Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the legal and economic basis for the proposed 34.1% (Ridgeline Midstream Services LLC) / 65.9% (Appalachian Trunk Pipeline Company, LLC) cost allocation of the $22.3 million Wetzel County Interconnect facilities, and to rebut ATPC's advocacy for a mechanical 50/50 split ($11.15 million each) as asserted in ATPC's August 15, 2022 protest filed in FERC D

II. Background A. The Ridgeline Pipeline System Ridgeline Midstream Services LLC operates a 187-mile, 24-inch-diameter high-pressure natural gas pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia (approximate coordinates: 39.6120° N, 80.7540° W) to the Waynesburg Compressor Station in Greene County, Pennsylvania (approximate coordinates: 39.8965° N, 80.1810° W). The pipeline was de

III. Legal Framework for Interconnection Cost Allocation A. Natural Gas Act Provisions The allocation of interconnection facilities costs between Ridgeline and ATPC is governed by the Natural Gas Act ("NGA"), 15 U.S.C. § 717 et seq., and the Commission's implementing regulations. Three core provisions of the NGA bear directly on this analysis.

Section 4 (15 U.S.C. § 717c) requires that "[a]ll rates and charges made, demanded, or received by any natural-gas company for or in connection with the transportation or sale of natural gas subject to the jurisdiction of the Commission . . . shall be just and reasonable." The just and reasonable standard applies not only to transportation rates but also to the allocation of costs underlying those rates, including th

Section 5 (15 U.S.C. § 717d) empowers the Commission, upon its own motion or upon complaint, to investigate and determine whether existing rates or practices are unjust, unreasonable, unduly discriminatory, or preferential, and to fix just and reasonable rates. While Section 5 applies primarily to complaints against existing rates, its articulation of the unjust-and-unreasonable standard informs the Commission's revi

Section 7 (15 U.S.C. § 717f) governs the authorization of pipeline construction and interconnections. Under Section 7, the Commission may attach conditions to the issuance of a certificate of public convenience and necessity, including conditions relating to the allocation of construction costs for interconnection facilities. The Commission's authority under Section 7 provides an independent basis for reviewing and a

1. Benefit Analysis: Which party's customers will benefit from the interconnection, and in what proportion? Where one party's customers stand to benefit significantly more — for example, by gaining access to new supply sources or new markets — the Commission has assigned a greater share of interconnection costs to that party.

2. System-Specific Requirements: Which party's system requires the specific facilities in question? For example, where metering equipment must conform to one party's tariff measurement standards, or where pressure regulation equipment is necessitated by one party's operating pressure specifications, the Commission has allocated the costs of those components to the party whose system drives the design requirements.

3. Relative Design and Operational Demands: The relative design and operational demands each party places on the interconnection facilities. Where one party's system operates at a higher pressure, larger diameter, or more complex operational profile, the resulting incremental facility costs have been allocated to that party. These principles have been applied in numerous Commission orders addressing interconnection f

IV. Engineering Analysis of Interconnection Facility Components A. Overview of the $22.3 Million Cost Estimate The total estimated cost of the Wetzel County Interconnect facilities is $22.3 million. This estimate was prepared by Thomas Greaves, Vice President of Engineering & Operations at Ridgeline Midstream Services LLC, based on detailed engineering specifications, vendor quotations, construction cost surveys, and

1. Metering Facilities The metering facilities at the Wetzel County Interconnect consist of three runs of 12-inch-diameter ultrasonic flow meters, gas chromatographs for continuous gas quality measurement and analysis, and associated electronic flow measurement equipment. These facilities are essential for custody transfer measurement — the precise quantification and quality determination of natural gas flowing betwe

2. Pig Launcher/Receiver The pig launcher/receiver assembly is located at milepost 0.0 of the Ridgeline system and is designed to facilitate pipeline integrity management and inline inspection activities. The facility enables the launching and receiving of pipeline inspection tools ("pigs"), including smart pigs equipped with magnetic flux leakage and caliper technologies for detecting corrosion, dents, and other ano

3. Valving, Piping, and Civil Works The valving, piping, and civil works component encompasses the isolation valves, block valves, check valves, and associated piping connections between Ridgeline's 24-inch pipeline and ATPC's 30-inch mainline. This component also includes all civil works necessary for the interconnect site, including site preparation, grading, concrete foundations for equipment, access road construc

4. Pressure Regulation and Control Equipment The pressure regulation and control equipment at the Wetzel County Interconnect is designed to manage the differential between Ridgeline's operating pressure and ATPC's mainline operating pressure. This equipment includes pressure regulators, relief valves, pressure transmitters, and associated control systems necessary to ensure safe and reliable gas flow across the inter

5. Communication and SCADA Integration The communication and SCADA (Supervisory Control and Data Acquisition) integration component encompasses the SCADA equipment, telemetry hardware, communication infrastructure (including fiber optic and microwave communication links), and software integration necessary for real-time flow data exchange between Ridgeline's and ATPC's operational control centers. This component also

V. Rebuttal of ATPC's 50/50 Cost Allocation Proposal A. ATPC's Arguments Summarized In its August 15, 2022 protest, filed by William Pratt of Kellner, Royce & Dillard LLP, ATPC advances four principal arguments in support of its proposed 50/50 cost allocation: (1) Equal Benefit: Both parties benefit equally from the interconnection, and therefore costs should be split equally. (2) Initiating Party: Ridgeline is the p

VI. Economic Impact Analysis A. Impact on Ridgeline's Rate Base and Cost of Service This section quantifies the economic impact of ATPC's proposed 50/50 cost allocation on Ridgeline's rate base, cost of service, and proposed recourse rate. If Ridgeline's share of the interconnection facilities costs increases from $7.6 million (under the proposed 34.1%/65.9% allocation) to $11.15 million (under ATPC's 50/50 proposal)