Company Quick10K Filing
Northwest Pipeline
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 -0 $-0
10-Q 2019-10-31 Quarter: 2019-09-30
10-Q 2019-08-01 Quarter: 2019-06-30
10-Q 2019-05-02 Quarter: 2019-03-31
10-K 2019-02-21 Annual: 2018-12-31
10-Q 2018-11-01 Quarter: 2018-09-30
10-Q 2018-08-02 Quarter: 2018-06-30
10-Q 2018-05-03 Quarter: 2018-03-31
10-K 2018-02-22 Annual: 2017-12-31
10-Q 2017-11-02 Quarter: 2017-09-30
10-Q 2017-08-03 Quarter: 2017-06-30
10-Q 2017-05-04 Quarter: 2017-03-31
10-K 2017-02-22 Annual: 2016-12-31
10-Q 2016-10-31 Quarter: 2016-09-30
10-Q 2016-08-02 Quarter: 2016-06-30
10-Q 2016-05-05 Quarter: 2016-03-31
10-K 2016-02-24 Annual: 2015-12-31
10-Q 2015-10-29 Quarter: 2015-09-30
10-Q 2015-07-30 Quarter: 2015-06-30
10-Q 2015-04-30 Quarter: 2015-03-31
10-K 2015-02-25 Annual: 2014-12-31
10-Q 2014-10-30 Quarter: 2014-09-30
10-Q 2014-07-31 Quarter: 2014-06-30
10-Q 2014-05-01 Quarter: 2014-03-31
10-K 2014-02-26 Annual: 2013-12-31
10-Q 2013-10-31 Quarter: 2013-09-30
10-Q 2013-07-31 Quarter: 2013-06-30
10-Q 2013-05-08 Quarter: 2013-03-31
10-K 2013-02-27 Annual: 2012-12-31
10-Q 2012-10-31 Quarter: 2012-09-30
10-Q 2012-08-02 Quarter: 2012-06-30
10-Q 2012-04-26 Quarter: 2012-03-31
10-K 2012-02-27 Annual: 2011-12-31
10-Q 2011-11-02 Quarter: 2011-09-30
10-Q 2011-08-04 Quarter: 2011-06-30
10-Q 2011-05-05 Quarter: 2011-03-31
10-K 2011-02-24 Annual: 2010-12-31
10-Q 2010-10-28 Quarter: 2010-09-30
10-Q 2010-07-29 Quarter: 2010-06-30
10-Q 2010-05-05 Quarter: 2010-03-31
10-K 2010-02-23 Annual: 2009-12-31
8-K 2018-11-13 Regulation FD, Exhibits
8-K 2018-08-24 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-21 Other Events, Exhibits
8-K 2018-07-13 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-30 Regulation FD, Exhibits
NWP 2019-09-30
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 nwp20190930ex-311.htm
EX-31.2 nwp20190930ex-312.htm
EX-32 nwp20190930ex-32.htm

Northwest Pipeline Earnings 2019-09-30

NWP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CNHC 12,949 11,626 877 0 149 771 5,714 0% 7.4 1%
RMES 1 1 0 0 -0 -0 -0 0.5 -13%
TCT 210 12 13 0 11 11 -200 0% -18.3 5%
VDI 1,766 1,288 779 0 465 632 222 0% 0.4 26%
POYE 0 0 0 0 -0 -0 -0 0.0 -1,973%
SCTF 0 0 0 0 -0 -0 -0 3.0 -33%
SEK 302,033 283,794 0 0 0 0 -0 0%
DAVEY 570 398 1,095 98 32 97 161 9% 1.7 6%
SLDV 25 6 2 0 13 19 -1 0% -0.0 53%
MBCC 216 243 112 0 -7 10 215 0% 21.5 -3%

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 1-7414
 
NORTHWEST PIPELINE LLC
(Exact name of registrant as specified in its charter)
 
DE
 
26-1157701
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
295 Chipeta Way
 
 
Salt Lake City
UT
 
84108
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (801)  583-8800
NO CHANGE
(Former name, former address, and former fiscal year, if changed since last report)
 
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
Accelerated filer
¨
 
Non-accelerated filer
þ
 
Smaller reporting company
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  þ
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (H)(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.


Table of Contents

NORTHWEST PIPELINE LLC
FORM 10-Q
INDEX
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1. Legal Proceedings                                                                                                                                          
 
 
 
 
FORWARD-LOOKING STATEMENTS
The reports, filings, and other public announcements of Northwest Pipeline LLC, may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters.
All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe, or anticipate will exist or may occur in the future are forward-looking statements. Forward-looking statements can be identified by various forms of words or phrases such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “assumes,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “guidance,” “outlook,” “in-service date,” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:
Our and our affiliates’ future credit ratings;

Amounts and nature of future capital expenditures;

Expansion and growth of our business and operations;

Expected in-service dates for capital projects;

Financial condition and liquidity;

Business strategy;

Cash flow from operations or results of operations;

Rate case filings;

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Natural gas prices, supply, and demand; and

Demand for our services.
Forward-looking statements are based on numerous assumptions, uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by forward-looking statements include, among others, the following:

Availability of supplies, including lower than anticipated volumes from third parties and market demand;

Volatility of pricing including the effect of lower than anticipated energy commodity prices;

Inflation, interest rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);

The strength and financial resources of our competitors and the effects of competition;

Whether we are able to successfully identify, evaluate and timely execute our capital projects and other investment opportunities;

Our ability to successfully expand our facilities and operations;

Development and rate of adoption of alternative energy sources;

Availability of adequate insurance coverage and the impact of operational and development hazards and unforeseen interruptions;

The impact of existing and future laws and regulations, the regulatory environment, environmental liabilities, and litigation, as well as our ability to obtain necessary permits and approvals and achieve favorable rate proceeding outcomes;

Our costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;

Changes in maintenance and construction costs, as well as our ability to obtain sufficient construction related inputs including skilled labor;

Changes in the current geopolitical situation;

Our exposure to the credit risks of our customers and counterparties;

Risks related to financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of capital;

Risks associated with weather and natural phenomena, including climate conditions and physical damage to our facilities;

Acts of terrorism, including cybersecurity threats, and related disruptions; and

Additional risks described in our filings with the Securities and Exchange Commission (SEC).
Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly any revisions to any of the forward-looking statements to reflect future events or developments.
In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to

ii

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differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.
Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K filed with the SEC on February 21, 2019.

iii

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.

NORTHWEST PIPELINE LLC
STATEMENT OF NET INCOME
(Thousands of Dollars)
(Unaudited)
 
 
 
Three months ended 
 September 30,
 
Nine months ended 
 September 30,
 
 
2019
 
2018
 
2019
 
2018
OPERATING REVENUES:
 
 
 
 
 
 
 
 
Natural gas transportation
 
$
107,122

 
$
106,425

 
$
322,470

 
$
320,499

Natural gas storage
 
3,271

 
3,239

 
12,396

 
9,369

Other
 
19

 
15

 
(27
)
 
16

Total operating revenues
 
110,412

 
109,679

 
334,839

 
329,884

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
General and administrative
 
11,877

 
11,355

 
38,653

 
35,892

Operation and maintenance
 
24,596

 
19,638

 
61,509

 
53,557

Depreciation and amortization
 
26,922

 
26,657

 
80,529

 
79,466

Regulatory debits
 
180

 
372

 
538

 
2,219

Taxes, other than income taxes
 
3,347

 
3,786

 
11,195

 
12,893

Regulatory charges resulting from tax rate changes
 
5,944

 
17,585

 
17,637

 
29,737

Other (income) expenses, net
 
45

 
40

 
56

 
399

Total operating expenses
 
72,911

 
79,433

 
210,117

 
214,163

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
37,501

 
30,246

 
124,722

 
115,721

 
 
 
 
 
 
 
 
 
OTHER (INCOME) AND OTHER EXPENSES:
 
 
 
 
 
 
 
 
Interest expense
 
7,348

 
5,417

 
21,822

 
20,923

Allowance for equity and borrowed funds used during construction (AFUDC)
 
(1,310
)
 
(632
)
 
(2,566
)
 
(1,619
)
Miscellaneous other (income) expenses, net
 
(1,043
)
 
7

 
(3,117
)
 
(654
)
Total other (income) and other expenses
 
4,995

 
4,792

 
16,139

 
18,650

 
 
 
 
 
 
 
 
 
NET INCOME
 
$
32,506

 
$
25,454

 
$
108,583

 
$
97,071

See accompanying notes.


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NORTHWEST PIPELINE LLC
BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
 
 
 
September 30,
2019
 
December 31,
2018
ASSETS
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash
 
$

 
$

Receivables:
 
 
 
 
Trade
 
36,116

 
42,143

Affiliated companies
 
22

 
18

Advances to affiliate
 
225,128

 
180,400

Other
 
487

 
970

Materials and supplies
 
9,972

 
10,046

Exchange gas due from others
 
2,563

 
4,581

Prepayments and other
 
3,440

 
8,591

Total current assets
 
277,728

 
246,749

 
 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, at cost
 
3,573,003

 
3,457,982

Less-Accumulated depreciation and amortization
 
1,661,067

 
1,596,369

Total property, plant and equipment, net
 
1,911,936

 
1,861,613

 
 
 
 
 
OTHER ASSETS:
 
 
 
 
Deferred charges
 
853

 
1,277

Right-of-use assets
 
17,491

 

Regulatory assets
 
22,683

 
23,992

Total other assets
 
41,027

 
25,269

 
 
 
 
 
Total assets
 
$
2,230,691

 
$
2,133,631

See accompanying notes.

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NORTHWEST PIPELINE LLC
BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
 

 
 
September 30,
2019
 
December 31,
2018
LIABILITIES AND MEMBER’S EQUITY
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Payables:
 
 
 
 
Trade
 
$
34,897

 
$
12,839

Affiliated companies
 
9,141

 
26,532

Accrued liabilities:
 
 
 
 
Taxes, other than income taxes
 
16,251

 
11,496

Interest
 
12,019

 
5,505

Exchange gas due to others
 
1,232

 
11,660

Customer advances
 
1,018

 
788

Other
 
6,195

 
7,386

Total current liabilities
 
80,753

 
76,206

 
 
 
 
 
LONG-TERM DEBT
 
576,807

 
576,168

 
 
 
 
 
OTHER NONCURRENT LIABILITIES:
 
 
 
 
Asset retirement obligations
 
89,944

 
69,350

Regulatory liabilities
 
314,891

 
290,430

Lease liability
 
16,187

 

Other
 
884

 
835

Total other noncurrent liabilities
 
421,906

 
360,615

 
 
 
 
 
CONTINGENT LIABILITIES AND COMMITMENTS (Note 5)
 

 

 
 
 
 
 
MEMBER’S EQUITY:
 
 
 
 
Member’s capital
 
1,073,892

 
1,073,892

Retained earnings
 
77,333

 
46,750

Total member’s equity
 
1,151,225

 
1,120,642

 
 
 
 
 
Total liabilities and member’s equity
 
$
2,230,691

 
$
2,133,631

See accompanying notes.


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Table of Contents

NORTHWEST PIPELINE LLC
STATEMENT OF MEMBER’S EQUITY
(Thousands of Dollars)
(Unaudited)
 
 
 
Three months ended September 30,
 
 
2019
 
2018
MEMBER'S CAPITAL:
 
 
 
 
Balance at beginning and end of period
 
$
1,073,892

 
$
1,073,892

RETAINED EARNINGS:
 
 
 
 
Balance at beginning of period
 
76,827

 
73,906

Net income
 
32,506

 
25,454

Cash distributions to parent
 
(32,000
)
 

Balance at end of period
 
77,333

 
99,360

Total Member's Equity
 
$
1,151,225

 
$
1,173,252


 
 
Nine months ended September 30,
 
 
2019
 
2018
MEMBER'S CAPITAL:
 
 
 
 
Balance at beginning and end of period
 
$
1,073,892

 
$
1,073,892

RETAINED EARNINGS:
 
 
 
 
Balance at beginning of period
 
46,750

 
89,289

Net income
 
108,583

 
97,071

Cash distributions to parent
 
(78,000
)
 
(87,000
)
Balance at end of period
 
77,333

 
99,360

Total Member's Equity
 
$
1,151,225

 
$
1,173,252

See accompanying notes.


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Table of Contents

NORTHWEST PIPELINE LLC
STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
 
 
Nine months ended September 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
108,583

 
$
97,071

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
80,529

 
79,466

Regulatory debits
 
538

 
2,219

Regulatory charges resulting from tax rate changes
 
17,637

 
29,737

Amortization of deferred charges and credits
 
(1,833
)
 
658

Allowance for equity funds used during construction (equity AFUDC)
 
(2,058
)
 
(1,262
)
Changes in current assets and liabilities:
 
 
 
 
Trade and other accounts receivable
 
5,895

 
3,429

Affiliated receivables
 
(4
)
 
1,890

Materials and supplies
 
74

 
(33
)
Other current assets
 
7,169

 
4,313

Trade accounts payable
 
(2,669
)
 
(449
)
Affiliated payables
 
(17,391
)
 
290

Other accrued liabilities
 
139

 
7,615

Changes in noncurrent assets and liabilities:
 
 
 
 
Regulatory liabilities
 
2,485

 
1,816

Other, net
 
2,623

 
(3,395
)
Net cash provided by operating activities
 
201,717

 
223,365

 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from long-term debt
 

 
246,395

Retirement of long-term debt
 

 
(250,000
)
Payments for debt issuance costs
 
(59
)
 
(1,938
)
Cash distributions to parent
 
(78,000
)
 
(87,000
)
Net cash used in financing activities
 
(78,059
)
 
(92,543
)
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Property, plant and equipment:
 
 
 
 
Capital expenditures*
 
(78,739
)
 
(50,100
)
Contributions and advances for construction costs
 
2,558

 
1,535

Disposal of property, plant and equipment, net
 
(2,749
)
 
(657
)
Advances to affiliates, net
 
(44,728
)
 
(81,600
)
Net cash used in investing activities
 
(123,658
)
 
(130,822
)
 
 
 
 
 
NET INCREASE (DECREASE) IN CASH
 

 

CASH AT BEGINNING OF PERIOD
 

 

CASH AT END OF PERIOD
 
$

 
$

____________________________________
 
 
 
 
* Increases to property, plant and equipment, exclusive of equity AFUDC
 
$
(102,467
)
 
$
(55,105
)
Changes in related accounts payable and accrued liabilities
 
23,728

 
5,005

Capital expenditures
 
$
(78,739
)
 
$
(50,100
)
See accompanying notes.

5

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NORTHWEST PIPELINE LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)


1. BASIS OF PRESENTATION
In this report, Northwest Pipeline LLC (Northwest) is at times referred to in the first person as “we,” “us,” or “our.”
Northwest is indirectly owned by The Williams Companies, Inc. (Williams).
General
The accompanying unaudited financial statements have been prepared from our books and records. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. The unaudited financial statements include all normal recurring adjustments and others which, in the opinion of our management, are necessary to present fairly our interim financial statements. These unaudited financial statements should be read in conjunction with the financial statements and notes thereto in our 2018 Annual Report on Form 10‑K.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim financial statements and accompanying notes. Actual results could differ from those estimates.
Income Taxes
We generally are not a taxable entity for federal or state and local income tax purposes. The tax on net income is generally borne by our parent, Williams. Net income for financial statement purposes may differ significantly from taxable income of Williams as a result of differences between the tax basis and financial reporting basis of assets and liabilities.
Accounting Standards Issued and Adopted
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02 “Leases (Topic 842)” (ASU 2016-02). ASU 2016-02 establishes a comprehensive new lease accounting model. ASU 2016-02 modifies the definition of a lease, requires a dual approach to lease classification similar to prior lease accounting, and causes lessees to recognize operating leases on the balance sheet as a lease liability measured as the present value of the future lease payments with a corresponding right-of-use asset, with an exception for leases with a term of one year or less. Additional disclosures are required regarding the amount, timing, and uncertainty of cash flows arising from leases. In January 2018, the FASB issued ASU 2018-01 “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842” (ASU 2018-01). Per ASU 2018-01, land easements and rights-of-way are required to be assessed under ASU 2016-02 to determine whether the arrangements are or contain a lease. ASU 2018-01 permits an entity to elect a transition practical expedient to not apply ASU 2016-02 to land easements that exist or expired before the effective date of ASU 2016-02 and that were not previously assessed under the previous lease guidance in Accounting Standards Codification (ASC) Topic 840 “Leases.”
In July 2018, the FASB issued ASU 2018-11 “Leases (Topic 842): Targeted Improvements” (ASU 2018-11). Prior to ASU 2018-11, a modified retrospective transition was required for financing or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. ASU 2018-11 allows entities an additional transition method to the existing requirements whereby an entity could adopt the provisions of ASU 2016-02 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. ASU 2018-11 also allows a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are present. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. We prospectively adopted ASU 2016-02 effective January 1, 2019, and did not adjust prior periods as permitted by ASU 2018-11 (See Note 3).
We completed our review of contracts to identify leases based on the modified definition of a lease and implemented changes to our internal controls to support management in the accounting for and disclosure of leasing activities upon adoption of ASU 2016-02. We implemented a financial lease accounting system to assist management in the accounting for leases upon adoption. The most significant changes to our financial statements as a result of adopting ASU 2016-02 relate to the recognition of a $17.8

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million lease liability and offsetting right-of-use asset in our Balance Sheet for operating leases. We also evaluated ASU 2016-02’s available practical expedients on adoption and have generally elected to adopt the practical expedients, which includes the practical expedient to not separate lease and nonlease components by both lessees and lessors by class of underlying assets and the land easements practical expedient.
Accounting Standards Issued But Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. ASU 2016-13 is effective for us for interim and annual periods beginning after December 15, 2019. We plan to adopt as of January 1, 2020. We anticipate that ASU 2016-13 will primarily apply to our trade receivables. While we do not expect a significant financial impact, we have analyzed our historical credit loss experience and continue to develop and implement processes, procedures and internal controls in order to make the necessary credit loss assessments and required disclosures upon adoption.

2. REVENUE RECOGNITION
Revenue by Category
Our revenue disaggregation by major service line includes Natural gas transportation, Natural gas storage, and Other, which are separately presented on the Statement of Net Income.
We do not have any material contract assets or material contract liabilities.
Remaining Performance Obligations
The following table presents the transaction price allocated to the remaining performance obligations under certain contracts as of September 30, 2019. These primarily include reservation charges on contracted capacity on our firm transportation and storage contracts with customers. Amounts from certain contracts included in the table below, which are subject to the periodic review and approval by the FERC, reflect the rates for such services in our current FERC tariffs for the life of the related contracts; however, these rates may change based on future rate cases or settlements approved by the FERC and the amount and timing of these changes is not currently known. This table excludes the variable consideration component for commodity charges that will be recognized in future periods. Certain of our contracts contain evergreen provisions for periods beyond the initial term of the contract. The remaining performance obligations as of September 30, 2019, do not consider potential future performance obligations for which the renewal has not been exercised. The table below also does not include contracts with customers for which the underlying facilities have not received FERC authorization to be placed into service.
 
(Thousands)
2019 (remainder)
$
110,768

2020
430,425

2021
404,452

2022
393,618

2023
362,300

Thereafter
3,164,230

Total
$
4,865,793


Accounts Receivable
Receivables from contracts with customers are included within Receivables - Trade and Receivables - Affiliated companies and receivables that are not related to contracts with customers are included within the balance of Receivables - Advances to affiliate and Receivables - Other in our Balance Sheet.

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3. LEASES
We are a lessee through noncancellable lease agreements for property and equipment consisting primarily of buildings, land, vehicles, and equipment used in both our operations and administrative functions. We recognize a lease liability with an offsetting right-of-use asset in our Balance Sheet for operating leases based on the present value of the future lease payments. As an accounting policy, we have elected to combine lease and nonlease components for all classes of leased assets in our calculation of the lease liability and the offsetting right-of-use asset.
Our lease agreements require both fixed and variable periodic payments, with initial terms typically ranging from one year to 15 years, with some having a term of up to 38 years. Payment provisions in certain of our lease agreements contain escalation factors which may be based on stated rates or a change in a published index at a future time. The amount by which a lease escalates based on the change in a published index, which is not known at lease commencement, is considered a variable payment and is not included in the present value of the future lease payments, which only includes those that are stated or can be calculated based on the lease agreement at lease commencement. In addition to the noncancellable periods, many of our lease agreements provide for one or more extensions of the lease agreement for periods ranging from one year in length to an indefinite number of times following the specified contract term. Other lease agreements provide for extension terms that allow us to utilize the identified leased asset for an indefinite period of time so long as the asset continues to be utilized in our operations. In consideration of these renewal features, we assess the term of the lease agreements, which includes using judgment in the determination of which renewal periods and termination provisions, when at our sole election, will be reasonably certain of being exercised. Periods after the initial term or extension terms that allow for either party to the lease to cancel the lease are not considered in the assessment of the lease term. Additionally, we have elected to exclude leases with an original term of one year or less, including renewal periods, from the calculation of the lease liability and the offsetting right-of-use asset.
We used judgment in determining the discount rate upon which the present value of the future lease payments is determined. This rate is based on a collateralized interest rate corresponding to the term of the lease agreement using company, industry, and market information available.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
(Thousands)
Lease Cost:
 
 
 
Operating lease cost
$
556

 
$
1,633

Variable lease cost
277

 
815

Total lease cost
$
833

 
$
2,448

 
 
 
 
Cash paid for amounts included in the measurement of operating lease liabilities
$
524

 
$
1,550

 
 
 
 
 
 
 
 
September 30, 2019
 
 
(Thousands)
Other Information:
 
 
Right-of-use assets
 
$
17,491

Operating lease liabilities:
 
 
Current (included in Other in our Balance Sheet)
 
$
1,309

Lease liability
 
$
16,187

Weighted-average remaining lease term - operating leases (years)
 
12

Weighted-average discount rate - operating leases
 
4.73
%



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As of September 30, 2019, the following table represents our operating lease maturities, including renewal provisions that we have assessed as being reasonably certain of exercise, for each of the years ended December 31:
 
(Thousands)
2019 (remainder)
$
484

2020
2,075

2021
2,044

2022
2,039

2023
1,973

Thereafter
14,685

Total future lease payments
23,300

Less amount representing interest
5,804

Total obligations under operating leases
$
17,496


4. RATE AND REGULATORY MATTERS
FERC Developments
On March 21, 2019, the FERC issued a Notice of Inquiry (NOI) in Docket No. PL19-4-000, seeking comments regarding whether and, if so, how FERC should revise its policies for determining the base return on equity (ROE) used in setting rates charged by jurisdictional public utilities. FERC also seeks comment on, among other things, whether FERC should change its ROE policies for interstate natural gas and oil pipelines to align with its policy for electric public utilities. FERC’s action follows a decision from the United States Court of Appeals for the District of Columbia Circuit, which vacated and remanded a series of earlier FERC orders establishing a new base ROE for certain electric transmission owners.  Following that decision, FERC proposed in the remanded proceedings that it rely on four financial models to establish ROEs for the affected utilities rather than rely primarily on its long-used, two-step Discounted Cash Flow model. In the NOI, FERC poses a series of questions and invited comments on this proposed new approach, including whether it should apply the new approach to future proceedings involving interstate natural gas and oil pipeline ROEs. We currently are monitoring this proceeding. Our next general rate case must be filed for new rates to become effective no later than January 1, 2023.

5. CONTINGENT LIABILITIES AND COMMITMENTS
Environmental Matters
We are subject to the National Environmental Policy Act and other federal and state legislation regulating the environmental aspects of our business. Except as discussed below, our management believes that we are in substantial compliance with existing environmental requirements. Environmental expenditures are expensed or capitalized depending on their future economic benefit and potential for rate recovery. We believe that, with respect to any expenditures required to meet applicable standards and regulations, the FERC would grant the requisite rate relief so that substantially all of such expenditures would be permitted to be recovered through rates.
Beginning in the mid-1980s, we evaluated many of our facilities for the presence of toxic and hazardous substances to determine to what extent, if any, remediation might be necessary. We identified polychlorinated biphenyl (PCB) contamination in air compressor systems, soils, and related properties at certain compressor station sites. Similarly, we identified hydrocarbon impacts at these facilities due to the former use of earthen pits, lubricating oil leaks or spills, and excess pipe coating released to the environment. In addition, heavy metals have been identified at these sites due to the former use of mercury containing meters and paint and welding rods containing lead, cadmium, and arsenic. The PCBs were remediated pursuant to a Consent Decree with the U.S. Environmental Protection Agency (EPA) in the late 1980s, and we conducted a voluntary clean-up of the hydrocarbon and mercury impacts in the early 1990s. In 2005, the Washington Department of Ecology required us to re-evaluate our previous clean-ups in Washington. During 2006 to 2015, 129 meter stations were evaluated, of which 82 required remediation. As of September 30, 2019, all of the meter stations have been remediated. During 2006 to 2018, 14 compressor stations were evaluated, of which 11 required remediation. As of September 30, 2019, 10 compressor stations have been remediated. At September 30, 2019 we had accrued liabilities totaling approximately $1.9 million, $1.1 million recorded in Accrued liabilities - Other and $0.8 million recorded in Other Noncurrent Liabilities - Other in the accompanying Balance Sheet. At December 31, 2018 we had accrued liabilities totaling approximately $2.0 million, $1.3 million recorded in Accrued liabilities - Other and $0.7 million recorded in Other Noncurrent Liabilities - Other in the accompanying Balance Sheet. We are conducting environmental assessments and implementing a variety of remedial measures that may result in increases or decreases in the total estimated costs.

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The EPA and various state regulatory agencies routinely promulgate and propose new rules, and issue updated guidance to existing rules. These rulemakings include, but are not limited to, rules for reciprocating internal combustion engine and combustion turbine maximum achievable control technology, air quality standards for one-hour nitrogen dioxide emissions, and volatile organic compound and methane new source performance standards impacting design and operation of storage vessels, pressure valves, and compressors. The EPA previously issued its rule regarding National Ambient Air Quality Standards for ground-level ozone. We are monitoring the rule’s implementation as it will trigger additional federal and state regulatory actions that may impact our operations. Implementation of the regulations is expected to result in impacts to our operations and increase the cost of additions to Property, plant, and equipment - net in the Balance Sheet for both new and existing facilities in affected areas. We are unable to reasonably estimate the cost of additions that may be required to meet the regulations at this time due to uncertainty created by various legal challenges to these regulations and the need for further specific regulatory guidance.
Other Matters
Various other proceedings are pending against us and are considered incidental to our operations.
Summary
We estimate that for all matters for which we are able to reasonably estimate a range of loss, including those noted above and others that are not individually significant, our aggregate reasonably possible losses beyond amounts accrued for all of our contingent liabilities are immaterial to our expected future annual results of operations, liquidity and financial position. These calculations have been made without consideration of any potential recovery from third-parties. We have disclosed all significant matters for which we are unable to reasonably estimate a range of possible loss.

6. DEBT AND FINANCING ARRANGEMENT
Credit Facility
We, along with Williams and Transcontinental Gas Pipe Line Company, LLC (Transco) (the “borrowers”), are party to a Credit Agreement with aggregate commitments available of $4.5 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. We and Transco are each subject to a $500 million borrowing sublimit. Letter of credit commitments of $1.0 billion are, subject to the $500 million borrowing sublimit applicable to us and Transco, available to the borrowers. At September 30, 2019, no letters of credit have been issued and no loans were outstanding under the credit facility.
Williams participates in a commercial paper program, and Williams management considers amounts outstanding under this program to be a reduction of available capacity under the credit facility. The program allows a maximum outstanding amount at anytime of $4.0 billion of unsecured commercial paper notes. At September 30, 2019, Williams had no outstanding commercial paper.
7. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and advances to affiliate—The carrying amounts approximate fair value because of the short-term nature of these instruments.
Long-term debt—The disclosed fair value of our long-term debt, which we consider as a level 2 measurement, is determined by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. The carrying amount and estimated fair value of our long-term debt, including current maturities, were $576.8 million and $631.2 million, respectively, at September 30, 2019, and $576.2 million and $577.1 million, respectively, at December 31, 2018.

8. TRANSACTIONS WITH AFFILIATES
We are a participant in Williams’ cash management program, and we make advances to and receive advances from Williams. At September 30, 2019, our advances to Williams totaled approximately $225.1 million and at December 31, 2018, our advances to Williams totaled approximately $180.4 million. These advances are represented by demand notes and are classified as Receivables - Advances to affiliate in the accompanying Balance Sheet. The interest rate on these intercompany demand notes is based upon the daily overnight investment rate paid on Williams’ excess cash at the end of each month, which was 1.92 percent at September 30, 2019. The interest income from these advances was $1.1 million and $3.4 million for the three and nine months ended September 30, 2019, respectively, and $0.2 million and $1.0 million for the three and nine months ended September 30, 2018, respectively. Such interest income is included in Other (Income) and Other Expenses – Miscellaneous other (income) expenses, net on the accompanying Statement of Net Income.
We have no employees. Services necessary to operate our business are provided to us by Williams and certain affiliates of Williams. We reimburse Williams and its affiliates for all direct and indirect expenses incurred or payments made (including salary, bonus, incentive compensation, and benefits) in connection with these services. Employees of Williams also provide general administrative and management services to us, and we are charged for certain administrative expenses incurred by Williams. These charges are either directly identifiable or allocated to our assets. Direct charges are for goods and services provided by Williams at our request. Allocated charges are based on a three-factor formula, which considers revenues; property, plant, and equipment; and payroll. In management’s estimation, the allocation methodologies used are reasonable and result in a reasonable allocation to us of our costs of doing business incurred by Williams. We were billed $25.9 million and $74.8 million in the three and nine months ended September 30, 2019, respectively, and $22.5 million and $68.3 million for the three and nine months ended September 30, 2018, respectively, for these services. Such expenses are primarily included in General and administrative and

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Operation and maintenance expenses on the accompanying Statement of Net Income. The amount billed to us for the nine months ended September 30, 2019, includes $5.7 million for estimated severance and related costs driven by a voluntary separation program associated with a review of Williams' enterprise cost structure.
During the nine months ended September 30, 2019 and 2018, we declared and paid cash distributions to our parent of $78.0 million and $87.0 million, respectively. During October 2019, we declared and paid an additional cash distribution of $32.0 million to our parent.
We have entered into various other transactions with certain related parties, the amounts of which were not significant. These transactions and the above-described transactions are made on the basis of commercial relationships and prevailing market prices or general industry practices.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL
The following discussion should be read in conjunction with the Management’s Discussion and Analysis, Financial Statements, and Notes contained in Items 7 and 8 of our 2018 Annual Report on Form 10-K and with the Financial Statements and Notes contained in this Form 10-Q.
                    
RESULTS OF OPERATIONS
Analysis of Financial Results
This analysis discusses financial results of our operations for the nine-month periods ended September 30, 2019 and 2018. Variances due to changes in natural gas prices and transportation volumes have little impact on revenues, because under our rate design methodology, the majority of overall cost of service is recovered through firm capacity reservation charges in our transportation rates.
Our operating revenues increased $5.0 million, or 2 percent, in the first nine months of 2019 as compared with the first nine months of 2018 primarily due to higher natural gas storage revenues of $3.0 million ($1.5 million increase in liquefaction, $1.2 million increase in Park and Loan services and $0.4 million increase in interruptible storage services). In addition, natural gas transportation revenues increased $2.0 million resulting from the start of a new redelivery contract and a contract modification. In the periods ended September 30, 2019 and 2018, transportation services accounted for 96 percent and gas storage services accounted for 4 percent of our operating revenues.
Operating expenses decreased $4.0 million, or 2 percent, for the first nine months of 2019 as compared to the same period in 2018. This is mostly due to a $12.1 million regulatory charge related to establishing a regulatory liability associated with a decrease in our estimated state tax rate following the WPZ Merger in September 2018, $1.7 million primarily associated with a property tax adjustment and $1.7 million lower costs related to the expiration of certain levelized incremental evergreen contracts in 2018. These decreases are partially offset by $5.7 million for estimated severance and related costs driven by a voluntary separation program associated with a review of Williams' enterprise cost structure, $1.8 million in higher other costs including lubrication, electricity usage at our LNG facility due to increased operating hours along with higher fleet, contractor services and rental costs, $1.8 million increase in allocations from Williams’ for services provided, $1.1 million in higher depreciation, and $0.8 million lower capitalized labor.

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Item 4. Controls and Procedures
Our management, including our Senior Vice President—West and our Vice President and Chief Accounting Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended) (Disclosure Controls) or our internal control over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant.
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Senior Vice President—West and our Vice President and Chief Accounting Officer. Based upon that evaluation, our Senior Vice President—West and our Vice President and Chief Accounting Officer concluded that these Disclosure Controls are effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes during the third quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting.
PART II. OTHER INFORMATION

Item 1. Legal Proceedings
On August 27, 2018, Northwest Pipeline LLC received a Notice of Violation/Cease and Desist Order (NOV) from the Water Quality Control Division of the Colorado Department of Public Health & Environment (the Division) regarding certain alleged violations of the Colorado Water Quality and Control Act and its General Permit under the Colorado Discharge Permit System related to its stormwater management practices at two construction sites. On March 4, 2019, the Division provided Northwest with its initial penalty calculation, proposing a penalty of approximately $81,000 in settlement of all violations alleged in the NOV. Northwest reached a final settlement with the Division and the payment of $81,000 was made to the Division on September 16, 2019.
The additional information called for by this item is provided in Note 5. Contingent Liabilities and Commitments, included in the Notes to Financial Statements included under Part 1, Item 1. Financial Statements of this Form 10-Q, which information is incorporated by reference into this item.
Item 1A. Risk Factors

Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018, includes risk factors that could materially affect our business, financial condition, or future results. Those risk factors have not materially changed.
    




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Item 6. Exhibits
The following instruments are included as exhibits to this report.
 
Exhibit
 
Description
 
 
 
2
 
 
 
 
3.1
 
 
 
 
3.2
 
 
 
 
31.1*
 
 
 
 
31.2*
 
 
 
 
32**
 
 
 
 
101.INS*
 
XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
 
 
 
101.SCH*
 
XBRL Taxonomy Extension Schema.
 
 
 
101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase.
 
 
 
101.DEF*
 
XBRL Taxonomy Definition Linkbase.
 
 
 
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase.
 
 
 
101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase.
104*
 
Cover Page Interactive Data File. The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101).

*
Filed herewith.
**
Furnished herewith.



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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
NORTHWEST PIPELINE LLC
 
 
 
 
Registrant
 
 
 
 
 
Date:
October 31, 2019
By:
 
/s/ Kathleen R. Hambleton
 
 
 
 
Kathleen R. Hambleton

 
 
 
 
Controller
 
 
 
 
(Principal Accounting Officer)