Contract analysis

I. Executive Summary This memorandum surveys the substantial body of case law, policy statements, and regulatory orders issued by the Federal Energy Regulatory Commission ("FERC" or the "Commission") governing the allocation of interconnection facility costs between interconnecting interstate natural gas pipelines. The memorandum then applies that precedent to the pending dispute between Ridgeline Midstream Services

II. Background and Factual Context A. The Ridgeline Pipeline System Ridgeline Midstream Services LLC operates a 187-mile, 24-inch-diameter high-pressure natural gas pipeline system located in West Virginia and southwestern Pennsylvania. The system originates at the Wetzel County Interconnect in Wetzel County, West Virginia, at approximately 39.6120° N, 80.7540° W, and terminates at the Waynesburg Compressor Station i

III. Legal Framework for Interconnection Cost Allocation A. Statutory Authority The allocation of interconnection facility costs between interstate natural gas pipelines is governed by the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717 et seq., and the Commission's implementing regulations at 18 C.F.R. Parts 154, 157, and 284. Three sections of the NGA are of particular relevance:

Section 4 of the NGA (15 U.S.C. § 717c) establishes the foundational requirement that all rates and charges for the transportation or sale of natural gas subject to FERC jurisdiction be "just and reasonable." Section 4 further provides that a pipeline bears the burden of demonstrating that any proposed rate, including a proposed cost allocation in an interconnection agreement filed as a rate schedule, is just and rea

Section 5 of the NGA (15 U.S.C. § 717d) authorizes the Commission, on its own motion or upon complaint, to investigate and modify rates, charges, or classifications that are found to be "unjust, unreasonable, unduly discriminatory, or preferential." Section 5 provides the Commission with the authority to reform an interconnection cost allocation that does not comport with cost-causation principles or that imposes an

Section 7 of the NGA (15 U.S.C. § 717f) requires natural gas companies to obtain a certificate of public convenience and necessity from the Commission before constructing or operating facilities for the transportation or sale of natural gas in interstate commerce. Section 7 authorizes the Commission to attach to any certificate "such reasonable terms and conditions as the public convenience and necessity may require,

IV. Survey of FERC Case Law on Interconnection Cost Allocation A. Cases Supporting Cost-Causation Allocation (Favorable to Ridgeline's Position) A comprehensive review of FERC orders in contested interconnection dockets reveals a strong and consistent pattern: the Commission has repeatedly approved cost-causation-based allocation methodologies and has rejected proposals for equal or arbitrary cost splits where one pa

V. Application to the Ridgeline/ATPC Dispute A. Analysis of the $22.3 Million Total Interconnection Facilities Cost A detailed analysis of the $22.3 million estimated total cost of the Wetzel County Interconnect facilities reveals that the cost is attributable to several distinct facility categories, each with its own cost-causation characteristics. The following breakdown is based on the engineering estimates prepar

VI. Key Takeaways and Recommendations A. Strength of Ridgeline's Cost Allocation Position Based on our comprehensive review of FERC precedent,