Contract analysis

I. Executive Summary and Purpose This memorandum analyzes the legal standards governing Ridgeline Midstream Services LLC’s initial tariff rate filing under Section 4 of the Natural Gas Act, 15 U.S.C. § 717c, and the Federal Energy Regulatory Commission’s implementing regulations at 18 C.F.R. Part 154. Ridgeline’s filing concerns its proposed open-access interstate natural gas transportation service on the Ridgeline P

II. Statutory Framework — Natural Gas Act § 4 A. Text and Scope of NGA § 4

Section 4 of the Natural Gas Act is the principal statutory provision governing rates, charges, classifications, and tariff terms filed by jurisdictional natural gas companies. It establishes the foundational “just and reasonable” standard and imposes a filing obligation on natural gas companies subject to FERC jurisdiction.

Section 4(a) provides, in substance, that all rates and charges made, demanded, or received by a natural gas company for or in connection with the transportation or sale of natural gas subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges, must be just and reasonable. Any rate or charge that is not just and reasonable is declared unlawful. Sectio

Section 4(c) requires natural gas companies to file with the Commission schedules showing all rates and charges for jurisdictional transportation or sales, together with classifications, practices, contracts, and regulations affecting those rates and charges. These schedules must be kept open for public inspection, reflecting the NGA’s broader filed-rate regime. The purpose of the filing requirement is to ensure tran

Section 4(d) requires advance notice of rate or tariff changes. A natural gas company may not change a filed rate, charge, classification, or service term except after thirty days’ notice to the Commission and the public, unless the Commission permits the change to become effective on shorter notice for good cause shown.

Section 4(e) authorizes the Commission, upon the filing of a rate or tariff change, to enter upon a hearing concerning the lawfulness of the proposed rate, charge, classification, rule, regulation, or practice. The Commission may suspend the operation of the proposed rate for up to five months. After the suspension period expires, the filed rate may go into effect, but only subject to refund if the rate is later dete

Section 4 should be distinguished from Sections 5 and 7 of the NGA.

Section 5 authorizes the Commission, on its own motion or on complaint, to investigate existing rates, charges, classifications, rules, regulations, practices, or contracts and to determine whether they are unjust, unreasonable, unduly discriminatory, or preferential. In an NGA § 5 proceeding, the burden generally rests on the Commission or the complainant to demonstrate that the existing rate or practice is unlawful

Section 7 governs certificates of public convenience and necessity for the construction and operation of new interstate natural gas pipeline facilities. In a traditional NGA § 7 certificate proceeding, FERC may approve initial rates as part of certificate authorization, often subject to further NGA § 4 filings or later rate review. The certificate inquiry focuses on whether the proposed facilities are required by the

III. Burden of Proof in Initial Rate Filings A. The Filing Pipeline Bears the Burden Under NGA § 4(e), the burden of proof to show that a proposed rate, charge, classification, rule, regulation, practice, or contract is just and reasonable rests on the natural gas company making the filing. This burden applies not only to changes in existing rates but also to initial rates proposed for jurisdictional service. The bur

1. James K. Winfield, addressing corporate policy, project background, and service need;

2. Angela Moretti, addressing cost of service, rate base, and accounting support;

3. Thomas Greaves, addressing engineering, system design, capacity, and operational assumptions;

4. Dr. Natasha Orlov, addressing rate design and tariff provisions;

5. Dr. Raymond Braswell, addressing return on equity, capital structure, and financial methodology; and 6. two additional witnesses addressing operational implementation, scheduling, regulatory compliance, and open-access tariff administration. Answering testimony was filed on January 9, 2023 by Appalachian Trunk Pipeline Company, Mountain Gas Procurement Cooperative, and the Central Municipal Gas Alliance. MGPC’s ca

IV. Regulatory Filing Requirements Under 18 C.F.R. Part 154 A. Content Requirements — 18 C.F.R. § 154.7 Part 154 sets forth the Commission’s tariff filing requirements for natural gas companies. Section 154.7 requires a filing to include, among other things, a clear statement of the nature of the filing, the tariff records submitted, the requested effective date, the basis for the filing, and supporting information s

Section 154.7(a)(9) requires verification under oath by a responsible officer. The purpose is to ensure that the data submitted to the Commission are formally certified by an officer with authority and knowledge sufficient to attest to their accuracy. James K. Winfield, Chief Executive Officer and President of Ridgeline, signed the Verification and Certificate of Accuracy accompanying the application. The verificatio

V. Cost-of-Service Methodology for New Pipelines A. Overview of Cost-of-Service Rate-Making FERC’s traditional cost-of-service methodology determines a pipeline’s revenue requirement by adding return on rate base and operating expenses. In simplified form: Revenue Requirement = Return on Rate Base + Operating Expenses + Depreciation + Taxes − Revenue Credits The pipeline then proposes billing determinants, typically

I. Billing Determinants and Rate Design Ridgeline’s original billing determinants assumed full utilization of design capacity: 1,200,000 Dth/d × 365 days × 100% load factor = 438,000,000 Dth/year Using the original total cost of service of $97.36 million, Ridgeline calculated the original recourse rate as follows: $97.36 million ÷ 438,000,000 Dth/year = $0.2265 per Dth The original rate consisted of a $0.2223 per Dth

VI. Open-Access Requirements — Part 284, Subpart G A. Blanket Certificate Authority Ridgeline operates under Part 284, Subpart G open-access transportation blanket certificate authority. That authority permits interstate pipelines to provide certain transportation services without obtaining a separate case-specific certificate for each transaction, provided the pipeline complies with FERC’s open-access requirements.

VII. Emerging Regulatory Issues Relevant to Ridgeline’s Filing A. Greenhouse Gas Emission Cost Recovery Deficiency Item 13 states that the tariff does not include provisions addressing greenhouse gas emission cost recovery. The regulatory landscape for greenhouse gas costs affecting midstream infrastructure is evolving at both the federal and state levels. Potential future costs could arise from carbon pricing regime

VIII. Implications for Ridgeline’s Filing Strategy A. Building the Evidentiary Record Because Ridgeline bears the NGA § 4 burden of proof, the redesigned filing must present a comprehensive evidentiary record. FERC staff, led by Dr. Miriam Okafor, Lead Economic Analyst, and Jonathan Briggs, Lead Trial Attorney, have signaled through the deficiency letter that the original filing did not provide sufficient support on

IX. Recommendations We recommend the following actions:

1. Complete all deficiency responses before the February 21, 2025 deadline. The redesigned tariff filing should address all fourteen deficiency items comprehensively. Each item should be cross-referenced to tariff language, testimony, exhibits, and workpapers.

2. Coordinate closely with Braswell Energy Consulting Group. Braswell should finalize the updated DCF proxy group analysis, revised cost-of-service model, billing determinant support, WACC calculation, and rate design explanation. The model should be audit-ready and internally consistent with FERC Form 2 data.

3. Prepare targeted supplemental testimony. Dr. Natasha Orlov should sponsor revised tariff provisions, including capacity release, NAESB compliance, EBB, shipper-must-have-title, segmentation, creditworthiness, GHG cost recovery, and Order No. 2222 responses. Angela Moretti should sponsor the revised cost of service, revenue credits, rate base reconciliation, and billing determinant schedules.

4. Evaluate the defensibility of the 75% load factor. Actual throughput is approximately 680 MMcf/d, or 56.67% utilization of 1.2 Bcf/d design capacity. Ridgeline should determine whether the 75% assumption can be supported through contract demand, shipper commitments, production forecasts, seasonal ramp-up evidence, or market studies. If not, FERC staff may view the assumption as optimistic.

5. Continue settlement discussions. Ridgeline should continue discussions to narrow the approximately $0.058 per Dth gap between its $0.3140 per Dth position and the ATPC/MGPC $0.2560 per Dth ceiling. A contested hearing presents uncertainty because Ridgeline bears the full NGA § 4 burden.

6. Manage lender communications. Communications with Pinnacle National Bank, Harborview Capital Management LLC, and Sentinel Ridge Fund LP should accurately reflect the status of the FERC proceeding. The September 15, 2021 credit facility includes regulatory covenant implications, and lenders should not receive communications that overstate procedural certainty or Commission approval.

X. Conclusion NGA § 4 places the full burden of proof on Ridgeline to demonstrate that its proposed initial recourse rate and tariff terms are just and reasonable and not unduly discriminatory or preferential. Because Ridgeline is filing its first FERC Gas Tariff, Original Volume No. 1, it cannot rely on any prior approved rate as a baseline. The tariff redesign strategy, led by Calderwood & Harkness and supported by