ACQUISITION AGREEMENT





                      ACQUISITION AGREEMENT



     This Acquisition Agreement (the "Agreement") is entered into

as of May 29, 2001, by and among Allegheny Ventures, Inc., a

Delaware corporation, or its designee (the "Buyer"), Allegheny

Energy, Inc., a Maryland corporation ("Allegheny"), Conoco Inc.,

a Delaware corporation ("Conoco"), Alliance Gas Services, Inc., a

Kentucky corporation ("AGS"), John C. McCord, an individual

("McCord"), and Andrew R. Fellon, an individual ("Fellon," and

together with Conoco, AGS and McCord, the "Sellers").  The Buyer

and the Sellers are referred to collectively herein as the

"Parties."



     WHEREAS, Fellon and McCord in the aggregate own all of the

outstanding shares of stock of both AGS and Fellon-McCord

Associates, Inc., a Kentucky corporation ("FMA" and together with

AGS, the "Target Corporations"); and



     WHEREAS, each of AGS and Conoco owns a 50% partnership

interest in Alliance Energy Services Partnership, a Kentucky

general partnership ("AES" or the "Target Partnership" and

together with the Target Corporations, the "Targets").



     This Agreement contemplates a transaction in which (1) the

Buyer will purchase from Fellon and McCord, and Fellon and McCord

will sell to the Buyer, all of the outstanding capital stock of

the Target Corporations in return for notes and performance

payments and (2) the Buyer will purchase from Conoco, and Conoco

will sell to the Buyer, its 50% partnership interest in the

Target Partnership.



     Now, therefore, in consideration of the premises and the

mutual promises herein made, and in consideration of the

representations, warranties, and covenants herein contained, the

Parties agree as follows.



     1.  Definitions.



     "Accredited Investor" has the meaning set forth in

Regulation D promulgated under the Securities Act.



     "Actual EBITDA" has the meaning set forth in Section 2(d)

below.



     "Adverse Consequences" means all actions, suits,

proceedings, hearings, investigations, charges, complaints,

claims, demands, injunctions, judgments, orders, decrees,

rulings, damages, dues, penalties, fines, costs, amounts paid in

settlement, Liabilities, obligations, Taxes, liens, losses,

expenses, and fees, including court costs and reasonable

attorneys' fees and expenses.



     "AES Disclosure Schedule" has the meaning set forth in

Section 4 below.



     "Affiliate" has the meaning set forth in Rule 12b-2 of the

regulations promulgated under the Securities Exchange Act.



     "Affiliated Group" means any affiliated group within the

meaning of Code Section 1504(a).



     "AGS Disclosure Schedule" has the meaning set forth in

Section 4 below.



     "Basis" means any past or present fact, situation,

circumstance, status, condition, activity, practice, plan,

occurrence, event, incident, action, failure to act, or

transaction that forms the basis for any specified consequence.



     "Buyer" has the meaning set forth in the preface above.



     "Closing" has the meaning set forth in Section 2(d) below.



     "Closing Date" has the meaning set forth in Section 2(d)

below.



     "Code" means the Internal Revenue Code of 1986, as amended.



     "COBRA" means the requirements of Part 6 of Subtitle B of

Title I of ERISA and Code Section 4980B.



     "Confidential Information" means any information concerning

the businesses and affairs of the Targets that is not already

generally available to the public.



     "Disclosure Schedules" has the meaning set forth in Section

4 below.



     "Employee Benefit Plan" means any (a) nonqualified deferred

compensation or retirement plan or arrangement, (b) qualified

defined contribution retirement plan or arrangement which is an

Employee Pension Benefit Plan, (c) qualified defined benefit

retirement plan or arrangement which is an Employee Pension

Benefit Plan (including any Multiemployer Plan), or (d) Employee

Welfare Benefit Plan or material fringe benefit or other

retirement, severance, bonus, or incentive plan or program.



     "Employee Pension Benefit Plan" has the meaning set forth in

ERISA Section 3(2).



     "Employee Welfare Benefit Plan" has the meaning set forth in

ERISA Section 3(1).



     "Energy Commodities" has the meaning set forth in Section

4(r) below.



     "Environmental, Health and Safety Requirements" shall mean

all federal, state, local and foreign statutes, regulations,

ordinances and other provisions having the force or effect of

law, all judicial and administrative orders and determinations,

all contractual obligations and all common law concerning public

health and safety, worker health and safety, and pollution or

protection of the environment, including without limitation, all

those relating to the presence, use, production, generation,

handling, transportation, treatment, storage, disposal,

distribution, labeling, testing, processing, discharge, release,

threatened release, control, or cleanup of any hazardous

materials, substances or wastes, chemical substances or mixtures,

pesticides, pollutants, contaminants, toxic chemicals, petroleum

products or byproducts, asbestos, polychlorinated biphenyls,

noise or radiation, each as amended and as now or hereafter in

effect.



     "ERISA" means the Employee Retirement Income Security Act of

1974, as amended.



     "ERISA Affiliate" means each entity which is treated as a

single employer with Seller for purposes of Code Section 414.



     "FMA Disclosure Schedule" has the meaning set forth in

Section 4 below.



     "Fiduciary" has the meaning set forth in ERISA Section

3(21).



     "Financial Statement" has the meaning set forth in Section

4(g) below.



     "GAAP" means United States generally accepted accounting

principles as in effect from time to time.



     "Indemnified Party" has the meaning set forth in Section

8(d) below.



     "Indemnifying Party" has the meaning set forth in Section

8(d) below.



     "Intellectual Property" means (a) all inventions (whether

patentable or unpatentable and whether or not reduced to

practice), all improvements thereto, and all patents, patent

applications, and patent disclosures, together with all

reissuances, continuations, continuations-in-part, revisions,

extensions, and reexaminations thereof, (b) all trademarks,

service marks, trade dress, logos, trade names, and corporate

names, together with all translations, adaptations, derivations,

and combinations thereof and including all goodwill associated

therewith, and all applications, registrations, and renewals in

connection therewith, (c) all copyrightable works, all

copyrights, and all applications, registrations, and renewals in

connection therewith, (d) all mask works and all applications,

registrations, and renewals in connection therewith, (e) all

trade secrets and confidential business information (including

ideas, research and development, know-how, formulas,

compositions, manufacturing and production processes and

techniques, technical data, designs, drawings, specifications,

customer and supplier lists, pricing and cost information, and

business and marketing plans and proposals), (f) all computer

software (including data and related documentation), (g) all

other proprietary rights and (h) all copies and tangible

embodiments thereof (in whatever form or medium).



     "ISDA" means the International Swaps Dealers Association,

Inc.



     "Knowledge" means actual, not implied or imputed, then

present knowledge after reasonable investigation.



     "Liability" means any liability (whether known or unknown,

whether asserted or unasserted, whether absolute or contingent,

whether accrued or unaccrued, whether liquidated or unliquidated,

and whether due or to become due), including any liability for

Taxes.



     "Material Adverse Effect" means, with respect to any entity

or entities any state of facts, event, change, or effect that is

materially adverse to the business, financial condition, assets,

or operations or business prospects of the entity or entities

taken as a whole or on the ability of such entity or entities to

perform its obligations hereunder in all material respects.

EBITDA as forecasted is not intended to be a representation with

respect to the business prospects of the Targets and the failure

to achieve forecasted EBITDA results will not, in itself,

constitute a Material Adverse Effect.



     "Most Recent Balance Sheet" means the balance sheet

contained within the Most Recent Financial Statements.



     "Most Recent Financial Statements" has the meaning set forth

in Section 4(g) below.



     "Most Recent Fiscal Month End" has the meaning set forth in

Section 4(g) below.



     "Most Recent Fiscal Year End" has the meaning set forth in

Section 4(g) below.



     "Multiemployer Plan" has the meaning set forth in ERISA

Section 3(37).



     "Ordinary Course of Business" means the ordinary course of

business consistent with past custom and practice (including with

respect to quantity and frequency).



     "Party" has the meaning set forth in the preface above.



     "PBGC" means the Pension Benefit Guaranty Corporation.



     "Performance Payments" has the meaning set forth in Section

2(c) below.



     "Person" means an individual, a partnership, a corporation,

an association, a joint stock company, a trust, a joint venture,

an unincorporated organization, or a governmental entity (or any

department, agency, or political subdivision thereof).



     "Prohibited Transaction" has the meaning set forth in ERISA

Section 406 and Code Section 4975.



     "Purchase Price" has the meaning set forth in Section 2(b)

below.



     "Regulatory Approvals" has the meaning set forth in Section

5(h).



     "Reportable Event" has the meaning set forth in ERISA

Section 4043.



     "Securities Act" means the Securities Act of 1933, as

amended.



     "Securities Exchange Act" means the Securities Exchange Act

of 1934, as amended.



     "Security Interest" means any mortgage, pledge, lien,

encumbrance, charge, or other security interest, other than (a)

mechanic's, materialmen's, and similar liens, (b) liens for Taxes

not yet due and payable or for Taxes that the taxpayer is

contesting in good faith through appropriate proceedings, (c)

purchase money liens and liens securing rental payments under

capital lease arrangements, (d) other liens arising in the

Ordinary Course of Business and not incurred in connection with

the borrowing of money, (e) statutory liens not yet delinquent or

the validity of which are being contested in good faith by

appropriate actions and (f) liens in connection with liabilities

reflected on the Most Recent Financial Statement.



     "Sellers" has the meaning set forth in the preface above.



     "Subsidiary" means any corporation with respect to which a

specified Person (or a Subsidiary thereof) owns a majority of the

outstanding shares of common stock or has the power to vote or

direct the voting of sufficient securities to elect a majority of

the directors.



     "Target Corporations" has the meaning set forth in the

preface above.



     "Target Partnership" has the meaning set forth in the

preface above.



     "Targets" has the meaning set forth in the preface above.



     "Tax" means any federal, state, local, or foreign income,

gross receipts, license, payroll, employment, excise, severance,

stamp, occupation, premium, windfall profits, environmental

(including taxes under Code 59A), customs duties, capital stock,

franchise, profits, withholding, social security (or similar),

unemployment, disability, real property, personal property,

sales, use, transfer, registration, value added, alternative or

add-on minimum, estimated, or other tax of any kind whatsoever,

including any interest or  penalty whether disputed or not.



     "Tax Return" means any material return, declaration, report,

claim for refund, or information return or statement relating to

Taxes, including any schedule or attachment thereto, and

including any amendment thereof.



     "Third Party Claim" has the meaning set forth in Section

8(d) below.



     2.  Purchase and Sale of Target Shares.



     (a)  Basic Transaction. On and subject to the terms and

conditions of this Agreement, (1) the Buyer will purchase from

Fellon and McCord, and Fellon and McCord will sell to the Buyer,

all the outstanding capital stock of the Target Corporations,

free and clear of all claims, liens, encumbrances, pledges or

charges of any nature whatsoever and (2) the Buyer will purchase

from Conoco, and Conoco will sell to the Buyer, its 50%

partnership interest in the Target Partnership, free and clear of

all claims, liens, encumbrances, pledges or charges of any nature

whatsoever for the consideration specified below in this Section

2.



     (b)  Purchase Price.  The aggregate Purchase Price for the

Targets (the "Purchase Price") shall be in an amount not to

exceed $48,299,905 (the "Maximum Purchase Price") and shall be

paid and determined as set forth in this Section 2.  At Closing,

the Buyer will (i) in exchange for all the shares of stock of the

Target Corporations held by Fellon, issue Fellon a note in the

principal sum of $7,962,000 payable seven days after Closing (the

"Fellon Note Payment") and agree to the payment to Fellon of 50%

of the Performance Payments as described below, (ii) in exchange

for all the shares of stock of the Target Corporations held by

McCord, issue McCord a note in the principal sum of $7,962,000

payable seven days after Closing (the "McCord Note Payment") and

agree to the payment to McCord of 50% of the Performance Payments

as described below and (iii) in exchange for Conoco's 50%

partnership interest in the Target Partnership, pay Conoco the

sum of $13,670,000 in cash (the "Conoco Cash Payment").  In the

event that Buyer shall fail to satisfy all or any part of its

obligation to pay the Performance Payments determined as set

forth below, Allegheny shall pay the net amount due at such time

to each of Fellon and McCord.



     (c)  Performance Payments.  Performance Payments are based

on the Letter of Intent, dated March 5, 2001, and the

Confidential and Preliminary Valuation, dated February 21, 2001,

as set forth on Schedule A, and are calculated as follows:



          (i)  On the first anniversary of the Closing Date

     ("Year 1"), the Performance Payment shall be an amount equal

     to (1) $6,045,180, in the event that Year 1 Actual EBITDA is

     equal to or greater than $5.99 million; or (2) an amount

     equal to Year 1 Actual EBITDA divided by $5.99 million

     multiplied by $6,045,180, if Actual EBITDA is less than

     $5.99 million ("Year 1 Performance Payment").



          (ii)  On the second anniversary of the Closing Date

     ("Year 2"), the Performance Payment shall be an amount equal

     to (1) $6,407,891, in the event the Year 2 Actual EBITDA is

     equal to or greater than $7.18 million, or (2) an amount

     equal to Year 2 Actual EBITDA divided by $7.18 million

     multiplied by $6,407,891, if Actual EBITDA is less than

     $7.18 million ("Year 2 Performance Payment").  In the event

     that (1) Year 2 Actual EBITDA is greater than $8.98 million,

     and (2) Year 1 Actual EBITDA was less than $5.99 million,

     then Fellon and McCord shall receive an additional payment

     ("First Additional Payment") in an aggregate amount equal to

     the lesser of (a) (Year 2 Actual EBITDA minus $8.98 million)

     divided by $5.99 million multiplied by $6,045,180, and (b)

     $6,045,180 minus the Year 1 Performance Payment.



          (iii)  On the third anniversary of the Closing Date

     ("Year 3"), the Performance Payment shall be an amount equal

     to (1) $6,252,834, if cumulative EBITDA for Year 1, Year 2

     and Year 3 (the "Cumulative EBITDA") is greater than $27.24

     million, (2) $0 if the Cumulative EBITDA is less than $21.79

     million, or (3) (the Cumulative EBITDA minus $21.79 million)

     divided by $5.45 million multiplied by $6,252,834 if

     Cumulative EBITDA is greater than $21.79 million and less

     than $27.24 million.  In the event that (1) Year 3 Actual

     EBITDA is greater than $10.77 million and (2) Year 1 Actual

     EBITDA was less than $5.99 million, then Fellon and McCord

     shall receive an additional Performance Payment in an

     aggregate amount equal to the lesser of (a) (Year 3 Actual

     EBITDA minus $10.77 million) divided by $5.99 million

     multiplied by $6,045,180, and (b) $6,045,180 minus the Year

     1 Payment minus the First Additional Payment (the "Second

     Additional Payment").  In the event that (1) Year 3 Actual

     EBITDA is greater than $10.77 million and (2) Year 2 Actual

     EBITDA was less than $7.18 million, then Fellon and McCord

     shall receive a Performance Payment in the aggregate amount

     equal to the lesser of (a) (Year 3 Actual EBITDA minus

     $10.77 million minus (the Second Additional Payment divided

     by $6,407,891 multiplied by $5.99 million)) divided by $7.18

     million multiplied by $6,407,891, and (b) $6,407,891 minus

     the Year 2 Payment.



          (iv)  In order to permit Fellon and McCord to maximize

     the Performance Payments, Allegheny and Buyer agree, until

     the end of Year 3, to the following:



               (1)  Not to change either the corporate and

          partnership structure of the Target Partnership or FMA,

          except for such changes as may be necessary or

          appropriate for Allegheny to satisfy its obligations

          pursuant to the Participation Agreement, dated December

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