1016-00005 · Dunmore Energy Holdings · FERC Application & Filings

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UNITED STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

VERIFICATION AND CERTIFICATE OF ACCURACY

Filed: May 12, 2022

I. IDENTIFICATION OF AFFIANT

I, James K. Winfield, hereby state and represent as follows:

1. I am the Chief Executive Officer and President of Ridgeline Midstream Services LLC ("Ridgeline" or the "Company"), a limited liability company duly organized and existing under the laws of the State of Delaware. Ridgeline maintains its principal office at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301. The Company's federal Employer Identification Number is 87-4231956, and its FERC Code is 960442.

2. The sole member of Ridgeline Midstream Services LLC is Dunmore Energy Holdings Ltd., an exempted limited company organized under the laws of the Cayman Islands, Cayman Registry No. CR-381204, with a registered address at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands.

3. I am duly authorized to execute this Verification and Certificate of Accuracy on behalf of Ridgeline Midstream Services LLC in my capacity as Chief Executive Officer and President. My authority to act on behalf of Ridgeline in matters before the Federal Energy Regulatory Commission ("Commission" or "FERC") is derived from resolutions of the Board of Managers of the Company, copies of which have been retained in the Company's corporate records and are available for inspection upon request by the Commission or its staff.

4. I have held the position of Chief Executive Officer and President of Ridgeline since the Company's formation in April 2021. Prior to my current role, I served in senior executive positions in the natural gas pipeline industry for over twenty-two years. I am familiar with the operations, finances, regulatory obligations, and business affairs of Ridgeline Midstream Services LLC.

II. DESCRIPTION OF FILING

5. This Verification and Certificate of Accuracy is submitted in connection with the Application for Initial Tariff Rate and Interconnection Authorization (the "Application") filed by Ridgeline Midstream Services LLC on this date, May 12, 2022, in Docket Nos. RP22-847-000 (rate case proceeding) and RP22-847-001 (interconnection proceeding).

6. The Application is filed pursuant to Sections 4 and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c and 717f, and the Commission's regulations at 18 C.F.R. Parts 154, 157, and 284. Specifically, the rate proceeding in Docket No. RP22-847-000 is filed under Section 4 of the NGA and 18 C.F.R. Part 154, while the interconnection authorization in Docket No. RP22-847-001 is filed under Section 7 of the NGA and 18 C.F.R. Part 157.

7. The filing encompasses the following documents and materials, all of which are incorporated by reference into this Verification and Certificate of Accuracy:

(a) The Application for Initial Tariff Rate and Interconnection Authorization, together with all accompanying transmittal letters and procedural filings;

(b) Ridgeline's FERC Gas Tariff, Original Volume No. 1, consisting of proposed tariff sheets including Rate Schedule FT-1 (Firm Transportation Service), Rate Schedule IT-1 (Interruptible Transportation Service), the General Terms and Conditions, and the Form of Service Agreement, filed as an open-access transportation tariff under Part 284, Subpart G of the Commission's regulations;

(d) Exhibit Nos. A through P, which contain supporting data including, but not limited to, cost-of-service schedules, rate base calculations, rate design workpapers, a system map, operating statistics, depreciation schedules, and capital structure support, as more particularly described in the Application;

(e) All appendices, attachments, workpapers, and supplemental materials filed in support of the Application.

III. VERIFICATION OF KEY DATA — SYSTEM DESCRIPTION

8. I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the following system data as presented in the Application and the accompanying Exhibits:

9. Pipeline System. The Ridgeline Pipeline System (the "System") is a newly constructed, 187-mile, 24-inch-diameter high-pressure natural gas transmission pipeline. The System was designed and constructed to transport natural gas produced in the Appalachian Basin, principally from Marcellus and Utica shale formations, from points of receipt in northern West Virginia to points of delivery in southwestern Pennsylvania.

10. Receipt Point. The primary receipt point on the Ridgeline Pipeline System is the Wetzel County Interconnect, located in Wetzel County, West Virginia, at approximate geographic coordinates 39.6120° N latitude, 80.7540° W longitude. This receipt point serves as the origin of the System at milepost 0.0.

11. Delivery Point. The primary delivery point on the Ridgeline Pipeline System is the Waynesburg Compressor Station, located in Greene County, Pennsylvania, at approximate geographic coordinates 39.8965° N latitude, 80.1810° W longitude.

12. Design Capacity. The Ridgeline Pipeline System has a design capacity of 1.2 billion cubic feet per day ("Bcf/d"), equivalent to 1,200,000 dekatherms per day ("Dth/d") at an assumed BTU content of 1,000 BTU per standard cubic foot. This design capacity reflects the maximum sustainable throughput of the System under normal operating conditions and with all compressor stations operating at full capacity.

13. Current Throughput. As of the test year, the System's current throughput is approximately 680 million cubic feet per day ("MMcf/d"), which represents approximately 56.67% utilization of design capacity. The Company anticipates that throughput will increase over time as additional firm transportation service agreements are executed and as market conditions support increased production in the Appalachian Basin.

14. Compressor Stations. The Ridgeline Pipeline System is served by three compressor stations: (i) Wetzel Station, located near the receipt point in Wetzel County, West Virginia; (ii) Mannington Station, located at an intermediate point along the pipeline route in Marion County, West Virginia; and (iii) Waynesburg Station, located at the delivery point in Greene County, Pennsylvania. The aggregate installed compression capacity of these three stations is 45,000 horsepower ("HP"). Each station is equipped with natural gas-fired turbine-driven centrifugal compressors designed for continuous service.

15. In-Service Date. The Ridgeline Pipeline System was placed in service on October 1, 2021, following completion of construction and successful hydrostatic testing, commissioning, and receipt of all necessary federal, state, and local permits.

16. Original Construction Cost. The original construction cost of the Ridgeline Pipeline System, including pipeline facilities, compressor stations, meter stations, rights-of-way, and associated infrastructure, totals $587.2 million. This figure is consistent with the final project cost report prepared by the Company and has been reflected in the Company's books of account.

IV. VERIFICATION OF KEY DATA — RATE BASE AND COST OF SERVICE

17. I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the following financial data as presented in the Application and Exhibit Nos. A through P.

A. Rate Base

18. The rate base for the Ridgeline Pipeline System, as filed and calculated for the test year ended March 31, 2022, consists of the following components:

(a) Net Plant in Service: $563.71 million. This figure represents the original construction cost of $587.2 million, less accumulated depreciation of $23.49 million. Accumulated depreciation was calculated on a straight-line basis at a composite depreciation rate of 2.5% per annum, adjusted to reflect the partial-year period from the in-service date of October 1, 2021, through the end of the test year on March 31, 2022 (a period of six months), as well as the full annualized depreciation included in the test-year calculation consistent with Commission policy.

(b) Working Capital Allowance: $18.64 million. The working capital allowance was calculated using the Commission's standard formula methodology, consisting of one-eighth (1/8) of the sum of annual operations and maintenance ("O&M") expenses and administrative and general ("A&G") expenses.

(c) Accumulated Deferred Income Taxes (ADIT): negative $12.45 million. Consistent with Commission requirements, ADIT reduces the rate base to prevent ratepayers from being required to provide a return on capital that has been supplied, in effect, by the government through the deferral of income tax payments. The ADIT balance reflects the timing differences between book depreciation and tax depreciation, including the application of the Modified Accelerated Cost Recovery System ("MACRS") for federal income tax purposes.

(d) Other Rate Base Items: $42.50 million. This component includes gas stored underground, prepayments, and materials and supplies. These items represent additional investment that is necessary for and used in the provision of natural gas transportation service on the Ridgeline Pipeline System.

(e) Total Rate Base: $612.40 million. The total rate base is the sum of the foregoing components: $563.71 million (net plant in service) plus $18.64 million (working capital) minus $12.45 million (ADIT) plus $42.50 million (other rate base items).

B. Test-Year Cost of Service

19. The test-year cost of service for the Ridgeline Pipeline System, as presented in the Application, totals $97.36 million and consists of the following components:

(a) Return on Rate Base: $61.62 million. This amount represents the product of the total rate base of $612.40 million and the weighted average cost of capital of 10.0625%, as described in paragraph 22 below.

(b) Depreciation Expense: $14.68 million. Depreciation expense is calculated on a straight-line basis at the composite depreciation rate of 2.5% per annum applied to the original cost of depreciable plant in service.

(c) Operations and Maintenance Expense: $12.44 million. This amount includes all expenses directly attributable to the operation and maintenance of the Ridgeline Pipeline System, including compressor fuel and power, pipeline inspections and repairs, rights-of-way maintenance, environmental compliance, and safety programs.

(d) Administrative and General Expense: $4.82 million. This amount includes salaries and wages of executive, administrative, and general personnel; employee benefits; office supplies and expenses; outside professional services (legal, accounting, and consulting); insurance premiums; and other general corporate overhead allocated to jurisdictional operations.

(e) Taxes Other Than Income: $3.80 million. This category includes ad valorem property taxes assessed by the states of West Virginia and Pennsylvania on the Ridgeline Pipeline System, as well as state franchise taxes and other applicable taxes and assessments that are not based on income.

(f) Income Tax Allowance: $16.10 million. The income tax allowance was calculated using a grossed-up effective income tax rate of approximately 26.13%, reflecting the combined effect of the federal corporate income tax rate of 21% and the West Virginia corporate net income tax rate of 6.5%, with appropriate adjustments for the deductibility of state income taxes for federal purposes.

(g) Revenue Credit Adjustments: negative $16.10 million. Revenue credits reflect various items that reduce the total cost of service, including interruptible transportation revenues, penalty revenues, and other miscellaneous revenues that offset the cost of service to firm transportation customers.

C. Capital Structure and Return

20. Capital Structure. The proposed capital structure for Ridgeline Midstream Services LLC, as presented in the Application, consists of 55% equity and 45% debt. This capital structure reflects the actual capitalization of the Company and is consistent with the capital structures of comparable natural gas pipeline companies.

21. Cost of Capital Components. The proposed return on equity is 14.00%, based on a discounted cash flow ("DCF") proxy group analysis performed in accordance with Commission precedent, as set forth in Exhibit I to the Application. The cost of debt is 5.25%, representing the weighted average interest rate across two debt tranches, as described in Section VII of this Verification.

22. Weighted Average Cost of Capital. The resulting weighted average cost of capital is 10.0625%, calculated as follows: (55% × 14.00%) + (45% × 5.25%) = 7.70% + 2.3625% = 10.0625%.

V. VERIFICATION OF KEY DATA — RATE DESIGN

23. I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the proposed rate design for the Ridgeline Pipeline System as presented in the Application and the proposed tariff sheets filed as part of the FERC Gas Tariff, Original Volume No. 1.

24. Billing Determinants. The billing determinants used in the rate design are 438,000,000 Dth per year, derived from the design capacity of 1,200,000 Dth/d multiplied by 365 days per year, assuming a 100% load factor. This calculation is consistent with Commission policy for establishing initial rates based on full design capacity of a new pipeline.

25. Proposed Initial Recourse Rate. The proposed initial recourse rate for firm transportation service under Rate Schedule FT-1 is $0.2265 per Dth (total), consisting of a reservation component of $0.2223 per Dth and a usage component of $0.0042 per Dth. The reservation component reflects the fixed costs of the System that are recovered through monthly reservation charges, while the usage component reflects the variable costs, principally compressor fuel and variable operations and maintenance expenses, that are recovered on a per-unit-of-throughput basis.

26. Rate Derivation. The proposed total rate was derived by dividing the total annual cost of service of $97.36 million by the annual billing determinants of 438,000,000 Dth per year, yielding a rate of $0.2223 per Dth for the reservation component (rounded). The usage component of $0.0042 per Dth was calculated separately based on the variable cost allocation, with the reservation/usage split between these components as set forth in detail in the rate design workpapers included in Exhibit J to the Application.

27. Tariff Type. The proposed tariff is filed as a Part 284, Subpart G open-access transportation tariff in compliance with the Commission's regulations and policies governing open-access natural gas pipeline transportation services. The proposed rates, terms, and conditions are designed to be applied on a non-discriminatory basis to all shippers seeking service on the Ridgeline Pipeline System.

VI. VERIFICATION OF KEY DATA — INTERCONNECTION FACILITIES

28. I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the interconnection facilities data as presented in the Application filed in Docket No. RP22-847-001.

29. Proposed Interconnection Point. The proposed interconnection is designated as the Wetzel County Interconnect, which will consist of a new meter station and pig launcher/receiver facility to be constructed at milepost 0.0 of the Ridgeline Pipeline System. The interconnection will tie into the existing 30-inch-diameter mainline of Appalachian Trunk Pipeline Company, LLC ("ATPC") at ATPC Milepost 412.6, located in Wetzel County, West Virginia. The proposed interconnection will facilitate the receipt of natural gas from ATPC's system for onward transportation on the Ridgeline Pipeline System.

30. Estimated Cost. The total estimated cost of the interconnection facilities is $22.3 million. This estimate encompasses all engineering, procurement, and construction costs associated with the meter station, pig launcher/receiver, interconnecting piping and valves, cathodic protection systems, telecommunications and SCADA infrastructure, site preparation, and environmental mitigation measures.

31. Cost Allocation. The proposed cost allocation for the interconnection facilities, as negotiated between Ridgeline and ATPC and set forth in the Interconnection Agreement attached as Exhibit N to the Application, is as follows: Ridgeline's share is $7.6 million (34.1% of total estimated cost) and ATPC's share is $14.7 million (65.9% of total estimated cost). This cost allocation reflects the relative benefits and usage expected to accrue to each party from the interconnection and is consistent with Commission precedent regarding the sharing of interconnection costs between pipeline systems.

32. Metering Equipment. The interconnection facilities will include ultrasonic flow meters configured in three measurement runs, each utilizing 12-inch-diameter meter tubes. The metering station will be equipped with gas chromatographs for continuous gas quality analysis and will be fully integrated into Ridgeline's Supervisory Control and Data Acquisition ("SCADA") system to permit real-time monitoring, data recording, and remote operation.

33. Design Capacity at Interconnect. The interconnection facilities are designed for an initial bidirectional capacity of 800 MMcf/d. The facilities have been engineered to be expandable to 1.2 Bcf/d through the addition of meter runs and associated piping without requiring replacement of the existing station infrastructure.

34. Target In-Service Date. The target in-service date for the interconnection facilities is the fourth quarter of 2023 (Q4 2023), subject to resolution of the interconnection proceeding in Docket No. RP22-847-001, receipt of all necessary regulatory approvals, and completion of construction activities.

VII. VERIFICATION OF KEY DATA — FINANCING

35. I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the financing information presented in the Application and supporting Exhibits.

36. Senior Secured Credit Facility. The construction and initial operation of the Ridgeline Pipeline System were financed in part through a senior secured credit facility consisting of (i) a $400 million term loan and (ii) a $75 million revolving credit facility. The credit facility was arranged with Pinnacle National Bank, N.A. serving as Administrative Agent and Lead Arranger, and with Granite Trust Company and Lakeshore Capital Bank participating as syndicate lenders. The credit facility bears interest at the Secured Overnight Financing Rate ("SOFR") plus a margin of 325 basis points. The credit facility matures on October 1, 2028. The credit facility agreement is dated September 15, 2021, and a summary of its material terms and conditions is included in Exhibit M to the Application.

37. Second Lien Notes. In addition to the senior secured credit facility, Ridgeline issued $150 million in aggregate principal amount of 7.875% Second Lien Senior Secured Notes due 2030 (the "Second Lien Notes"). The Second Lien Notes were issued on September 22, 2021, and were placed privately with two institutional investors: Harborview Capital Management LLC and Sentinel Ridge Fund LP. The Second Lien Notes are secured by a second-priority lien on substantially all assets of the Company, subordinate to the liens securing the senior secured credit facility. Details of the Second Lien Notes, including the applicable indenture provisions, are summarized in Exhibit M to the Application.

38. Equity Contribution. Dunmore Energy Holdings Ltd., the sole member of Ridgeline Midstream Services LLC, made an equity contribution of $37.2 million to the Company in connection with the development and construction of the Ridgeline Pipeline System. This equity contribution, together with the proceeds from the senior secured credit facility and the Second Lien Notes, funded the total original construction cost of $587.2 million as well as initial working capital requirements.

VIII. CERTIFICATION OF SOURCES

39. I hereby certify that the data and information set forth in the Application and in supporting Exhibit Nos. A through P were prepared under my direction and supervision or, with respect to certain financial, engineering, and regulatory data, were prepared by qualified personnel of Ridgeline Midstream Services LLC under the supervision of the following officers and senior staff members:

(a) Angela Moretti, Vice President, Finance and Treasurer — Ms. Moretti supervised and directed the preparation of all cost-of-service data, rate base calculations, capital structure support, tax computations, and financial schedules contained in Exhibit Nos. A through E and Exhibit M;

(b) Thomas Greaves, Vice President, Engineering and Operations — Mr. Greaves supervised and directed the preparation of all engineering data, system design specifications, operating statistics, hydraulic analysis, compressor station data, interconnection engineering, and system maps contained in Exhibit Nos. F through H and Exhibit N;

(c) Dr. Natasha Orlov, Director of Rates and Regulatory — Dr. Orlov supervised and directed the preparation of all rate design workpapers, tariff provisions, billing determinant calculations, and regulatory compliance analyses contained in Exhibit Nos. I through L and Exhibit O.

40. I further certify that the financial records and books of account of Ridgeline Midstream Services LLC have been audited by Ashford & McBride LLP, a nationally recognized independent public accounting firm, for the period from the Company's formation through the test year ended March 31, 2022. The audited financial statements were issued with an unqualified opinion and are consistent with the financial data presented in the Application.

41. In addition, the pipeline valuation for the Ridgeline Pipeline System was independently performed by Ridgepoint Appraisal & Valuation Inc., a firm with recognized expertise in natural gas pipeline valuation. The results of that valuation are consistent with the original cost data and net plant in service figures included in the rate base computations presented in the Application.

42. I certify that the data and information contained in the Application and all supporting Exhibits, schedules, workpapers, and attachments are consistent with the books and records of Ridgeline Midstream Services LLC as of the test year ended March 31, 2022, and that such data and information accurately reflect the financial condition, operating characteristics, and cost of service of the Ridgeline Pipeline System.

IX. VERIFICATION UNDER PENALTY OF PERJURY

43. I, James K. Winfield, being duly sworn, depose and state that I am the Chief Executive Officer and President of Ridgeline Midstream Services LLC; that I have read the foregoing Application for Initial Tariff Rate and Interconnection Authorization filed in Docket Nos. RP22-847-000 and RP22-847-001, including all exhibits and attachments thereto; that I am familiar with the contents thereof; and that the facts set forth therein are true and correct to the best of my knowledge, information, and belief.

44. I declare under penalty of perjury under the laws of the United States of America, pursuant to 28 U.S.C. § 1746, that the foregoing statements are true and correct.

45. This Verification is executed on this 12th day of May, 2022, at Charleston, West Virginia.

X. CERTIFICATE OF ACCURACY

46. In addition to the foregoing Verification, and in accordance with the Commission's regulations, I hereby certify as follows:

47. All tariff sheets, rate schedules, general terms and conditions, forms of service agreements, workpapers, and supporting data filed in the FERC Gas Tariff, Original Volume No. 1 of Ridgeline Midstream Services LLC are accurate, complete, and conform in all material respects to the requirements of 18 C.F.R. Part 154, including the Commission's filing requirements, formatting requirements, and content requirements applicable to natural gas pipeline tariff filings.

48. The proposed rates, terms, and conditions contained in the FERC Gas Tariff, Original Volume No. 1, including Rate Schedule FT-1, Rate Schedule IT-1, the General Terms and Conditions, and the Form of Service Agreement, are just and reasonable within the meaning of Section 4 of the Natural Gas Act, 15 U.S.C. § 717c, and are not unduly discriminatory or preferential within the meaning of Section 4 or Section 5 of the Natural Gas Act.

49. The filing complies in all material respects with the Commission's regulations governing open-access transportation under 18 C.F.R. Part 284, Subpart G, and with the Commission's policies and precedent applicable to initial rate filings by natural gas pipeline companies.

50. Counsel for Ridgeline Midstream Services LLC in this proceeding is the law firm of Calderwood & Harkness LLP, located at 1601 K Street NW, Suite 900, Washington, DC 20006 (telephone: (202) 555-3400). George Trujillo of Calderwood & Harkness LLP serves as lead counsel for Ridgeline in connection with this filing. This matter has been assigned Calderwood & Harkness matter number 1016-00005. All communications and service in this proceeding should be directed to lead counsel at the address stated above.

XI. SIGNATURE

Respectfully submitted,

________________________________________

James K. Winfield Chief Executive Officer and President Ridgeline Midstream Services LLC 700 Kanawha Boulevard East, Suite 1400 Charleston, West Virginia 25301

Date: May 12, 2022

XII. NOTARY ACKNOWLEDGMENT

STATE OF WEST VIRGINIA

COUNTY OF KANAWHA

Subscribed and sworn to before me this 12th day of May, 2022, by James K. Winfield, who is personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity and that by his signature on the instrument the entity upon behalf of which the person acted executed the instrument.

________________________________________

Notary Public, State of West Virginia

Name: ________

My commission expires: ______

[NOTARIAL SEAL]

Note: This Verification and Certificate of Accuracy was executed both as a declaration under penalty of perjury pursuant to 28 U.S.C. § 1746 (paragraph 44 above) and subscribed and sworn before a notary public in the State of West Virginia (above). Either method of execution is sufficient to satisfy the Commission's verification requirements.

Ridgeline Midstream Services LLC

RP22-847-001

UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
VERIFICATION AND CERTIFICATE OF ACCURACY
Filed: May 12, 2022
I. IDENTIFICATION OF AFFIANT
I, James K. Winfield, hereby state and represent as follows:
1.  I am the Chief Executive Officer and President of Ridgeline Midstream Services LLC ("Ridgeline" or the "Company"), a limited liability company duly organized and existing under the laws of the State of Delaware. Ridgeline maintains its principal office at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301. The Company's federal Employer Identification Number is 87-4231956, and its FERC Code is 960442.
2.  The sole member of Ridgeline Midstream Services LLC is Dunmore Energy Holdings Ltd., an exempted limited company organized under the laws of the Cayman Islands, Cayman Registry No. CR-381204, with a registered address at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands.
3.  I am duly authorized to execute this Verification and Certificate of Accuracy on behalf of Ridgeline Midstream Services LLC in my capacity as Chief Executive Officer and President. My authority to act on behalf of Ridgeline in matters before the Federal Energy Regulatory Commission ("Commission" or "FERC") is derived from resolutions of the Board of Managers of the Company, copies of which have been retained in the Company's corporate records and are available for inspection upon request by the Commission or its staff.
4.  I have held the position of Chief Executive Officer and President of Ridgeline since the Company's formation in April 2021. Prior to my current role, I served in senior executive positions in the natural gas pipeline industry for over twenty-two years. I am familiar with the operations, finances, regulatory obligations, and business affairs of Ridgeline Midstream Services LLC.
II. DESCRIPTION OF FILING
5.  This Verification and Certificate of Accuracy is submitted in connection with the Application for Initial Tariff Rate and Interconnection Authorization (the "Application") filed by Ridgeline Midstream Services LLC on this date, May 12, 2022, in Docket Nos. RP22-847-000 (rate case proceeding) and RP22-847-001 (interconnection proceeding).
6.  The Application is filed pursuant to Sections 4 and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c and 717f, and the Commission's regulations at 18 C.F.R. Parts 154, 157, and 284. Specifically, the rate proceeding in Docket No. RP22-847-000 is filed under Section 4 of the NGA and 18 C.F.R. Part 154, while the interconnection authorization in Docket No. RP22-847-001 is filed under Section 7 of the NGA and 18 C.F.R. Part 157.
7.  The filing encompasses the following documents and materials, all of which are incorporated by reference into this Verification and Certificate of Accuracy:
(a) The Application for Initial Tariff Rate and Interconnection Authorization, together with all accompanying transmittal letters and procedural filings;
(b) Ridgeline's FERC Gas Tariff, Original Volume No. 1, consisting of proposed tariff sheets including Rate Schedule FT-1 (Firm Transportation Service), Rate Schedule IT-1 (Interruptible Transportation Service), the General Terms and Conditions, and the Form of Service Agreement, filed as an open-access transportation tariff under Part 284, Subpart G of the Commission's regulations;
(c) The Statement of Nature of Filing and Tariff Summary prepared and filed in accordance with 18 C.F.R. § 154.7;
(d) Exhibit Nos. A through P, which contain supporting data including, but not limited to, cost-of-service schedules, rate base calculations, rate design workpapers, a system map, operating statistics, depreciation schedules, and capital structure support, as more particularly described in the Application;
(e) All appendices, attachments, workpapers, and supplemental materials filed in support of the Application.
III. VERIFICATION OF KEY DATA — SYSTEM DESCRIPTION
8.  I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the following system data as presented in the Application and the accompanying Exhibits:
9.  Pipeline System. The Ridgeline Pipeline System (the "System") is a newly constructed, 187-mile, 24-inch-diameter high-pressure natural gas transmission pipeline. The System was designed and constructed to transport natural gas produced in the Appalachian Basin, principally from Marcellus and Utica shale formations, from points of receipt in northern West Virginia to points of delivery in southwestern Pennsylvania.
10.  Receipt Point. The primary receipt point on the Ridgeline Pipeline System is the Wetzel County Interconnect, located in Wetzel County, West Virginia, at approximate geographic coordinates 39.6120° N latitude, 80.7540° W longitude. This receipt point serves as the origin of the System at milepost 0.0.
11.  Delivery Point. The primary delivery point on the Ridgeline Pipeline System is the Waynesburg Compressor Station, located in Greene County, Pennsylvania, at approximate geographic coordinates 39.8965° N latitude, 80.1810° W longitude.
12.  Design Capacity. The Ridgeline Pipeline System has a design capacity of 1.2 billion cubic feet per day ("Bcf/d"), equivalent to 1,200,000 dekatherms per day ("Dth/d") at an assumed BTU content of 1,000 BTU per standard cubic foot. This design capacity reflects the maximum sustainable throughput of the System under normal operating conditions and with all compressor stations operating at full capacity.
13.  Current Throughput. As of the test year, the System's current throughput is approximately 680 million cubic feet per day ("MMcf/d"), which represents approximately 56.67% utilization of design capacity. The Company anticipates that throughput will increase over time as additional firm transportation service agreements are executed and as market conditions support increased production in the Appalachian Basin.
14.  Compressor Stations. The Ridgeline Pipeline System is served by three compressor stations: (i) Wetzel Station, located near the receipt point in Wetzel County, West Virginia; (ii) Mannington Station, located at an intermediate point along the pipeline route in Marion County, West Virginia; and (iii) Waynesburg Station, located at the delivery point in Greene County, Pennsylvania. The aggregate installed compression capacity of these three stations is 45,000 horsepower ("HP"). Each station is equipped with natural gas-fired turbine-driven centrifugal compressors designed for continuous service.
15.  In-Service Date. The Ridgeline Pipeline System was placed in service on October 1, 2021, following completion of construction and successful hydrostatic testing, commissioning, and receipt of all necessary federal, state, and local permits.
16.  Original Construction Cost. The original construction cost of the Ridgeline Pipeline System, including pipeline facilities, compressor stations, meter stations, rights-of-way, and associated infrastructure, totals $587.2 million. This figure is consistent with the final project cost report prepared by the Company and has been reflected in the Company's books of account.
IV. VERIFICATION OF KEY DATA — RATE BASE AND COST OF SERVICE
17.  I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the following financial data as presented in the Application and Exhibit Nos. A through P.
A. Rate Base
18.  The rate base for the Ridgeline Pipeline System, as filed and calculated for the test year ended March 31, 2022, consists of the following components:
(a) Net Plant in Service: $563.71 million. This figure represents the original construction cost of $587.2 million, less accumulated depreciation of $23.49 million. Accumulated depreciation was calculated on a straight-line basis at a composite depreciation rate of 2.5% per annum, adjusted to reflect the partial-year period from the in-service date of October 1, 2021, through the end of the test year on March 31, 2022 (a period of six months), as well as the full annualized depreciation included in the test-year calculation consistent with Commission policy.
(b) Working Capital Allowance: $18.64 million. The working capital allowance was calculated using the Commission's standard formula methodology, consisting of one-eighth (1/8) of the sum of annual operations and maintenance ("O&M") expenses and administrative and general ("A&G") expenses.
(c) Accumulated Deferred Income Taxes (ADIT): negative $12.45 million. Consistent with Commission requirements, ADIT reduces the rate base to prevent ratepayers from being required to provide a return on capital that has been supplied, in effect, by the government through the deferral of income tax payments. The ADIT balance reflects the timing differences between book depreciation and tax depreciation, including the application of the Modified Accelerated Cost Recovery System ("MACRS") for federal income tax purposes.
(d) Other Rate Base Items: $42.50 million. This component includes gas stored underground, prepayments, and materials and supplies. These items represent additional investment that is necessary for and used in the provision of natural gas transportation service on the Ridgeline Pipeline System.
(e) Total Rate Base: $612.40 million. The total rate base is the sum of the foregoing components: $563.71 million (net plant in service) plus $18.64 million (working capital) minus $12.45 million (ADIT) plus $42.50 million (other rate base items).
B. Test-Year Cost of Service
19.  The test-year cost of service for the Ridgeline Pipeline System, as presented in the Application, totals $97.36 million and consists of the following components:
(a) Return on Rate Base: $61.62 million. This amount represents the product of the total rate base of $612.40 million and the weighted average cost of capital of 10.0625%, as described in paragraph 22 below.
(b) Depreciation Expense: $14.68 million. Depreciation expense is calculated on a straight-line basis at the composite depreciation rate of 2.5% per annum applied to the original cost of depreciable plant in service.
(c) Operations and Maintenance Expense: $12.44 million. This amount includes all expenses directly attributable to the operation and maintenance of the Ridgeline Pipeline System, including compressor fuel and power, pipeline inspections and repairs, rights-of-way maintenance, environmental compliance, and safety programs.
(d) Administrative and General Expense: $4.82 million. This amount includes salaries and wages of executive, administrative, and general personnel; employee benefits; office supplies and expenses; outside professional services (legal, accounting, and consulting); insurance premiums; and other general corporate overhead allocated to jurisdictional operations.
(e) Taxes Other Than Income: $3.80 million. This category includes ad valorem property taxes assessed by the states of West Virginia and Pennsylvania on the Ridgeline Pipeline System, as well as state franchise taxes and other applicable taxes and assessments that are not based on income.
(f) Income Tax Allowance: $16.10 million. The income tax allowance was calculated using a grossed-up effective income tax rate of approximately 26.13%, reflecting the combined effect of the federal corporate income tax rate of 21% and the West Virginia corporate net income tax rate of 6.5%, with appropriate adjustments for the deductibility of state income taxes for federal purposes.
(g) Revenue Credit Adjustments: negative $16.10 million. Revenue credits reflect various items that reduce the total cost of service, including interruptible transportation revenues, penalty revenues, and other miscellaneous revenues that offset the cost of service to firm transportation customers.
C. Capital Structure and Return
20.  Capital Structure. The proposed capital structure for Ridgeline Midstream Services LLC, as presented in the Application, consists of 55% equity and 45% debt. This capital structure reflects the actual capitalization of the Company and is consistent with the capital structures of comparable natural gas pipeline companies.
21.  Cost of Capital Components. The proposed return on equity is 14.00%, based on a discounted cash flow ("DCF") proxy group analysis performed in accordance with Commission precedent, as set forth in Exhibit I to the Application. The cost of debt is 5.25%, representing the weighted average interest rate across two debt tranches, as described in Section VII of this Verification.
22.  Weighted Average Cost of Capital. The resulting weighted average cost of capital is 10.0625%, calculated as follows: (55% × 14.00%) + (45% × 5.25%) = 7.70% + 2.3625% = 10.0625%.
V. VERIFICATION OF KEY DATA — RATE DESIGN
23.  I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the proposed rate design for the Ridgeline Pipeline System as presented in the Application and the proposed tariff sheets filed as part of the FERC Gas Tariff, Original Volume No. 1.
24.  Billing Determinants. The billing determinants used in the rate design are 438,000,000 Dth per year, derived from the design capacity of 1,200,000 Dth/d multiplied by 365 days per year, assuming a 100% load factor. This calculation is consistent with Commission policy for establishing initial rates based on full design capacity of a new pipeline.
25.  Proposed Initial Recourse Rate. The proposed initial recourse rate for firm transportation service under Rate Schedule FT-1 is $0.2265 per Dth (total), consisting of a reservation component of $0.2223 per Dth and a usage component of $0.0042 per Dth. The reservation component reflects the fixed costs of the System that are recovered through monthly reservation charges, while the usage component reflects the variable costs, principally compressor fuel and variable operations and maintenance expenses, that are recovered on a per-unit-of-throughput basis.
26.  Rate Derivation. The proposed total rate was derived by dividing the total annual cost of service of $97.36 million by the annual billing determinants of 438,000,000 Dth per year, yielding a rate of $0.2223 per Dth for the reservation component (rounded). The usage component of $0.0042 per Dth was calculated separately based on the variable cost allocation, with the reservation/usage split between these components as set forth in detail in the rate design workpapers included in Exhibit J to the Application.
27.  Tariff Type. The proposed tariff is filed as a Part 284, Subpart G open-access transportation tariff in compliance with the Commission's regulations and policies governing open-access natural gas pipeline transportation services. The proposed rates, terms, and conditions are designed to be applied on a non-discriminatory basis to all shippers seeking service on the Ridgeline Pipeline System.
VI. VERIFICATION OF KEY DATA — INTERCONNECTION FACILITIES
28.  I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the interconnection facilities data as presented in the Application filed in Docket No. RP22-847-001.
29.  Proposed Interconnection Point. The proposed interconnection is designated as the Wetzel County Interconnect, which will consist of a new meter station and pig launcher/receiver facility to be constructed at milepost 0.0 of the Ridgeline Pipeline System. The interconnection will tie into the existing 30-inch-diameter mainline of Appalachian Trunk Pipeline Company, LLC ("ATPC") at ATPC Milepost 412.6, located in Wetzel County, West Virginia. The proposed interconnection will facilitate the receipt of natural gas from ATPC's system for onward transportation on the Ridgeline Pipeline System.
30.  Estimated Cost. The total estimated cost of the interconnection facilities is $22.3 million. This estimate encompasses all engineering, procurement, and construction costs associated with the meter station, pig launcher/receiver, interconnecting piping and valves, cathodic protection systems, telecommunications and SCADA infrastructure, site preparation, and environmental mitigation measures.
31.  Cost Allocation. The proposed cost allocation for the interconnection facilities, as negotiated between Ridgeline and ATPC and set forth in the Interconnection Agreement attached as Exhibit N to the Application, is as follows: Ridgeline's share is $7.6 million (34.1% of total estimated cost) and ATPC's share is $14.7 million (65.9% of total estimated cost). This cost allocation reflects the relative benefits and usage expected to accrue to each party from the interconnection and is consistent with Commission precedent regarding the sharing of interconnection costs between pipeline systems.
32.  Metering Equipment. The interconnection facilities will include ultrasonic flow meters configured in three measurement runs, each utilizing 12-inch-diameter meter tubes. The metering station will be equipped with gas chromatographs for continuous gas quality analysis and will be fully integrated into Ridgeline's Supervisory Control and Data Acquisition ("SCADA") system to permit real-time monitoring, data recording, and remote operation.
33.  Design Capacity at Interconnect. The interconnection facilities are designed for an initial bidirectional capacity of 800 MMcf/d. The facilities have been engineered to be expandable to 1.2 Bcf/d through the addition of meter runs and associated piping without requiring replacement of the existing station infrastructure.
34.  Target In-Service Date. The target in-service date for the interconnection facilities is the fourth quarter of 2023 (Q4 2023), subject to resolution of the interconnection proceeding in Docket No. RP22-847-001, receipt of all necessary regulatory approvals, and completion of construction activities.
VII. VERIFICATION OF KEY DATA — FINANCING
35.  I hereby verify, to the best of my knowledge, information, and belief, the accuracy of the financing information presented in the Application and supporting Exhibits.
36.  Senior Secured Credit Facility. The construction and initial operation of the Ridgeline Pipeline System were financed in part through a senior secured credit facility consisting of (i) a $400 million term loan and (ii) a $75 million revolving credit facility. The credit facility was arranged with Pinnacle National Bank, N.A. serving as Administrative Agent and Lead Arranger, and with Granite Trust Company and Lakeshore Capital Bank participating as syndicate lenders. The credit facility bears interest at the Secured Overnight Financing Rate ("SOFR") plus a margin of 325 basis points. The credit facility matures on October 1, 2028. The credit facility agreement is dated September 15, 2021, and a summary of its material terms and conditions is included in Exhibit M to the Application.
37.  Second Lien Notes. In addition to the senior secured credit facility, Ridgeline issued $150 million in aggregate principal amount of 7.875% Second Lien Senior Secured Notes due 2030 (the "Second Lien Notes"). The Second Lien Notes were issued on September 22, 2021, and were placed privately with two institutional investors: Harborview Capital Management LLC and Sentinel Ridge Fund LP. The Second Lien Notes are secured by a second-priority lien on substantially all assets of the Company, subordinate to the liens securing the senior secured credit facility. Details of the Second Lien Notes, including the applicable indenture provisions, are summarized in Exhibit M to the Application.
38.  Equity Contribution. Dunmore Energy Holdings Ltd., the sole member of Ridgeline Midstream Services LLC, made an equity contribution of $37.2 million to the Company in connection with the development and construction of the Ridgeline Pipeline System. This equity contribution, together with the proceeds from the senior secured credit facility and the Second Lien Notes, funded the total original construction cost of $587.2 million as well as initial working capital requirements.
VIII. CERTIFICATION OF SOURCES
39.  I hereby certify that the data and information set forth in the Application and in supporting Exhibit Nos. A through P were prepared under my direction and supervision or, with respect to certain financial, engineering, and regulatory data, were prepared by qualified personnel of Ridgeline Midstream Services LLC under the supervision of the following officers and senior staff members:
(a) Angela Moretti, Vice President, Finance and Treasurer — Ms. Moretti supervised and directed the preparation of all cost-of-service data, rate base calculations, capital structure support, tax computations, and financial schedules contained in Exhibit Nos. A through E and Exhibit M;
(b) Thomas Greaves, Vice President, Engineering and Operations — Mr. Greaves supervised and directed the preparation of all engineering data, system design specifications, operating statistics, hydraulic analysis, compressor station data, interconnection engineering, and system maps contained in Exhibit Nos. F through H and Exhibit N;
(c) Dr. Natasha Orlov, Director of Rates and Regulatory — Dr. Orlov supervised and directed the preparation of all rate design workpapers, tariff provisions, billing determinant calculations, and regulatory compliance analyses contained in Exhibit Nos. I through L and Exhibit O.
40.  I further certify that the financial records and books of account of Ridgeline Midstream Services LLC have been audited by Ashford & McBride LLP, a nationally recognized independent public accounting firm, for the period from the Company's formation through the test year ended March 31, 2022. The audited financial statements were issued with an unqualified opinion and are consistent with the financial data presented in the Application.
41.  In addition, the pipeline valuation for the Ridgeline Pipeline System was independently performed by Ridgepoint Appraisal & Valuation Inc., a firm with recognized expertise in natural gas pipeline valuation. The results of that valuation are consistent with the original cost data and net plant in service figures included in the rate base computations presented in the Application.
42.  I certify that the data and information contained in the Application and all supporting Exhibits, schedules, workpapers, and attachments are consistent with the books and records of Ridgeline Midstream Services LLC as of the test year ended March 31, 2022, and that such data and information accurately reflect the financial condition, operating characteristics, and cost of service of the Ridgeline Pipeline System.
IX. VERIFICATION UNDER PENALTY OF PERJURY
43.  I, James K. Winfield, being duly sworn, depose and state that I am the Chief Executive Officer and President of Ridgeline Midstream Services LLC; that I have read the foregoing Application for Initial Tariff Rate and Interconnection Authorization filed in Docket Nos. RP22-847-000 and RP22-847-001, including all exhibits and attachments thereto; that I am familiar with the contents thereof; and that the facts set forth therein are true and correct to the best of my knowledge, information, and belief.
44.  I declare under penalty of perjury under the laws of the United States of America, pursuant to 28 U.S.C. § 1746, that the foregoing statements are true and correct.
45.  This Verification is executed on this 12th day of May, 2022, at Charleston, West Virginia.
X. CERTIFICATE OF ACCURACY
46.  In addition to the foregoing Verification, and in accordance with the Commission's regulations, I hereby certify as follows:
47.  All tariff sheets, rate schedules, general terms and conditions, forms of service agreements, workpapers, and supporting data filed in the FERC Gas Tariff, Original Volume No. 1 of Ridgeline Midstream Services LLC are accurate, complete, and conform in all material respects to the requirements of 18 C.F.R. Part 154, including the Commission's filing requirements, formatting requirements, and content requirements applicable to natural gas pipeline tariff filings.
48.  The proposed rates, terms, and conditions contained in the FERC Gas Tariff, Original Volume No. 1, including Rate Schedule FT-1, Rate Schedule IT-1, the General Terms and Conditions, and the Form of Service Agreement, are just and reasonable within the meaning of Section 4 of the Natural Gas Act, 15 U.S.C. § 717c, and are not unduly discriminatory or preferential within the meaning of Section 4 or Section 5 of the Natural Gas Act.
49.  The filing complies in all material respects with the Commission's regulations governing open-access transportation under 18 C.F.R. Part 284, Subpart G, and with the Commission's policies and precedent applicable to initial rate filings by natural gas pipeline companies.
50.  Counsel for Ridgeline Midstream Services LLC in this proceeding is the law firm of Calderwood & Harkness LLP, located at 1601 K Street NW, Suite 900, Washington, DC 20006 (telephone: (202) 555-3400). George Trujillo of Calderwood & Harkness LLP serves as lead counsel for Ridgeline in connection with this filing. This matter has been assigned Calderwood & Harkness matter number 1016-00005. All communications and service in this proceeding should be directed to lead counsel at the address stated above.
XI. SIGNATURE
Respectfully submitted,
________________________________________
James K. Winfield Chief Executive Officer and President Ridgeline Midstream Services LLC 700 Kanawha Boulevard East, Suite 1400 Charleston, West Virginia 25301
Date: May 12, 2022
XII. NOTARY ACKNOWLEDGMENT
STATE OF WEST VIRGINIA
COUNTY OF KANAWHA
Subscribed and sworn to before me this 12th day of May, 2022, by James K. Winfield, who is personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity and that by his signature on the instrument the entity upon behalf of which the person acted executed the instrument.
________________________________________
Notary Public, State of West Virginia
Name: ________
My commission expires: ______
[NOTARIAL SEAL]
Note: This Verification and Certificate of Accuracy was executed both as a declaration under penalty of perjury pursuant to 28 U.S.C. § 1746 (paragraph 44 above) and subscribed and sworn before a notary public in the State of West Virginia (above). Either method of execution is sufficient to satisfy the Commission's verification requirements.
Ridgeline Midstream Services LLC | Docket Nos. RP22-847-000
RP22-847-001