Contract analysis

I. Executive Summary The purpose of this memorandum is to memorialize the analytical basis supporting the 2.5% annual straight-line depreciation rate proposed for the Ridgeline Pipeline System in both the original May 12, 2022 filing and the ongoing tariff redesign, and to address negative salvage considerations that bear on the depreciation component of the cost of service. This memorandum is intended to serve as a

II. Background A. The Ridgeline Pipeline System Ridgeline Midstream Services LLC ("Ridgeline" or the "Company") is a Delaware limited liability company organized on March 14, 2019, for the purpose of developing, constructing, owning, and operating the Ridgeline Pipeline System. Ridgeline's sole member is Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted limited company registered with the Cayman Islands

III. Rate Base and Depreciation in the Original Filing A. Rate Base Summary (As Filed, May 2022; Test Year Ended March 31, 2022) The original FERC filing included a detailed Statement of Rate Base prepared in accordance with 18 C.F.R. § 154.312 and consistent with the Uniform System of Accounts prescribed by the Commission for natural gas companies. The rate base calculation, using a test year ending March 31, 2022,

IV. FERC Depreciation Policy Framework A. Governing Regulatory Framework The Federal Energy Regulatory Commission regulates the depreciation practices of jurisdictional natural gas pipeline companies under the authority of the Natural Gas Act, 15 U.S.C. § 717 et seq., and the Commission's implementing regulations, principally 18 C.F.R. Part 154 (Rate Schedules and Tariffs) and the Uniform System of Accounts ("USoA")

V. Support for the 2.5% Annual Depreciation Rate (40-Year Life) A. Engineering and Physical Life Analysis The Ridgeline Pipeline System consists of approximately 187 miles of 24-inch-diameter, high-pressure carbon steel transmission pipeline, designed and constructed in accordance with the following industry codes and regulatory standards: • API 5L: Specification for Line Pipe, published by the American Petroleum Ins

VI. Negative Salvage Analysis A. Concept of Negative Salvage Negative salvage is a concept in regulatory depreciation accounting that arises when the estimated cost of retirement, removal, and site restoration at the end of an asset's useful life exceeds the gross salvage (scrap) value of the retired asset. In other words, negative salvage represents the net cost — over and above any recovery from scrap — of removing

VII. Interaction with Other Cost-of-Service Components A. Depreciation and Rate Base The depreciation rate and the resulting accumulated depreciation have a direct and ongoing impact on Ridgeline's rate base. Under FERC ratemaking methodology, rate base is calculated as gross plant in service less accumulated depreciation (yielding net plant in service), plus working capital, less accumulated deferred income taxes, p