CALDERWOOD & HARKNESS LLP Attorneys at Law 1601 K Street NW, Suite 900 Washington, DC 20006
Telephone: (202) 555-4100 Facsimile: (202) 555-4101 www.calderwoodharkness.com
George Trujillo Responsible Partner Energy & Infrastructure Practice Direct: (202) 555-4127 gtrujillo@calderwoodharkness.com
May 12, 2022
The Honorable Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street NE Washington, DC 20426
Re: Ridgeline Midstream Services LLC — Application for Initial Tariff Rate and Interconnection Authorization FERC Docket Nos. RP22-847-000 (Rate Case) and RP22-847-001 (Interconnection) FERC Code: 960442 Filing of FERC Gas Tariff, Original Volume No. 1
Dear Secretary Bose:
I. Purpose of Filing
Calderwood & Harkness LLP, on behalf of its client Ridgeline Midstream Services LLC ("Ridgeline" or "Applicant"), a Delaware limited liability company with its principal office at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301, hereby submits for filing with the Federal Energy Regulatory Commission ("Commission" or "FERC") Ridgeline's application for authorization of (1) an initial tariff rate for interstate natural gas transportation service, and (2) physical interconnection with Appalachian Trunk Pipeline Company, LLC ("ATPC") (FERC Code: 840117). Ridgeline is a wholly owned subsidiary of Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted limited company (Cayman Registry No. CR-381204).
This filing is made pursuant to Section 4 of the Natural Gas Act ("NGA"), 15 U.S.C. § 717c, and Section 7 of the Natural Gas Act, 15 U.S.C. § 717f, and in accordance with the Commission's regulations at 18 C.F.R. Parts 154, 157, and 284. Ridgeline respectfully requests that the effective date for the proposed initial rates and interconnection authorization be established by Commission order. The filing has been prepared in conformity with the Commission's filing requirements, including those set forth in 18 C.F.R. §§ 154.1 through 154.501 and 18 C.F.R. §§ 157.5 through 157.21, and includes all required supporting data, workpapers, exhibits, and certifications.
II. Description of Applicant and the Ridgeline Pipeline System
Ridgeline owns and operates the Ridgeline Pipeline System, a 187-mile, 24-inch-diameter high-pressure natural gas pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia (approximate coordinates: 39.6120° N, 80.7540° W) to the Waynesburg Compressor Station in Greene County, Pennsylvania (approximate coordinates: 39.8965° N, 80.1810° W). The system is designed to transport natural gas produced in the Marcellus and Utica shale formations of the northern Appalachian Basin to interconnections with downstream interstate and intrastate pipeline systems serving markets in the Mid-Atlantic and Northeast regions.
The Ridgeline Pipeline System has a certificated design capacity of 1.2 Bcf/d (1,200,000 Dth/d at an assumed BTU content of 1,000 BTU/cf). Current throughput on the system is approximately 680 MMcf/d, representing approximately 56.7% utilization of design capacity. The system includes three compressor stations — the Wetzel Station, the Mannington Station, and the Waynesburg Station — with aggregate installed compression of 45,000 horsepower.
The Ridgeline Pipeline System was placed in service on October 1, 2021, following the successful completion of hydrostatic testing, commissioning, and receipt of all necessary state and federal permits and approvals. The original construction cost of the system, inclusive of pipeline, compressor stations, meter stations, SCADA infrastructure, rights-of-way acquisition, and related facilities, was $587.2 million.
Ridgeline's Employer Identification Number is 87-4231956. Ridgeline's registered agent for service of process in the State of Delaware is Capitol Filings Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. As noted above, Ridgeline is a wholly owned subsidiary of DEH, and its principal officers include James K. Winfield, Chief Executive Officer and President.
III. Description of the Filing — Rate Case (Docket No. RP22-847-000)
Ridgeline hereby submits its FERC Gas Tariff, Original Volume No. 1, a Part 284, Subpart G open-access transportation tariff in compliance with the Commission's open-access transportation requirements established in Order No. 636 and subsequent orders. The proposed tariff includes rate schedules for firm transportation service (Rate Schedule FT-1) and interruptible transportation service (Rate Schedule IT-1), together with General Terms and Conditions ("GT&C") governing all aspects of the provision of transportation service on the Ridgeline Pipeline System, and the Form of Service Agreement applicable to each rate schedule.
Proposed Initial Recourse Rate. Ridgeline proposes an initial recourse rate for firm transportation service of $0.2265 per Dth total, consisting of a reservation rate component of $0.2223 per Dth and a usage rate component of $0.0042 per Dth. The interruptible transportation rate under Rate Schedule IT-1 is derived from the firm transportation rate on a 100% load factor basis, consistent with Commission policy. These rates have been designed to recover Ridgeline's total cost of service and provide a reasonable opportunity to earn a fair return on the capital invested in its pipeline system.
Rate Design. The proposed rate design is based on a 100% load factor applied to the system's design capacity of 1,200,000 Dth/d, yielding annual billing determinants of 438,000,000 Dth (calculated as 1,200,000 Dth/d multiplied by 365 days). Ridgeline's rate design employs the straight-fixed-variable ("SFV") methodology prescribed by the Commission in Order No. 636 and subsequent policy pronouncements, under which all fixed costs are assigned to the reservation rate and only variable costs (fuel, lost and unaccounted for gas, and electric power costs) are assigned to the usage rate.
Test Year. The rates proposed herein are based on the twelve-month test year ended March 31, 2022. Ridgeline has prepared its cost-of-service and rate base computations in accordance with the Commission's Uniform System of Accounts prescribed in 18 C.F.R. Part 201 and the filing requirements of 18 C.F.R. Part 154.
Total Cost of Service. The total cost of service as filed is $97.36 million, reflecting Ridgeline's operating and maintenance expenses, administrative and general expenses, depreciation and amortization, taxes (including income taxes and other taxes), and return on rate base.
Rate Base. Ridgeline's rate base as filed is $612.40 million, consisting of the following components:
• Net Plant in Service: $563.71 million, comprising original plant cost of $587.2 million less accumulated depreciation of $23.49 million through the end of the test year;
• Working Capital Allowance: $18.64 million, calculated using the Commission's one-eighth of operations and maintenance expense methodology;
• Accumulated Deferred Income Taxes (ADIT): negative $12.45 million, reflecting the timing differences between book and tax depreciation resulting from the application of the Modified Accelerated Cost Recovery System ("MACRS") for federal income tax purposes, and presented as a reduction to rate base in accordance with Commission precedent;
• Other Rate Base Items: $42.50 million, consisting of gas stored underground, prepayments, and materials and supplies necessary for the ongoing operation and maintenance of the Ridgeline Pipeline System.
Return on Equity. Ridgeline proposes a return on equity ("ROE") of 14.00%. This ROE is supported by a discounted cash flow ("DCF") proxy group analysis presented in Exhibit No. L to the Application. The proxy group consists of publicly traded natural gas pipeline companies with comparable risk profiles, and the analysis was conducted using both the constant growth and two-stage growth DCF models in accordance with established Commission methodology. Ridgeline respectfully submits that a 14.00% ROE is reasonable and appropriate given the risks associated with operating a recently constructed pipeline system in a competitive and evolving market for natural gas transportation capacity in the Appalachian Basin, including the Applicant's current below-design utilization level.
Capital Structure. Ridgeline's proposed capital structure for ratemaking purposes consists of 55% common equity and 45% long-term debt. This capital structure reflects the actual capitalization of the Ridgeline Pipeline System as of the end of the test year and is consistent with the capital structures approved by the Commission for comparable pipeline companies.
Cost of Debt. The weighted average cost of Ridgeline's long-term debt is 5.25%, reflecting the blended interest rates on Ridgeline's outstanding term loan facility and senior secured notes.
Weighted Average Cost of Capital. Based on the foregoing capital structure, cost of equity, and cost of debt, Ridgeline's overall weighted average cost of capital is 10.0625%, calculated as follows: (55% × 14.00%) + (45% × 5.25%) = 7.70% + 2.3625% = 10.0625%.
Statement of Nature of Filing and Tariff Summary. A Statement of Nature of Filing and Tariff Summary prepared pursuant to 18 C.F.R. § 154.7 is included with the filing and provides a concise overview of the proposed tariff, the basis for the proposed rates, and the regulatory authority under which the filing is made.
IV. Description of the Filing — Interconnection Authorization (Docket No. RP22-847-001)
Concurrently with the rate case filing described above, Ridgeline seeks authorization pursuant to Section 7 of the Natural Gas Act, 15 U.S.C. § 717f, for the construction and operation of physical interconnection facilities with ATPC's existing 30-inch mainline at ATPC Milepost 412.6. The proposed interconnection point is designated as the Wetzel County Interconnect, located at milepost 0.0 of the Ridgeline Pipeline System, in Wetzel County, West Virginia. This interconnection will enable Ridgeline to receive natural gas from, and deliver natural gas to, the ATPC system, thereby enhancing supply diversity, operational flexibility, and market access for shippers on both systems.
Interconnection Facilities. The proposed interconnection facilities include a new measurement and regulation ("M&R") meter station and a pig launcher/receiver assembly to facilitate inline inspection and pipeline integrity management operations. The metering equipment at the interconnect will consist of ultrasonic flow meters configured in three measurement runs, each utilizing 12-inch-diameter meter tubes, together with gas chromatographs for real-time gas quality monitoring and Supervisory Control and Data Acquisition ("SCADA") integration to enable remote monitoring, data acquisition, and operational control of the interconnection facilities by both Ridgeline and ATPC.
Design Capacity. The proposed interconnection facilities have been designed for an initial bidirectional flow capacity of 800 MMcf/d, with the capability to be expanded to the full design capacity of 1.2 Bcf/d through the addition of supplemental measurement runs and associated piping modifications, as warranted by future market demand and system requirements.
Estimated Cost and Cost Sharing. The total estimated cost of the interconnection facilities is $22.3 million. Ridgeline and ATPC have negotiated a cost-sharing arrangement under which Ridgeline will bear approximately 34.1% of the total interconnection cost ($7.6 million) and ATPC will bear approximately 65.9% of the total interconnection cost ($14.7 million). The respective cost shares have been allocated based on each party's proportional use of the interconnection facilities and the relative benefits accruing to each pipeline system's shippers. The terms of this cost-sharing arrangement are set forth in the Interconnection and Operating Agreement between Ridgeline and ATPC, a copy of which is included as Exhibit No. O to the Application.
Target In-Service Date. Ridgeline proposes to complete construction and place the interconnection facilities in service during the fourth quarter of 2023 (Q4 2023), subject to timely receipt of all necessary regulatory authorizations and permits.
Description of ATPC. ATPC is a Pennsylvania limited liability company (EIN: 25-1987643) with its principal office at 2200 Penn Center West, Suite 300, Pittsburgh, Pennsylvania 15276. ATPC's registered agent for service of process in the Commonwealth of Pennsylvania is Keystone Corporate Services LLC, located at 600 North Second Street, Harrisburg, Pennsylvania 17101. ATPC owns and operates a 640-mile interstate natural gas pipeline system with a current certificated capacity of approximately 3.8 Bcf/d, serving markets in Pennsylvania, Ohio, and New York. ATPC is a subsidiary of Tidewater Infrastructure Partners LP (EIN: 51-0438712), a Delaware limited partnership. ATPC is a Commission-jurisdictional natural gas company and an existing holder of certificates of public convenience and necessity under Section 7 of the Natural Gas Act.
V. List of Enclosed Documents and Exhibits
In connection with this filing, Ridgeline encloses the following documents and exhibits for filing with the Commission:
1. Application for Initial Tariff Rate and Interconnection Authorization — The complete application, including all supporting narrative, filed in the original and the required number of copies as prescribed by the Commission's regulations at 18 C.F.R. § 385.2003.
2. FERC Gas Tariff, Original Volume No. 1 — Proposed Tariff Sheets — The complete set of proposed original tariff sheets comprising Rate Schedule FT-1 (Firm Transportation), Rate Schedule IT-1 (Interruptible Transportation), General Terms and Conditions, and Form of Service Agreement.
3. Statement of Nature of Filing and Tariff Summary — Prepared pursuant to 18 C.F.R. § 154.7, providing a concise summary of the nature, basis, and purpose of the filing and the proposed tariff rates.
4. Exhibit Nos. A through P — Supporting Data — Comprehensive supporting data required by the Commission's regulations, including cost-of-service schedules, rate base calculations, rate design workpapers, a system map depicting the Ridgeline Pipeline System and the proposed interconnection point, operating statistics for the test year, depreciation schedules and depreciation rate support, capital structure support and cost of capital analysis, proxy group data and DCF analysis supporting the proposed return on equity, revenue requirement schedules, fuel and lost-and-unaccounted-for gas projections, environmental reports, and the Interconnection and Operating Agreement with ATPC.
5. Verification and Certificate of Accuracy — Executed by James K. Winfield, Chief Executive Officer and President of Ridgeline Midstream Services LLC, attesting to the accuracy and completeness of the information and data contained in the application and supporting exhibits.
6. Notice of Appearance and Designation of Lead Counsel — Designating George Trujillo of Calderwood & Harkness LLP as lead counsel, and Brett Callahan and David Stanton as additional counsel of record authorized to represent Ridgeline in all proceedings before the Commission in connection with this filing.
7. Certificate of Service — Certifying that the filing has been served upon all parties required to receive notice under the Commission's regulations, including ATPC and relevant state regulatory agencies.
8. Form of Notice Suitable for Publication in the Federal Register — A proposed notice prepared in the format customarily accepted by the Commission for publication in the Federal Register, describing the nature of the filing and the procedures for intervention and comment.
VI. Request for Establishment of Intervention Deadline and Procedural Schedule
Ridgeline respectfully requests that the Commission issue a Notice of Filing and establish an intervention and protest deadline consistent with the Commission's customary practice for filings of this nature. Ridgeline further requests that, in the event the Commission determines that the proposed initial rates or interconnection authorization raise issues of material fact warranting further examination, the Commission set a procedural schedule for hearing, including the establishment of dates for discovery, testimony, and evidentiary hearing, as may be necessary and appropriate.
Ridgeline notes that it has endeavored to provide a complete and thorough record supporting the reasonableness of its proposed initial rates and the need for the proposed interconnection facilities. Ridgeline submits that the filing fully complies with the Commission's regulatory requirements and is in the public interest, and respectfully urges the Commission to act on the application in an expeditious manner so that Ridgeline may begin providing open-access transportation service under its proposed tariff and proceed with the construction of the interconnection facilities in accordance with the target in-service date of Q4 2023.
VII. Contact Information for Counsel
All communications, correspondence, pleadings, and documents regarding this filing should be directed to the following counsel for Ridgeline:
George Trujillo Responsible Partner, Energy & Infrastructure Practice Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-4127 Facsimile: (202) 555-4101
Email: gtrujillo@calderwoodharkness.com
Brett Callahan Lead Associate, Energy & Infrastructure Practice Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-4134 Facsimile: (202) 555-4101
Email: bcallahan@calderwoodharkness.com
David Stanton Working Associate, Energy & Infrastructure Practice Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-4139 Facsimile: (202) 555-4101
Email: dstanton@calderwoodharkness.com
Copies of all communications should also be served on the following representatives of Ridgeline:
James K. Winfield Chief Executive Officer & President Ridgeline Midstream Services LLC 700 Kanawha Boulevard East, Suite 1400 Charleston, WV 25301 Telephone: (304) 555-7200
Email: jwinfield@ridgelinemidstream.com
Dr. Natasha Orlov Director of Rates & Regulatory Ridgeline Midstream Services LLC 700 Kanawha Boulevard East, Suite 1400 Charleston, WV 25301 Telephone: (304) 555-7218
Email: norlov@ridgelinemidstream.com
VIII. Closing
Ridgeline respectfully requests that the Commission accept the enclosed filing as submitted and grant the authorizations requested herein. Ridgeline is committed to the full and timely compliance with all applicable Commission regulations and orders, and stands ready to provide any additional information, data, or supplemental materials that the Commission or its Staff may require in connection with the review and processing of this application. The undersigned counsel is available at any time to discuss any aspect of the filing or to address any questions the Commission may have.
We appreciate the Commission's attention to this matter and look forward to the prompt and favorable consideration of Ridgeline's application.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
George Trujillo Responsible Partner, Energy & Infrastructure Calderwood & Harkness LLP 1601 K Street NW, Suite 900 Washington, DC 20006 Telephone: (202) 555-4127
Email: gtrujillo@calderwoodharkness.com
C&H Matter No. 1016-00005
Date: May 12, 2022
Enclosures (as described above)
cc:
Patricia Dunmore, Chairperson, Dunmore Energy Holdings Ltd., 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands
James K. Winfield, CEO & President, Ridgeline Midstream Services LLC, 700 Kanawha Boulevard East, Suite 1400, Charleston, WV 25301
Angela Moretti, VP, Finance & Treasurer, Ridgeline Midstream Services LLC, 700 Kanawha Boulevard East, Suite 1400, Charleston, WV 25301
Dr. Natasha Orlov, Director of Rates & Regulatory, Ridgeline Midstream Services LLC, 700 Kanawha Boulevard East, Suite 1400, Charleston, WV 25301
Thomas Greaves, VP, Engineering & Operations, Ridgeline Midstream Services LLC, 700 Kanawha Boulevard East, Suite 1400, Charleston, WV 25301