Contract analysis

I. Executive Summary The purpose of this memorandum is to provide the Board of Directors of Dunmore Energy Holdings Ltd. ("DEH" or the "Company") with an updated regulatory risk assessment for the Federal Energy Regulatory Commission ("FERC" or the "Commission") proceeding involving Ridgeline Midstream Services LLC ("Ridgeline"), DEH's wholly-owned U.S. subsidiary, together with a revised litigation budget as the mat

II. Proceeding Background and Current Posture A. Filing and Initial Proceedings (May 2022 – January 2023) On May 12, 2022, Ridgeline filed an application with FERC under Sections 4 and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c and 717f, and implementing regulations at 18 C.F.R. Parts 154, 157, and 284. The application sought two forms of relief: (i) approval of an initial tariff rate for firm and interrupti

1. Mountainside Gas Producers Coalition ("MGPC"). Filed intervention on July 28, 2022. MGPC is a coalition of fourteen independent natural gas producers operating in the Appalachian Basin with production interests directly served by or adjacent to the Ridgeline Pipeline System. MGPC generally supports the proposed interconnection with ATPC — which would expand market access for MGPC members' production — but opposes

2. Clearwater Municipal Gas Authority ("CMGA"). Filed intervention on August 1, 2022. CMGA is a municipal natural gas distribution utility serving approximately 47,000 residential and commercial customers in southwestern Pennsylvania. CMGA's primary concern is the impact of Ridgeline's proposed tariff rate on downstream rates paid by its customers. CMGA supports ATPC's position on interconnection cost allocation and

3. Appalachian Trunk Pipeline Company, LLC ("ATPC"). Filed protest and intervention on the August 15, 2022, deadline. ATPC is the owner and operator of the interstate trunk pipeline with which Ridgeline seeks to interconnect. ATPC opposes Ridgeline's proposed interconnection configuration and, most significantly, contests the proposed allocation of $14.7 million in interconnection costs to ATPC's shippers. ATPC's lea

1. Inadequate ROE Support. The filing did not include an updated discounted cash flow ("DCF") proxy group analysis reflecting market conditions after 2021, rendering the 14.00% ROE insufficiently supported.

2. Missing FL&U Tracker Mechanism. The tariff lacked a fuel, lost and unaccounted-for gas ("FL&U") tracker mechanism to account for gas consumed or lost in the provision of transportation service.

3. Missing Interruptible Transportation ("IT") Rate Derivation. The tariff did not include a derivation of the interruptible transportation rate or the methodology for calculating the IT rate from the firm rate components.

4. Insufficient Support for 100% Load Factor. The filing did not provide adequate support for the use of a 100% load factor in the rate design, particularly given that actual throughput was materially below design capacity.

5. No Capacity Release Provisions. The tariff did not include provisions for capacity release consistent with 18 C.F.R. § 284.8.

6. Incomplete NAESB Standards Compliance. The tariff did not fully incorporate the standards promulgated by the North American Energy Standards Board Wholesale Gas Quadrant ("NAESB WGQ"), Version 3.2.

7. Missing Electronic Bulletin Board ("EBB") Posting Requirements. The tariff lacked provisions requiring the posting of capacity, operational, and transactional information on an Internet-accessible EBB.

8. Inadequate Shipper-Must-Have-Title ("SMHT") Provisions. The tariff provisions addressing the shipper-must-have-title requirement were incomplete and did not conform to FERC Order No. 712.

9. Interconnection Agreement Not Filed as Rate Schedule. The proposed interconnection agreement with ATPC was not filed as a rate schedule within the tariff, as required by FERC regulations.

10. No Penalty Revenue Crediting Mechanism. The tariff did not include a mechanism for crediting penalty revenues to non-offending shippers, as required by FERC policy.

11. Inadequate Creditworthiness Provisions. The tariff's creditworthiness provisions did not include adequate specificity regarding collateral requirements, unsecured credit limits, and credit rating thresholds.

12. Missing Segmentation and Flexible Receipt/Delivery Point Provisions. The tariff did not include provisions allowing segmentation of capacity or flexible receipt and delivery point usage.

13. No GHG Emission Cost Recovery Provisions. The tariff did not address cost recovery for greenhouse gas ("GHG") emission-related costs, including potential carbon pricing or compliance costs.

14. Failure to Address Order No. 2222 DER Aggregation Implications. The tariff did not address the implications of FERC Order No. 2222 regarding distributed energy resource ("DER") aggregation, which may be relevant given DEH's 250 MW wind portfolio under development. ALJ Whitfield stayed the procedural schedule on February 6, 2023, pending resolution of the deficiency items. Ridgeline filed a partial response to the

III. Risk Assessment: Rate Case (Docket No. RP22-847-000) This section presents C&H's assessment of the principal risks associated with the tariff rate proceeding under Docket No. RP22-847-000. The analysis addresses each major rate design component and its potential impact on the final approved rate. A. Return on Equity The ROE is the single most significant variable in the rate design and represents the area of gre

IV. Risk Assessment: Interconnection (Docket No. RP22-847-001) A. Interconnection Configuration and Metering Design The proposed interconnection at the Wetzel County Interconnect involves the construction of a new meter station and pig launcher/receiver facilities at Ridgeline milepost 0.0, tying into ATPC's existing 30-inch mainline at ATPC Milepost 412.6. The interconnection is designed for a capacity of 800 MMcf/d

V. Settlement Prospects A. Current Positions The following table summarizes the current settlement positions of the principal parties: The settlement gap between Ridgeline's floor and the intervenors' ceiling is approximately $0.058/Dth ($0.3140 minus $0.2560). Settlement Judge Howard Margolis has overseen four settlement conferences over the course of the proceeding, and while the conferences have facilitated constr

VI. Lender and Noteholder Considerations A. Senior Secured Credit Facility Ridgeline's construction and operations are financed in part through a Senior Secured Credit Facility consisting of a $400 million term loan and a $75 million revolving credit facility, dated September 15, 2021. The key terms of the facility are as follows: The Credit Agreement includes regulatory covenants that are directly relevant to the FE

VII. Anticipated Procedural Timeline Following February 21, 2025 Filing A. Immediate Post-Filing Steps The following steps are anticipated immediately following the February 21, 2025, filing:

1. February 21, 2025: Ridgeline files the redesigned FERC Gas Tariff, Original Volume No. 1, together with the supplemental testimony of Dr. Natasha Orlov and Angela Moretti, and a transmittal letter to the Secretary of the Federal Energy Regulatory Commission. The filing will be accompanied by supporting workpapers and electronic copies of all tariff sheets in the Commission's eTariff format.

2. Within 30 days of filing (approximately March 21, 2025): FERC is expected to issue a notice of filing and establish a new intervention and comment period. Although the existing intervenors' participation status should carry over from the original proceeding, the notice will provide an opportunity for new parties to seek late intervention. C&H does not anticipate significant new intervention at this stage, though i

3. Within 60 days of filing (approximately April 21, 2025): FERC or ALJ Whitfield is expected to lift the stay of the procedural schedule and establish a revised procedural schedule for the resumption of the Track II hearing. C&H submitted a letter to ALJ Whitfield in November 2024 proposing a procedural schedule for the resumption of proceedings, which envisions answering testimony in the spring of 2025, rebuttal te