith early in the fiscal year based on corporate performance, the
performance of their respective subsidiaries and their effectiveness in
performing their respective responsibilities. In December 2002 the Committee
determined a bonus for each of these executives following consultation with Mr.
Ackerman. Mr. Ackerman made recommendations for fiscal 2002 bonuses for the
other officers including Mr. Wehrlin which were accepted by the Committee. The
Summary Compensation Table on page 14 includes in the "Bonus" column the amount
earned by the named executive officers in fiscal 2002 as bonuses. These awards
are considered by the SEC to be bonuses because they are based on performance
during a single fiscal year.

Stock Options and Restricted Stock

Stock options and restricted stock represent the longer-term incentive and
retention component of the executive compensation package. In fiscal 2002, the
Committee awarded stock options to 87 employees, including the named executive
officers. These awards are intended to focus attention on managing the Company
from a long-term investor's perspective and encourage officers and other
managers to have a significant, personal investment in the Company through stock
ownership. Employees are encouraged to retain their stock for long-term
investment. Awards are made under plans such as the 1997 Award and Option Plan
which allow the Committee broad flexibility to use a wide range of stock-based
performance awards.

The Committee awards stock options to buy Company Common Stock, both of
which have value only to the extent the market price of the Company's Common
Stock increases after the date of an award. The Committee also from time to time
awards restricted stock, which increases or decreases in value to the same
extent as the Company's Common Stock. Dividends are paid on restricted stock and
on the shares held for employees (including executive officers) in various
employee benefit plans, so executive officers benefit directly from dividends
paid on the Company's Common Stock.

In 2002 the Committee reviewed and revised its past practice of annual
option awards. It determined that it would not continue to make annual awards of
stock options to officers and other employees. Consequently, in 2002 the
Committee granted options to officers and employees which are intended to be a
multi-year incentive. Option awards were made to each named executive officer to
buy stock in the future at the market price on the award date. These options
vest over a three year period and none can be exercised for at least one year
after the award date. All of them expire no later than 10 years after the award
date. The Committee may decide to award options in individual cases or where
participants are promoted to new positions. Awards to the named executive
officers are shown on the Option Grants in Fiscal 2002 table on page 15.

In March the Committee also granted Mr. Ackerman 100,000 shares of
Restricted Stock. Vesting restrictions on this Restricted Stock lapse in equal
amounts on the anniversary of grant in 2004, 2005, 2006 and 2007. Should Mr.
Ackerman's employment with the company and its subsidiaries terminate for any
reason (except death), any unvested shares will be forfeited. In determining the
appropriate level of Mr. Ackerman's option and restricted stock grant the

Committee took into consideration Company performance, as well as the desire to
retain Mr. Ackerman's services.

Benefits Based on Retirement, Death, or Change in Control

Benefits based on retirement, death, or change in control are payable
under various arrangements which are applicable to the named executive officers
(as well as other core employees). The Committee is not generally authorized to
amend such arrangements, but makes recommendations to the Board of Directors to
amend such plans.

Neither the Company nor the Committee made any material changes in any of
the plans described in this section. Neither the Company nor the Committee made
any material changes in any of the "miscellaneous minor perquisites and personal
benefits" discussed in footnote (1) of the Summary Compensation Table on page
14.

Compensation of Chief Executive Officer

The bases for Mr. Ackerman's fiscal 2002 base salary and At Risk Program
award including the Committee's goals and methodology, are discussed earlier in
this report under the headings Base Salary and Annual At Risk Incentive and
Bonus. The bases for Mr. Ackerman's other fiscal 2002 longer-term incentive
awards are discussed earlier in this report under the heading Stock Options and
Restricted Stock.

Policy With Respect to Qualifying Compensation Paid to Executive Officers
For Deductibility Under Section 162(m) of the Internal Revenue Code

The Committee intends that, whenever reasonably possible, compensation
paid to its managers, including its executive officers, should be deductible for
federal income tax purposes. Compensation paid under the At Risk Program
qualifies as performance-based compensation under Section 162(m) of the Internal
Revenue Code. The Committee may vote to award compensation, especially to a
chief executive officer, that is not fully deductible, if the Committee
determines that such award is consistent with its philosophy and is in the best
interests of the Company and its stockholders.

COMPENSATION COMMITTEE

GEORGE L. MAZANEC, CHAIRMAN
ROBERT T. BRADY
EUGENE T. MANN
JOHN F. RIORDAN

Executive Compensation Summary Table

The following table sets forth information with respect to compensation
paid by the Company and its subsidiaries for services rendered during the last
three fiscal years to the Chief Executive Officer and each of the four other
most highly compensated executive officers for the fiscal year ended September
30, 2002 (the "named executive officers").

SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------------------- ----------------------------------------
Awards Payouts
--------------------------- ------------
Other Annual Restricted Securities All Other
Fiscal Base Compensa- Stock Underlying LTIP Compensa-
Name and Principal Position Year Salary($) Bonus($) tion($)(1) Awards($)(2) Options Payouts($) tion($)(3)
-------------------------------- -------- ----------- ---------- -------------- -------------- ------------ ------------ -----------

Philip C. Ackerman ............. 2002 767,500 134,000 0 2,449,500 200,000 480,000 161,743
Chief Executive Officer and 2001 630,000 0 0 0 500,000 535,500 145,248
President of the Company 2000 570,000 0 0 0 440,000 530,100 156,463
David F. Smith ................. 2002 411,250 250,000 0 0 180,000 0 72,852
President of National 2001 360,000 125,000 0 0 90,000 0 68,979
Fuel Gas Distribution 2000 300,000 100,000 0 0 90,000 0 66,041
Corporation
Dennis J. Seeley ............... 2002 411,250 250,000 0 0 180,000 0 66,329
President of National 2001 360,000 125,000 0 0 90,000 0 61,700
Fuel Gas Supply 2000 281,500 100,000 0 0 80,000 0 55,463
Corporation
James A. Beck .................. 2002 408,923 25,000 0 0 180,000 0 44,846
President of Seneca 2001 360,769 25,000 0 0 70,000 0 23,191
Resources Corporation 2000 277,500 100,000 0 111,190 50,000 0 4,120
Gerald T. Wehrlin .............. 2002 270,000 150,000 0 0 75,000 0 63,181
President of National Fuel 2001 258,000 90,000 0 0 50,000 0 60,577
Resources and Controller of 2000 246,500 75,000 0 0 50,000 0 59,157
the Company

------------
(1) Excludes perquisites or personal benefits because, for each named executive
officer, the cost to the Company of all such items was less than $50,000
and less than 10% of that executive's base salary and bonus, if any, for
each fiscal year listed.

(2) The dollar values shown in the Restricted Stock Awards column are based on
the fair market value of the Company's Common Stock on the date of the
restricted stock award. Restricted shares may not be transferred or
pledged, but such Company-imposed restrictions lapse with the passage of
time and continued employment with the Company.

As of September 30, 2002, the aggregate number of unvested shares of
restricted stock held by each named executive officer and the aggregate
fair market value of such shares using a closing market price as of
September 30, 2002 of $19.87 are as follows: for Mr. Ackerman, 101,328
shares ($2,013,387); Mr. Smith, 6,000 shares ($119,220); Mr. Seeley, 6,000
shares ($119,220); and Mr. Beck, 18,000 shares ($357,660). Dividends are
paid on all shares of restricted stock.

Mr. Ackerman was awarded 100,000 shares of restricted stock on March 14,
2002 as a long term incentive. Vesting restrictions lapse in equal amounts
(one-quarter of the awarded shares) on each of the following dates: March
14, 2004, March 14, 2005, March 14, 2006 and March 14, 2007. Should Mr.
Ackerman's employment with NFG and its subsidiaries terminate for any
reason (except death) prior to the expiration of any vesting restrictions,
the unvested Restricted Stock shall be forfeited by Mr. Ackerman. In the
event of Mr. Ackerman's death, all restrictions shall lapse on the date of
death.

He was also awarded 1,328 shares of restricted stock on December 9, 1999
for performance in fiscal 1999. Vesting restrictions lapse on the first
January 15 which occurs after the year in which Mr. Ackerman retires as an
officer of the Company. These shares do not vest if both his employment and
Directorship with the Company and its subsidiaries terminate for any reason
prior to the expiration of vesting restrictions, unless such termination is
on account of death, disability or retirement.

On December 7, 2000, Mr. Beck was awarded 4,000 shares of restricted stock
for performance in fiscal 2000. He was also awarded 4,000 shares of
restricted stock on December 9, 1999 for performance in fiscal 1999.
Vesting restrictions lapse on December 7, 2006 and December 9, 2005,
respectively. These shares do not vest if Mr. Beck's employment with the
Company and its subsidiaries terminates for any reason except death.

(3) In fiscal 2002, the Company paid, contributed or accrued for Messrs.
Ackerman, Smith, Seeley, Beck, and Wehrlin $11,400, $11,400, $11,400,
$10,067 and $11,400, respectively, under the Tax-Deferred Savings Plan;
$53,710, $17,156, $17,156, $10,079 and $8,658, respectively, under the
Tophat Plan which pays all participants a sum intended to replace amounts
which they will not receive as Company-matching contributions under the
Tax-Deferred Savings Plan as a result of tax law limits or other tax
considerations; $5,702, $755, $2,029, $0 and $4,172, respectively, under a
program that passes through to employees the Company's tax savings
associated with payment of dividends on Employee Stock Ownership Plan
shares; $22,331, $4,641, $10,144, $0 and $22,251, respectively, as
above-market interest under the Deferred Compensation Plan (which amount,
in the case of Mr. Smith, could be forfeited); and $68,600, $38,900,
$25,600, $24,700 and $16,700 respectively, as the dollar value of
split-dollar or other life insurance benefits paid for by the Company.

Stock Option Grant Table

The following table sets forth information with respect to options to
purchase shares of Common Stock awarded during fiscal 2002 to the named
executive officers pursuant to plans approved by the Company's stockholders.

OPTION GRANTS IN FISCAL 2002(1)
--------------------------------------------------------------------------------

Individual Grants
----------------------------------------------
Percent of Total
Number of Options Exercise
Securities Granted to or Base
Underlying Employees Price Per Grant Date
Options in Fiscal share Expiration Present
Name Granted(#) Year ($/Sh) Date Value($)(2)
---------------------------- ------------ ----------------- ----------- ------------ ------------

Philip C. Ackerman ......... 200,000 7.8% 24.495 3/2012 918,000
David F. Smith ............. 180,000 7.0% 24.495 3/2012 826,200
Dennis J. Seeley ........... 180,000 7.0% 24.495 3/2012 826,200
James A. Beck .............. 180,000 7.0% 24.495 3/2012 826,200
Gerald T. Wehrlin .......... 75,000 2.9% 24.495 3/2012 344,250

------------
(1) The options shown on this table were granted under the 1993 and 1997 Award
and Option Plans and vest in one-third increments on the first, second and
third anniversary of the grant date. Thereafter, they can be exercised any
time prior to the expiration date if the holder remains with the Company.
These options terminate within three months of termination of employment,
except that upon termination of employment for any reason other than
discharge for cause or voluntary resignation prior to age 60, most of such
options may be exercised within five years after termination of employment.
Payment of the exercise price may be in cash or by tendering shares of
Company Common Stock.

(2) This column shows the hypothetical value of these options according to a
binomial option pricing model. The assumptions used in this model for the
options granted in fiscal 2002 were: quarterly dividend yield of 1.03%, an
annual standard deviation (volatility) of 21.92%, a risk-free rate of
5.04%, and an expected term before exercise of 5.5 years. Whether the
assumptions used will prove accurate cannot be known at the date of grant.
The model produces a value based on freely tradable securities, which the
options are not. The holder can derive a benefit only to the extent the
market value of Company Common Stock is higher than the exercise price at
the date of actual exercise.

Stock Option Exercises and Fiscal Year-End Value Table

The following table sets forth as to each named executive officer
information with respect to stock option and SAR exercises during fiscal 2002
and the number and value of unexercised options and SARs at September 30, 2002.

AGGREGATED OPTION/SAR EXERCISES IN FISCAL 2002
AND OPTION/SAR VALUES ON SEPTEMBER 30, 2002
--------------------------------------------------------------------------------

Number of Securities
Number of Underlying Unexercised Value of Unexercised
Securities Options/SARs at In-the-money Options/SARs
Underlying Fiscal Year-End(#) at Fiscal Year-End($)(2)
Options/SAR Value ----------------------------- -----------------------------
Name Exercised(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
------------------------ ------------ -------------- ----------- ------------- ----------- -------------

Philip C. Ackerman ..... 0 0 2,489,728 200,000 3,149,823 0
David F. Smith ......... 2,500 14,809 351,500 180,000 39,566 0
Dennis J. Seeley ....... 12,000 143,910 354,000 180,000 57,550 0
James A. Beck .......... 0 0 311,698 180,000 96,008 0
Gerald T. Wehrlin ...... 0 0 354,000 75,000 396,388 0

------------
(1) Market value of stock at exercise less exercise price or base price.

(2) Market value of stock at fiscal year-end less exercise price or base price.

Long-Term Incentive Plan Award Table

The following table sets forth information with respect to long-term
incentive plan awards made during fiscal 2002 to the named executive officer
pursuant to the At Risk Program.

LONG-TERM INCENTIVE PLAN -- AWARDS IN FISCAL 2002
--------------------------------------------------------------------------------

Estimated Future Payouts Under
Non-Stock Price-Based Plans(1)
Performance Period ------------------------------------------
Name Until Maturation Threshold($) Target($) Maximum($)
---------------------------- ----------------------- -------------- ----------- -----------

Philip C. Ackerman ......... 2 years ended 9/30/02 0 767,500 1,535,000

------------
(1) This table describes the sole At Risk Program opportunity which was made to
any executive officer in fiscal 2002 based on the rolling two-year average
of performance in fiscal 2001 and fiscal 2002. The actual amounts awarded
and paid for fiscal 2002 under the At Risk Program are shown in the Summary
Compensation Table on page 14 in the LTIP Payouts column.

Report on Repricing of Options/SARs

The Company did not reprice any stock options or SARs in fiscal 2002.
Under the 1997 Award and Option Plan, from which 99% of the current grants are
issued, options and SARs can not be repriced after they have been granted.

Corporate Performance Graph

The following graph compares the yearly cumulative stockholder return on
the Company's Common Stock against the cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500"), and the AMEX Natural Gas
Index for a period of five years commencing September 30, 1997, and ended
September 30, 2002. The Standard & Poor's Utilities Index, which the Company
used in this graph for many years, was discontinued in 2001. This graph shows
the performance of that index through September 30, 2001. The Company selected
the AMEX Natural Gas Index as the industry or line-of-business index required
for this chart. This published index is comprised of 15 publicly traded
companies (including the Company) engaged in the distribution, transmission,
exploration and/or production of natural gas.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
FISCAL YEARS 1997-2002

[PERFORMANCE GRAPH]

1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----

National Fuel .................. $100 $111 $116 $143 $122 $110
S&P 500 ........................ $100 $109 $139 $158 $116 $ 92
S&P Utilities .................. $100 $130 $129 $186 $140 dicontinued
AMEX Nat. Gas Index ............ $100 $ 67 $ 79 $124 $100 $ 72

* Assumes $100 invested on September 30, 1997, and reinvestment of dividends.

Employment Contracts and Termination of Employment and Change-in-Control
Agreements

Messrs. Ackerman, Beck, Smith, Seeley and Wehrlin entered into Employment
Continuation and Noncompetition Agreements with the Company dated December 11,
1998 that are to become effective in the event of a defined change of control of
the Company. They preserve as a minimum, for the three years following such
change of control, the annual salary levels and employee benefits as are then in
effect for these executives and provide that, in the event of certain
terminations of employment, these executives shall receive severance payments up
to 1.99 times their respective annual base salaries and annual bonuses prior to
termination. Unless an executive elects not to be bound by the Noncompetition
part of the agreement, an additional payment of 1.00 times salary and annual
bonus prior to termination will be made. In addition, executives shall receive
continuation of certain employee benefits for three years or receipt of the
value of such benefits.

Also, in the event of a defined change in control, these executives shall
receive the above-market rate interest on certain deferrals under the Deferred
Compensation Plan, which otherwise could have been forfeited. At September 30,
2002, the above-market rate interest account balance for each of the named
executive officers were as follows: $150,002 for Mr. Ackerman, $49,549 for Mr.
Smith, $0 for Mr. Beck, $69,664 for Mr. Seeley, and $158,475 for Mr. Wehrlin.

Retirement Benefits

The following table shows annual 50% joint and survivor life annuity total
benefits payable under the Retirement Plan plus the Executive Retirement Plan to
eligible officers retiring at the normal retirement age of 65 with a spouse of
the same age. Forms of benefit payment other than the 50% joint and survivor
life annuity, or retirement at an age earlier than 65, would result in different
annual benefits to eligible officers.

Pension Plan Table
Estimated Annual Retirement Benefits
For Years of Benefit Service Credited (1)
Remuneration ------------------------------------------------------------
(2) (3) 20 25 30 35 40
-------------------- --------- ---------- ---------- ---------- ---------

$ 300,000 ......... $98,841 $123,551 $148,262 $164,460 $180,659
500,000 ......... 167,633 209,542 251,450 279,172 306,894
700,000 ......... 236,426 295,532 354,639 393,885 433,130
900,000 ......... 305,218 381,523 457,827 508,597 559,366
1,100,000 ......... 374,011 467,513 561,016 623,309 685,602
1,300,000 ......... 442,803 553,504 664,205 738,021 811,838

------------
(1) The service credited for retirement benefit purposes to the officers named
in the Summary Compensation Table, as of September 30, 2002 is as follows:
Mr. Ackerman, 34 years, 2 months; Mr. Smith, 24 years, 2 months; Mr.
Seeley, 37 years, 3 months; Mr. Beck, 13 years, 4 months; Mr. Wehrlin, 26
years, 1 month.

(2) Compensation covered for retirement benefit purposes differs from the
amounts appearing in the three "annual compensation" columns of the Summary
Compensation Table on page 14, because the retirement benefits are based on
the average of the "annual cash compensation" (including At Risk Awards,
other performance-related lump-sum compensation and certain other
restricted stock) payable for the 60 consecutive month period during the
last ten years before retiring which produces the highest average.
Accordingly, the current compensation covered by the plans (meaning the
average "annual cash compensation" for the 60 months ending September 2002)
for the above named executive officers was: Mr. Ackerman, $1,019,420; Mr.
Smith, $432,950; Mr. Seeley, $428,000; Mr. Beck, $335,950; and Mr. Wehrlin,
$355,100.

(3) Benefits described in this table reflect a partial offset for Social
Security benefits.

2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS

At the 2003 Annual Meeting, stockholders will be asked to appoint
PriceWaterhouseCoopers, LLP, independent accountants for the Company's fiscal
year ending September 30, 2003 ("fiscal 2003"). If appointed,
PriceWaterhouseCoopers, LLP will examine the financial statements of the Company
and its subsidiaries and report upon the annual consolidated financial
statements for fiscal 2003.

Representatives of that firm will not be attending this year's annual
meeting. Therefore, no representative will be available to answer questions or
make a statement.

The affirmative vote of a majority of the votes cast with respect to the
appointment of independent accountants by the holders of shares of Common Stock
entitled to vote is required for the appointment of PriceWaterhouseCoopers, LLP
as independent accountants.

If the necessary votes are not received, or if PriceWaterhouseCoopers, LLP
declines to accept or otherwise becomes incapable of accepting or exercising the
appointment, or its services are otherwise discontinued, the Board of Directors
will appoint other independent accountants. Unless they are otherwise directed
by the stockholders, the Proxies intend to vote for the appointment of
PriceWaterhouseCoopers, LLP as independent accountants.

The Board of Directors Recommends a Vote FOR this Appointment.

3. FIRST SHAREHOLDER PROPOSAL

A shareholder (the "Proponent") has indicated that he or she will present
the proposal set forth below for consideration by the shareholders at the Annual
Meeting. The name, address and stock ownership of the Proponent will be provided
by the Company's Secretary to any shareholder promptly upon receipt of any oral
or written request.

"The stockholders recommend that the Board limit all Company executive
compensation plans ("Plans") so that additional potential share dilution
attributable to awards to executive officers does not exceed 1% of outstanding
shares per year. Consequently, if there were 80,000,000 shares outstanding
(approximately the current number), no more than 800,000 stock options, shares
of restricted stock and similar securities could be awarded under the Plans to
executive officers.

The Company's latest proxy statement concedes that Company common stock
underperformed the Standard & Poors 500 Composite Stock Price Index and the
Standard & Poors Utility Index over five years ending September 30, 2001.

Since then, the price of Company common stock has declined. As of this
writing (August 9, 2002), it languishes at levels prevailing in late 1996, after
adjusting for the 2001 stock split.

Executives responsible for poor performance should not enjoy compensation
bonanzas. Yet executive compensation at the Company has exploded. The Company
increased the annual total compensation package of Bernard Kennedy, who recently
retired as Company CEO and Chairman of the Board, from $2,165,306 (fiscal 1996)
to $5,234,811 (fiscal 2000), and to $8,787,501 (fiscal 2001). This is a 306%
increase over a mere 5 years.

Kennedy: 306% increase in compensation. Stockholders: stock price at 1996
levels.

Further, during fiscal years 1999-2001, the Company awarded stock options
and stock appreciation rights (SAR's) that it valued at approximately
$28,000,000.

Moreover, just for fiscal 2001, the Company awarded stock options, SARs
and restricted stock respecting approximately 3% of Company common stock. This
increased greatly from approximately 1.3% in fiscal 1996. The 6 year total
(approximately 14%) represents an enormous potential dilution of Company common
stock.

This large overhang will harm stockholders for years.

Commentators have criticized stock options for their costs and dilutive
effect because they mortgage future earnings and depress stock prices, etc. See
Fortune, June 25, 2001, "CEO Pay Heist", and Business Week, July 15, 2002, "An
Overdose of Options".

The Company filed a Form 8-K with the SEC in 2001, which further shows
that the directors cannot be trusted to control costs. This filing shows that
Kennedy will also receive an annual pension of approximately $2,347,000, the
right to convert part of that to a $23,000,000 lump sum payment, consulting pay
totaling $625,000, and even continuing medical, health and dental benefits for
his daughter Maureen.

Even worse, this largesse was disclosed just after the New York Public
Service Commission issued an order stating: "it appears the company may have
violated certain provisions of the Public Service Law . . . and that these
violations directly contributed to the death of this customer" (a woman wrongly
denied gas service, who died from hypothermia). The Commission seeks
approximately $19,000,000 in penalties.

In short, the Board has behaved irresponsibly. Won't anything cause it to
shut off the spigot?

Therefore, stockholders should limit the Plans as recommended, and save
themselves millions of dollars."

Statement of the Board in Opposition to the Shareholder Proposal

Your Board of Directors recommends that you vote "AGAINST" this proposal.
The proposal is unnecessary, unwise, and is motivated by the personal grievances
of this disgruntled ex-employee who submits a similar proposal every year. This
proposal is part of the Proponent's long-running vendetta against the Company
and certain officers, in violation of numerous court orders, for which various
judges have found the Proponent guilty of a total of more than 80 counts of
civil contempt of court and 35 counts of criminal contempt.

All of the equity-based awards about which the Proponent complains were
authorized by Company shareholders at various annual meetings over the years.
There are currently 118 individuals who hold stock options issued under the
Company's compensation plans. The Proponent would limit the issuance of awards
to executive officers under those plans each year to about 800,000 shares (after
adjustment for the September 2001 two-for-one stock split).

Under the Company's currently effective plans, there remain 1,030,069
shares (post-split) available on December 10, 2002, to be issued as stock
options, restricted stock or other awards. Awards may be made under the current
plans until December 12, 2006. Obviously, the proposed limit of 800,000 awards
per fiscal year would have little or no effect on the timetable for issuing the
remaining shares available under the current plans. The shareholders' approval
of this proposal would not "save themselves million of dollars," as the
Proponent misleadingly claims.

The number of shares authorized by the current plans could be increased by
vote of the Company's shareholders, but there is no such proposal on the agenda
at the upcoming Annual Meeting. Company shareholders will have the opportunity,
as they have had for all previous option plans, to vote on the adoption of any
future compensation plan that would authorize additional stock options for
Company executives and employees.

In the spirit of full disclosure, note that additional shares also become
available under the current plans from time to time by the operation of certain
non-dilutive provisions of those plans. From fiscal 1999 through fiscal 2002, an
average of 96,434 (post-split) shares per year were added back to these plans as
a result of cancelled shares or forfeited awards. Shares are added back into
these plans when awards are forfeited voluntarily or involuntarily (for example,
the Proponent's unexercised stock options were forfeited when a Company
subsidiary fired the Proponent in 1999).

However, it is not possible under the plans for anybody to voluntarily forfeit
options in return for lower-priced (more valuable) options, because that would
amount to a prohibited "repricing." Shares are also added back to the plans
when outstanding shares of Company stock are cancelled to pay the option
exercise price or to pay withholding taxes due in connection with the exercise
or vesting of awards.

The Proponent complains vehemently about the number and value of options
the Company has issued since 1999. Even though the Company's stock has
outperformed the Standard & Poors 500 Index over the most recent five-year
period, all of the options issued by the Company since the beginning of fiscal
1999 are under water as of December 10, 2002. These options cannot be sold, and
whatever intrinsic value they have is much less than the Proponent claims. They
will never have any value nor dilute existing shares unless our stock price
rises. The outstanding options serve as a very tangible incentive for the
Company's officers and employees to do what they honestly can do to cause the
Company's stock price to increase.

The Company is not satisfied with the current market performance of its
stock, even though the Corporate Performance Graph on page 17 demonstrates that
Company stock did outperform, over the most recent five-year period, the indexes
shown for that five-year-period. The Company does not promise that its stock
will always outperform the S&P 500 or any other index, and can not unequivocally
promise to continue its long and proud streak of continually increasing annual
cash dividends and its 100 uninterrupted years of dividend payments. The Company
does promise our best honest efforts in generating earnings and dividends for
our shareholders, and in designing compensation programs that align our
officers' and employees' personal economic interests with the economic interests
of our shareholders.

Your Board of Directors recommends a vote "AGAINST" this proposal.

4. SECOND SHAREHOLDER PROPOSAL

"The stockholders recommend that the Board (1) create and appoint a
committee comprised principally of unaffiliated and independent members of the
public, including members of minority groups, (2) direct, empower and enable
this committee to issue a plan to eliminate the impact of discrimination in
employment at the Company and its subsidiaries ("NFG"), by increasing minority
employment to reflect the demographic makeup of the customers, populations and
places that NFG serves, and (3) describe the problem, and the plan to correct
it, in the Company's proxy statement or annual report of late 2003 or early
2004, and describe its implementation in the following proxy statement or annual
report.

NFG has never had a nonwhite executive officer.

NFG has repeatedly refused to disclose to its stockholders the precise
percentage of its entire American workforce that is nonwhite, and how that
breaks down by pay and employment grade. All NFG will state to shareholders is
that the percentage is 3% or more.

This suggests that NFG has discriminated against nonwhites in its
employment practices.

NFG's principal business has been its utility business. Most of the
utility's customers reside in Erie and Niagara Counties, New York and Erie
County, Pennsylvania. The population of the 3 counties is, respectively, 17.8%,
9.3% and 9.1% nonwhite. The weighted average is about 15% nonwhite, since the
population of the first county is about two times the population of the other
two combined. The vast majority of the American employees of NFG work for the
utility.

Many NFG employees work in Houston, Texas (Harris County). 41.3% of the
population of this county is nonwhite.

The 2000 United States census provides these county population statistics.

Why take resolution of this problem away from management? The answer is
obvious -- management has not solved the problem despite decades of opportunity.

Additionally, NFG has shown its contempt for the law and the public. The
Public Service Commission of New York conducted an investigation into the
hypothermia death of a black woman who was wrongly denied utility service. The
Commission stated: "As a result of that investigation, it appears the company
may have violated certain provisions of the Public Service law, . . . and that
these violations directly contributed to the death of this customer".

Consequently, the Commission seeks approximately $19 million in penalties
from NFG.

If NFG had more nonwhite employees, especially at high levels, it probably
would show greater sensitivity to the nonwhite community, and might have avoided
this large potential penalty and damage to reputation.

The Civil Rights Act of 1964 and other laws concerning employment
discrimination have been in effect for decades. Shouldn't their spirit play a
greater role at NFG? Shouldn't NFG take a more proactive role before additional
governmental action, and/or litigation, occurs? Millions of dollars, and the
good will of the government and the public, are at stake.

Therefore, management should stop the evasions and come clean, and
shareholders should approve this proposal."

Statement of the Board in Opposition to the Shareholder Proposal

Your Board of Directors recommends that you vote "AGAINST" this proposal.

The Company is committed to operating our business in full compliance with
all laws, including the laws relating to equal employment opportunity. We have a
long-standing and widely disseminated policy which requires that our hiring and
promotion process be free from discrimination based on race, color, gender,
national origin, age, disability or veteran status. The Company has long
believed that creating and maintaining a qualified diverse workforce makes good
business sense and is a critical component to our continued success in the
competitive deregulated environment. Recruiting and retaining a diverse
workforce is a priority for the Company. Our extensive outreach program is
designed to ensure that the applicants reflect talent from all segments of the
American workforce, including those in the many communities we serve across the
nation.

The Proponent's statements are clearly intended to mislead the reader.
National Fuel has voluntarily and publicly stated that the minority composition
of its utility workforce is greater than 9%, which it still is. Actual U.S.
census data indicates that the percentage of what the Proponent calls
"nonwhites" living in the service territory of the Company's utility segment was
8.49% according to the 1990 Census data. Under the classification system
introduced with the 2000 census (which for the first time allowed people to
self-identify as belonging to one or more races), 10.99% of the people in our
utility service territory identified themselves in 2000 as belonging to a race
other than or in addition to "white." Further, less than 3% of the Company's
U.S. workforce actually works in Harris County, Texas. The Proponent fails to
recognize that the Company is, and has been for quite some time, a diversified
energy company consisting of six primary business segments operating in various
geographic areas.

Moreover, the Proponent's claims that "the Public Service Commission
conducted an investigation into the hypothermia death of a black woman who was
wrongly denied utility service"

and that "the Commission seeks approximately $19 million in penalties from NFG"
are inaccurate. The Commission has opened a case for the purpose of
investigating whether alleged violations of utility regulations contributed to a
customer's death, and has stated that once the investigation is completed, the
Commission will then decide whether to pursue a civil remedy (which could
include penalties) in State Supreme Court. The Company has made a comprehensive
filing with the Commission showing, among other things, that the Company did not
violate the law or regulations; that it played no role in the woman's death, and
that she did not die from hypothermia. The Proponent's assertion that the tragic
death of this woman was related in any way to race is cynical, reckless and has
no basis in fact. The order initiating this administrative proceeding (discussed
in more detail in the Company's Forms 10-Q and 10-K) does not, in any way,
involve or relate to the race of the customer in question or accuse the Company
of racial discrimination; indeed, it does not even mention the customer's race.

The Proponent's practice of presenting selective half-truths without
context is reckless and clearly intended to mislead the shareholders and to
foment discord and controversy, rather than to provide relevant information. The
Proponent has a close personal relationship with the proponent of the other
shareholder proposal on the agenda, and is thus motivated by that ex-employee's
same personal grievances. In fact, that ex-employee submitted essentially this
same proposal at the 2000 Annual Meeting, at which it was defeated by a wide
margin.

We continue to strive to make sure that (i) all applicants have an equal
opportunity, regardless of race or ethnic origin, to apply for employment and be
evaluated objectively, and (ii) minority individuals and organizations become
aware of our employment opportunities. We believe that the additional committee,
procedures, plan and report suggested in the proposal are unnecessary.

Your Board of Directors recommends a vote "AGAINST" this proposal.

COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and the New York Stock Exchange.
Directors, officers and greater-than-10% stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on review of information furnished to the Company, reports
filed through the Company and written representations that no Forms 5 were
required, the Company believes that all Section 16(a) filing requirements
applicable to its officers, directors and greater-than-10% beneficial owners
were complied with during fiscal 2002, except as described in the following two
sentences. On the day Mr. Rolland Kidder became a director in September 2002, he
signed his initial Form 3 and entrusted it to the Company for filing. Due to
logistical problems and human error within the Company, his Form 3 was filed one
day late.

OTHER BUSINESS

The Board of Directors does not know of any business that will be
presented for consideration at the meeting except as set forth above. However,
if any other business is properly brought before the meeting, or any adjournment
thereof, the Proxies will vote in regard thereto according to their discretion.

PROPOSALS OF SECURITY HOLDERS

Proposals that security holders intend to present at the 2004 Annual
Meeting of Stockholders must be received by the Secretary at the principal
offices of the Company no later than September 12, 2003, in order to be
considered for inclusion in the Company's proxy statement and proxy for that
meeting. Notice of a shareholder proposal submitted outside the processes of SEC
Rule 14a-8 under the Securities Exchange Act, for consideration at the 2004
Annual Meeting of Stockholders, shall be considered untimely unless received by
the Secretary at the Company's principal office no later than September 22,
2003.

BY ORDER OF THE BOARD OF DIRECTORS

ANNA MARIE CELLINO
Secretary

January 10, 2003

[NATIONAL FUEL LOGO] 000000 0000000000 0 0000

MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1 000000000.000 ext
ADD 2 000000000.000 ext
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ADD 6
Holder Account Number
[BAR CODE]
C 1234567890 J N T

[BAR CODE]

|_| Mark this box with an X if you have
made changes to your name or address
details above.

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Annual Meeting Proxy Card
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PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE VOTING INSTRUCTIONS.

A Election of Directors

The Board of Directors Recommends a Vote "FOR" the listed nominees.

1. Election of the following nominees as Directors:
For three-year terms which expire in 2006 -

For Withhold

01 - R. Don Cash |_| |_|

02 - George L. Mazanec |_| |_|

03 - John F. Riordan |_| |_|

For two-year term which expires in 2005 -

04 - Rolland E. Kidder |_| |_|

B Issues

The Board of Directors Recommends a Vote "FOR" Item 2.

For Against Abstain

2. Appointment of independent accountants |_| |_| |_|

The Board of Directors Recommends a Vote "AGAINST" Items 3 and 4.

For Against Abstain

3. Adoption of, if presented at the Meeting, first
shareholder proposal |_| |_| |_|

4. Adoption of, if presented at the Meeting,
second shareholder proposal |_| |_| |_|

Please mark this box with an X if you will attend
Meeting |_|

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2 AND
"AGAINST" ITEMS 3 AND 4.

**WE ENCOURAGE YOU TO VOTE BY TELEPHONE TOLL FREE. PLEASE READ THE
INSTRUCTIONS ON THE REVERSE SIDE.**

C Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.

Please sign your name as it appears on this proxy/voting instruction card and
return the completed card in the enclosed envelope. When signing as an attorney,
executor, administrator, trustee, guardian or other representative, please give
title as such. If signer is a corporation, please sign full corporate name by
duly authorized officer and attach corporate seal. For joint accounts, each
joint owner should sign.

Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (mm/dd/yyyy)
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1 U P X H H H P P P P 0014661

001CD40001 0095ZD

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Proxy - National Fuel Gas Company
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Proxy/Voting Instruction Card Solicited by the Board of Directors for Use at the
Annual Meeting of Stockholders, February 20, 2003
PLACE: The Houstonian Hotel, 111 N. Post Oak Lane, Houston, Texas 77024

The undersigned on the other side of this card hereby appoints P. C. Ackerman
and A. M. Cellino, or either of them, Proxies with full power of substitution
and revocation in each, to vote all the shares of Common Stock held of record by
the undersigned on December 23, 2002 at the Annual Meeting of Stockholders of
National Fuel Gas Company or at any adjournment of the meeting, on each of the
items on the reverse side and in accordance with the directions given there,
and, in their discretion, on all other matters that may properly come before the
Annual Meeting or any adjournment thereof, respecting (i) matters of which the
Board is not currently aware, but that may be presented at the meeting, (ii) any
shareholder proposal omitted from this proxy statement pursuant to Rule 14a-8 or
14a-9 of the Securities and Exchange Commission's proxy rules, and (iii) all
matters incident to the conduct of the meeting. This proxy may be revoked with
the Secretary of the meeting as described on the first page of the enclosed
Proxy Statement.

Employee Benefit Plans. This card also provides voting instructions for shares
held in the National Fuel Gas Company Employee Stock Ownership Plan, the
National Fuel Gas Company Employees' Thrift Plan and the National Fuel Gas
Company Tax-Deferred Savings Plans. If you are a participant in any of these
plans and have shares of the common Stock of the Company allocated to your
account under these plans, please read the following authorization to the
Trustees of those plans as to the voting of such shares.

Trustees' Authorization. The undersigned on the other side of this card
authorizes and instructs JPMorgan Chase Bank as Trustee of the National Fuel Gas
Company Employees' Thrift Plan and/or authorizes and instructs Vanguard
Fiduciary Trust Company as Trustee of the National Fuel Gas Company Tax Deferred
Savings Plans and the National Fuel Gas Company Employee Stock Ownership Plan to
vote all shares of the Common Stock of the Company allocated to the
undersigned's account under such plan(s) (as shown on the reverse side) at the
Annual Meeting, or at any adjournment thereof, in accordance with the
instructions on the reverse side. All shares of Company stock for which the
Trustee has not received timely directions shall be voted or exercised by the
Trustee in the same proportion as the shares of Company Stock for which the
Trustee received timely directions. You may revoke your instructions by notice
to the Trustee(s) as described on the first page of the enclosed Proxy
Statement.

This proxy, when properly executed, will be voted as directed by the
stockholder. See above and below for important provisions and additional
instructions.

Incomplete Directions and Instructions. If this card is returned signed but
without directions marked for one or more items, regarding the unmarked items,
you are instructing the Trustee(s) and granting the Proxies discretion to vote
FOR Items 1 and 2 and AGAINST Items 3 and 4.

THIS PROXY/VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE. PLEASE VOTE
BY TELEPHONE, OR SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.

Telephone and Mail Voting Instructions

You can vote by telephone or Mail! Available 24 Hours a day 7 days a week! Your
vote is important! You may choose one of the two voting methods outlined below
to vote your proxy. Have this proxy card in hand when you call.

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[PHONE] To vote using the Telephone (within U.S. and Canada)
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o Call toll free 1-866-267-5529 in the United States or Canada any time on a
touch tone telephone. There is NO CHARGE to you for the call.

o Enter the Holder Account Number (excluding the letter "C") and Proxy Access
Number located below.

o Follow the simple recorded instructions.

Option 1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.

When asked, please confirm your vote by pressing 1.

Option 2: If you choose to vote on EACH proposal separately, press 0 and follow
the simple recorded instructions.

*When prompted, please answer whether or not you will be attending the
annual meeting.

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[MAILBOX] To Vote by Mail
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o Mark, sign and date the proxy card.

o Return the proxy card in the postage-paid envelope provided.

HOLDER ACCOUNT NUMBER C0123456789 PROXY ACCESS NUMBER 12345

If you vote by telephone, please DO NOT mail back this proxy card.

Proxies submitted by telephone must be received by 12:00 midnight, Central Time,
on February 19, 2003.

THANK YOU FOR VOTING

00961F