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 ~~June 30, 2017~~March 31, 2018



¨	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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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.

Table of Contents

NORTHWEST PIPELINE LLC

FORM 10-Q

INDEX

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~~“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:

Our and our affiliates' future credit ratings;

Amounts and nature of future capital expenditures;

Expansion and growth of our business and operations;

~~Expected in service dates for capital projects;~~

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.

Table of Contents

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

Availability of supplies, including lower than anticipated volumes from third parties, 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 capital expenditure budget;

~~Whether Williams will be able to effectively manage the transition in its board of directors and management as well as successfully execute its business restructuring;~~

Our ability to successfully expand our facilities and operations;

Development and rate of adoption of alternative energy sources;

The impact of operational and ~~development~~developmental hazards, unforeseen interruptions, and the availability of adequate insurance ~~coverage for such interruptions;~~coverage;

The impact of existing and future laws (including, but not limited to, the Tax Cuts and Job Acts of 2017), regulations (including, but not limited to, the FERC’s “Revised Policy Statement on Treatment of Income Taxes” in Docket No. PL17-1-000), the regulatory environment, environmental liabilities, and litigation, as well as our ability to obtain necessary permits and approvals, and achieve favorable rate proceeding outcomes;

Our 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.

~~Table of Contents~~

For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K filed with the SEC on February 22, ~~2017.~~2018 and in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

~~iii~~ii

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

NORTHWEST PIPELINE LLC

STATEMENT OF COMPREHENSIVE INCOME

(Thousands of Dollars)

(Unaudited)


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2017			2016			2017			2016			2018			2017
OPERATING REVENUES	$	115,094		$	115,569		$	235,594		$	236,017
OPERATING REVENUES:
Natural gas transportation													$	108,865		$	117,333
Natural gas storage													3,045			3,152
Other													16			15
Total operating revenue													111,926			120,500
OPERATING EXPENSES:
General and administrative	13,421			13,038			27,502			26,865			12,733			14,081
Operation and maintenance	19,125			21,231			34,522			38,483			15,168			15,452
Depreciation	25,313			25,414			50,829			50,729			26,329			25,461
Regulatory debits	1,213			871			2,461			1,720			939			1,247
Taxes, other than income taxes	4,206			4,312			8,987			8,664			4,661			4,781
Regulatory charge resulting from tax rate change (Note 3)													5,814			—
Other expenses, net													315			—
Total operating expenses	63,278			64,866			124,301			126,461			65,959			61,022

OPERATING INCOME	51,816			50,703			111,293			109,556			45,967			59,478

OTHER (INCOME) AND OTHER EXPENSES:
Interest expense	8,448			10,952			16,811			22,429			8,064			8,362
Allowance for equity and borrowed funds used during construction	(362		)	(242		)	(512		)	(625		)
Allowance for equity and borrowed funds used during construction (AFUDC)													(411		)	(150		)
Miscellaneous other (income) expenses, net	98			31			213			669			(481		)	117
Total other (income) and other expenses	8,184			10,741			16,512			22,473			7,172			8,329

NET INCOME	43,632			39,962			94,781			87,083			38,795			51,149

CASH FLOW HEDGES:
Amortization of cash flow hedges into Interest expense	—			(13		)	—			(28		)	—			—
COMPREHENSIVE INCOME	$	43,632		$	39,949		$	94,781		$	87,055		$	38,795		$	51,149

See accompanying notes.

NORTHWEST PIPELINE LLC

BALANCE SHEET

(Thousands of Dollars)

(Unaudited)


	June 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
ASSETS

CURRENT ASSETS:
Cash	$	—	$	—	$	—	$	—
Receivables:
Trade	38,172		42,702		39,272		38,884
Affiliated companies	1,505		1,321		2,048		1,921
Advances to affiliate	123,999		45,137		167,486		137,666
Other	595		598		1,195		2,618
Materials and supplies	10,162		10,106		10,101		10,084
Exchange gas due from others	1,082		3,869		2,512		2,720
Prepayments and other	6,762		5,740		4,882		6,423
Total current assets	182,277		109,473		227,496		200,316

PROPERTY, PLANT AND EQUIPMENT, at cost	3,344,867		3,319,516		3,404,327		3,396,776
Less-Accumulated depreciation	1,462,287		1,424,855
Less-Accumulated depreciation and amortization					1,531,439		1,508,245
Total property, plant and equipment, net	1,882,580		1,894,661		1,872,888		1,888,531

OTHER ASSETS:
Deferred charges	1,112		2,122		832		934
Regulatory assets	31,114		34,900		22,604		22,747
Total other assets	32,226		37,022		23,436		23,681

Total assets	$	2,097,083	$	2,041,156	$	2,123,820	$	2,112,528

See accompanying notes.

NORTHWEST PIPELINE LLC

BALANCE SHEET

(Thousands of Dollars)

(Unaudited)


	June 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
LIABILITIES AND OWNER’S EQUITY
LIABILITIES AND MEMBER’S EQUITY

CURRENT LIABILITIES:
Payables:
Trade	$	13,372	$	11,243	$	7,583	$	11,053
Affiliated companies	6,607		7,293		5,665		11,298
Accrued liabilities:
Taxes, other than income taxes	12,719		11,435		15,199		11,617
Interest	3,593		3,501		11,472		3,677
Exchange gas due to others	3,181		4,169		2,793		4,500
Exchange gas offset	1,881		1,428		1,370		1,499
Customer advances	1,027		1,893		2,552		2,092
Other	9,968		5,224		3,379		6,655
Long-term debt due within one year	249,737		184,924		249,943		249,874
Total current liabilities	302,085		231,110		299,956		302,265

LONG-TERM DEBT	331,729		334,236		331,708		331,748

OTHER NONCURRENT LIABILITIES:
Asset retirement obligations	59,880		60,762		68,223		67,100
Regulatory liabilities	35,367		30,717		254,273		246,504
Other	3,227		7,316		1,684		1,730
Total other noncurrent liabilities	98,474		98,795		324,180		315,334
CONTINGENT LIABILITIES AND COMMITMENTS (Note 2)
OWNER’S EQUITY:
Owner’s capital	1,073,892		1,073,892

CONTINGENT LIABILITIES AND COMMITMENTS (Note 4)

MEMBER’S EQUITY:
Member’s capital					1,073,892		1,073,892
Retained earnings	290,903		303,123		94,084		89,289
Total owner’s equity	1,364,795		1,377,015
Total liabilities and owner’s equity	$	2,097,083	$	2,041,156
Total member’s equity					1,167,976		1,163,181

Total liabilities and member’s equity					$	2,123,820	$	2,112,528

See accompanying notes.

NORTHWEST PIPELINE LLC

STATEMENT OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)


	Six months ended June 30,						Three months ended March 31,
	2017			2016			2018			2017
OPERATING ACTIVITIES:
Cash flows from operating activities:
Net income	$	94,781		$	87,083		$	38,795		$	51,149
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	50,829			50,729			26,329			25,461
Regulatory debits	2,461			1,720			939			1,247
Amortization of deferred charges and credits	683			(190		)	261			173
Allowance for equity funds used during construction	(388		)	(431		)	(317		)	(110		)
Changes in current assets and liabilities:
Trade and other accounts receivable	4,533			3,221			1,035			150
Affiliated receivables	(184		)	(218		)	(127		)	(215		)
Exchange gas due from others	2,787			658			208			1,574
Materials and supplies	(56		)	3			(17		)	(31		)
Other current assets	(1,022		)	(102		)	1,542			(277		)
Trade accounts payable	(962		)	799			(2,242		)	(2,949		)
Affiliated payables	(686		)	(5,476		)	(5,633		)	(2,366		)
Exchange gas due to others	(2,787		)	(658		)	(208		)	(1,573		)
Other accrued liabilities	5,691			(1,324		)	9,062			11,196
Changes in noncurrent assets and liabilities:
Deferred charges	298			(2,900		)	(1,811		)	820
Noncurrent liabilities	(1,055		)	5,697			7,343			2,554
Net cash provided by operating activities	154,923			138,611			75,159			86,803
FINANCING ACTIVITIES:
Payments of long-term debt	(185,000		)	(175,000		)
Proceeds from long-term debt	249,102			—
Debt issue costs	(2,082		)	—

Cash flows from financing activities:
Payments for debt issuance costs							(116		)	—
Cash distributions to parent	(107,000		)	(86,000		)	(34,000		)	(50,000		)
Net cash used in financing activities	(44,980		)	(261,000		)	(34,116		)	(50,000		)
INVESTING ACTIVITIES:

Cash flows from investing activities:
Property, plant and equipment:
Capital expenditures, net of equity AFUDC*	(31,493		)	(22,843		)	(11,940		)	(12,389		)
Contributions and advances for construction costs	365			252			1,097			(417		)
Disposal of property, plant and equipment, net	48			(364		)	(380		)	50
Advances to affiliates, net	(78,863		)	135,399			(29,820		)	(24,047		)
Proceeds from insurance	—			9,776
Net cash provided by (used in) investing activities	(109,943		)	122,220
Net cash used in investing activities							(41,043		)	(36,803		)

NET INCREASE (DECREASE) IN CASH	—			(169		)	—			—
CASH AT BEGINNING OF PERIOD	—			169			—			—
CASH AT END OF PERIOD	$	—		$	—		$	—		$	—
____________________________________
* Increases to property, plant and equipment	$	(33,894	)	$	(18,451	)	$	(9,108	)	$	(14,768	)
Changes in related accounts receivable, accounts payable, and accrued liabilities	2,401			(4,392		)
Changes in related accounts payable and accrued liabilities							(2,832		)	2,379
Capital expenditures, net of equity AFUDC	$	(31,493	)	$	(22,843	)	$	(11,940	)	$	(12,389	)

See accompanying notes.

~~NORTHWEST PIPELINE LLC~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~(Unaudited)~~

NORTHWEST PIPELINE LLC

STATEMENT OF COMPREHENSIVE INCOME

(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). In January 2017, Williams permanently waived the WPZ general partner's incentive distribution rights, converted its 2 percent general partner interest in WPZ to a non-economic interest, and purchased additional WPZ common units. At ~~June 30, 2017~~March 31, 2018, Williams owned an approximate 74 percent limited partner interest in WPZ.

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

General

The accompanying unaudited interim financial statements ~~do not include all the notes~~have been prepared from our books and records. Certain information and footnote disclosures normally included in ~~our annual~~ financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted in this Form 10-Q pursuant to Securities and ~~therefore, should be read in conjunction with the financial statements~~Exchange Commission rules and ~~notes thereto in our 2016 Annual Report on Form 10-K.~~regulations. The ~~accompanying~~ unaudited interim financial statements include all ~~adjustments both~~ normal recurring adjustments and others which, in the opinion of our management, are necessary to present fairly our interim financial statements. These interim unaudited financial statements should be read in conjunction with the financial statements and notes thereto in our 2017 Annual Report on Form 10-K.

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

Accounting Standards Issued ~~But Not Yet~~and Adopted

In ~~August 2016,~~May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-15 "Statement~~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 ~~Cash Flows~~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 ~~230)~~606): ~~Classification~~Deferral of ~~Certain Cash Receipts and Cash Payments"~~the Effective Date” (ASU ~~2016-15)~~2015-14). Per 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. ASU 2016-152015-14, the standard is effective for interim and annual reporting periods beginning after December 15, 2017. ~~Early~~

We adopted the provisions of ASC 606 effective January 1, 2018, utilizing the modified retrospective transition method for all contracts with customers, which included applying the provisions of ASC 606 beginning January 1, 2018, to all contracts not completed as of that date. There was no cumulative effect adjustment to retained earnings upon initially applying ASC 606 for periods prior to January 1, 2018.

For each revenue contract type, we conducted a formal contract review process to evaluate the impact of ASC 606. As a result of the adoption ~~is permitted. ASU 2016-15 requires a retrospective transition. We do not expect ASU 2016-15~~of ASC 606, there are no changes to ~~have a material impact on~~the timing of our revenue recognition or differences in the presentation in our condensed consolidated financial ~~statements.~~statements from those under the previous revenue standard. (See Note 2.)

Accounting Standards Issued But Not Yet Adopted

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. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. ASU 2016-13 requires varying transition methods for the different categories of amendments. We do not expect ASU 2016-13 to have a significant impact on our financial statements.

In February 2016, the FASB issued ASU 2016-02 ~~"Leases~~“Leases (Topic 842)"” (ASU 2016-02). ASU 2016-02 establishes a comprehensive new lease accounting model. ~~The~~ ASU 2016-02 clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease ~~classifications,~~accounting, and causes lessees to recognize leases on the balance sheet as a lease liability measured as the present value of the future lease payments with a corresponding right-of-use ~~asset.~~asset, with an exception for leases with a term of one year or less. Additional disclosures will also be required regarding the amount, timing, and uncertainty of cash flows arising from leases. In January 2018, the FASB issued ASU 2018-01 “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842” (ASU 2018-01) Per ASU 2018-01, land easements and right-of-way are required to be assessed under ASU 2016-02 to determine whether the arrangements are or contain a lease and permits an entity to elect a transition practical expedient to not apply ASU 2016-02 to land easements that exist or expired before the effective date of ASU 2016-02 and that were not previously assessed under the previous lease guidance in ASC Topic 840 “Leases”. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. ASU 2016-02 currently requires a modified retrospective transition for ~~capital~~financing or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements.

In January 2018, the FASB proposed an accounting standard update titled “Leases (Topic 842): Targeted Improvements”, which is an update to ASU 2016-02 allowing entities an additional transition method to the existing requirements whereby an entity could adopt the provisions of ASU 2016-02 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. We expect to adopt ASU 2016-02 effective January 1, 2019.

We are in the process of reviewing contracts to identify leases ~~as well as~~based on the modified definition of a lease, implementing a financial lease accounting system, and evaluating internal control changes to support management in the ~~applicability~~accounting for and disclosure of leasing activities. While we are still in the process of completing our implementation evaluation of ASU 2016-02, we currently believe the most significant changes to ~~contracts involving easement/rights-of-way.~~our financial statements relate to the recognition of a lease liability and offsetting right-of-use asset in our Balance Sheet for operating leases. We are also evaluating ASU 2016-02's currently available and proposed practical expedients on adoption.

~~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~~

2. REVENUE RECOGNITION

Our customers are comprised of public utilities, municipalities, gas marketers and producers, direct industrial users, and electrical generators.

A performance obligation is a ~~comprehensive new revenue recognition model designed~~promise in a contract to ~~depict the~~ transfer a distinct good or service (or integrated package of goods or ~~services~~services) to ~~a customer~~the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue, when, or as, the performance obligation is satisfied. A performance obligation is distinct if the service is separately identifiable from other items in ~~an amount that reflects~~ the ~~consideration the entity expects to be entitled to receive in exchange for those goods~~integrated package of products or services and ~~requires significantly enhanced~~if a customer can benefit from it on its own or with other resources that are readily available to the customer. Service revenue ~~disclosures. In August 2015,~~contracts contain a series of distinct services, with the ~~FASB issued ASU 2015-14 "Revenue from Contracts~~majority of our contracts having a single performance obligation that is satisfied over time as the customer simultaneously receives and consumes the benefits provided by our performance.

Certain customers reimburse us for costs we incur associated with ~~Customers~~construction of property, plant, and equipment utilized in our operations. As a rate-regulated entity applying ASC 980 "Regulated Operations" (Topic ~~606): Deferral~~980), we follow Federal Energy Regulatory Commission (FERC) guidelines with respect to reimbursement of construction costs. FERC tariffs only allow for cost reimbursement and are non-negotiable in nature; thus, the construction activities do not represent an ongoing major and central operation of our gas pipelines business and are not within the scope of ASC 606. Accordingly, cost reimbursements are treated as a reduction to the cost of the ~~Effective Date" (ASU 2015-14). Per ASU 2015-14,~~constructed assets.

Service Revenues

We are subject to regulation by certain state and federal authorities, including the ~~standard is effective~~FERC, with revenue derived from both firm and interruptible transportation and storage contracts. Firm transportation and storage agreements provide for ~~interim~~a reservation charge based on the pipeline or storage capacity reserved, and ~~annual reporting periods beginning after December 15, 2017. ASC 606~~a commodity charge based on the volume of natural gas scheduled, each at rates specified in our FERC tariffs or as negotiated with our customers, with contract terms that are generally long-term in nature. Most of our long-term contracts contain an evergreen provision, which allows the contracts to be extended beyond the specified contract term and until terminated generally by either ~~full retrospective~~us or ~~modified retrospective transition~~the customer, but in certain cases unilaterally by the customer, with advance notice of termination ranging from one to five years. Interruptible transportation and ~~early adoption is permitted~~storage agreements provide for ~~annual periods beginning after December 15, 2016.~~

~~NORTHWEST PIPELINE LLC~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~(Unaudited)~~a

volumetric charge based on actual commodity transportation or storage utilized in the period in which those services are provided, and the contracts are generally limited to one month periods or less. Our performance obligations include the following:

Guaranteed transportation or storage under firm transportation and storage contracts - an integrated package of services typically constituting a single performance obligation, which includes standing ready to provide such services and receiving, transporting or storing (as applicable), and redelivering commodities;

Interruptible transportation and storage under interruptible transportation and storage contracts - an integrated package of services typically constituting a single performance obligation, which includes receiving, transporting or storing (as applicable), and redelivering commodities upon nomination by the customer.

In situations where we consider the integrated package of services a single performance obligation, which represents a majority of our contracts with customers, we do not consider there to be multiple performance obligations because the nature of the overall promise in the contract is to stand ready (with regard to firm transportation and storage contracts), receive, transport or store, and redeliver natural gas to the customer; therefore, revenue is recognized at the completion of the integrated package of services and represents a single performance obligation.

We ~~continue~~recognize revenues for reservation charges over the performance obligation period, which is the contract term, regardless of the volume of natural gas that is transported or stored. Revenues for commodity charges from both firm and interruptible transportation services and storage services are recognized based on volumes of natural gas scheduled for delivery at the agreed upon delivery point or based on volumes of natural gas scheduled for injection or withdrawn from the storage facility because they specifically relate to ~~evaluate~~our efforts to transfer these distinct services. Generally, reservation charges and commodity charges are recognized as revenue in the ~~impact~~same period they are invoiced to our customers. As a result of the ~~standard~~ratemaking process, certain amounts collected by us may be subject to refunds upon the issuance of final orders by the FERC in pending rate proceedings. We record estimates of rate refund liabilities considering our and other third-party regulatory proceedings, advice of counsel, and other risks.

In the course of providing transportation services to customers, we may receive different quantities of natural gas from customers than the quantities delivered on behalf of those customers. The resulting imbalances are typically settled through the receipt or delivery of gas in the future. Customer imbalances to be repaid or recovered in-kind are recorded as Exchange gas due from others or Exchange gas due to others in our Balance Sheet. The difference between exchange gas due to us from customers and the exchange gas that we owe to customers is included in the Exchange gas offset in our Balance Sheet. These imbalances are valued at the average of the spot market rates at the Canadian border and the Rocky Mountain market as published in the SNL Financial "Bidweek Index - Spot Rates." Settlement of imbalances requires agreement between the pipelines and shippers as to allocations of volumes to specific transportation contracts and timing of delivery of gas based on operational conditions.

Revenue by Category

Our revenue disaggregation by major service line includes natural gas transportation, natural gas storage, and other, which are separately presented on the Statement of Comprehensive Income.

We do not have any contract assets or material contract liabilities.

Remaining Performance Obligations

The following table presents the transaction price allocated to the remaining performance obligations under certain contracts as of March 31, 2018. These primarily include reservation charges on contracted capacity on our ~~financial statements. For each revenue contract type, we~~firm transportation and storage contracts with customers. Amounts from certain contracts included in the table below reflect the rates from such services, which are ~~conducting a formal contract~~subject to the periodic review ~~process to evaluate~~and approval by the ~~impact, if any, that~~FERC, for the ~~new revenue standard may have. We are continuing our evaluation~~life of the ~~application of accounting for noncash consideration as it relates to certain contracts where we receive~~related contracts; however, these rates may change based on future rate cases or ~~retain natural gas as part of~~settlements approved by the ~~service arrangement. We are unable to determine the potential impact upon~~FERC and the amount and timing of ~~revenue recognition. We continue~~these changes is not currently known. As a practical expedient permitted by ASC 606, this table excludes the variable consideration component for commodity charges and consideration received prior to ~~evaluate and develop disclosures required under~~March 31, 2018, that will be recognized in future periods. As noted above, certain of our contracts contain evergreen provisions for periods beyond the ~~new standard, with a particular focus on~~initial term of the ~~scope of contracts subject to disclosure of~~contract. The remaining performance ~~obligations. Additionally,~~obligations as of March 31, 2018, does not consider potential future performance obligations for which the renewal has not been exercised. The table below also does not include contracts with customers for which the underlying facilities have not received FERC authorization to be placed into service.



	(Thousands)
2018 (remainder)	$	321,039
2019	422,432
2020	395,678
2021	374,003
2022	367,421
2023	316,348
Thereafter	1,758,779
Total	$	3,955,700

Accounts Receivable

We do not offer extended payment terms and typically receive payment within one month. We consider receivables past due if full payment is not received by the contractual due date. Our credit risk exposure in the event of nonperformance by the other parties is limited to the face value of the receivables. We perform ongoing credit evaluations of our customers' financial condition and require collateral from our customers, if necessary. Due to our customer base, we have ~~identified possible financial system~~ not historically experienced recurring credit losses in connection with our receivables.

Receivables from contracts with customers are included within Receivables - Trade andReceivables - Affiliated companies and ~~internal control changes necessary for adoption. We currently anticipate utilizing a modified retrospective transition upon~~receivables that are not related to contracts with customers comprise the ~~adoption~~balance of ~~ASC 606 as of January 1, 2018.~~Receivables - Advances to affiliate and Receivables - Other in our Balance Sheet.

2.3. RATE AND REGULATORY MATTERS

Rate Case Settlement Filing

On January 23, 2017, we filed for ~~Federal Energy Regulatory Commission (FERC)~~FERC approval a Stipulation and Settlement Agreement (Settlement) and were assigned Docket No. RP17-346. The Settlement specified an annual cost of service of $440 million and established a new general system firm Rate Schedule TF-1 (Large Customer) demand rate of $0.39294/Dth with a $0.00832 commodity rate (Phase 1) and a demand rate of $0.39033/Dth with a $0.00832 commodity rate (Phase 2). Phase 1 rates ~~become~~became effective January 1, 2018, with the Phase 2 rates becoming effective October 1, 2018. The annual cost of service does not change from Phase 1 to Phase 2, but the Phase 2 rates reflect the termination of fifteen-year levelized contracts that will now become Rate Schedule TF-1 (Large Customer) contracts. Provisions were included in the Settlement that we can file a general rate case to place new rates into effect after October 1, 2018, and that a general rate case must be filed for new rates to become effective no later than January 1, 2023.

Tax Reform

Rates charged to our customers are subject to the rate-making policies of the FERC. These policies permit an interstate pipeline to include in its cost-of-service an income tax allowance that includes a deferred income tax component. The ~~FERC has been without~~recently enacted Tax Cuts and Jobs Act signed into law on December 22, 2017 (Tax Reform), among other things, reduces the corporate federal income tax rates. As part of our Settlement discussed above, we agreed with our customers to record a ~~quorum since February 4, 2017.~~regulatory asset or liability for federal income tax rate increases or decreases due to subsequent legislation, such as Tax Reform. Therefore, we have established a regulatory liability of $5.8 million as of March 31, 2018, included within Regulatory Liabilities in our Balance Sheet. This ~~lack of quorum has left FERC unable to formally approve the Settlement. In response, on March 29, 2017, we filed tariff records~~liability will be amortized over a five-year period, coincidental with the ~~FERC to extend our requirement to file an NGA section 4 general~~next rate case "by not later than July 1, 2017" (as required in our prior Settlement in Docket No. RP12-490 and our pending 2017 Settlement in RP 17-346). These tariff records also provide a means to place the rate reductions of the 2017 Settlementgoing into ~~effect commencing January 1,~~effect.

Recent FERC Developments

On March 15, 2018, ~~until a quorum at FERC is restored and can formally approve the Settlement. This new filing was assigned Docket No. RP17-567. On April 12, 2017,~~ the FERC issued a policy statement regarding the recovery of income tax costs in rates of natural gas pipelines. The FERC found that an ~~order accepting~~impermissible double recovery results from granting a Master Limited Partnership (MLP) pipeline both an income tax allowance and a return on equity pursuant to the ~~tariff records effective May 1, 2017.~~discounted cash flow methodology. The FERC will no longer permit a MLP pipeline to recover an income tax allowance in its cost of service. The FERC further stated it will address the application of this policy to non-MLP partnership forms as those issues arise in subsequent proceedings. The FERC also issued a Notice of Proposed Rulemaking proposing a process that will allow it to determine which natural gas pipelines may be collecting unjust and unreasonable rates in light of the recent reduction in the corporate income tax rate in Tax Reform and this policy statement. Furthermore, the FERC issued a Notice of Inquiry seeking comments on the additional impacts of Tax Reform on jurisdictional rates, particularly whether, and if so how, the FERC should address changes relating to accumulated deferred income

tax amounts after the corporate income tax rate reduction and bonus depreciation rules, as well as whether other features of Tax Reform require FERC action. We are evaluating the impact of these developments and currently expect any associated impacts would be prospective and determined through subsequent rate proceedings. We also continue to monitor developments that may impact our regulatory liabilities resulting from Tax Reform. It is reasonably possible that our future tariff-based rates collected may be adversely impacted.

3.4. 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 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 ~~June 30, 2017,~~March 31, 2018, 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 two of these compressor stations. Remediation has been completed at eleven of the thirteen compressor stations. On the basis of the findings to date, we estimate that environmental assessment and

~~NORTHWEST PIPELINE LLC~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~(Unaudited)~~

remediation costs will total approximately ~~$4.4~~$3.0 million, measured on an undiscounted basis, and are expected to be incurred through 2020. At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, we had ~~accrued liabilities totaling~~ approximately ~~$4.4~~$3.0 million ~~and $4.4 million, respectively,~~accrued for these ~~costs.~~costs, $1.3 million recorded in Accrued liabilities-Other and $1.7 million in Other noncurrent liabilities-Other in both periodsin the accompanying Balance Sheet. 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 and various state regulatory agencies routinely promulgate and propose new rules, and issue updated guidance to existing rules. More recent rules and rulemakings include, but are not limited to, rules for reciprocating internal combustion engine maximum achievable control technology, air quality standards for one hour nitrogen dioxide emissions, and volatile organic compound and methane new source performance standards impacting design and operation of storage vessels, pressure valves, and compressors. On October 1, 2015, the EPA ~~promulgated a new, lower~~issued its rule regarding National Ambient Air Quality ~~Standard (NAAQS)~~Standards for ground-level ~~ozone. In May 2012, the EPA completed designation~~ozone, setting a stricter standard 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.~~70 parts per billion. We are monitoring the ~~rule's~~rule’s implementation as the reduction will trigger additional federal and state regulatory actions that may impact our operations. ~~As a~~Implementation of the regulations is expected to result in impacts to our operations and increase the cost of additions to Total property, plant and equipment, ~~is expected to increase.~~net in the Balance Sheet for both new and existing facilities in affected areas. 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 (NO~~2~~) NAAQS. The effective date of the new NO~~2 ~~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 NO~~2 ~~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 NO~~2 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 NO~~2 ~~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~~reasonably estimate the cost of additions that may be required to meet the regulations at this ~~regulation.~~time due to uncertainty created by various legal challenges to these regulations and the need for further specific regulatory guidance.

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.

5. 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 ~~June 30, 2017~~March 31, 2018, no letters of credit have been issued and no loans were 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 ~~June 30, 2017~~March 31, 2018, WPZ had no commercial paper ~~was~~ outstanding under the commercial paper program.

Issuance and Retirement of Long-Term Debt

~~NORTHWEST PIPELINE LLC~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~(Unaudited)~~

On April 3, 2017, we issued $250 million of ~~4.00~~4.0 percent senior unsecured notes due 2027 to investors in a private debt placement. We used the net proceeds to ~~repay the~~retire $185 million of 5.95 percent senior unsecured notes that matured on April 15, 2017, and ~~to fund capital expenditures.~~for general corporate purposes. As part of the issuance, we entered into a registration rights agreement with the initial ~~purchaser~~purchasers of the unsecured notes. ~~We are~~Under the terms of the agreement, we were obligated to file and consummate a registration statement for an offer to exchange the notes for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended, within 365 days from ~~the~~ closing and to use commercially reasonable efforts to complete the exchange offer. We ~~are required to provide a shelf~~have filed the registration statement, ~~to cover resales of the notes under certain circumstances. If we fail to fulfill these obligations, additional interest will be accrued~~which became effective in January 2018. The exchange offer was completed on the affected securities. The rate of additional interest will be 0.25 percent per annum on the principal amount of the affected securities for the first 90-day period immediately following the occurrence of a registration default, increasing by an additional 0.25 percent per annum with respect to each subsequent 90-day period thereafter, up to a maximum amount for all such registration defaults of 0.5 percent annually. Following the cure of any registration defaults, the accrual of additional interest will cease.March 1,2018.

Long-Term Debt due within ~~one-year~~one year

The $250 million, 6.05 percent notes due June 15, 2018, are classified as ~~long-term~~Long-term debt due within ~~in one-year~~one year in the accompanying Balance Sheet as of ~~June 30, 2017.~~

March 31, 2018.

5.6. 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 ~~$581.5~~$581.7 million and ~~$614.5~~$599.7 million, respectively, at ~~June 30, 2017~~March 31, 2018, and ~~$519.2~~$581.6 million and ~~$546.8~~$608.8 million, respectively, at December 31, ~~2016~~2017.

6.7. TRANSACTIONS WITH AFFILIATES

We are a participant in WPZ’s cash management program. At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017, the advances due to us by WPZ totaled approximately $~~124.0~~167.5 million and $~~45.1~~137.7 million, respectively. These advances are represented by demand notes and are classified as ~~Current Assets~~Receivables - Advances to affiliate 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 ~~0.83~~1.54 percent at ~~June 30, 2017~~March 31, 2018. The interest income from these advances was minimal during the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 and ~~June 30, 2016~~March 31, 2017. 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 ~~$23.2~~$22.1 million and ~~$46.2~~$23.0 million in the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018, ~~respectively,~~ and ~~$21.1 million and $46.1 million in the three and six months ended June 30, 2016,~~2017, 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 six months ended June 30,~~

~~NORTHWEST PIPELINE LLC~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~2016, includes $2.0 million recognized in the first quarter of 2016 for severance and other related costs associated with a reduction in workforce.~~

During the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016,~~2017, we declared and paid cash distributions to our parent of ~~$107.0~~$34.0 million and ~~$86.0~~$50.0 million, respectively. During ~~July 2017,~~April 2018, we declared and paid an additional cash distribution of ~~$41.0~~$53.0 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.

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 ~~2016~~2017 Annual Report on Form 10-K and with the Financial Statements and Notes contained in this Form 10-Q.

CRITICAL ACCOUNTING ESTIMATES

FERC Income Tax Policy Revision

In December 2017, Tax Reform was enacted, which, among other things, reduced the corporate income tax rate from 35 percent to 21 percent. Rates charged to our customers are subject to the rate-making policies of the FERC, which have historically permitted the recovery of a income tax allowance that includes a deferred income tax component. As a result of the reduced income tax rate from Tax Reform and the collection of historical rates that reflected historical federal income tax rates, we expect that we will be required to return amounts to certain customers through future rates and have accordingly established a regulatory liability totaling $206.5 million as of March 31, 2018. The timing and actual amount of such return will be subject to future negotiations regarding this matter and many other elements of cost-of-service rate proceedings, including other costs of providing service.

RESULTS OF OPERATIONS

Analysis of Financial Results

This analysis discusses financial results of our operations for the ~~six~~three-month periods ended ~~June 30, 2017~~March 31, 2018 and ~~2016~~2017. 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 ~~were relatively flat~~decreased $8.6 million in the first ~~six~~three months of ~~2017~~2018 as compared with the first ~~six~~three months of ~~2016. Transportation~~2017 primarily due to the reduction of our rates as a result of the Settlement of our rate case Docket No. RP17-346 that became effective January 1, 2018. In the periods ended March 31, 2018 and 2017, transportation services accounted for 97 percent and gas storage ~~service~~services accounted for 3 percent of our operating ~~revenues for both periods.~~revenues.

Operating expenses ~~decreased $4.0~~increased $4.9 million, or 108 percent, for the first ~~six~~three months of ~~2017~~2018 as compared to the ~~first six months of 2016,~~same period in 2017, mostly due ~~primarily~~ to a ~~$2.1~~$5.8 million regulatory charge resulting from the establishing of a regulatory liability for the decrease in ~~contractual and other outside services, a $0.5 million decrease in charges billed from affiliates in~~ the ~~first six months~~federal income tax rate that was part of ~~2017 as well as the absence~~Tax Reform per our Settlement, partially offset by lower labor related costs of ~~$1.0 million in severance and $0.2 million of employee relocation costs recorded in the first six months of 2016, associated with a reduction and movements in workforce.~~$1.3 million.

Interest expense decreased ~~$5.6~~$0.3 million ~~or 25 percent,~~ as a result of the ~~retirement of our $175.0 million 7 percent senior unsecured notes that matured on June 15, 2016 and the retirement of~~difference in interest expense associated with the $185 million 5.95 percent notes retired in April 2017 ~~partially offset by~~as compared to the interest expense ~~recorded on~~associated with the $250 million 4 percent ~~senior unsecured~~ notes issued onin April 3, 2017.

~~Financing~~Interest income increased $0.6 million as a result of increased advances to affiliates.

On April 3, 2017, we issued $250 million of 4.00 percent senior unsecured notes due 2027 to investors in a private debt placement. We used the net proceeds to repay the $185 million, 5.95 percent notes that matured on April 15, 2017, and to fund capital expenditures.

~~Capital Expenditures~~

~~Our capital expenditures were~~ ~~$31.5 million~~ ~~and~~ ~~$22.8 million~~ ~~for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2017~~ ~~and~~ ~~2016, respectively. Our capital expenditures estimate for~~ ~~2017~~ ~~is discussed in our~~ ~~2016~~ ~~Annual Report on Form 10-K.~~

Pipeline Projects

The North Seattle Lateral Upgrade (Project) involves an expanded delivery capabilities of Northwest’s North Seattle Lateral. On May 11, 2017, we filed the FERC 7(c) application for the Project. The Project consists of the removal and replacement of approximately ~~6.9~~5.9 miles of 8-inch diameter pipeline with new 20-inch diameter pipeline. We plan to place the Project into service as early as the fourth quarter of 2019, and it is expected to increase the delivery capacity by ~~up to 196~~approximately 159 MDth/d.

Item 4. Controls and Procedures

Our management, including our Senior Vice President—West and our Vice President, Controller 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)~~Act of 1934 as amended) (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, Controller and Chief Accounting Officer. Based upon that evaluation, our Senior Vice President—West and our Vice President, Controller 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 ~~second~~first quarter of ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting.

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, 2017, includes certain risk factors that could materially affect our business, financial condition, or future results. Those Risk Factors have not materially changed, except that the risk factor in the Form 10-K captioned “The amount of income taxes that we will be allowed to recover will be determined by the outcome of future rate cases and any potential action taken by the FERC in response to its recent Notice of Inquiry” is replaced by the risk factor set forth below:

On March 15, 2018, the FERC issued a policy statement that reversed its 2005 income tax policy that permitted master limited partnership (MLP) interstate oil and natural gas pipelines to recover an income tax allowance in cost of service rates, which if implemented, may adversely impact our financial condition and future results of operations.

In May 2005, the FERC issued a statement of general policy permitting a pipeline to include in its cost-of-service computations an income tax allowance provided that an entity or individual has an actual or potential income tax liability on income from the pipeline’s public utility assets. Pursuant to that policy, the extent to which owners of pipelines have such actual or potential income tax liability will be reviewed by the FERC on a case-by-case basis in rate cases where the amounts of the allowances will be established. On March 15, 2018, the FERC found that an impermissible double-recovery results from granting a MLP pipeline both an income tax allowance and a return on equity pursuant to the discounted cash flow methodology. As a result, the FERC will no longer permit an MLP pipeline to recover an income tax allowance in its cost of service and further stated it will address the application of this policy to non-MLP partnership forms as those issues arise in subsequent proceedings. The FERC also issued a Notice of Proposed Rulemaking proposing a process that will allow it to consider costs and revenues in the context of the recent reduction in the corporate income tax rate as a result of Tax Reform and the FERC’s revised policy statement regarding MLPs. Furthermore, the FERC issued a Notice of Inquiry seeking comments on the additional impacts of Tax Reform on jurisdictional rates, and whether other features of Tax Reform require FERC action. Due to the foregoing, it is reasonably possible that future tariff-based rates collected by our interstate natural gas pipelines may be negatively impacted by such actions, which may have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Item 6. Exhibits

The following instruments are included as exhibits to this report.



Exhibit		Description

2		Certificate of Conversion of Northwest Pipeline GP ~~(Exhibit~~(filed July 3, 2013 as Exhibit 2.1 to our current report on Form 8-K ~~filed July 3, 2013~~ (File No. 001-07414)) and incorporated herein by ~~reference.~~reference).

3.1		Certificate of Formation of Northwest Pipeline LLC ~~(Exhibit~~(filed July 3, 2013 as Exhibit 2.2 to our current report on Form 8-K ~~filed July 3, 2013~~ (File No. 001-07414)) and incorporated herein by ~~reference.~~reference).

3.2		Operating Agreement of Northwest Pipeline LLC ~~(Exhibit~~(filed July 3, 2013 as Exhibit 3.1 to our current report on Form 8-K, ~~filed July 3, 2013~~ (File No. 001-07414)) and incorporated herein by ~~reference.~~reference).

~~4.1~~		Indenture, dated as of April 3, 2017, between Northwest Pipeline LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on April 3, 2017 as Exhibit 4.1 to Northwest Pipeline LLC’s current report on Form 8-K (File No. 0001-07414) and incorporated herein by reference).
~~10.1~~		Registration Rights Agreement, dated April 3, 2017, between Northwest Pipeline LLC and the initial purchasers listed therein (filed on April 3, 2017 as Exhibit 10.1 to Northwest Pipeline LLC’s current report on Form 8-K (File No. 0001-07414) 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.

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/ Ted T. Timmermans
			Ted T. Timmermans Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)

Date: ~~August~~May 3, ~~2017~~2018



	Page
PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements -

Statement of Comprehensive Income — Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~	1

Balance Sheet — ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017	2

Statement of Cash Flows — Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~	4

Notes to Financial Statements	5

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1012

Item 4. Controls and Procedures	1113

PART II. OTHER INFORMATION:

Item 1. Legal Proceedings	1214

Item 1A. Risk Factors	14

Item 6. Exhibits	1215