Contract analysis

I. Executive Summary This memorandum has been prepared at the request of Ridgeline Midstream Services LLC ("Ridgeline" or the "Pipeline") to address Deficiency Item 13 from the January 19, 2023 Deficiency Letter issued by the Federal Energy Regulatory Commission's ("FERC" or the "Commission") Office of Energy Market Regulation ("OEMR"). The Deficiency Letter, authored under the supervision of Dr. Miriam Okafor, Lead

II. Background and Procedural Context A. The FERC Proceeding On May 12, 2022, Ridgeline Midstream Services LLC filed an application with the Federal Energy Regulatory Commission for an initial tariff rate and interconnection authorization in FERC Docket Nos. RP22-847-000 (the rate case proceeding) and RP22-847-001 (the interconnection proceeding). The filing was made pursuant to Sections 4 and 7 of the Natural Gas Ac

1. Appalachian Trunk Pipeline Company, LLC ("ATPC"), an existing FERC-jurisdictional interstate natural gas pipeline headquartered at 2200 Penn Center West, Suite 300, Pittsburgh, PA 15276, represented by Kellner, Royce & Dillard LLP (lead counsel William Pratt). ATPC operates a 640-mile interstate natural gas pipeline system with a design capacity of 3.8 Bcf/d. ATPC's intervention is principally focused on the terms

2. Mountainside Gas Producers Coalition ("MGPC"), represented by Whitmore & Sable LLP (lead counsel Rebekah Montague). MGPC is a coalition of 14 independent natural gas producers operating in the Marcellus and Utica shale formations in the greater Appalachian Basin. MGPC generally supports the construction and operation of the Ridgeline Pipeline System as a new takeaway capacity option for Appalachian producers, but

3. Clearwater Municipal Gas Authority ("CMGA"), represented by Fordham Municipal Law Group PC (lead counsel Stephen Greer). CMGA is a municipal gas distribution authority, and its General Manager, Dennis Ott, has expressed concern regarding the potential impact of the Ridgeline interconnection on transportation rates on ATPC's system, which could ultimately affect delivered gas costs to CMGA's municipal end-users. B.

III. Federal Regulatory Landscape for GHG Costs Affecting Midstream Pipelines The federal regulatory landscape affecting GHG emissions from midstream natural gas pipeline operations has evolved substantially over the past several years and is expected to continue to evolve throughout the useful life of the Ridgeline Pipeline System. This section surveys the principal federal regulatory programs that currently impose,

IV. State Regulatory Landscape — West Virginia and Pennsylvania The Ridgeline Pipeline System traverses two states — West Virginia and Pennsylvania — each of which has its own distinct regulatory framework governing air quality, GHG emissions, and environmental compliance. This section surveys the relevant state-level regulatory environments and identifies the potential GHG compliance costs associated with each state

V. FERC Policy on GHG Cost Recovery in Natural Gas Pipeline Tariffs A. Current FERC Framework The Federal Energy Regulatory Commission exercises jurisdiction over the rates, terms, and conditions of interstate natural gas pipeline transportation service pursuant to Sections 4 and 5 of the Natural Gas Act, 15 U.S.C. §§ 717c and 717d, and the Commission's implementing regulations at 18 C.F.R. Part 154. Under the NGA's

1. Pipeline A (name withheld pending privilege review) adopted an "Environmental Compliance Cost Tracker" in its FERC Gas Tariff in connection with a 2021 Section 4 rate case settlement. The tracker covers "costs incurred by Pipeline in compliance with Environmental Laws and Regulations, including but not limited to greenhouse gas emission regulations, air quality standards, and water quality requirements." The track

2. Pipeline B included a "Carbon Cost Recovery Surcharge" provision in its initial tariff filing in 2022, specifically designed to address the anticipated costs of compliance with the IRA methane fee and potential state-level carbon pricing programs. The surcharge is calculated annually based on projected carbon-related costs, with a quarterly true-up mechanism and no rate cap. The tariff provision was approved by FE

3. Pipeline C adopted a general "Regulatory Compliance Cost Tracker" that encompasses a broader range of regulatory compliance costs, including GHG-related costs, safety compliance costs, and cybersecurity compliance costs. The tracker provides for semi-annual filings with shipper protest rights and independent audit requirements. The remaining five pipelines surveyed do not have standalone GHG cost recovery provisio