e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2007


o		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 CORPORATION

(Exact name of registrant as specified in its charter)


DELAWARE		87-0269236

(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 and Zip Code)

(801) 583-8800

(Registrant’s telephone number, including area code)

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 o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at August 7, 2007
Common stock, $1 par value		1,000 shares

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 CORPORATION

TABLE OF CONTENTS


	Page
PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements -

Condensed Statements of Income, three and six months ended June 30, 2007 and 2006		1

Condensed Balance Sheets as of June 30, 2007 and December 31, 2006		2

Condensed Statements of Cash Flows, six months ended June 30, 2007 and 2006		4

Notes to Condensed Financial Statements		5

Item 2. Management’s Narrative Analysis of the Results of Operations		11

Item 4. Controls and Procedures		13

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		14

Item 1A. Risk Factors		14

Item 6. Exhibits		14
Certification of Principal Executive Officer Pursuant to Section 302
Certification of Principal Financial Officer Pursuant to Section 302
Certification Pursuant to Section 906

Certain matters contained in this report include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements discuss our expected future results based on current and pending business operations. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.

All statements, other than statements of historical facts, included in this report, which 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 such as “anticipates,” “believes,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “might,” “planned,” “potential,” “projects,” “scheduled” or similar expressions. These forward-looking statements include, among others, statements regarding:

	•		Amounts and nature of future capital expenditures;

	•		Expansion and growth of our business and operations;

	•		Business strategy;

	•		Cash flow from operations; and

	•		Power and natural gas prices and demand.

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 document. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors which could cause actual results to differ from those in the forward-looking statements include:

	•		Availability of supplies ( including the uncertainties inherent in assessing and estimating future natural gas reserves), market demand, volatility of prices, and increased costs of capital;

	•		Inflation, interest rates, and general economic conditions;

	•		The strength and financial resources of our competitors;

	•		Development of alternative energy sources;

	•		The impact of operational and development hazards;

	•		Costs of, changes in, or the results of laws, government regulations including proposed climate change legislation, environmental liabilities, litigation, and rate proceedings;

	•		Changes in the current geopolitical situation;

	•		Risks related to strategy and financing, including restrictions stemming from our debt agreements and our lack of investment grade credit ratings; and

	•		Risk associated with future weather conditions and acts of terrorism.

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 and do not intend to update the above list or to announce publicly the result of 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, 2006 and Part II, Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NORTHWEST PIPELINE CORPORATION
CONDENSED STATEMENT OF INCOME
(Thousands of Dollars)
(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
OPERATING REVENUES	$	102,655		$	79,915		$	205,698		$	159,553


OPERATING EXPENSES:
General and administrative		16,920			14,689			31,355			26,865
Operation and maintenance		15,454			14,656			30,844			30,334
Depreciation		19,992			17,773			39,405			35,184
Regulatory credits		(975	)		(1,554	)		(1,745	)		(2,616	)
Taxes, other than income taxes		2,296			4,417			6,480			8,914
Regulatory liability reversal (Note 1)		(16,562	)		—			(16,562	)		—


Total operating expenses		37,125			49,981			89,777			98,681


Operating income		65,530			29,934			115,921			60,872


OTHER INCOME — net
Interest income -
Affiliated		449			984			637			1,947
Other		155			644			365			1,249
Allowance for equity funds used during construction		583			2,107			1,511			3,134
Miscellaneous other income, net		773			1,703			1,001			3,690
Contract termination income		6,045			895			6,045			895


Total other income, net		8,005			6,333			9,559			10,915


INTEREST CHARGES:
Interest on long-term debt		11,768			9,746			24,104			19,189
Other interest		1,550			853			2,538			1,913
Allowance for borrowed funds used during construction		(375	)		(1,071	)		(934	)		(1,600	)


Total interest charges		12,943			9,528			25,708			19,502


INCOME BEFORE INCOME TAXES		60,592			26,739			99,772			52,285

PROVISION FOR INCOME TAXES		22,651			9,265			37,851			18,909


NET INCOME	$	37,941		$	17,474		$	61,921		$	33,376

See accompanying notes.

NORTHWEST PIPELINE CORPORATION
CONDENSED BALANCE SHEET
(Thousand of Dollars)


	June 30,		December 31,
	2007		2006
	(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	367	$	1,489
Advance to affiliates		42,464		49,980
Accounts receivable -
Trade, less allowance of $53 for June 30, 2007 and December 31, 2006		36,576		32,230
Affiliated companies		1,495		591
Materials and supplies, less reserves of $454 for June 30, 2007 and $472 for December 31, 2006		10,280		10,013
Exchange gas due from others		6,497		10,556
Exchange gas offset		2,797		4,538
Deferred income taxes		2,723		4,066
Prepayments and other		8,462		7,945


Total current assets		111,661		121,408


PROPERTY, PLANT AND EQUIPMENT, at cost		2,734,278		2,669,056
Less — Accumulated depreciation		923,201		893,033


Total property, plant and equipment		1,811,077		1,776,023


OTHER ASSETS:
Deferred charges		39,999		32,093
Regulatory assets		51,929		47,829


Total other assets		91,928		79,922


Total assets	$	2,014,666	$	1,977,353

See accompanying notes.

NORTHWEST PIPELINE CORPORATION
CONDENSED BALANCE SHEET
(Thousands of Dollars)


	June 30,			December 31,
	2007			2006
	(Unaudited)
LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES
Accounts payable-
Trade	$	26,021		$	55,403
Affiliated companies		9,821			13,701
Accrued liabilities -
Income taxes due to affiliate		7,739			3,090
Taxes, other than income taxes		8,665			6,779
Interest		5,166			7,038
Employee costs		7,492			10,759
Exchange gas due to others		9,294			15,094
Deferred contract termination income		—			6,045
Other		3,749			5,268
Current maturities of long-term debt		252,867			252,867


Total current liabilities		330,814			376,044


LONG-TERM DEBT LESS CURRENT MATURITIES		443,620			434,208

DEFERRED INCOME TAXES		274,243			255,469

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES		90,431			98,595

CONTINGENT LIABILITIES AND COMMITMENTS

COMMON STOCKHOLDER’S EQUITY:
Common stock, par value $1 per share; authorized and outstanding, 1,000 shares		1			1
Additional paid-in capital		327,844			327,844
Retained earnings		564,974			503,055
Accumulated other comprehensive loss		(17,261	)		(17,863	)


Total common stockholder’s equity		875,558			813,037


Total liabilities and stockholder’s equity	$	2,014,666		$	1,977,353

See accompanying notes.

NORTHWEST PIPELINE CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)


	Six Months Ended
	June 30,
	2007			2006
OPERATING ACTIVITIES:
Net Income	$	61,921		$	33,376
Adjustments to reconcile to net cash provided by operating activities -
Depreciation		39,405			35,184
Regulatory credits		(1,745	)		(2,616	)
Provision for deferred income taxes		19,754			17,755
Amortization of deferred charges and credits		4,451			935
Allowance for equity funds used during construction		(1,511	)		(3,134	)
Regulatory liability reversal		(16,562	)		—
Contract termination income		(6,045	)		—
Changes in:
Trade accounts receivable		(4,346	)		(1,060	)
Affiliated receivables, including income taxes		(904	)		5,284
Exchange gas due from others		5,800			8,251
Materials and supplies		(267	)		194
Other current assets		(517	)		(1,199	)
Deferred charges		(5,140	)		(3,433	)
Trade accounts payable		(344	)		(1,016	)
Affiliated payables, including income taxes		769			7,535
Exchange gas due to others		(5,800	)		(8,251	)
Other accrued liabilities		(3,098	)		630
Other deferred credits		3,931			1,828

Net cash provided by operating activities		89,752			90,263


FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		184,362			174,447
Prepayments of long-term debt		(175,000	)		—
Debt issuance costs		(2,133	)		(2,310	)
Premium on early retirement of long-term debt		(7,111	)		—
Changes in cash overdrafts		(37,543	)		3,444

Net cash provided by (used in) financing activities		(37,425	)		175,581


INVESTING ACTIVITIES:
Property, plant and equipment -
Capital expenditures		(68,627	)		(136,256	)
Proceeds from sales		832			—
Asset removal cost		—			(10,272	)
Changes in accounts payable		6,830			(6,532	)
Proceeds from contract termination payments (Note 3)		—			3,348
Repayments from affiliates		7,516			20

Net cash used in investing activities		(53,449	)		(149,692	)


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,122	)		116,152
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,489			59,709

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	367		$	175,861

See accompanying notes.

NORTHWEST PIPELINE CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Corporate Structure and Control

Northwest Pipeline Corporation (Northwest) is a wholly-owned subsidiary of Williams Gas Pipeline Company, LLC (WGP). WGP is a wholly-owned subsidiary of The Williams Companies, Inc. (Williams).

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

Basis of Presentation

Our 1983 acquisition by Williams has been accounted for using the purchase method of accounting. Accordingly, Williams performed an allocation of the purchase price to our assets and liabilities, based on their estimated fair values at the time of the acquisition. Williams has not pushed down the purchase price allocation (amounts in excess of original cost) of $69.8 million, as of June 30, 2007, to us as current Federal Energy Regulatory Commission (FERC) policy does not permit us to recover these amounts through our rates. The accompanying financial statements reflect our original basis in our assets and liabilities.

The condensed financial statements have been prepared from our books and records. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. The condensed unaudited financial statements include all adjustments both normal recurring and others which, in the opinion of our management, are necessary to present fairly our financial position at June 30, 2007 and December 31, 2006, and results of operations for the three and six month periods ended June 30, 2007 and 2006, and cash flows for the six months ended June 30, 2007 and 2006. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in our 2006 Annual Report on Form 10-K and 2007 First Quarter Report on Form 10-Q.

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 condensed financial statements and accompanying notes. Actual results could differ from those estimates. Estimates and assumptions which, in the opinion of management, are significant to the underlying amounts included in the financial statements and for which it would be reasonably possible that future events or information could change those estimates include: 1) revenues subject to refund; 2) litigation-related contingencies; 3) environmental remediation obligations; 4) impairment assessments of long-lived assets; 5) deferred and other income taxes; 6) depreciation; 7) pension and other post-employment benefits; and 8) asset retirement obligations.

As a participant in Williams’ cash management program, we make advances to and receive advances from Williams. The advances are represented by demand notes. The interest rate on intercompany demand notes is based upon the weighted average cost of Williams’ debt outstanding at the end of each quarter.

Recent Accounting Standards

Effective January 1, 2007, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). The Interpretation prescribes guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. To recognize a tax position, the enterprise determines whether it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit, determined on a cumulative probability basis, that is greater than 50 percent likely of being realized upon ultimate settlement.

NORTHWEST PIPELINE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

FIN 48 is effective for fiscal years beginning after December 15, 2006. The cumulative effect of applying the Interpretation must be reported as an adjustment to the opening balance of retained earnings in the year of adoption. We adopted FIN 48 beginning January 1, 2007, as required. The adoption of FIN 48 did not have a material effect on our financial position or results of operations.

Our policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As of January 1, 2007, the IRS examination of Williams’ consolidated U.S. income tax return for 2002 was in process. The Williams’ consolidated U.S. income tax return incorporates our tax information. During the first quarter of 2007, the IRS also commenced examination of Williams’ 2003 through 2005 consolidated U.S. income tax returns. IRS examinations for 1996 through 2001 have been completed but the years remain open while certain issues are under review with the Appeals Division of the IRS. The statute of limitations for most states expires one year after IRS audit settlement.

FERC Accounting and Reporting Guidance

On March 29, 2007, the FERC issued “Commission Accounting and Reporting Guidance to Recognize the Funded Status of Defined Benefit Postretirement Plans.” The guidance is being provided to all jurisdictional entities to ensure proper and consistent implementation of Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (SFAS No. 158) for FERC financial reporting purposes beginning with the 2007 FERC Form 2 to be filed in 2008. We completed our evaluation and applied the FERC guidance during the second quarter of 2007. It had no effect on our financial statements.

Change in Accounting Estimate

In the second quarter of 2007, we recorded $16.6 million in income for a change in accounting estimate related to a pension regulatory liability. We have historically recorded a regulatory asset or liability for the difference between pension expense as estimated under Statement of Financial Accounting Standards No. 87, “Employer’s Accounting for Pensions,” and the amount we have funded as a contribution to our pension plans. As a result of recent information, including the most recent rate filing, we have re-assessed the probability of refunding or recovering this difference and have concluded that it is not probable that it will be refundable or recoverable in future rates.

Reclassifications

A regulatory asset has been recorded in connection with our asset retirement obligations, and is being recovered through the negative salvage component of depreciation included in our rates. The negative salvage component of accumulated depreciation has been previously classified as a non-current regulatory liability. Beginning in 2007, the regulatory asset has been offset against the regulatory liability and prior periods have been reclassified to conform to the current period presentation.

Certain reclassifications have been made to the 2006 financial statements to conform to the 2007 presentation, including reflecting the change in bank overdrafts as financing activities and additional changes in capital related accounts payable as investing activities in the condensed statement of cash flows.

2. RATE AND REGULATORY MATTERS

General Rate Case (Docket No. RP06-416)

NORTHWEST PIPELINE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

FERC approved the submitted settlement. The settlement specified an annual cost of service of $404 million and increased our general system firm transportation rates from $0.30760 to $0.40984 per Dth, effective January 1, 2007. Refunds to customers were made during April 2007.

3. CONTINGENT LIABILITIES AND COMMITMENTS

Legal Proceedings

In 1998, the United States Department of Justice (DOJ) informed Williams that Jack Grynberg, an individual, had filed claims in the United States District Court for the District of Colorado under the False Claims Act against Williams and certain of its wholly-owned subsidiaries including us. Mr. Grynberg had also filed claims against approximately 300 other energy companies alleging that the defendants violated the False Claims Act in connection with the measurement, royalty valuation and purchase of hydrocarbons. The relief sought was an unspecified amount of royalties allegedly not paid to the federal government, treble damages, a civil penalty, attorneys’ fees, and costs. In April 1999, the DOJ declined to intervene in any of the Grynberg qui tam cases, and in October 1999, the Panel on Multi-District Litigation transferred all of the Grynberg qui tam cases, including those filed against Williams, to the United States District Court for the District of Wyoming for pre-trial purposes. In October 2002, the court granted a motion to dismiss Grynberg’s royalty valuation claims. Grynberg’s measurement claims remained pending against Williams, including us, and the other defendants, although the defendants had filed a number of motions to dismiss these claims on jurisdictional grounds. In May 2005, the court-appointed special master entered a report which recommended that many of the cases be dismissed, including the case pending against us and certain of the other Williams defendants. On October 20, 2006, the District Court dismissed all claims against us. Mr. Grynberg filed a Notice of Appeal from the dismissals with the Tenth Circuit Court of Appeals effective November 17, 2006.

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, management believes that we are in substantial compliance with existing environmental requirements. We believe that, with respect to any additional expenditures required to meet applicable standards and regulations, the 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-1980’s, 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 and mercury contamination at certain gas metering sites. The PCBs were remediated pursuant to a Consent Decree with the U.S. Environmental Protection Agency in the late 1980’s and we conducted a voluntary clean-up of the hydrocarbon and mercury impacts in the early 1990’s. In 2005, the Washington Department of Ecology required us to reevaluate our previous mercury clean-ups in Washington. Currently, we are assessing the actions needed to bring the sites up to Washington’s current environmental standards. At June 30, 2007, we have accrued liabilities totaling approximately $7.6 million for these costs which are expected to be incurred over the period from now through 2011. We consider these costs associated with compliance with these environmental laws and regulations to be prudent costs incurred in the ordinary course of business and, therefore, recoverable through our rates.

Safety Matters

Pipeline Integrity Regulations We have developed an Integrity Management Plan that meets the United States Department of Transportation Pipeline and Hazardous Materials Safety Administration final rule that was issued pursuant to the requirements of the Pipeline Safety Improvement Act of 2002. In meeting the Integrity Regulations, we have identified the high consequence areas, including a baseline assessment and periodic reassessments to be completed within specified timeframes. Currently, we estimate that the cost to perform required assessments and remediation will be between $195 million and $215 million over the

NORTHWEST PIPELINE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

remaining assessment period of 2007 through 2012. The cost estimates have been revised to reflect refinements in the scope of required remediation and for increases in assessment and remediation costs. Management considers the costs associated with compliance with the rule to be prudent costs incurred in the ordinary course of business and, therefore, recoverable through our rates.

Other Matters

In addition to the foregoing, various other proceedings are pending against us incidental to our operations.

Summary

Litigation, arbitration, regulatory matters, environmental matters, and safety matters are subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations in the period in which the ruling occurs. Management, including internal counsel, currently believes that the ultimate resolution of the foregoing matters, taken as a whole and after consideration of amounts accrued, insurance coverage, recovery from customers or other indemnification arrangements, will not have a material adverse effect upon our future financial position.

Termination of the Grays Harbor Transportation Agreement

Effective January 2005, Duke Energy Trading and Marketing, LLC (Duke) terminated its firm transportation agreement related to the Grays Harbor Lateral. We invoiced Duke the amount we believe was contractually owed by Duke according to the terms of the facilities reimbursement agreement and our tariff. Duke initially paid us approximately $88 million for the remaining net book value of the lateral facilities and approximately $6 million towards the related income taxes. We invoiced Duke for an additional $30 million, representing the additional income taxes related to the termination of the contract. Duke disputed this additional amount. We recorded a reserve against the full $30 million invoiced and deferred recognition of the $6 million received from Duke related to income taxes.

On June 16, 2005, we filed a Petition for a Declaratory Order with the FERC requesting that it rule on our interpretation of our tariff to aid in resolving the dispute with Duke. On October 4, 2006, the FERC issued its Order on Petition for Declaratory Order (2006 Order) addressing a possible equitable solution but not directly addressing the tariff interpretation issues that we had presented.

On November 3, 2006, we filed a request for rehearing of the FERC’s 2006 Order seeking a FERC determination of our tariff language concerning mid-term contractual buyouts and further clarification of the underlying principles of a possible equitable solution.

On June 15, 2007, the Federal Energy Regulatory Commission issued its Order on Rehearing in response to our request for rehearing, reaffirming its 2006 Order, but providing specific clarifications as to how the Duke buyout amount should be calculated with respect to related taxes. As a result of the Order on Rehearing, $6 million of previously deferred income was recognized in June 2007. Based upon terms of the Order, we are also seeking an additional $14 million (including interest) from Duke, for which no income has been recognized at June 30, 2007.

4. DEBT AND FINANCING ARRANGEMENTS

Revolving Credit and Letter of Credit Facilities

Under Williams’ $1.5 billion unsecured revolving credit facility, letters of credit totaling $28.0 million, none of which were issued on our behalf, have been issued by the participating institutions and no revolving credit loans were outstanding under the facility at June 30, 2007.

On May 9, 2007, Williams amended its $1.5 billion unsecured credit facility, extending the maturity date

NORTHWEST PIPELINE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

from May 1, 2009 to May 1, 2012. Applicable borrowing rates and commitment fees for investment grade credit ratings were also modified.

Long-Term Debt

Current maturities

The current maturities of long-term debt at June 30, 2007 are primarily associated with $250 million of 6.625 percent notes that mature on December 1, 2007. We plan to refinance this debt.

Issuances and retirements

On April 4, 2007, we retired $175 million of 8.125 percent senior unsecured notes due 2010. We paid premiums of approximately $7.1 million in conjunction with the early debt retirement. As such amounts are deemed recoverable through rates, these premiums are deferred as a component of deferred charges on our condensed balance sheet and amortized over the life of the original debt.

On April 5, 2007, we issued $185 million aggregate principal amount of 5.95 percent senior unsecured notes due 2017 to certain institutional investors in a private debt placement.

Registration payment arrangements

Under the terms of our $185 million 5.95 percent senior unsecured notes mentioned above, we are obligated to file a registration statement for an offer to exchange the notes for a new issue of substantially identical notes issued under the Securities Act of 1933, as amended, within 180 days from closing and use commercially reasonable efforts to cause the registration statement to be declared effective within 270 days after closing. We may be required to provide a shelf registration statement to cover resales of the notes under certain circumstances. We may also be required to pay additional interest, up to a maximum of 0.5 percent annually, if we fail to satisfy these obligations. We launched an exchange offer on July 26, 2007, which will expire on August 23, 2007, unless we choose to extend the expiration.

5. TRANSACTIONS WITH AFFILIATES

Included in our operating revenues for the six months ending June 30, 2007 and 2006 are amounts received from affiliates for transportation and exchange transactions of $3.8 million and $0.5 million, respectively. The rates charged to provide services to affiliates are the same as those that are charged to similarly-situated nonaffiliated customers.

Williams has a policy of charging subsidiary companies for management services provided by the parent company and other affiliated companies. Included in our administrative and general expenses for the six months ending June 30, 2007 and 2006 are $8.9 million and $7.6 million, respectively, for such corporate expenses charged by Williams and other affiliated companies. Management considers the cost of these services to be reasonable.

6. COMPREHENSIVE INCOME

Comprehensive income is as follows:

NORTHWEST PIPELINE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(Thousands of Dollars)						(Thousands of Dollars)
Net income	$	37,941		$	17,474		$	61,921		$	33,376
Gain on cash flow hedges		—			387			—			387
Reclassification of cash flow hedge gain into earnings, net of tax		(10	)		(2	)		(19	)		(2	)
Pension benefits, net of tax
Amortization of prior service cost		12			—			24			—
Amortization of net actuarial loss		290			—			597			—

Total comprehensive income	$	38,233		$	17,859		$	62,523		$	33,761

The gain on cash flow hedges for the three and six months ending June 30, 2006 represents a realized gain on forward starting interest rate swaps that we entered into prior to our issuance of fixed rate, long-term debt in the second quarter 2006. The swaps, which were settled near the date of the debt issuance, hedged the variability of forecasted interest payments arising from changes in interest rates prior to the issuance of our fixed rate debt.

ITEM 2. Management’s Narrative Analysis of Results of Operations

GENERAL

The following discussion should be read in conjunction with the financial statements, notes and management’s narrative analysis of the results of operations contained in Items 7 and 8 of our 2006 Annual Report on Form 10-K and with the condensed financial statements and notes thereto contained in Item 2 of our 2007 first quarter report on Form 10-Q and within this report.

Recent Event

In July 2007, Williams announced its intention to create a new, publicly traded master limited partnership that will own interstate natural gas pipeline assets. An affiliate of ours will serve as the general partner of the new pipeline master limited partnership. The initial asset in the new pipeline partnership will be an interest in Northwest Pipeline. Williams will continue to own the remaining interest and will continue to operate Northwest Pipeline.

General Rate Case (Docket No. RP06-416)

On June 30, 2006, we filed a general rate case under Section 4 of the Natural Gas Act. On July 31, 2006, the FERC issued an Order accepting our filing and suspended the effective date of the new rates for five months, to become effective January 1, 2007, subject to refund. On January 31, 2007, we filed a stipulation and settlement agreement to resolve all outstanding issues in our pending rate case. On March 30, 2007, the FERC approved the submitted settlement. The settlement specified an annual cost of service of $404 million and increased our general system firm transportation rates from $0.30760 to $0.40984 per Dth, effective January 1, 2007. Refunds to customers were made during April 2007.

RESULTS OF OPERATIONS

ANALYSIS OF FINANCIAL RESULTS

This analysis discusses financial results of our operations for the six-month periods ended June 30, 2007 and 2006. Variances due to changes in price and volume 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 $46.1 million, or 29 percent. Higher rates resulting from our rate case are the primary source of this increase.

Our transportation service accounted for 97 percent and 96 percent of our operating revenues for the six-month periods ended June 30, 2007 and 2006, respectively. Additionally, gas storage service accounted for 3 percent of operating revenues for each of the six-month periods ended June 30, 2007 and 2006.

Operating expenses decreased $8.9 million, or 9 percent. This decrease is due primarily to the June 2007 reversal of our pension regulatory liability of $16.6 million as described in Note 1 of the Notes to Condensed Financial Statements and reduction of our accrued ad valorem taxes of $1.8 million reflecting lower than expected 2007 tax assessments on our property. These decreases were partially offset by a $4.2 million increase in depreciation related to new property additions, a $2.2 million increase in labor, a $1.2 million increase in group insurance expense, a $1.1 million increase in management services provided by Williams and other affiliates, and a $0.8 million increase in lease expense.

Other income decreased $1.4 million, or 12 percent, primarily due to a $4.2 million decrease in the allowance for equity funds used during construction resulting from the lower capital expenditures in 2007, a $1.3 million decrease in interest income from affiliates resulting from note repayments from Williams, and a $0.9 million decrease in other interest income resulting from lower short-term investments. Also adding to this decrease is the 2006 settlement of a contribution in aid of construction associated with our Capacity Replacement Project of $0.9 million. These decreases were partially offset by the recognition of $6.0 million of previously deferred income related to the termination of the Grays Harbor transportation agreement as discussed in Note 3 of the Notes to Condensed Financial Statements.

Interest charges increased $6.2 million, or 32 percent, due primarily to the issuance of $175 million 7 percent debt due 2016 in June of 2006 and the issuance of $185 million 5.95 percent debt due 2017 in April of 2007, partially offset by the early retirement of $175 million 8.125 percent debt due 2010 in April of 2007. A $0.7 million decrease in the allowance for borrowed funds used during construction related to the lower capital expenditures in 2007 and a $0.6 million increase in other interest also contributed to this increase.

The provision for income taxes increased $18.9 million, due primarily to higher pre-tax income in 2007 as compared to 2006.

The following table summarizes volumes and capacity for the periods indicated:


	Six Months Ended June 30,
	2007		2006
	(In trillion British Thermal
	Units)
Total Throughput (TBtu)		360		322
Average Daily Transportation Volumes (TBtu)		2.0		1.8
Average Daily Reserved Capacity Under Base Firm Contracts, excluding peak capacity (TBtu)		2.5		2.5
Average Daily Reserved Capacity Under Short-
Term Firm Contracts (TBtu) (1)		0.8		0.8


(1)		Includes additional capacity created from time to time through the installation of new receipt or delivery points or the segmentation of existing mainline capacity. Such capacity is generally marketed on a short-term firm basis.

CAPITAL EXPENDITURES

Our capital expenditures for the six months ended June 30, 2007 were $68.6 million, compared to $136.3 million for the six months ended June 30, 2006. The decrease is primarily due to the completion of the Capacity Replacement Project in late 2006. We anticipate 2007 capital expenditures will be between $145 million and $165 million. These expenditures will include maintenance capital expenditures, including expenditures required for the Pipeline Safety Improvement Act of 2002, and the Parachute Lateral project.

Parachute Lateral Project

In January 2006, we filed an application with the FERC to construct a 38-mile lateral (Parachute lateral) that would provide additional transportation capacity from the Parachute area to the Greasewood area in northwest Colorado. In August 2006, the FERC granted us the requested certificate and we commenced construction of the facilities. The Parachute lateral provides new capacity of 450 MDth/day through a 30-inch diameter line and is estimated to cost $86 million. The lateral was placed into service in May 2007.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act) (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 and our Vice President and Treasurer. Based upon that evaluation, our Senior Vice President and our Vice President and Treasurer have concluded that our Disclosure Controls and procedures were effective at a reasonable assurance level.

Our management, including our Senior Vice President and our Vice President and Treasurer, does not expect that our Disclosure Controls or our internal controls 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 the Internal Controls will be modified as systems change and conditions warrant.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control during the second quarter of 2007 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

See discussion in Note 2 of the Notes to Condensed Financial Statements included herein.

ITEM 1A. RISK FACTORS.

There are no material changes to the Risk Factors previously disclosed in Part I, Item 1A. Risk Factors in our 2006 Annual Report on Form 10-K and Part II, Item 1A. Risk Factors in our 2007 First Quarter Report on Form 10-Q.

ITEM 6. EXHIBITS.

The following instruments are included as exhibits to this report. Those exhibits below incorporated by reference herein are indicated as such by the information supplied in the parenthetical thereafter. If no parenthetical appears after an exhibit, copies of the instrument have been included herewith.


(4	)	Instruments defining the rights of security holders, including indentures:
		-	1	Indenture, dated as of April 5, 2007, between Northwest Pipeline Corporation and The Bank of New York. (Exhibit 4.1 to Form 8-K filed April 6, 2007)

(10	)	Material contracts
		-	1	Amendment Agreement, dated May 9, 2007, among The Williams Companies, Inc., Williams Partners L.P., Northwest Pipeline Corporation, Transcontinental Gas Pipe Line Corporation, certain banks, financial institutions and other institutional lenders and Citibank, N.A., as Administrative Agent (Exhibit 10.1 to The Williams Companies, Inc. Form 8-K filed May 15, 2007 (Commission File Number 1-4174) and incorporated by reference as Exhibit 10.1 to Form 8-K filed May 15, 2007)

		-	2	Registration Rights Agreement, dated as of April 5, 2007, among Northwest Pipeline Corporation and Greenwich Capital Markets, Inc. and Banc of America Securities LLC, acting on behalf of themselves and the several initial purchasers listed on Schedule I thereto. (Exhibit 10.1 to Form 8-K filed April 6, 2007)

(31	)	Section 302 Certifications
		-	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.

		-	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	)	Section 906 Certification
		-	1	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.


	NORTHWEST PIPELINE CORPORATION Registrant
	By:	/s/ R. Rand Clark
		R. Rand Clark
		Controller (Duly Authorized Officer and Chief Accounting Officer)

	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)		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

	c)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


By:		/s/Phillip D. Wright

		Phillip D. Wright
		Senior Vice President
		(Principal Executive Officer)

	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)		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

	c)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


By:		/s/ Richard D. Rodekohr
		Richard D. Rodekohr
		Vice President and Treasurer
		(Principal Financial Officer)

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1.		I have reviewed this Quarterly Report on Form 10-Q of Northwest Pipeline Corporation;

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 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)), for the registrant and have:

	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.


/s/ Phillip D. Wright

Phillip D. Wright
Senior Vice President
August 7, 2007

/s/ Richard D. Rodekohr

Richard D. Rodekohr
Vice President and Treasurer
August 7, 2007