The consolidated financial statements include the accounts of wholly owned subsidiaries whose investments in joint venture, energy-related businesses are accounted for under the equity method. Our ownership interest in each entity is included in “Equity method investments in non-utility activities” in “Noncurrent Assets” in the Consolidated Balance Sheets. Earnings or losses from equity method investments are included in “Income from equity method investments” in “Other Income (Expense)” in the Consolidated Statements of Comprehensive Income.

As of October 31, 2012, there were no amounts that represented undistributed earnings of our 50% or less owned equity method investments in our retained earnings.

We own 21.49% of the membership interests in Cardinal Pipeline Company, L.L.C. (Cardinal), a North Carolina limited liability company. The other members are subsidiaries of The Williams Companies, Inc., and SCANA Corporation. Cardinal owns and operates an intrastate natural gas pipeline in North Carolina and is regulated by the NCUC. Cardinal has firm, long-term service agreements with local distribution companies for 100% of the firm transportation capacity on the pipeline. Cardinal is dependent on the Williams-Transco pipeline system to deliver gas into its system for service to its customers. Cardinal's long-term debt is nonrecourse to the members and is secured by Cardinal's assets and by each member's equity investment in Cardinal.

In October 2009, we reached an agreement with Progress Energy Carolinas, Inc. (PEC), now a subsidiary of DEC, to provide natural gas delivery service to a power generation facility to be built at their Wayne County, North Carolina site. To provide that delivery service, we executed an agreement with Cardinal, which was approved by the NCUC in May 2010, to expand our firm capacity requirement on Cardinal to serve PEC. This required Cardinal to invest in a new compressor station and expanded meter stations in order to increase the capacity of its system for us and another customer. As an equity member of Cardinal, we made capital contributions related to this system expansion from January 2011 through June 2012. As of October 31, 2012, our 2012 fiscal year contributions related to this expansion were $3.6 million, and our total contributions related to this expansion were $9.8 million. Cardinal's expansion service for the project was placed into service on June 1, 2012.

Our natural gas delivery service for PEC's Wayne County generation project was placed into service on June 1, 2012. The charges we incur as transportation costs from Cardinal are passed through to PEC under the terms of our natural gas delivery service agreement with PEC. Our service subscription to Cardinal's capacity following the system expansion increased from approximately 37% to approximately 53%. Subsequent to the project being placed into service, members' capital was replaced with $45 million of long-term debt issued by Cardinal on June 22, 2012, and we received a distribution of $5.4 million as a partial return of our capital contributions.

Cardinal enters into interest-rate swap agreements to modify the interest characteristics of its long-term debt. Our share of movements in the market value of these agreements are recorded as a hedge in “Accumulated other comprehensive loss” in “Stockholders' equity” in the Consolidated Balance Sheets.

We have related party transactions as a transportation customer of Cardinal, and we record the transportation costs charged by Cardinal in “Cost of Gas” in the Consolidated Statements of Comprehensive Income. For each of the years ended October 31, 2012, 2011 and 2010, these transportation costs and the amounts we owed Cardinal as of October 31, 2012 and 2011 are as follows.

In thousands	2012		2011		2010

Transportation costs	$	6,613	$	4,104	$	4,104
Trade accounts payable		855		349

Summarized financial information provided to us by Cardinal for 100% of Cardinal as of September 30, 2012 and 2011, and for the twelve months ended September 30, 2012, 2011 and 2010 is presented below.

In thousands	2012		2011		2010

Current assets	$	9,179	$	25,868
Noncurrent assets		120,437		88,329
Current liabilities		1,786		5,665
Noncurrent liabilities		45,702		24,225
Revenues		16,165		13,633	$	13,633
Gross profit		16,165		13,633		13,633
Income before income taxes		10,433		6,473		6,375

We own 40% of the membership interests in Pine Needle LNG Company, L.L.C. (Pine Needle), a North Carolina limited liability company. The other members are the Municipal Gas Authority of Georgia and subsidiaries of The Williams Companies, Inc., SCANA Corporation and Hess Corporation. Pine Needle owns an interstate LNG storage facility in North Carolina and is regulated by the FERC. Pine Needle has firm, long-term service agreements for 100% of the storage capacity of the facility, of which Piedmont subscribes to approximately 64%.

Pine Needle enters into interest-rate swap agreements to modify the interest characteristics of its long-term debt. Our share of movements in the market value of these agreements are recorded as a hedge in “Accumulated other comprehensive loss” in “Stockholders' equity” in the Consolidated Balance Sheets. Pine Needle's long-term debt is nonrecourse to the members and is secured by Pine Needle's assets and by each member's equity investment in Pine Needle.

We have related party transactions as a customer of Pine Needle, and we record the storage costs charged by Pine Needle in “Cost of Gas” in the Consolidated Statements of Comprehensive Income. For the years ended October 31, 2012, 2011 and 2010, these gas storage costs and the amounts we owed Pine Needle as of October 31, 2012 and 2011 are as follows.

In thousands	2012		2011		2010

Gas storage costs	$	10,410	$	10,677	$	12,158
Trade accounts payable		914		849

Summarized financial information provided to us by Pine Needle for 100% of Pine Needle as of September 30, 2012 and 2011, and for the twelve months ended September 30, 2012, 2011 and 2010 is presented below.

In thousands	2012		2011		2010

Current assets	$	11,937	$	10,984
Noncurrent assets		77,463		74,472
Current liabilities		4,278		1,826
Noncurrent liabilities		35,851		35,657
Revenues		16,390		17,666	$	18,808
Gross profit		16,390		17,666		18,808
Income before income taxes		5,832		5,763		8,317

We own 15% of the membership interests in SouthStar Energy Services LLC (SouthStar), a Delaware limited liability company. The other member is Georgia Natural Gas Company (GNGC), a wholly-owned subsidiary of AGL Resources, Inc. SouthStar primarily sells natural gas to residential, commercial and industrial customers in the southeastern United States and Ohio with most of its business being conducted in the unregulated retail gas market in Georgia. On January 1, 2010, we sold half of our 30% membership interest in SouthStar to GNGC and retained a 15% earnings and membership share in SouthStar after the sale. At closing, we received $57.5 million from GNGC resulting in an after-tax gain of $30.3 million, or $.42 per diluted share for 2010. GNGC has no further rights to acquire our remaining 15% interest. We account for our investment in SouthStar using the equity method, as we have board representation with voting rights equal to GNGC on significant governance matters and policy decisions, and thus, exercise significant influence over the operations of SouthStar.

SouthStar's business is seasonal in nature as variations in weather conditions generally result in greater revenue and earnings during the winter months when weather is colder and natural gas consumption is higher. Also, because SouthStar is not a rate-regulated company, the timing of its earnings can be affected by changes in the wholesale price of natural gas. While SouthStar uses financial contracts to moderate the effect of price and weather changes on the timing of its earnings, wholesale price and weather volatility can cause variations in the timing of the recognition of earnings.

These financial contracts, in the form of futures, options and swaps, are considered to be derivatives and fair value is based on selected market indices. Our share of movements in the market value of these contracts are recorded as a hedge in “Accumulated other comprehensive loss” in “Stockholders' equity” in the Consolidated Balance Sheets.

We have related party transactions as we sell wholesale gas supplies to SouthStar, and we record the amounts billed to SouthStar in “Operating Revenues” in the Consolidated Statements of Comprehensive Income. For the years ended October 31, 2012, 2011 and 2010, our operating revenues from these sales and the amounts SouthStar owed us as of October 31, 2012 and 2011 are as follows.

In thousands	2012		2011		2010

Operating revenues	$	2,442	$	4,961	$	5,083
Trade accounts receivable		473		736

Summarized financial information provided to us by SouthStar for 100% of SouthStar as of September 30, 2012 and 2011, and for the twelve months ended September 30, 2012, 2011 and 2010 is presented below.

In thousands	2012		2011		2010

Current assets	$	152,422	$	169,286
Noncurrent assets		9,803		9,292
Current liabilities		42,197		62,869
Noncurrent liabilities		1		141
Revenues		585,291		733,987	$	843,483
Gross profit		161,122		176,010		183,748
Income before income taxes		94,631		103,704		107,096

We own 50% of the membership interests in Hardy Storage Company, LLC (Hardy Storage), a West Virginia limited liability company. The other owner is a subsidiary of Columbia Gas Transmission Corporation, a subsidiary of NiSource Inc. Hardy Storage owns and operates an underground interstate natural gas storage facility located in Hardy and Hampshire Counties, West Virginia, and is regulated by the FERC. Hardy Storage has firm, long-term service agreements for 100% of the storage capacity of the facility, of which Piedmont subscribes to approximately 40%.

In June 2006, Hardy Storage signed a note purchase agreement for interim notes for construction financing. The members of Hardy Storage each agreed to guarantee 50% of the construction financing as well as a separate guaranty of 50% of construction expenditures should contingency wells be required based on the performance of the facility over the first three years after the in-service date. We recorded a liability of $1.2 million for the fair value of this guaranty based on the present value of 50% of the construction financing outstanding at the end of each quarter with the risk of the project evaluated at each quarter end, with a corresponding increase to our investment account in the venture. In March 2010, Hardy Storage completed their conversion to long-term project financing, which terminated our guaranty related to the interim financing with no payments having been made. We reversed the liability and our investment account was adjusted accordingly to reflect the elimination of the guaranty. The long-term project financing is nonrecourse to the members of Hardy Storage and their parent entities.

We have related party transactions as a customer of Hardy Storage, and we record the storage costs charged by Hardy Storage in “Cost of Gas” in the Consolidated Statements of Comprehensive Income. For the years ended October 31, 2012, 2011 and 2010, these gas storage costs and the amounts we owed Hardy Storage as of October 31, 2012 and 2011 are as follows.

In thousands	2012		2011		2010

Gas storage costs	$	9,702	$	9,702	$	9,386
Trade accounts payable		808		808

Summarized financial information provided to us by Hardy Storage for 100% of Hardy Storage as of October 31, 2012 and 2011, and for the twelve months ended October 31, 2012, 2011 and 2010 is presented below.

In thousands	2012		2011		2010

Current assets	$	10,302	$	7,358
Noncurrent assets		164,374		167,221
Current liabilities		14,534		10,945
Noncurrent liabilities		95,061		102,490
Revenues		24,359		24,378	$	23,562
Gross profit		24,359		24,378		23,562
Income before income taxes		9,939		9,657		8,249

On November 9, 2012, we entered into an agreement to become a 24% equity member of Constitution Pipeline Company, LLC, a Delaware limited liability company. The other members are subsidiaries of The Williams Companies, Inc. and Cabot Oil & Gas Corporation. A subsidiary of The Williams Companies is the operator of the project. The purpose of the joint venture is to construct and operate a 121 mile interstate natural gas pipeline and related facilities connecting gathering systems in Susquehanna County, Pennsylvania to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New York. We have committed to fund an amount in proportion to our ownership interest for the development and construction of the new pipeline, which is expected to cost between $700 – $800 million. In November 2012, we made an initial investment of $4.8 million, and we expect our total contributions will be an estimated $180 million through 2015. The target in-service date of the project is March 2015. The capacity of the pipeline is 100% subscribed under fifteen year service agreements with a negotiated rate structure.