10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number 1-7414

NORTHWEST PIPELINE LLC

(Exact name of registrant as specified in its charter)

DELAWARE	26-1157701
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
295 Chipeta Way Salt Lake City, Utah	84108
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (801) 583-8800

NO CHANGE

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	þ  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (H)(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.

NORTHWEST PIPELINE LLC

FORM 10-Q

INDEX

	Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements -
Statement of Comprehensive Income — Three and Nine Months Ended September 30, 2016 and 2015	1
Balance Sheet — September 30, 2016 and December 31, 2015	2
Statement of Cash Flows — Nine Months Ended September 30, 2016 and 2015	4
Notes to Financial Statements	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 4. Controls and Procedures	10
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings	11
Item 1A. Risk Factors	11
Item 6. Exhibits	12

Forward-Looking Statements

The reports, filings, and other public announcements of Northwest Pipeline LLC, may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions, and other matters.

All statements, other than statements of historical facts, included in this report that address activities, events, or developments that we expect, believe, or anticipate will exist or may occur in the future are forward-looking statements. Forward-looking statements can be identified by various forms of words or phrases such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “assumes,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “guidance,” “outlook,” “in service date,” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

• Amounts and nature of future capital expenditures;

• Expansion of our business and operations;

• Financial condition and liquidity;

• Business strategy;

• Cash flow from operations or results of operations;

• Rate case filings;

• Natural gas prices, supply, and demand; and

• Demand for our services.

Forward-looking statements are based on numerous assumptions, uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results

i

are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:

• Availability of supplies and market demand;

• Volatility of pricing including the effect of lower than anticipated energy commodity prices and margins;

• Inflation, interest rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);

• The strength and financial resources of our competitors and the effects of competition;

• Whether we are able to successfully identify, evaluate, and timely execute our capital projects and other investment opportunities in accordance with our forecasted capital expenditures budget;

• Our ability to successfully expand our facilities and operations;

• Development of alternative energy sources;

• Availability of adequate insurance coverage and the impact of operational and developmental hazards and unforeseen interruptions;

• The impact of existing and future laws, regulations, the regulatory environment, environmental liabilities, and litigation as well as our ability to obtain permits and achieve favorable rate proceeding outcomes;

• Our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;

• Changes in maintenance and construction costs;

• Changes in the current geopolitical situation;

• Our exposure to the credit risks of our customers and counterparties;

• Risks related to financing, including restrictions stemming from our debt agreements, future changes in our credit ratings, and the availability and cost of capital;

• Risks associated with weather and natural phenomena, including climate conditions and physical damage to our facilities;

• Acts of terrorism, including cybersecurity threats and related disruptions; and

• Additional risks described in our filings with the Securities and Exchange Commission (SEC).

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.

Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2015 and in Part II, Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

NORTHWEST PIPELINE LLC

STATEMENT OF COMPREHENSIVE INCOME

(Thousands of Dollars)

(Unaudited)

	Three months ended   September 30,						Nine months ended   September 30,
	2016			2015			2016			2015
OPERATING REVENUES	$	116,897		$	116,933		$	352,914		$	352,143
OPERATING EXPENSES:
General and administrative	12,337			13,714			39,202			42,913
Operation and maintenance	20,218			19,160			58,701			54,477
Depreciation	25,421			25,190			76,150			75,349
Regulatory debits	873			574			2,593			1,758
Taxes, other than income taxes	4,692			3,995			13,356			12,907
Total operating expenses	63,541			62,633			190,002			187,404
OPERATING INCOME	53,356			54,300			162,912			164,739
OTHER (INCOME) AND OTHER EXPENSES:
Interest expense	8,376			11,506			30,805			34,525
Allowance for equity and borrowed funds used during construction	(454		)	(556		)	(1,079		)	(1,027		)
Miscellaneous other (income) expenses, net	176			40			845			(586		)
Total other (income) and other expenses	8,098			10,990			30,571			32,912
NET INCOME	45,258			43,310			132,341			131,827
CASH FLOW HEDGES:
Amortization of cash flow hedges into Interest expense	—			(15		)	(28		)	(46		)
COMPREHENSIVE INCOME	$	45,258		$	43,295		$	132,313		$	131,781

See accompanying notes.

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NORTHWEST PIPELINE LLC

BALANCE SHEET

(Thousands of Dollars)

(Unaudited)

	September 30, 2016		December 31, 2015
ASSETS
CURRENT ASSETS:
Cash	$	—	$	169
Receivables:
Trade	39,289		42,669
Affiliated companies	1,665		1,441
Advances to affiliate	51,741		171,867
Other	8,061		14,051
Materials and supplies	10,126		10,183
Exchange gas due from others	2,846		3,733
Exchange gas offset	—		201
Prepayments and other	5,519		6,164
Total current assets	119,247		250,478
PROPERTY, PLANT AND EQUIPMENT, at cost	3,320,314		3,306,205
Less-Accumulated depreciation	1,427,012		1,367,632
Total property, plant and equipment, net	1,893,302		1,938,573
OTHER ASSETS:
Deferred charges	1,826		2,110
Regulatory assets	36,187		40,853
Total other assets	38,013		42,963
Total assets	$	2,050,562	$	2,232,014

See accompanying notes.

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NORTHWEST PIPELINE LLC

BALANCE SHEET

(Thousands of Dollars)

(Unaudited)

	September 30, 2016		December 31, 2015
LIABILITIES AND OWNER’S EQUITY
CURRENT LIABILITIES:
Payables:
Trade	$	17,972	$	14,363
Affiliated companies	4,627		11,959
Accrued liabilities:
Taxes, other than income taxes	16,874		11,033
Interest	11,548		4,045
Exchange gas due to others	3,064		2,252
Exchange gas offset	709		—
Customer advances	1,930		5,573
Other	5,109		3,417
Long-term debt due within one year	184,858		174,837
Total current liabilities	246,691		227,479
LONG-TERM DEBT	334,158		518,583
OTHER NONCURRENT LIABILITIES:
Asset retirement obligations	60,927		82,454
Regulatory liabilities	29,640		26,802
Other	7,245		6,108
Total other noncurrent liabilities	97,812		115,364
CONTINGENT LIABILITIES AND COMMITMENTS (Note 2)
OWNER’S EQUITY:
Owner’s capital	1,073,892		1,073,892
Retained earnings	298,009		296,668
Accumulated other comprehensive income	—		28
Total owner’s equity	1,371,901		1,370,588
Total liabilities and owner’s equity	$	2,050,562	$	2,232,014

See accompanying notes.

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NORTHWEST PIPELINE LLC

STATEMENT OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Nine months ended September 30,
	2016			2015
OPERATING ACTIVITIES:
Net income	$	132,341		$	131,827
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	76,150			75,349
Regulatory debits	2,593			1,758
Amortization of deferred charges and credits	910			440
Allowance for equity funds used during construction	(749		)	(697		)
Changes in current assets and liabilities:
Trade and other accounts receivable	4,632			1,745
Affiliated receivables	(224		)	546
Exchange gas due from others	(594		)	7,693
Materials and supplies	57			(148		)
Other current assets	645			(1,628		)
Trade accounts payable	394			(304		)
Affiliated payables	(7,332		)	(4,401		)
Exchange gas due to others	594			(7,680		)
Other accrued liabilities	11,246			19,545
Changes in noncurrent assets and liabilities:
Deferred charges	(5,024		)	(3,446		)
Noncurrent liabilities	9,269			8,610
Net cash provided by operating activities	224,908			229,209
FINANCING ACTIVITIES:
Payments of long-term debt	(175,000		)	—
Cash distributions to parent	(131,000		)	(129,000		)
Other	—			(338		)
Net cash used in financing activities	(306,000		)	(129,338		)
INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures, net of equity AFUDC*	(51,115		)	(50,599		)
Contributions and advances for construction costs	1,134			1,323
Disposal of property, plant and equipment, net	570			1,695
Advances to affiliates, net	120,126			(52,304		)
Proceeds from insurance	10,208			—
Net cash provided by (used in) investing activities	80,923			(99,885		)
NET INCREASE (DECREASE) IN CASH	(169		)	(14		)
CASH AT BEGINNING OF PERIOD	169			154
CASH AT END OF PERIOD	$	—		$	140
____________________________________
* Increases to property, plant and equipment	$	(48,188	)	$	(58,980	)
Changes in related accounts receivable, accounts payable, and accrued liabilities	(2,927		)	8,381
Capital expenditures, net of equity AFUDC	$	(51,115	)	$	(50,599	)

See accompanying notes.

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NORTHWEST PIPELINE LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Northwest Pipeline LLC (Northwest) is indirectly owned by Williams Partners L.P. (WPZ), a publicly traded Delaware limited partnership, which is consolidated by The Williams Companies, Inc. (Williams). On February 2, 2015, WPZ was merged into Access Midstream Partners, L.P. (ACMP), another publicly traded limited partnership consolidated by Williams. ACMP was the surviving partnership and was subsequently renamed WPZ. At September 30, 2016, Williams holds an approximate 60 percent interest in WPZ, comprised of an approximate 58 percent limited partner interest and all of the 2 percent general partner interest.

On September 28, 2015, Williams publicly announced in a press release that it had entered into an Agreement and Plan of Merger (Merger Agreement) with Energy Transfer Equity, L.P. (Energy Transfer) and certain of its affiliates. The Merger Agreement provided that, subject to the satisfaction of customary closing conditions, Williams would be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger), with ETC surviving the ETC Merger. Energy Transfer formed ETC as a limited partnership that would be treated as a corporation for U.S. federal income tax purposes. Immediately following the completion of the ETC Merger, ETC would contribute to Energy Transfer all of the assets and liabilities of Williams in exchange for the issuance by Energy Transfer to ETC of a number of Energy Transfer Class E common units equal to the number of ETC common shares issued to Williams stockholders in the ETC Merger.

On June 29, 2016, Energy Transfer provided Williams written notice terminating the Merger Agreement, citing the alleged failure of certain conditions under the Merger Agreement.

In this report, Northwest is at times referred to in the first person as “we,” “us,” or “our.”

General

The accompanying interim financial statements do not include all the notes in our annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto in our 2015 Annual Report on Form 10-K. The accompanying unaudited financial statements include all adjustments both normal recurring and others which, in the opinion of our management, are necessary to present fairly our interim financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Accounting Standards Issued But Not Yet Adopted

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15 "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" (ASU 2016-15). ASU 2016-15 provides specific guidance on eight cash flow classification issues, including debt prepayment or debt extinguishment costs and distributions received from equity method investees, to reduce diversity in practice. The new standard is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The new standard requires a retrospective transition. We are evaluating the impact of the new standard on our financial statements.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. The new standard is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The new standard requires varying transition methods for the different categories of amendments. We are evaluating the impact of the new standard on our financial statements.

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)" (ASU 2016-02). ASU 2016-02 establishes a comprehensive new lease accounting model. The new standard clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset. The new standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases

5

NORTHWEST PIPELINE LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. We are evaluating the impact of the new standard on our financial statements.

In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (ASC) Topic 606, "Revenue from Contracts with Customers" (ASC 606). ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. In August 2015, the FASB issued ASU 2015-14 "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date" (ASU 2015-14). Per ASU 2015-14, the standard is effective for interim and annual reporting periods beginning after December 15, 2017. ASC 606 allows either full retrospective or modified retrospective transition and early adoption is permitted for annual periods beginning after December 15, 2016. We continue to evaluate both the impact of this new standard on our financial statements and the transition method we will utilize for adoption.

2. CONTINGENT LIABILITIES AND COMMITMENTS

Environmental Matters

We are subject to the National Environmental Policy Act and other federal and state legislation regulating the environmental aspects of our business. Except as discussed below, our management believes that we are in substantial compliance with existing environmental requirements. Environmental expenditures are expensed or capitalized depending on their future economic benefit and potential for rate recovery. We believe that, with respect to any expenditures required to meet applicable standards and regulations, the Federal Energy Regulatory Commission (FERC) would grant the requisite rate relief so that substantially all of such expenditures would be permitted to be recovered through rates.

Beginning in the mid-1980s, we evaluated many of our facilities for the presence of toxic and hazardous substances to determine to what extent, if any, remediation might be necessary. We identified polychlorinated biphenyl (PCB) contamination in air compressor systems, soils, and related properties at certain compressor station sites. Similarly, we identified hydrocarbon impacts at these facilities due to the former use of earthen pits, lubricating oil leaks or spills, and excess pipe coating released to the environment. In addition, heavy metals have been identified at these sites due to the former use of mercury containing meters and paint and welding rods containing lead, cadmium, and arsenic. The PCBs were remediated pursuant to a Consent Decree with the U.S. Environmental Protection Agency (EPA) in the late 1980s, and we conducted a voluntary clean-up of the hydrocarbon and mercury impacts in the early 1990s. In 2005, the Washington Department of Ecology required us to re-evaluate our previous clean-ups in Washington. During 2006 to 2015, 129 meter stations were evaluated, of which 82 required remediation. As of September 30, 2016, all of the meter stations have been remediated. Initial assessments have been completed at all thirteen compressor stations in Washington. Additional assessments are ongoing at three of these compressor stations. Remediation has been completed at ten of the thirteen compressor stations. On the basis of the findings to date, we estimate that environmental assessment and remediation costs will total approximately $4.7 million, measured on an undiscounted basis, and are expected to be incurred through 2020. At September 30, 2016 and December 31, 2015, we had accrued liabilities totaling approximately $4.7 million and $4.6 million, respectively, for these costs. We are conducting environmental assessments and implementing a variety of remedial measures that may result in increases or decreases in the total estimated costs.

In March 2008, the EPA promulgated a new, lower National Ambient Air Quality Standard (NAAQS) for ground-level ozone. In May 2012, the EPA completed designation of new eight-hour ozone non-attainment areas. Based on the published designations, no Northwest facilities are located within the non-attainment areas. At this time, it is unknown whether future state regulatory actions associated with implementation of the 2008 ozone standard will impact our operations and increase the cost of additions to property, plant and equipment. Until any additional state regulatory actions are proposed, we are unable to estimate the cost of additions that may be required to meet any such new regulation.

In December 2014, the EPA proposed to further reduce the ground-level ozone NAAQS from the March 2008 levels and subsequently finalized a rule on October 1, 2015. We are monitoring the rule's implementation as the reduction will trigger additional federal and state regulatory actions that may impact our operations. As a result, the cost of additions to property, plant, and equipment is expected to increase. We are unable at this time to estimate with any certainty the cost of additions that may be required to meet new regulations.

On January 22, 2010, the EPA set a new one-hour nitrogen dioxide (NO2) NAAQS. The effective date of the new NO2 standard was April 12, 2010. On January 20, 2012, the EPA determined pursuant to available information that no area in the country is violating the 2010 NO2 NAAQS, and thus, designated all areas of the country as “unclassifiable/attainment.” Also, at

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NORTHWEST PIPELINE LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

that time, the EPA noted its plan to deploy an expanded NO2 monitoring network beginning in 2013. However, on October 5, 2012, the EPA proposed a graduated implementation of the monitoring network between January 1, 2014 and January 1, 2017. Once three years of data are collected from the new monitoring network, the EPA will reassess attainment status with the one-hour NO2 NAAQS. Until that time, the EPA or states may require ambient air quality modeling on a case by case basis to demonstrate compliance with the NO2 standard. Because we are unable to predict the outcome of the EPA’s or states’ future assessment using the new monitoring network, we are unable to estimate the cost of additions that may be required to meet this regulation.

Other Matters

Various other proceedings are pending against us and are considered incidental to our operations.

Summary

We estimate that for all matters for which we are able to reasonably estimate a range of loss, including those noted above and others that are not individually significant, our aggregate reasonably possible losses beyond amounts accrued for all of our contingent liabilities are immaterial to our expected future annual results of operations, liquidity, and financial position.  These calculations have been made without consideration of any potential recovery from third parties.  We have disclosed all significant matters for which we are unable to reasonably estimate a range of possible loss.

3. DEBT AND FINANCING ARRANGEMENT

Credit Facility

We, along with WPZ and Transcontinental Gas Pipe Line Company, LLC, are party to a credit agreement with aggregate commitments available of $3.5 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. Total letter of credit capacity available to WPZ under this credit facility is $1.125 billion. We are able to borrow up to $500 million under this credit facility to the extent not otherwise utilized by the other co-borrowers. At September 30, 2016, no letters of credit have been issued and $1.230 billion of loans to WPZ are outstanding under the credit facility.

WPZ participates in a commercial paper program, and WPZ management considers amounts outstanding under this program to be a reduction of available capacity under the credit facility. The program allows a maximum outstanding amount at any time of $3 billion of unsecured commercial paper notes. At September 30, 2016, WPZ had $2 million of commercial paper outstanding.

Retirement of Long-Term Debt

In June 2016, we retired our $175.0 million 7 percent senior unsecured notes that matured on June 15, 2016. These notes were retired with proceeds from the repayment of advances to WPZ.

Long-Term Debt Due Within One Year

The long-term debt due within one year at September 30, 2016 is associated with the $185 million 5.95 percent senior unsecured notes that mature on April 15, 2017.

4. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and advances to affiliate—The carrying amounts approximate fair value because of the short-term nature of these instruments.

Long-term debt—The disclosed fair value of our long-term debt, which we consider as a level 2 measurement, is determined by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. The carrying amount and estimated fair value of our long-term debt, including current maturities, were $519.0 million and $552.8 million, respectively, at September 30, 2016, and $693.4 million and $721.9 million, respectively, at December 31, 2015.

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NORTHWEST PIPELINE LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

5. TRANSACTIONS WITH AFFILIATES

We are a participant in WPZ’s cash management program. At September 30, 2016 and December 31, 2015, the advances due to us by WPZ totaled approximately $51.7 million and $171.9 million, respectively. These advances are represented by demand notes and are classified as Current Assets in the accompanying Balance Sheet. The interest rate on these intercompany demand notes is based upon the daily overnight investment rate paid on WPZ’s excess cash at the end of each month, which was approximately 0.27 percent at September 30, 2016. The interest income from these advances was minimal during the three and nine months ended September 30, 2016 and September 30, 2015. Such interest income is included in Other (Income) and Other Expenses – Miscellaneous other (income) expenses, net on the accompanying Statement of Comprehensive Income.

We have no employees. Services necessary to operate our business are provided to us by Williams and certain affiliates of Williams. We reimburse Williams and its affiliates for all direct and indirect expenses incurred or payments made (including salary, bonus, incentive compensation, and benefits) in connection with these services. Employees of Williams also provide general administrative and management services to us, and we are charged for certain administrative expenses incurred by Williams. These charges are either directly identifiable or allocated to our assets. Direct charges are for goods and services provided by Williams at our request. Allocated charges are based on a three-factor formula, which considers revenues; property, plant, and equipment; and payroll. In management’s estimation, the allocation methodologies used are reasonable and result in a reasonable allocation to us of our costs of doing business incurred by Williams. We were billed $22.8 million and $68.9 million in the three and nine months ended September 30, 2016, respectively, and $24.1 million and $74.5 million in the three and nine months ended September 30, 2015, respectively, for these services. Such expenses are primarily included in General and administrative and Operation and maintenance expenses on the accompanying Statement of Comprehensive Income. The amount billed to us for the nine months ended September 30, 2016 includes $2.0 million recognized in the first quarter for severance and other related costs associated with a reduction in workforce.

During the nine months ended September 30, 2016 and 2015, we declared and paid cash distributions to our parent of $131.0 million and $129.0 million, respectively. During October 2016, we declared and paid an additional cash distribution of $43.0 million to our parent.

We have entered into various other transactions with certain related parties, the amounts of which were not significant. These transactions and the above-described transactions are made on the basis of commercial relationships and prevailing market prices or general industry practices.

6. OTHER

Our Asset retirement obligations in Total other noncurrent liabilities on our Balance Sheet reflects a $21.5 million decrease for 2016 compared to December 31, 2015. This decrease is primarily due to changes in estimates of existing obligations as a result of our annual review process. The annual review process considers various factors including inflation rates, current estimates for removal cost, discount rates, and the estimated remaining life of assets.

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

The following discussion should be read in conjunction with the Management’s Discussion and Analysis, Financial Statements, and Notes contained in Items 7 and 8 of our 2015 Annual Report on Form 10-K and with the Financial Statements and Notes contained in this Form 10-Q.

RESULTS OF OPERATIONS

Analysis of Financial Results

This analysis discusses financial results of our operations for the nine-month periods ended September 30, 2016 and 2015. Variances due to changes in natural gas prices and transportation volumes have little impact on revenues, because under our rate design methodology, the majority of overall cost of service is recovered through firm capacity reservation charges in our transportation rates.

Our operating revenues increased $0.8 million in the first nine months of 2016 as compared with the first nine months of 2015. This increase is primarily associated with an extra day of business in 2016, due to leap year. Transportation service accounted for 97 percent and 98 percent, respectively, and gas storage service accounted for 3 percent and 2 percent, respectively, of our operating revenues for the periods ended September 30, 2016 and September 30, 2015.

Operating expenses increased $2.6 million, or 1 percent, due primarily to an increase in pipeline maintenance of $5.7 million; $2.0 million in severance and other related costs, recorded in the first quarter, associated with a reduction in workforce; and higher depreciation of $0.8 million, resulting from property additions; partially offset by decreased charges for corporate administrative services of $5.7 million.

Financing

We intend to utilize our availability under the WPZ credit facility or access to the capital markets to refinance the $185 million, 5.95 percent senior unsecured notes that mature on April 15, 2017.

Capital Expenditures

Our capital expenditures were $51.1 million and $50.6 million for the nine months ended September 30, 2016 and 2015, respectively. Our capital expenditures estimate for 2016 is discussed in our 2015 Annual Report on Form 10-K.

9

Item 4. Controls and Procedures

Our management, including our Senior Vice President—West and our Vice President and Chief Accounting Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act) (Disclosure Controls) or our internal control over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant.

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Senior Vice President—West and our Vice President and Chief Accounting Officer. Based upon that evaluation, our Senior Vice President—West and our Vice President and Chief Accounting Officer concluded that these Disclosure Controls are effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes during the third quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting.

10

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information called for by this item is provided in Note 2. Contingent Liabilities and Commitments, included in the Notes to Financial Statements included under Part 1, Item 1. Financial Statements of this Form 10-Q, which information is incorporated by reference into this item.

Item 1A. Risk Factors

Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2015 Part II, Item 1A Risk Factors in our Quarterly Report on Form 10-Q for the period ended June 30, 2016, include certain risk factors that could materially affect our business, financial condition, or future results. Except for the risk factor “The pendency of the proposed ETC Merger between Energy Transfer and Williams could adversely affect our business and operations.” whichisno longer applicable, the risk factors stated in our periodic reports remain applicable.

11

Item 6. Exhibits

The following instruments are included as exhibits to this report.

Exhibit	Description
2	Certificate of Conversion of Northwest Pipeline GP (Exhibit 2.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference.
3.1	Certificate of Formation of Northwest Pipeline LLC (Exhibit 2.2 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference.
3.2	Operating Agreement of Northwest Pipeline LLC (Exhibit 3.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference.
31.1*	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32**	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*	XBRL Taxonomy Definition Linkbase.
101.LAB*	XBRL Taxonomy Extension Label Linkbase.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase.

*	Filed herewith.
**	Furnished herewith.

12

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NORTHWEST PIPELINE LLC
	Registrant
By:	/s/ Jeffrey P. Heinrichs
	Jeffrey P. Heinrichs Controller (Duly Authorized Officer and Principal Accounting Officer)

Date: October 31, 2016

EXHIBIT INDEX

Exhibit	Description
2	Certificate of Conversion of Northwest Pipeline GP (Exhibit 2.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference.
3.1	Certificate of Formation of Northwest Pipeline LLC (Exhibit 2.2 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference.
3.2	Operating Agreement of Northwest Pipeline LLC (Exhibit 3.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference.
31.1*	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32**	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*	XBRL Taxonomy Definition Linkbase.
101.LAB*	XBRL Taxonomy Extension Label Linkbase.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase.

*	Filed herewith.
**	Furnished herewith.

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Walter J. Bennett, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Northwest Pipeline LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2016

By:	/s/ Walter J. Bennett
	Walter J. Bennett
	Sr. Vice President—West
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Ted T. Timmermans, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Northwest Pipeline LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 31, 2016

By:	/s/ Ted T. Timmermans
	Ted T. Timmermans
	Vice President and Chief Accounting Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Northwest Pipeline LLC (the “Company”) on Form 10-Q for the period ending September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, in his capacity as an officer of the Company, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Walter J. Bennett

Walter J. Bennett

Senior Vice President—West

October 31, 2016

/s/ Ted T. Timmermans

Ted T. Timmermans

Vice President and Chief Accounting Officer

October 31, 2016

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part of the Report.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 31, 2016
Entity Information [Line Items]
Entity registrant name	Northwest Pipeline LLC
Entity central index key	0000110019
Document type	10-Q
Document period end date	Sep. 30, 2016
Amendment flag	false
Document fiscal year focus	2016
Document fiscal period focus	Q3
Current fiscal year end date	--12-31
Entity filer category	Non-accelerated Filer
Entity common stock, shares outstanding		0

XML

Statement of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
OPERATING REVENUES	$ 116,897	$ 116,933	$ 352,914	$ 352,143
OPERATING EXPENSES:
General and administrative	12,337	13,714	39,202	42,913
Operation and maintenance	20,218	19,160	58,701	54,477
Depreciation	25,421	25,190	76,150	75,349
Regulatory debits	873	574	2,593	1,758
Taxes, other than income taxes	4,692	3,995	13,356	12,907
Total operating expenses	63,541	62,633	190,002	187,404
OPERATING INCOME	53,356	54,300	162,912	164,739
OTHER (INCOME) AND OTHER EXPENSES:
Interest expense	8,376	11,506	30,805	34,525
Allowance for equity and borrowed funds used during construction	(454)	(556)	(1,079)	(1,027)
Miscellaneous other (income) expenses, net	176	40	845	(586)
Total other (income) and other expenses	8,098	10,990	30,571	32,912
NET INCOME	45,258	43,310	132,341	131,827
CASH FLOW HEDGES:
Amortization of cash flow hedges into Interest expense	0	(15)	(28)	(46)
COMPREHENSIVE INCOME	$ 45,258	$ 43,295	$ 132,313	$ 131,781

XML

Balance Sheet (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
CURRENT ASSETS:
Cash	$ 0	$ 169
Receivables:
Trade	39,289	42,669
Affiliated companies	1,665	1,441
Advances to affiliate	51,741	171,867
Other	8,061	14,051
Materials and supplies	10,126	10,183
Exchange gas due from others	2,846	3,733
Exchange gas offset	0	201
Prepayments and other	5,519	6,164
Total current assets	119,247	250,478
PROPERTY, PLANT AND EQUIPMENT, at cost	3,320,314	3,306,205
Less-Accumulated depreciation	1,427,012	1,367,632
Total property, plant and equipment, net	1,893,302	1,938,573
OTHER ASSETS:
Deferred charges	1,826	2,110
Regulatory assets	36,187	40,853
Total other assets	38,013	42,963
Total assets	2,050,562	2,232,014
Payables:
Trade	17,972	14,363
Affiliated companies	4,627	11,959
Accrued liabilities:
Taxes, other than income taxes	16,874	11,033
Interest	11,548	4,045
Exchange gas due to others	3,064	2,252
Exchange gas offset	709	0
Customer advances	1,930	5,573
Other	5,109	3,417
Long-term debt due within one year	184,858	174,837
Total current liabilities	246,691	227,479
LONG-TERM DEBT	334,158	518,583
OTHER NONCURRENT LIABILITIES:
Asset retirement obligations	60,927	82,454
Regulatory liabilities	29,640	26,802
Other	7,245	6,108
Total other noncurrent liabilities	97,812	115,364
CONTINGENT LIABILITIES AND COMMITMENTS (Note 2)
OWNER'S EQUITY:
Owner's capital	1,073,892	1,073,892
Retained earnings	298,009	296,668
Accumulated other comprehensive income	0	28
Total owner's equity	1,371,901	1,370,588
Total liabilities and owner's equity	$ 2,050,562	$ 2,232,014

XML

Statement of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
OPERATING ACTIVITIES:
Net income	$ 132,341	$ 131,827
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	76,150	75,349
Regulatory debits	2,593	1,758
Amortization of deferred charges and credits	910	440
Allowance for equity funds used during construction	(749)	(697)
Changes in current assets and liabilities:
Trade and other accounts receivable	4,632	1,745
Affiliated receivables	(224)	546
Exchange gas due from others	(594)	7,693
Materials and supplies	57	(148)
Other current assets	645	(1,628)
Trade accounts payable	394	(304)
Affiliated payables	(7,332)	(4,401)
Exchange gas due to others	594	(7,680)
Other accrued liabilities	11,246	19,545
Changes in noncurrent assets and liabilities:
Deferred charges	(5,024)	(3,446)
Noncurrent liabilities	9,269	8,610
Net cash provided by operating activities	224,908	229,209
FINANCING ACTIVITIES:
Payments of long-term debt	(175,000)	0
Cash distributions to parent	(131,000)	(129,000)
Other	0	(338)
Net cash used in financing activities	(306,000)	(129,338)
Property, plant and equipment:
Capital expenditures, net of equity AFUDC	(51,115)	(50,599)
Contributions and advances for construction costs	1,134	1,323
Disposal of property, plant and equipment, net	570	1,695
Advances to affiliates, net	120,126	(52,304)
Proceeds from insurance	10,208	0
Net cash provided by (used in) investing activities	80,923	(99,885)
NET INCREASE (DECREASE) IN CASH	(169)	(14)
CASH AT BEGINNING OF PERIOD	169	154
CASH AT END OF PERIOD	0	140
Increases to property, plant and equipment	(48,188)	(58,980)
Changes in related in accounts receivable, accounts payable, and accrued liabilities	(2,927)	8,381
Capital expenditures, net of equity AFUDC	$ (51,115)	$ (50,599)

XML

Basis of Presentation (Notes)

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

Northwest Pipeline LLC (Northwest) is indirectly owned by Williams Partners L.P. (WPZ), a publicly traded Delaware limited partnership, which is consolidated by The Williams Companies, Inc. (Williams). On February 2, 2015, WPZ was merged into Access Midstream Partners, L.P. (ACMP), another publicly traded limited partnership consolidated by Williams. ACMP was the surviving partnership and was subsequently renamed WPZ. At September 30, 2016, Williams holds an approximate 60 percent interest in WPZ, comprised of an approximate 58 percent limited partner interest and all of the 2 percent general partner interest.

On September 28, 2015, Williams publicly announced in a press release that it had entered into an Agreement and Plan of Merger (Merger Agreement) with Energy Transfer Equity, L.P. (Energy Transfer) and certain of its affiliates. The Merger Agreement provided that, subject to the satisfaction of customary closing conditions, Williams would be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger), with ETC surviving the ETC Merger. Energy Transfer formed ETC as a limited partnership that would be treated as a corporation for U.S. federal income tax purposes. Immediately following the completion of the ETC Merger, ETC would contribute to Energy Transfer all of the assets and liabilities of Williams in exchange for the issuance by Energy Transfer to ETC of a number of Energy Transfer Class E common units equal to the number of ETC common shares issued to Williams stockholders in the ETC Merger.

On June 29, 2016, Energy Transfer provided Williams written notice terminating the Merger Agreement, citing the alleged failure of certain conditions under the Merger Agreement.

In this report, Northwest is at times referred to in the first person as “we,” “us,” or “our.”

General

The accompanying interim financial statements do not include all the notes in our annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto in our 2015 Annual Report on Form 10-K. The accompanying unaudited financial statements include all adjustments both normal recurring and others which, in the opinion of our management, are necessary to present fairly our interim financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Accounting Standards Issued But Not Yet Adopted

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15 "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" (ASU 2016-15). ASU 2016-15 provides specific guidance on eight cash flow classification issues, including debt prepayment or debt extinguishment costs and distributions received from equity method investees, to reduce diversity in practice. The new standard is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The new standard requires a retrospective transition. We are evaluating the impact of the new standard on our financial statements.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. The new standard is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The new standard requires varying transition methods for the different categories of amendments. We are evaluating the impact of the new standard on our financial statements.

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)" (ASU 2016-02). ASU 2016-02 establishes a comprehensive new lease accounting model. The new standard clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset. The new standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. We are evaluating the impact of the new standard on our financial statements.

In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (ASC) Topic 606, "Revenue from Contracts with Customers" (ASC 606). ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. In August 2015, the FASB issued ASU 2015-14 "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date" (ASU 2015-14). Per ASU 2015-14, the standard is effective for interim and annual reporting periods beginning after December 15, 2017. ASC 606 allows either full retrospective or modified retrospective transition and early adoption is permitted for annual periods beginning after December 15, 2016. We continue to evaluate both the impact of this new standard on our financial statements and the transition method we will utilize for adoption.

XML

Contingent Liabilities and Commitments (Notes)

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities and Commitments

CONTINGENT LIABILITIES AND COMMITMENTS

Environmental Matters

We are subject to the National Environmental Policy Act and other federal and state legislation regulating the environmental aspects of our business. Except as discussed below, our management believes that we are in substantial compliance with existing environmental requirements. Environmental expenditures are expensed or capitalized depending on their future economic benefit and potential for rate recovery. We believe that, with respect to any expenditures required to meet applicable standards and regulations, the Federal Energy Regulatory Commission (FERC) would grant the requisite rate relief so that substantially all of such expenditures would be permitted to be recovered through rates.

Beginning in the mid-1980s, we evaluated many of our facilities for the presence of toxic and hazardous substances to determine to what extent, if any, remediation might be necessary. We identified polychlorinated biphenyl (PCB) contamination in air compressor systems, soils, and related properties at certain compressor station sites. Similarly, we identified hydrocarbon impacts at these facilities due to the former use of earthen pits, lubricating oil leaks or spills, and excess pipe coating released to the environment. In addition, heavy metals have been identified at these sites due to the former use of mercury containing meters and paint and welding rods containing lead, cadmium, and arsenic. The PCBs were remediated pursuant to a Consent Decree with the U.S. Environmental Protection Agency (EPA) in the late 1980s, and we conducted a voluntary clean-up of the hydrocarbon and mercury impacts in the early 1990s. In 2005, the Washington Department of Ecology required us to re-evaluate our previous clean-ups in Washington. During 2006 to 2015, 129 meter stations were evaluated, of which 82 required remediation. As of September 30, 2016, all of the meter stations have been remediated. Initial assessments have been completed at all thirteen compressor stations in Washington. Additional assessments are ongoing at three of these compressor stations. Remediation has been completed at ten of the thirteen compressor stations. On the basis of the findings to date, we estimate that environmental assessment and remediation costs will total approximately $4.7 million, measured on an undiscounted basis, and are expected to be incurred through 2020. At September 30, 2016 and December 31, 2015, we had accrued liabilities totaling approximately $4.7 million and $4.6 million, respectively, for these costs. We are conducting environmental assessments and implementing a variety of remedial measures that may result in increases or decreases in the total estimated costs.

In March 2008, the EPA promulgated a new, lower National Ambient Air Quality Standard (NAAQS) for ground-level ozone. In May 2012, the EPA completed designation of new eight-hour ozone non-attainment areas. Based on the published designations, no Northwest facilities are located within the non-attainment areas. At this time, it is unknown whether future state regulatory actions associated with implementation of the 2008 ozone standard will impact our operations and increase the cost of additions to property, plant and equipment. Until any additional state regulatory actions are proposed, we are unable to estimate the cost of additions that may be required to meet any such new regulation.

In December 2014, the EPA proposed to further reduce the ground-level ozone NAAQS from the March 2008 levels and subsequently finalized a rule on October 1, 2015. We are monitoring the rule's implementation as the reduction will trigger additional federal and state regulatory actions that may impact our operations. As a result, the cost of additions to property, plant, and equipment is expected to increase. We are unable at this time to estimate with any certainty the cost of additions that may be required to meet new regulations.

On January 22, 2010, the EPA set a new one-hour nitrogen dioxide (NO2) NAAQS. The effective date of the new NO2 standard was April 12, 2010. On January 20, 2012, the EPA determined pursuant to available information that no area in the country is violating the 2010 NO2 NAAQS, and thus, designated all areas of the country as “unclassifiable/attainment.” Also, at that time, the EPA noted its plan to deploy an expanded NO2 monitoring network beginning in 2013. However, on October 5, 2012, the EPA proposed a graduated implementation of the monitoring network between January 1, 2014 and January 1, 2017. Once three years of data are collected from the new monitoring network, the EPA will reassess attainment status with the one-hour NO2 NAAQS. Until that time, the EPA or states may require ambient air quality modeling on a case by case basis to demonstrate compliance with the NO2 standard. Because we are unable to predict the outcome of the EPA’s or states’ future assessment using the new monitoring network, we are unable to estimate the cost of additions that may be required to meet this regulation.

Other Matters

Various other proceedings are pending against us and are considered incidental to our operations.

Summary

We estimate that for all matters for which we are able to reasonably estimate a range of loss, including those noted above and others that are not individually significant, our aggregate reasonably possible losses beyond amounts accrued for all of our contingent liabilities are immaterial to our expected future annual results of operations, liquidity, and financial position.  These calculations have been made without consideration of any potential recovery from third parties.  We have disclosed all significant matters for which we are unable to reasonably estimate a range of possible loss.

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Debt and Financing Arrangement (Notes)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Debt and Financing Arrangement

DEBT AND FINANCING ARRANGEMENT

Credit Facility

We, along with WPZ and Transcontinental Gas Pipe Line Company, LLC, are party to a credit agreement with aggregate commitments available of $3.5 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. Total letter of credit capacity available to WPZ under this credit facility is $1.125 billion. We are able to borrow up to $500 million under this credit facility to the extent not otherwise utilized by the other co-borrowers. At September 30, 2016, no letters of credit have been issued and $1.230 billion of loans to WPZ are outstanding under the credit facility.

WPZ participates in a commercial paper program, and WPZ management considers amounts outstanding under this program to be a reduction of available capacity under the credit facility. The program allows a maximum outstanding amount at any time of $3 billion of unsecured commercial paper notes. At September 30, 2016, WPZ had $2 million of commercial paper outstanding.

Retirement of Long-Term Debt

In June 2016, we retired our $175.0 million 7 percent senior unsecured notes that matured on June 15, 2016. These notes were retired with proceeds from the repayment of advances to WPZ.

Long-Term Debt Due Within One Year

The long-term debt due within one year at September 30, 2016 is associated with the $185 million 5.95 percent senior unsecured notes that mature on April 15, 2017.

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Financial Instruments (Notes)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Financial Instruments

FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and advances to affiliate—The carrying amounts approximate fair value because of the short-term nature of these instruments.

Long-term debt—The disclosed fair value of our long-term debt, which we consider as a level 2 measurement, is determined by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. The carrying amount and estimated fair value of our long-term debt, including current maturities, were $519.0 million and $552.8 million, respectively, at September 30, 2016, and $693.4 million and $721.9 million, respectively, at December 31, 2015.

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Transactions with Affiliates (Notes)

9 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Transactions with Affiliates

TRANSACTIONS WITH AFFILIATES

We are a participant in WPZ’s cash management program. At September 30, 2016 and December 31, 2015, the advances due to us by WPZ totaled approximately $51.7 million and $171.9 million, respectively. These advances are represented by demand notes and are classified as Current Assets in the accompanying Balance Sheet. The interest rate on these intercompany demand notes is based upon the daily overnight investment rate paid on WPZ’s excess cash at the end of each month, which was approximately 0.27 percent at September 30, 2016. The interest income from these advances was minimal during the three and nine months ended September 30, 2016 and September 30, 2015. Such interest income is included in Other (Income) and Other Expenses – Miscellaneous other (income) expenses, net on the accompanying Statement of Comprehensive Income.

We have no employees. Services necessary to operate our business are provided to us by Williams and certain affiliates of Williams. We reimburse Williams and its affiliates for all direct and indirect expenses incurred or payments made (including salary, bonus, incentive compensation, and benefits) in connection with these services. Employees of Williams also provide general administrative and management services to us, and we are charged for certain administrative expenses incurred by Williams. These charges are either directly identifiable or allocated to our assets. Direct charges are for goods and services provided by Williams at our request. Allocated charges are based on a three-factor formula, which considers revenues; property, plant, and equipment; and payroll. In management’s estimation, the allocation methodologies used are reasonable and result in a reasonable allocation to us of our costs of doing business incurred by Williams. We were billed $22.8 million and $68.9 million in the three and nine months ended September 30, 2016, respectively, and $24.1 million and $74.5 million in the three and nine months ended September 30, 2015, respectively, for these services. Such expenses are primarily included in General and administrative and Operation and maintenance expenses on the accompanying Statement of Comprehensive Income. The amount billed to us for the nine months ended September 30, 2016 includes $2.0 million recognized in the first quarter for severance and other related costs associated with a reduction in workforce.

During the nine months ended September 30, 2016 and 2015, we declared and paid cash distributions to our parent of $131.0 million and $129.0 million, respectively. During October 2016, we declared and paid an additional cash distribution of $43.0 million to our parent.

We have entered into various other transactions with certain related parties, the amounts of which were not significant. These transactions and the above-described transactions are made on the basis of commercial relationships and prevailing market prices or general industry practices.

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Other (Notes)

9 Months Ended

Sep. 30, 2016

Asset Retirement Obligation Disclosure [Abstract]

Other

OTHER

Our Asset retirement obligations in Total other noncurrent liabilities on our Balance Sheet reflects a $21.5 million decrease for 2016 compared to December 31, 2015. This decrease is primarily due to changes in estimates of existing obligations as a result of our annual review process. The annual review process considers various factors including inflation rates, current estimates for removal cost, discount rates, and the estimated remaining life of assets.

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Basis of Presentation (Details)	9 Months Ended
	Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Parent, total ownership percentage	60.00%
Parent, limited partner ownership percentage	58.00%
Parent, general partner ownership percentage	2.00%

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Contingent Liabilities and Commitments (Details) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Environmental Matters [Abstract]
Environmental assessment and remediation costs, undiscounted	$ 4.7
Accrued environmental liabilities	$ 4.7	$ 4.6

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Debt and Financing Arrangement (Details) $ in Millions	Sep. 30, 2016 USD ($)
Williams Partners L.P. [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 3,500.0
Commercial paper, outstanding	2.0
$3.5 billion credit facility [Member]
Line of Credit Facility [Line Items]
Additional Amount By Which Credit Facility Can Be Increased	500.0
$3.5 billion credit facility [Member] | Williams Partners L.P. [Member]
Line of Credit Facility [Line Items]
Letters of credit outstanding, amount	0.0
Line of credit facility, amount outstanding	1,230.0
$3.5 billion credit facility [Member] | Williams Partners L.P. [Member] | Commercial paper [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	3,000.0
$3.5 billion credit facility [Member] | Letter of credit | Williams Partners L.P. [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,125.0

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Debt and Financing Arrangement Long-term Debt Instruments (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Long-term debt due within one year	$ 184,858	$ 174,837
7% Senior Unsecured Notes due 2016 [Member]
Debt Instrument [Line Items]
Retirement of Long-Term Debt	$ 175,000
Senior Unsecured Interest Rate	7.00%
5.95% Senior Unsecured Notes due 2017 [Member]
Debt Instrument [Line Items]
Long-term debt due within one year	$ 184,858
Senior Unsecured Interest Rate	5.95%

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Financial Instruments (Details) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Carrying (reported) amount, fair value disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt including current maturities	$ 519.0	$ 693.4
Estimate of fair value, fair value disclosure [Member] | Fair value, inputs, level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt including current maturities	$ 552.8	$ 721.9

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Transactions with Affiliates (Details) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Oct. 31, 2016 USD ($)	Sep. 30, 2016 USD ($) employee	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) employee	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Related Party Transaction [Line Items]
Advances to affiliate		$ 51,741		$ 51,741		$ 171,867
Related party transaction, rate				0.27%
Entity number of employees | employee		0		0
Related party transaction, expenses from transactions with related party		$ 22,800	$ 24,100	$ 68,900	$ 74,500
Severance and other related costs				2,000
Cash distributions to parent				131,000	$ 129,000
Williams Partners L.P. [Member]
Related Party Transaction [Line Items]
Advances to affiliate		$ 51,700		$ 51,700		$ 171,900
Subsequent Event [Member]
Related Party Transaction [Line Items]
Cash distributions to parent	$ 43,000

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Other (Details) $ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)
Asset Retirement Obligation Disclosure [Abstract]
Changes in estimates of existing obligations	$ 21.5