DRAFT — Prepared by Calderwood & Harkness LLP, C&H Matter No. 1016-00005 — For Review and Execution by Authorized Officer — NOT YET EXECUTED
OFFICER'S CERTIFICATE PURSUANT TO SECTION 6.02(c) OF THE CREDIT AGREEMENT
Delivered in Connection with Quarterly Regulatory Compliance Certification
Credit Agreement Reference: That certain Senior Secured Credit Agreement, dated as of September 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Ridgeline Midstream Services LLC, a Delaware limited liability company, as Borrower (the "Borrower"), Pinnacle National Bank, N.A., as Administrative Agent (in such capacity, the "Administrative Agent"), and the several lenders party thereto from time to time (collectively, the "Lenders"), including Pinnacle National Bank, N.A. (40.0% pro rata share), Granite Trust Company (30.0% pro rata share), and Lakeshore Capital Bank (30.0% pro rata share).
Certificate Date: [__], 2025
RECITALS AND INTRODUCTORY STATEMENTS
The undersigned, Angela Moretti, in her capacity as Vice President, Finance & Treasurer of Ridgeline Midstream Services LLC (the "Borrower"), a limited liability company duly organized and validly existing under the laws of the State of Delaware, with its principal executive office located at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301, and its registered agent for service of process being Capitol Filings Inc., located at 1209 Orange Street, Wilmington, Delaware 19801 (Employer Identification Number: 87-4231956), hereby delivers this Officer's Certificate (this "Certificate") to the Administrative Agent and the Lenders under the Credit Agreement.
The sole member of the Borrower is Dunmore Energy Holdings Ltd. ("DEH"), an exempted limited company organized and existing under the laws of the Cayman Islands (Cayman Islands General Registry Company Number CR-381204), with its registered address at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands.
This Certificate is delivered pursuant to Section 6.02(c) of the Credit Agreement in satisfaction of the Borrower's obligation to deliver periodic certifications to the Administrative Agent and the Lenders regarding the status of regulatory proceedings before the Federal Energy Regulatory Commission ("FERC") and the Borrower's compliance with the Regulatory Covenants (as defined in the Credit Agreement) applicable to the Borrower's ownership and operation of the Ridgeline Pipeline System (as defined below).
The Credit Agreement provides for (i) a senior secured term loan facility in the original aggregate principal amount of Four Hundred Million Dollars ($400,000,000) (the "Term Loan") and (ii) a senior secured revolving credit facility in the aggregate principal amount of Seventy-Five Million Dollars ($75,000,000) (the "Revolving Credit Facility" and, together with the Term Loan, the "Credit Facility"). As of December 31, 2024, the outstanding principal balance of the Term Loan was Three Hundred Sixty-Two Million Eight Hundred Thousand Dollars ($362,800,000). The interest rate applicable to the Term Loan as of the date hereof is the Secured Overnight Financing Rate ("SOFR") plus 325 basis points per annum.
This Certificate is delivered to the Administrative Agent at the following address:
Pinnacle National Bank, N.A. 600 Travis Street, Suite 4200 Houston, Texas 77002
Attention: Richard Calvert, Managing Director, Relationship Manager
Copies of this Certificate are being concurrently delivered to the following syndicate Lenders:
Granite Trust Company 100 Constitution Plaza Hartford, Connecticut 06103
Lakeshore Capital Bank 200 Public Square, Suite 3000 Cleveland, Ohio 44114
Capitalized terms used but not otherwise defined in this Certificate shall have the respective meanings ascribed to such terms in the Credit Agreement.
SECTION 1: CAPACITY AND AUTHORITY
The undersigned, Angela Moretti, hereby certifies as follows with respect to her capacity and authority to execute and deliver this Certificate:
1.1. The undersigned is the duly appointed Vice President, Finance & Treasurer of Ridgeline Midstream Services LLC, having been appointed to such position by the Board of Managers of the Borrower, effective as of November 1, 2020, and continuing to serve in such capacity as of the date hereof.
1.2. The undersigned is authorized to execute and deliver this Certificate on behalf of the Borrower pursuant to (a) the Credit Agreement, including specifically Section 6.02(c) thereof, which designates the Vice President, Finance & Treasurer as an "Authorized Officer" for purposes of delivering regulatory compliance certifications, and (b) the resolutions of the Board of Managers of the Borrower adopted on September 10, 2021, copies of which were previously delivered to the Administrative Agent in connection with the closing of the Credit Facility.
1.3. The undersigned has personal knowledge of the matters certified herein and has made due inquiry of the officers, employees, and agents of the Borrower, as well as the Borrower's outside legal counsel, Calderwood & Harkness LLP, located at 1601 K Street NW, Suite 900, Washington, DC 20006, to verify the accuracy and completeness of the statements contained in this Certificate. The undersigned has reviewed the relevant filings, orders, and correspondence in the FERC proceedings described herein and has consulted with the Borrower's tariff redesign consultants in connection with the preparation of this Certificate.
SECTION 2: DESCRIPTION OF THE FERC REGULATORY PROCEEDINGS
2.1. Nature of Proceedings
The Borrower has initiated and is currently prosecuting proceedings before the Federal Energy Regulatory Commission seeking the following authorizations:
(a) Approval of an initial tariff rate for interstate natural gas transportation service on the Ridgeline Pipeline System (as defined below) under Part 284, Subpart G of the Commission's regulations (18 C.F.R. Part 284, Subpart G), establishing rates, terms, and conditions for open-access firm and interruptible transportation service; and
(b) Authorization for the physical interconnection of the Ridgeline Pipeline System with the existing interstate pipeline network of Appalachian Trunk Pipeline Company, LLC ("ATPC"), including approval of the facilities necessary to effectuate such interconnection and the allocation of costs associated therewith.
The foregoing proceedings are pending before FERC under the following docket numbers:
• Docket No. RP22-847-000 — Rate case proceeding (initial tariff rate approval)
• Docket No. RP22-847-001 — Interconnection authorization proceeding
The proceedings are governed by and brought pursuant to the authority of the Natural Gas Act, 15 U.S.C. §§ 717c (Section 4), 717d (Section 5), and 717f (Section 7), and the Commission's implementing regulations at 18 C.F.R. Parts 154 (Rate Schedules and Tariffs), 157 (Applications for Certificates of Public Convenience and Necessity and for Orders Permitting and Approving the Abandonment of Natural Gas Facilities), and 284 (Certain Sales and Transportation of Natural Gas Under the Natural Gas Policy Act of 1978 and Related Authorities).
The Borrower's FERC pipeline identification code is 960442. ATPC's FERC pipeline identification code is 840117. The tariff at issue in the proceedings is the Ridgeline FERC Gas Tariff, Original Volume No. 1.
2.2. Description of the Ridgeline Pipeline System
The "Ridgeline Pipeline System" consists of the following facilities owned and operated by the Borrower:
(a) Pipeline: An approximately 187-mile, 24-inch-diameter high-pressure natural gas transmission pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia (the receipt point) to the Waynesburg Compressor Station in Greene County, Pennsylvania (the delivery point).
(b) Compressor Stations: Three natural gas compressor stations located along the pipeline route, as follows:
(i) Wetzel Station — Located at approximately milepost 0.0, Wetzel County, West Virginia;
(ii) Mannington Station — Located at approximately milepost 68.5, Marion County, West Virginia; and
(iii) Waynesburg Station — Located at approximately milepost 187.0, Greene County, Pennsylvania.
The three compressor stations have aggregate installed compression capacity of approximately 45,000 horsepower.
(c) Design Capacity: The Ridgeline Pipeline System has a certificated design capacity of approximately 1.2 billion cubic feet per day ("Bcf/d"), equivalent to approximately 1,200,000 dekatherms per day ("Dth/d") at an assumed BTU content of 1,000 BTU per cubic foot.
(d) Current Throughput: As of the date of the most recent quarterly status report filed with FERC (December 13, 2024), current throughput on the Ridgeline Pipeline System is approximately 680 million cubic feet per day ("MMcf/d"), representing an approximate utilization rate of 56.7% of design capacity.
(e) In-Service Date: The Ridgeline Pipeline System was placed into commercial service on October 1, 2021.
(f) Original Construction Cost: The original total construction cost of the Ridgeline Pipeline System, including pipeline, compressor stations, meter stations, SCADA systems, rights-of-way, and related facilities, was approximately Five Hundred Eighty-Seven Million Two Hundred Thousand Dollars ($587,200,000).
2.3. Parties to the Proceeding
The following entities are parties to the FERC proceedings in Docket Nos. RP22-847-000 and RP22-847-001:
(a) Ridgeline Midstream Services LLC (Applicant)
Principal office: 700 Kanawha Boulevard East, Suite 1400, Charleston, WV 25301 Represented by: Calderwood & Harkness LLP, 1601 K Street NW, Suite 900, Washington, DC 20006
(b) Appalachian Trunk Pipeline Company, LLC ("ATPC") (Interconnecting Pipeline / Protestant)
Principal office: 2200 Penn Center West, Suite 300, Pittsburgh, PA 15276 Parent entity: Tidewater Infrastructure Partners LP Represented by: Kellner, Royce & Dillard LLP, One PPG Place, Suite 2800, Pittsburgh, PA 15222 Lead counsel: William Pratt, Esq.
(c) Mountainside Gas Producers Coalition ("MGPC") (Intervenor / Shipper Group)
A coalition of fourteen (14) independent natural gas producers operating in the Appalachian Basin Represented by: Whitmore & Sable LLP, 1200 New Hampshire Avenue NW, Suite 600, Washington, DC 20036 Lead counsel: Rebekah Montague, Esq.
(d) Clearwater Municipal Gas Authority ("CMGA") (Intervenor / Municipal End-User)
Represented by: Fordham Municipal Law Group PC, 312 Adams Avenue, Suite 100, Scranton, PA 18503 Lead counsel: Stephen Greer, Esq.
(e) FERC Trial Staff
Lead Trial Attorney: Jonathan Briggs Lead Economic Analyst: Dr. Miriam Okafor Office of General Counsel and Office of Energy Market Regulation Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426
(f) Administrative Law Judge: The Honorable Clara Whitfield, FERC Office of Administrative Law Judges
(g) Settlement Judge: The Honorable Howard Margolis, FERC Office of Administrative Law Judges
SECTION 3: CURRENT STATUS OF FERC PROCEEDINGS
3.1. Procedural History Summary
The following is a summary of the procedural history of the FERC proceedings in Docket Nos. RP22-847-000 and RP22-847-001:
(a) Application Filing. The Borrower filed its application for approval of an initial tariff rate and interconnection authorization with FERC on May 12, 2022, together with supporting testimony, exhibits, workpapers, and the proposed Ridgeline FERC Gas Tariff, Original Volume No. 1.
(b) Notice of Filing. FERC issued its Notice of Filing on June 14, 2022, establishing an intervention and protest deadline of August 15, 2022, and publishing notice of the application in the Federal Register.
(c) Interventions and Protests. Motions to intervene were filed by the Mountainside Gas Producers Coalition (July 28, 2022), the Clearwater Municipal Gas Authority (August 1, 2022), and Appalachian Trunk Pipeline Company, LLC (August 15, 2022). ATPC concurrently filed a protest opposing the proposed interconnection configuration and the allocation of interconnection facilities costs, arguing that the Borrower's proposed cost allocation methodology would improperly shift approximately Fourteen Million Seven Hundred Thousand Dollars ($14,700,000) in facilities costs to ATPC and its existing shippers.
(d) FERC Order on Interventions. By order issued September 22, 2022, FERC granted all motions to intervene, established a Track II procedural schedule for the proceedings, and appointed the Honorable Howard Margolis as Settlement Judge to facilitate settlement discussions among the parties.
(e) Answer to ATPC Protest. The Borrower filed its answer to ATPC's protest on October 17, 2022, responding to ATPC's objections to the interconnection cost allocation and defending the Borrower's proposed 34.1%/65.9% cost-sharing methodology based on the relative benefits conferred upon each pipeline system by the proposed interconnection.
(f) ALJ Appointment and Prehearing Conference. On November 14, 2022, the Chief Administrative Law Judge appointed the Honorable Clara Whitfield as Presiding Judge for the hearing phase of the proceedings. ALJ Whitfield held a prehearing conference on the same date, establishing a procedural schedule for the submission of prefiled testimony and exhibits, the conduct of cross-examination, and the filing of initial and reply briefs.
(g) Direct Testimony. The Borrower filed its direct testimony and supporting exhibits on December 5, 2022. The Borrower's case-in-chief consisted of the prefiled testimony of seven (7) witnesses addressing rate design, cost of service, return on equity, interconnection engineering and cost allocation, operations and system capacity, depreciation, and tariff terms and conditions.
(h) Answering Testimony. ATPC, MGPC, and CMGA each filed answering testimony on January 9, 2023, presenting their respective positions on the rate design, return on equity, load factor assumptions, interconnection cost allocation, and tariff provisions proposed by the Borrower.
(i) Deficiency Letter. On January 19, 2023, the FERC Office of Energy Market Regulation ("OEMR") issued a Deficiency Letter addressed to the Borrower identifying fourteen (14) separate deficiencies in the Borrower's tariff filing, each requiring substantive correction or comprehensive tariff redesign. The nature of the deficiencies identified in the Deficiency Letter is described in greater detail in Section 6 of this Certificate.
(j) Stay of Procedural Schedule. On February 6, 2023, ALJ Whitfield issued an order staying the procedural schedule pending the Borrower's response to the Deficiency Letter and the resolution of the deficiency items identified therein.
(k) Partial Response to Deficiency Letter. On March 15, 2023, the Borrower filed a partial response to the Deficiency Letter, addressing eight (8) of the fourteen (14) deficiency items. The remaining six (6) items required more comprehensive analysis and tariff redesign efforts, as described in Section 6 of this Certificate.
3.2. Extensions of Time
Since the filing of the partial response to the Deficiency Letter, the Borrower has requested and received three (3) extensions of time within which to complete its response to the remaining deficiency items and file its redesigned tariff and supplemental testimony:
(a) First Extension. On April 28, 2023, the Borrower requested an extension of one hundred twenty (120) days. By order dated May 10, 2023, ALJ Whitfield granted the requested extension, establishing a new filing deadline of August 28, 2023. The extension request was supported by a showing that the Borrower had engaged tariff redesign consultants and required additional time to develop revised rate design methodologies and tariff provisions responsive to the deficiency items.
(b) Second Extension. On August 25, 2023, the Borrower requested a further extension of one hundred eighty (180) days. By order dated September 8, 2023, ALJ Whitfield granted the requested extension, establishing a new filing deadline of February 23, 2024. In the same order, ALJ Whitfield designated the proceeding status as "dormant" pursuant to 18 C.F.R. § 385.710, reflecting the extended pendency of the tariff redesign process. The extension request was supported by FERC Trial Staff, which did not oppose the additional time.
(c) Third Extension. On February 20, 2024, the Borrower requested a further extension of twelve (12) months. By order dated March 4, 2024, ALJ Whitfield granted the requested extension with conditions, establishing a new filing deadline of February 21, 2025. The conditions imposed by the ALJ required the Borrower to file quarterly status reports with the presiding judge and all parties, at intervals of approximately ninety (90) days, reporting on the progress of the tariff redesign and the Borrower's anticipated timeline for completion.
3.3. Current Proceeding Status
As of the date of this Certificate, the FERC proceedings in Docket Nos. RP22-847-000 and RP22-847-001 remain in "dormant" status pending the Borrower's filing of the redesigned Ridgeline FERC Gas Tariff, Original Volume No. 1, and supplemental prefiled testimony addressing the deficiency items identified in the OEMR Deficiency Letter.
The current filing deadline is February 21, 2025.
In compliance with the conditions imposed by ALJ Whitfield's March 4, 2024 order, the Borrower has filed the following quarterly status reports:
(i) First Quarterly Status Report — filed June 15, 2024;
(ii) Second Quarterly Status Report — filed September 14, 2024; and
(iii) Third Quarterly Status Report — filed December 13, 2024.
Each quarterly status report has been served on all parties to the proceeding and filed with the FERC Secretary's Office. No party has filed any objection or response to any quarterly status report to date.
The tariff redesign effort is being conducted in coordination with Braswell Energy Consulting Group LLC ("BECG") (engagement number BEC-2023-0041), an independent energy regulatory consulting firm engaged by the Borrower effective April 15, 2023. The lead consultant on the BECG engagement is Dr. Raymond Braswell, a former FERC economist with extensive experience in natural gas pipeline rate design and cost-of-service methodology. The BECG engagement encompasses the development of revised rate design methodologies, updated cost-of-service analyses, load factor studies, and the preparation of revised tariff language addressing the remaining deficiency items.
3.4. Settlement Status
Settlement efforts in the FERC proceedings have been ongoing under the supervision of Settlement Judge Margolis. To date, four (4) settlement conferences have been held:
(i) First Settlement Conference — November 30, 2022;
(ii) Second Settlement Conference — March 8, 2023;
(iii) Third Settlement Conference — July 12, 2023; and
(iv) Fourth Settlement Conference — January 18, 2024.
Despite the good-faith participation of all parties, no settlement has been reached. The parties remain approximately $0.058 per dekatherm apart on the proposed recourse transportation rate. The principal issues on which the parties have been unable to reach agreement are the following:
(a) Return on Equity ("ROE"). The parties have taken divergent positions on the appropriate ROE for the Borrower. ATPC has proposed an ROE of 10.75%, the Mountainside Gas Producers Coalition has proposed an ROE of 11.25%, and the Borrower proposes an ROE of 12.50% (revised downward from the originally filed ROE of 14.00%, as described in Section 5 of this Certificate). The spread between the lowest and highest ROE proposals is 175 basis points.
(b) Interconnection Cost Allocation. ATPC insists upon a 50/50 allocation of the total interconnection facilities cost of $22.3 million, which would require each party to bear $11.15 million of the total cost. The Borrower maintains that a 34.1%/65.9% allocation is appropriate, which would allocate $7.6 million to the Borrower and $14.7 million to ATPC, based on an analysis of the relative benefits conferred upon each pipeline system by the proposed interconnection and consistent with FERC cost causation principles.
(c) Load Factor. The intervenors (MGPC and CMGA) advocate the use of a load factor of 85% or higher for purposes of deriving billing determinants and calculating the unit recourse rate, arguing that a higher load factor more accurately reflects expected utilization patterns and results in a lower per-unit rate for shippers. The Borrower proposes a load factor of 75%, which it maintains is more reflective of reasonably anticipated throughput levels given the Ridgeline Pipeline System's current utilization rate of approximately 56.7% and projected ramp-up scenarios.
The Borrower expects that settlement discussions may resume following the filing of the redesigned tariff and supplemental testimony, at which time the parties will have the benefit of the Borrower's revised rate parameters and updated cost-of-service analysis.
SECTION 4: SUMMARY OF ORIGINALLY FILED RATE PARAMETERS
The following is a summary of the rate parameters as originally filed in the Borrower's May 12, 2022 application in Docket No. RP22-847-000:
Total Rate Base (as filed): $612,400,000
• Net plant in service: $563,710,000 (original construction cost of $587,200,000 less accumulated depreciation of $23,490,000 as of the test period)
• Working capital allowance: $18,640,000
• Accumulated deferred income taxes ("ADIT"): ($12,450,000)
• Other rate base items (including materials and supplies, prepayments, and gas held in storage): $42,500,000
Proposed Return on Equity (as originally filed): 14.00%
Capital Structure: 55.0% equity / 45.0% debt
Cost of Debt: 5.25%, representing the weighted average cost of (i) the Term Loan under the Credit Agreement, bearing interest at SOFR plus 325 basis points, and (ii) One Hundred Fifty Million Dollars ($150,000,000) in aggregate principal amount of 7.875% Second Lien Senior Secured Notes due 2030 (the "Second Lien Notes"), privately placed on September 22, 2021, with Harborview Capital Management LLC and Sentinel Ridge Fund LP.
Weighted Average Cost of Capital ("WACC") (as originally filed): 10.0625%, calculated as follows: (0.55 × 14.00%) + (0.45 × 5.25%) = 10.0625%.
Return on Rate Base (as originally filed): $61,620,000 ($612,400,000 × 10.0625%)
Total Cost of Service (as originally filed): $97,360,000
Billing Determinants (as originally filed): 438,000,000 Dth/yr, based on the system design capacity of 1,200,000 Dth/d at a 100% load factor (1,200,000 Dth/d × 365 days).
Proposed Recourse Rate (as originally filed): $0.2265/Dth, comprising a reservation rate of $0.2223/Dth and a usage rate of $0.0042/Dth.
SECTION 5: SUMMARY OF REVISED (REDESIGNED) RATE PARAMETERS
As part of the ongoing tariff redesign being conducted in coordination with Braswell Energy Consulting Group LLC, the Borrower has developed revised rate parameters that will be reflected in the redesigned Ridgeline FERC Gas Tariff, Original Volume No. 1, to be filed with FERC by the February 21, 2025 deadline. The following summarizes the revised rate parameters based on the near-final fourth draft of the redesigned tariff completed as of November 2024:
Revised Return on Equity: 12.50%, reflecting an updated discounted cash flow ("DCF") proxy group analysis conducted as of the third quarter of 2024, incorporating current market conditions and updated financial data for the proxy group of comparable natural gas transmission pipeline companies.
Revised Weighted Average Cost of Capital: 9.2375%, calculated as follows: (0.55 × 12.50%) + (0.45 × 5.25%) = 9.2375%.
Revised Return on Rate Base: $56,570,000, calculated as $612,400,000 × 9.2375%.
Rate Base: Unchanged at $612,400,000. The Borrower has not proposed any changes to the composition or total amount of rate base in the redesigned tariff.
Revised Operating and Maintenance ("O&M") Expense: $13,920,000, reflecting updated cost data and adjustments to test-period O&M expenses based on actual operating experience since the system's October 2021 in-service date.
Revised Administrative and General ("A&G") Expense: $5,140,000, reflecting updated cost data and revised allocations of shared corporate expenses between the Borrower and its affiliates.
Depreciation Expense: Unchanged at $14,680,000, based on an annual straight-line depreciation rate of 2.5% applied to depreciable plant in service.
Taxes Other Than Income: Unchanged at $3,800,000, reflecting ad valorem, property, and other non-income taxes applicable to the Ridgeline Pipeline System.
Revised Income Tax Allowance: $15,040,000, reflecting the lower pre-tax income resulting from the reduced ROE and updated income tax computations.
Revised Revenue Credits: ($6,000,000), reflecting a revised treatment of interruptible transportation revenues and other ancillary service revenues as credits against the cost of service. The reduction in revenue credits from the originally filed amount of ($16,100,000) reflects the Borrower's revised methodology for crediting such revenues, which is consistent with current FERC policy on the treatment of interruptible service revenues.
Revised Total Cost of Service: $103,150,000.
Modified Rate Design Methodology: The redesigned tariff employs a modified fixed-variable rate design methodology, with demand (reservation) and commodity (usage) rate components derived based on a 75% load factor assumption, as compared to the 100% load factor originally utilized.
Revised Billing Determinants: 328,500,000 Dth/yr, calculated as 1,200,000 Dth/d × 365 days × 75% load factor.
Revised Proposed Recourse Rate: $0.3140/Dth, comprising a reservation rate of $0.3102/Dth and a usage rate of $0.0038/Dth.
The undersigned notes that the revised per-unit recourse rate is higher than the originally filed rate, notwithstanding the reduction in ROE from 14.00% to 12.50%. This increase is attributable primarily to the change in the load factor assumption from 100% to 75%, which reduces the denominator (billing determinants) over which the total cost of service is recovered, as well as the significant reduction in revenue credits and modest increases in O&M and A&G expenses. The net effect of these changes is a higher per-unit rate despite the lower overall return on equity.
A detailed comparison of the originally filed and revised rate parameters is set forth in Exhibit B attached hereto.
SECTION 6: DEFICIENCY LETTER STATUS
6.1. Overview. On January 19, 2023, the FERC Office of Energy Market Regulation issued a Deficiency Letter addressed to the Borrower (the "Deficiency Letter") identifying fourteen (14) specific deficiencies in the Borrower's tariff filing. The Deficiency Letter required the Borrower to address each identified deficiency through amended or supplemental filings with the Commission.
6.2. Items Addressed
Eight (8) of the fourteen (14) deficiency items were addressed in the Borrower's partial response filed on March 15, 2023. The items addressed in the partial response are as follows:
(i) ROE support — supplemental DCF analysis and proxy group documentation;
(ii) FL&U (fuel, lost, and unaccounted-for gas) tracker mechanism — revised tariff provisions establishing a periodic tracker mechanism for the recovery of FL&U volumes;
(iii) IT (interruptible transportation) rate derivation — revised methodology for the derivation of the interruptible transportation rate from the firm transportation cost of service;
(iv) Load factor support — supplemental data and analysis supporting the Borrower's proposed load factor assumption;
(v) Electronic Bulletin Board ("EBB") posting requirements — revised tariff provisions addressing the posting of capacity information, transaction data, and index of customers on the Borrower's EBB in compliance with 18 C.F.R. § 284.13;
(vi) Shipper-must-have-title provisions — revised tariff provisions implementing FERC's shipper-must-have-title policy for gas tendered for transportation, consistent with Order No. 712;
(vii) Interconnection agreement as rate schedule — acknowledgment that the Borrower will file the negotiated interconnection agreement with ATPC as a rate schedule subject to FERC review and approval (responsive to Deficiency Item 9); and
(viii) Penalty revenue crediting mechanism — revised tariff provisions establishing a mechanism for the crediting of scheduling and imbalance penalty revenues to non-offending shippers, consistent with FERC policy.
6.3. Remaining Items
Six (6) deficiency items remain outstanding and are being addressed through the comprehensive tariff redesign being conducted with the assistance of Braswell Energy Consulting Group LLC. These remaining items are as follows:
(i) Capacity release provisions — The redesigned tariff will include comprehensive provisions governing the release of firm capacity by releasing shippers, including prearranged deals, bid floors, recall and reput rights, and the treatment of capacity released at less than the maximum rate, in compliance with 18 C.F.R. § 284.8 and applicable Commission orders;
(ii) NAESB standards compliance — The redesigned tariff will incorporate all applicable standards promulgated by the North American Energy Standards Board ("NAESB"), including Wholesale Gas Quadrant ("WGQ") standards for nominations, scheduling, flowing gas, invoicing, and capacity release, as required by Order No. 587 and subsequent orders in the Order No. 587 series;
(iii) Creditworthiness provisions — The redesigned tariff will include detailed creditworthiness provisions establishing criteria for the evaluation of shipper creditworthiness, acceptable forms of financial assurance, and procedures for requesting and posting collateral, consistent with FERC policy on creditworthiness standards for interstate pipelines;
(iv) Segmentation and flexible receipt/delivery point provisions — The redesigned tariff will address the segmentation of firm capacity and the designation of alternate and flexible receipt and delivery points, including provisions governing the rights of shippers to utilize capacity at points other than the primary receipt and delivery points specified in their service agreements;
(v) Greenhouse gas emission cost recovery provisions — The redesigned tariff will address the recovery of costs incurred by the Borrower in connection with federal, state, or local requirements for the monitoring, reporting, mitigation, or offsetting of greenhouse gas emissions associated with the operation of the Ridgeline Pipeline System, including any carbon fees, emission allowance costs, or compliance costs imposed under applicable law; and
(vi) Order No. 2222 distributed energy resource aggregation implications — The redesigned tariff will address the potential implications of FERC Order No. 2222 regarding the participation of distributed energy resource aggregations in wholesale energy markets and the interaction of such participation with the Borrower's transportation services, to the extent applicable to the Borrower's operations as a natural gas pipeline.
6.4. Status of Tariff Redesign
The tariff redesign is on track for completion and filing by the February 21, 2025 deadline. A near-final fourth draft of the redesigned Ridgeline FERC Gas Tariff, Original Volume No. 1, was completed in November 2024 and is currently undergoing final review by Calderwood & Harkness LLP and Braswell Energy Consulting Group LLC. The Borrower anticipates that the filing will include the redesigned tariff, supplemental prefiled testimony from updated witnesses, revised workpapers, and a comprehensive narrative response to each of the six remaining deficiency items.
SECTION 7: INTERCONNECTION STATUS
7.1. Proposed Interconnection
The Borrower has proposed a physical interconnection between the Ridgeline Pipeline System and the existing interstate pipeline facilities of ATPC. The proposed interconnection is located at the Wetzel County Interconnect, at milepost 0.0 of the Ridgeline Pipeline System, tying into ATPC's 30-inch-diameter mainline pipeline at ATPC Milepost 412.6. The interconnection facilities will include a new meter station and pig launcher/receiver facilities at the interconnect point.
7.2. Interconnection Facilities and Costs
The estimated total cost of the interconnection facilities (including the meter station, pig launcher/receiver, appurtenant piping, valves, controls, and associated civil and structural works) is Twenty-Two Million Three Hundred Thousand Dollars ($22,300,000).
The Borrower proposes the following allocation of interconnection facilities costs, based on a relative-benefits analysis consistent with FERC cost causation principles:
• Ridgeline's proposed share: $7,600,000 (34.1%)
• ATPC's proposed share: $14,700,000 (65.9%)
ATPC counter-proposes a 50/50 split of the total interconnection facilities cost, which would allocate Eleven Million One Hundred Fifty Thousand Dollars ($11,150,000) to each party. This cost allocation dispute remains one of the principal unresolved issues in the settlement discussions, as described in Section 3.4 of this Certificate.
7.3. Metering and SCADA
The metering equipment to be installed at the Wetzel County Interconnect will consist of ultrasonic flow meters configured in three (3) parallel meter runs, each utilizing 12-inch-diameter metering tubes, together with gas chromatographs for gas quality analysis and SCADA (Supervisory Control and Data Acquisition) system integration for remote monitoring, data collection, and operational control.
7.4. Design Capacity
The design capacity of the interconnection facilities at the Wetzel County Interconnect is approximately 800 MMcf/d bidirectional, expandable to 1.2 Bcf/d through the addition of supplemental meter runs and piping modifications.
7.5. Schedule. The original target in-service date for the interconnection facilities was the fourth quarter of 2023. The construction and commissioning of the interconnection facilities have been delayed pending resolution of the FERC proceedings, including the cost allocation dispute with ATPC and the completion of the tariff redesign.
7.6. Interconnection Agreement
The terms and conditions of the interconnection are being negotiated between Calderwood & Harkness LLP, on behalf of the Borrower, and Kellner, Royce & Dillard LLP, on behalf of ATPC. Consistent with Deficiency Item 9 of the OEMR Deficiency Letter, the interconnection agreement is being revised and will be filed with FERC as a rate schedule forming a part of the Ridgeline FERC Gas Tariff, Original Volume No. 1, subject to FERC review and approval.
SECTION 8: CERTIFICATIONS
The undersigned hereby makes the following certifications on behalf of the Borrower, in each case as of the date of this Certificate:
8.1. Regulatory Covenant Compliance
The undersigned hereby certifies that, as of the date of this Certificate, the Borrower is in compliance in all material respects with all Regulatory Covenants set forth in the Credit Agreement, including, without limitation, the following:
(a) The Borrower has maintained in effect, and has not withdrawn, dismissed, or abandoned, its application for FERC tariff approval and interconnection authorization pending in Docket Nos. RP22-847-000 and RP22-847-001. The Borrower continues to prosecute such application in good faith and with due diligence, consistent with the requirements of the Credit Agreement.
(b) The Borrower has timely complied with all orders, directives, and requirements of FERC and the presiding Administrative Law Judge in the pending proceedings, including, without limitation, (i) the filing of quarterly status reports as required by the ALJ's March 4, 2024 order, (ii) the filing of a partial response addressing eight (8) of the fourteen (14) deficiency items identified in the OEMR Deficiency Letter dated January 19, 2023, and (iii) all procedural and substantive filings required by the ALJ's orders and the Commission's regulations.
(c) The Borrower has not received any notice, order, or communication from FERC or any other federal or state regulatory authority indicating the revocation, suspension, or termination of the Borrower's operating authority for the Ridgeline Pipeline System, including the Borrower's blanket transportation certificate under Part 284, Subpart G of the Commission's regulations.
(d) No Material Adverse Regulatory Event (as defined in Section 1.01 of the Credit Agreement) has occurred with respect to the FERC proceedings or the Borrower's regulatory authorizations, permits, or licenses. For the avoidance of doubt, the dormant status of the FERC proceedings and the extensions of time granted by ALJ Whitfield do not constitute a Material Adverse Regulatory Event, as such extensions were requested by the Borrower in the ordinary course of the regulatory proceeding and were granted with the express or tacit consent of the parties and FERC Trial Staff.
(e) The Borrower continues to operate the Ridgeline Pipeline System in compliance with all applicable federal and state regulations, including, without limitation, the Natural Gas Act, the Natural Gas Policy Act of 1978, the Pipeline Safety Improvement Act of 2002, and the regulations of FERC, the Pipeline and Hazardous Materials Safety Administration ("PHMSA"), and applicable state public utility commissions, pending the final outcome of the rate proceeding.
8.2. No Default
The undersigned hereby certifies that, as of the date of this Certificate, no Default or Event of Default (each as defined in the Credit Agreement) has occurred and is continuing under the Credit Agreement, including, without limitation, no Default or Event of Default arising from or related to (i) the status of the FERC proceedings in Docket Nos. RP22-847-000 and RP22-847-001, (ii) the dormant status of such proceedings, (iii) the extensions of time granted by ALJ Whitfield, (iv) the deficiency items identified in the OEMR Deficiency Letter, or (v) any other regulatory matter described in this Certificate.
8.3. Anticipated Milestones
The undersigned hereby identifies the following as the next material regulatory milestone in the FERC proceedings:
February 21, 2025 — Filing of the redesigned Ridgeline FERC Gas Tariff, Original Volume No. 1, together with supplemental prefiled testimony and exhibits, revised workpapers, and a comprehensive response to the six (6) remaining deficiency items identified in the OEMR Deficiency Letter.
The Borrower, through its outside counsel, Calderwood & Harkness LLP, and its tariff redesign consultant, Braswell Energy Consulting Group LLC, is on track to meet this filing deadline. As noted in Section 6.4 of this Certificate, a near-final fourth draft of the redesigned tariff was completed in November 2024 and is undergoing final review.
Upon the filing of the redesigned tariff and supplemental testimony, the Borrower anticipates that ALJ Whitfield will issue an order lifting the stay of the procedural schedule and reactivating the Track II hearing schedule, including the establishment of revised deadlines for answering testimony, rebuttal testimony, cross-examination hearings, and briefing. The Borrower will promptly notify the Administrative Agent and the Lenders of any such order and will continue to deliver quarterly certifications as required by the Credit Agreement.
8.4. Material Changes
The undersigned hereby certifies that there have been no material changes to the Ridgeline Pipeline System, its operations, or the FERC proceedings since the last officer's certificate or regulatory compliance notification delivered by the Borrower to the Administrative Agent under the Credit Agreement, except as expressly described in this Certificate. The matters described in this Certificate that constitute changes from prior certifications are specifically:
(a) The ongoing tariff redesign, resulting in the revised rate parameters described in Section 5 of this Certificate, including the reduction of the proposed ROE from 14.00% to 12.50%, the change in load factor from 100% to 75%, and the resulting increase in the proposed per-unit recourse rate from $0.2265/Dth to $0.3140/Dth; and
(b) The continued dormant status of the FERC proceedings and the filing of the third quarterly status report on December 13, 2024, in compliance with the ALJ's March 4, 2024 order.
No other material changes have occurred.
SECTION 9: FINANCING CONTEXT
The undersigned provides the following information regarding the Borrower's financing structure, for the purpose of contextualizing the FERC proceedings and their relevance to the Borrower's financial covenants and obligations under the Credit Agreement:
Second Lien Notes. The Borrower has outstanding One Hundred Fifty Million Dollars ($150,000,000) in aggregate principal amount of 7.875% Second Lien Senior Secured Notes due 2030 (the "Second Lien Notes"), issued on September 22, 2021, pursuant to that certain Note Purchase Agreement of even date (the "Second Lien Note Purchase Agreement"). The Second Lien Notes were privately placed with the following investors:
• Harborview Capital Management LLC, 450 Park Avenue, 18th Floor, New York, New York 10022 (contact: Samantha Hu, Portfolio Manager); and
• Sentinel Ridge Fund LP, 301 Commerce Street, Suite 2200, Fort Worth, Texas 76102 (contact: Peter Nowicki, Managing Partner).
Relevance of FERC Tariff Approval. The status of FERC tariff approval is relevant to certain financial covenant calculations under both the Credit Agreement and the Second Lien Note Purchase Agreement. In particular, the determination of "Permitted Revenue" and "Projected Revenue" (each as defined in the Credit Agreement) for purposes of the Leverage Ratio and Debt Service Coverage Ratio covenants may be affected by the level of the approved tariff rate and the assumed load factor underlying the rate design. The Borrower acknowledges the significance of the timely resolution of the FERC proceedings to the ongoing satisfaction of these financial covenants.
DEH Equity Contribution. The original construction of the Ridgeline Pipeline System was financed through a combination of the Credit Facility, the Second Lien Notes, and an equity contribution from DEH. DEH's equity contribution to the project was approximately Thirty-Seven Million Two Hundred Thousand Dollars ($37,200,000), representing the difference between the total construction cost of $587,200,000 and the aggregate debt financing of $550,000,000 (i.e., the $400,000,000 Term Loan plus the $150,000,000 Second Lien Notes).
DEH Financial Profile. DEH reported annual consolidated revenue of approximately Four Hundred Eighty-Five Million Dollars ($485,000,000) for the fiscal year ended December 31, 2023. The estimated enterprise value of DEH is approximately Two Billion Eight Hundred Million Dollars ($2,800,000,000), based on an internal valuation prepared as of December 31, 2023. Patricia Dunmore is the Founder, Chairperson, and 72% controlling shareholder of DEH.
SECTION 10: REPRESENTATIONS AND WARRANTIES
The undersigned hereby represents and warrants, on behalf of the Borrower, as follows:
10.1. All representations and warranties made by the Borrower in the Credit Agreement, including those set forth in Article V thereof, are true and correct in all material respects as of the date of this Certificate (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty was true and correct in all material respects as of such earlier date).