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

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

Commission File Number 1-7414

NORTHWEST PIPELINE GP

(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)

(801) 583-8800

No Change

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 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 o No o

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

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

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

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 GP

INDEX

		Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements -
Condensed Statements of Income, three and nine months ended September 30, 2010 and 2009			1
Condensed Balance Sheets as of September 30, 2010 and December 31, 2009			2
Condensed Statements of Cash Flows, nine months ended September 30, 2010 and 2009			4
Notes to Condensed Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 4. Controls and Procedures			14
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings			15
Item 1A. Risk Factors			15
Item 6. Exhibits			15
EX-31.A
EX-31.B
EX-32.A

Forward Looking Statements

     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 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. 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 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 such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

	•		Amounts and nature of future capital expenditures;
	•		Expansion and growth of our business and operations;
	•		Financial condition and liquidity;
	•		Business strategy;

	•		Cash flow from operations or results of operations;
	•		Rate case filings; 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 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 the forward-looking statements include, among others, the following:

	•		Availability of supplies (including the uncertainties inherent in assessing and estimating future natural gas reserves), market demand, volatility of prices, and the availability and cost of capital;
	•		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;
	•		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;
	•		Our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;
	•		Changes in maintenance and construction costs;
	•		Changes in the current geopolitical situation;
	•		Our exposure to the credit risk of our customers;
	•		Risks related to strategy and financing, including restrictions stemming from our debt agreements, future changes in our credit ratings, and the availability and cost of credit;
	•		Risks associated with future weather conditions;
	•		Acts of terrorism; 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 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, 2009.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NORTHWEST PIPELINE GP

CONDENSED STATEMENTS OF INCOME

(Thousands of Dollars)
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
OPERATING REVENUES		$	103,562			$	106,615			$	312,250			$	325,919
OPERATING EXPENSES:
General and administrative			13,514				16,114				41,367				48,932
Operation and maintenance			15,921				16,561				48,884				54,127
Depreciation			21,863				21,570				65,766				64,858
Regulatory credits			(431	)			(608	)			(1,232	)			(1,793	)
Taxes, other than income taxes			4,347				3,833				13,407				10,485
Total operating expenses			55,214				57,470				168,192				176,609
Operating income			48,348				49,145				144,058				149,310
OTHER INCOME — net
Interest income —
Affiliated			11				9				20				60
Other			—				1				3				13
Allowance for equity funds used during construction			759				848				1,492				1,322
Miscellaneous other income (expense), net			(144	)			288				(789	)			391
Total other income — net			626				1,146				726				1,786
INTEREST CHARGES:
Interest on long-term debt			11,110				11,110				33,348				33,329
Other interest			524				1,365				2,135				4,128
Allowance for borrowed funds used during construction			(337	)			(444	)			(675	)			(691	)
Total interest charges			11,297				12,031				34,808				36,766
INCOME BEFORE INCOME TAXES			37,677				38,260				109,976				114,330
INCOME TAXES			4				—				42				—
NET INCOME		$	37,673			$	38,260			$	109,934			$	114,330

See accompanying notes.

NORTHWEST PIPELINE GP

CONDENSED BALANCE SHEETS

(Thousands of Dollars)
(Unaudited)

		September 30,				December 31,
		2010				2009
						(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	396			$	402
Advances to affiliates			70,186				—
Accounts receivable -
Trade			35,434				40,442
Affiliated companies			334				4,514
Materials and supplies, less reserves of $88 at September 30, 2010 and $11 for December 31, 2009			10,008				9,960
Exchange gas due from others			1,209				4,089
Exchange gas offset			1,141				10,288
Prepayments and other			4,517				4,241
Total current assets			123,225				73,936
PROPERTY, PLANT AND EQUIPMENT, at cost			2,937,859				2,887,021
Less — Accumulated depreciation			1,004,252				950,708
Total property, plant and equipment, net			1,933,607				1,936,313
OTHER ASSETS:
Deferred charges			11,938				13,996
Regulatory assets			58,374				57,032
Total other assets			70,312				71,028
Total assets		$	2,127,144			$	2,081,277

See accompanying notes.

NORTHWEST PIPELINE GP
CONDENSED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)

		September 30,				December 31,
		2010				2009
						(Restated)
LIABILITIES AND OWNERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable-
Trade		$	25,284			$	17,552
Affiliated companies			9,540				23,131
Accrued liabilities -
Taxes, other than income taxes			14,091				8,176
Interest			15,155				4,045
Exchange gas due to others			7,035				14,377
Other			4,053				5,270
Total current liabilities			75,158				72,551
LONG-TERM DEBT			693,585				693,437
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES			85,384				108,139
CONTINGENT LIABILITIES AND COMMITMENTS
OWNERS’ EQUITY:
Owners’ capital			1,031,862				1,027,862
Loan to affiliate			(38,670	)			(105,431	)
Retained earnings			279,472				284,319
Accumulated other comprehensive income			353				400
Total owners’ equity			1,273,017				1,207,150
Total liabilities and owners’ equity		$	2,127,144			$	2,081,277

See accompanying notes.

NORTHWEST PIPELINE GP

CONDENSED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)
(Unaudited)

		Nine Months Ended
		September 30,
		2010				2009
						(Restated)
OPERATING ACTIVITIES:
Net Income		$	109,934			$	114,330
Adjustments to reconcile to net cash provided by operating activities -
Depreciation			65,766				64,858
Regulatory credits			(1,232	)			(1,793	)
Gain on sale of property, plant and equipment			—				(243	)
Amortization of deferred charges and credits			1,864				3,788
Allowance for equity funds used during construction			(1,492	)			(1,322	)
Cash provided (used) by changes in current assets and liabilities:
Trade accounts receivable			5,008				3,182
Affiliated receivables			4,180				659
Exchange gas due from others			7,342				10,425
Materials and supplies			(48	)			(93	)
Other current assets			(276	)			661
Trade accounts payable			7,693				6,745
Affiliated payables			(13,591	)			(6,964	)
Exchange gas due to others			(7,342	)			(10,425	)
Other accrued liabilities			15,806				10,036
Changes in noncurrent assets and liabilities:
Deferred charges			(3,105	)			(3,487	)
Other deferred credits			5,118				4,210
Net cash provided by operating activities			195,625				194,567
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt			8,000				—
Retirement of long-term debt			(8,000	)			—
Capital contribution from Williams			4,000				34,050
Distributions paid			(114,780	)			(100,000	)
Changes in cash overdrafts			(1,106	)			(415	)
Net cash used in financing activities			(111,886	)			(66,365	)
INVESTING ACTIVITIES:
Property, plant and equipment -
Capital expenditures*			(84,958	)			(102,577	)
Proceeds from sales			4,638				549
Advances to affiliates			(3,425	)			(26,141	)
Net cash used in investing activities			(83,745	)			(128,169	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(6	)			33
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			402				345
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	396			$	378

* Increases to property, plant and equipment		$	(86,103	)		$	(110,544	)
Changes in related accounts payable and accrued liabilities			1,145				7,967
Capital expenditures		$	(84,958	)		$	(102,577	)
Supplemental disclosures of non-cash transactions:		$	—			$	(5,005	)
Loans to affiliate reclassified to equity

See accompanying notes.

NORTHWEST PIPELINE GP

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

General

     The accompanying interim condensed financial statements do not include all the notes in our annual financial statements, and therefore, should be read in conjunction with the consolidated financial statements and notes thereto in our 2009 Annual Report on Form 10-K. The accompanying unaudited condensed 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 September 30, 2010, and results of operations for the three and nine months ended September 30, 2010 and 2009, and cash flows for the nine months ended September 30, 2010 and 2009.

     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.

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

Corporate Structure and Control

     On January 1, 2010, Northwest was owned 35 percent by Williams Pipeline Partners Holdings LLC, a wholly-owned subsidiary of Williams Pipeline Partners L.P. (WMZ) and 65 percent by WGPC Holdings LLC, a wholly-owned subsidiary of The Williams Companies, Inc. (Williams). On February 17, 2010, Williams completed a strategic restructuring in which it contributed its ownership in WGPC Holdings LLC to Williams Partners L.P. (WPZ), a publicly traded Delaware limited partnership which is controlled by and consolidated with Williams. Through its ownership interests in each of our partners, Williams indirectly owned 71.3 percent of Northwest as of February 17, 2010.

     On May 24, 2010, WPZ and WMZ entered into a merger agreement that was consummated on August 31, 2010. All WMZ’s common units not held by WMZ’s general partner were exchanged at a ratio of 0.7584 of WPZ limited partner units for each WMZ limited partner unit. At September 30, 2010, WPZ owns a 100 percent interest in Northwest and Williams held an approximate 77 percent interest in WPZ, comprised of an approximate 75 percent limited partner interest and all of WPZ’s 2 percent general partner interest.

Basis of Presentation

     The financial statements prior to 2010 included the accounts of Northwest and Northwest Pipeline Services, LLC (Services Company), which was a variable interest entity (VIE) for which Northwest was considered the primary beneficiary. As a result of Williams’ strategic restructuring on February 17, 2010, which reorganized entities under common control, we have reevaluated the status of the Services Company as a consolidated VIE and have concluded that the Services Company is no longer considered a VIE, and therefore, will no longer be consolidated.

     The Accounting Standards Codification (Topic 250), “Accounting Changes and Error Corrections,” requires that when a change in the reporting entity occurs, the change shall be retrospectively applied to the financial statement of all prior periods to show financial information for the new reporting entity.

     The impact of these retrospective adjustments decreased accrued employee costs and increased accounts payable to affiliated companies as of December 31, 2009. These retrospective adjustments had no impact on net income.

Restatement

     As discussed in our 2009 Annual Report on Form 10-K, on January 20, 2010, we concluded that our financial statements for the year ended December 31, 2008 should be restated due to the manner in which we had presented and recognized pension and postretirement obligations in certain benefit plans for which Williams is the plan sponsor. We concluded that the impact of the error is not material to any of the three quarterly periods of 2009.

NORTHWEST PIPELINE GP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

2. CONTINGENT LIABILITIES AND COMMITMENTS

Legal Proceedings

     We are a party to legal, administrative, and regulatory proceedings arising in the ordinary course of business.

Environmental Matters

     We are subject to the National Environmental Policy Act and other federal and state legislation regulating the environmental aspects of our business. Except as discussed below, our management believes that we are in substantial compliance with existing environmental requirements. Environmental expenditures are expensed or capitalized depending on their future economic benefit and potential for rate recovery. We believe that, with respect to any expenditures required to meet applicable standards and regulations, the Federal Energy Regulatory Commission (FERC) would grant the requisite rate relief so that substantially all of such expenditures would be permitted to be recovered through rates. We believe that compliance with applicable environmental requirements is not likely to have a material effect upon our financial position or results of operations.

     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 and mercury contamination at certain natural gas metering sites. 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 mercury clean-ups in Washington. Currently, we are conducting assessment and remediation activities for mercury and other constituents to bring the sites up to Washington’s current environmental standards. At September 30, 2010, we had accrued liabilities totaling approximately $6.9 million for these costs which are expected to be incurred through 2015. We are conducting environmental assessments and implementing a variety of remedial measures that may result in increases or decreases in the total estimated costs.

     In March 2008, the EPA promulgated a new, lower National Ambient Air Quality Standard (NAAQS) for ground-level ozone. Within two years, the EPA was expected to designate new eight-hour ozone non-attainment areas. However, in September 2009, the EPA announced it would reconsider the 2008 NAAQS for ground-level ozone to ensure that the standards were clearly grounded in science, and were protective of both public health and the environment. As a result, the EPA delayed designation of new eight-hour ozone non-attainment areas under the 2008 standards until the reconsideration is complete. In January 2010, the EPA proposed to further reduce the ground-level ozone NAAQS from the March 2008 levels. The EPA currently anticipates finalization of the new ground-level ozone standard in the fourth quarter of 2010 and anticipates designation of new eight-hour ozone non-attainment areas under the new 2010 ozone NAAQS standards in July 2011. Designation of new eight-hour ozone non-attainment areas are expected to result in additional federal and state regulatory actions that will likely impact our operations and increase the cost of additions to property, plant and equipment. We are unable at this time to estimate the cost of additions that may be required to meet the new regulation.

     Additionally, in August 2010, the EPA promulgated National Emission Standards for hazardous air pollutants (NESHAP) regulations that will impact our operations. The emission control additions required to comply with hazardous air pollutant regulations are estimated to include costs in the range of $6 million to $9 million through 2013, the compliance date.

     Furthermore, the EPA promulgated the Greenhouse Gas (GHG) Mandatory Reporting Rule on October 30, 2009, which requires facilities that emit 25,000 metric tons or more carbon dioxide (CO₂) equivalent per year from stationary fossil-fuel combustion sources to report GHG emissions to the EPA annually beginning March

NORTHWEST PIPELINE GP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

31, 2011 for calendar year 2010. Subsequently, the EPA proposed additional reporting requirements on April 12, 2010 to address fugitive/vented GHG emissions from petroleum and natural gas facilities. Final promulgation of the additional reporting requirements is expected by late 2010, with an effective date of January 1, 2011. At such time, facilities that emit 25,000 metric tons or more CO₂ equivalent per year from stationary fossil-fuel combustion and fugitive/vented sources combined will be required to report GHG combustion and fugitive/vented emissions to the EPA annually beginning March 31, 2012 for calendar year 2011. Compliance with this reporting obligation is estimated to cost $3 million to $5 million over the next four to five years.

     In February 2010, the EPA promulgated a final rule establishing a new one-hour nitrogen dioxide (NO₂) National Ambient Air Quality Standard. The effective date of the new NO₂ standard was April 12, 2010. This new standard is subject to numerous challenges in the federal court. We are unable at this time to estimate the cost of additions that may be required to meet this new regulation.

Safety Matters

     Pipeline Integrity Regulations We have developed an Integrity Management Plan that we believe 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 high consequence areas and completed our baseline assessment plan. We are on schedule to complete the required assessments within specified timeframes. Currently, we estimate that the cost to perform required assessments and associated remediation will be primarily capital in nature and range between $80 million and $95 million over the remaining assessment period of 2010 through 2012. 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

     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 on our future liquidity or financial position.

Cash Distributions to Partners

     On or before the end of the calendar month following each quarter, available cash is distributed to our partners as required by our general partnership agreement. Available cash with respect to any quarter is generally defined as the sum of all cash and cash equivalents on hand at the end of the quarter, plus cash on hand from working capital borrowings made subsequent to the end of that quarter (as determined by the management committee), less cash reserves as established by the management committee as necessary or appropriate for the conduct of our business and to comply with any applicable law or agreement. During the nine months ended September 30, 2010, we declared and paid equity distributions of $75.5 million to our partners. During October 2010, we declared equity distributions of $38.0 million to be paid to our partners on October 29, 2010.

     In accordance with Williams’ restructuring of its business, our participation in the Williams’ cash management program was terminated. As a result of the restructuring, we became a participant in the WPZ cash management program. In February 2010, prior to the restructuring, our management committee authorized a cash distribution of $39.3 million.

NORTHWEST PIPELINE GP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

3. DEBT AND FINANCING ARRANGEMENTS

Debt Covenants

     Our debt agreements contain restrictions on our ability to incur secured debt beyond certain levels.

Revolving Credit and Letter of Credit Facility

     Prior to Williams’ restructuring of its business, we participated in Williams’ unsecured $1.5 billion revolving credit facility (Credit Facility) with a maturity date of May 1, 2012. As part of the restructuring, we were removed as borrowers under the Credit Facility, and on February 17, 2010, we entered into a new $1.75 billion three-year senior unsecured revolving credit facility (New Credit Facility) with WPZ and Transcontinental Gas Pipe Line Company, LLC (Transco), as co-borrowers, and Citibank, N.A., as administrative agent, and certain other lenders named therein. The full amount of the New Credit Facility is available to WPZ, and may, under certain conditions, be increased by up to an additional $250 million. We may borrow up to $400 million under the New Credit Facility to the extent not otherwise utilized by WPZ and Transco. At September 30, 2010, the full $400 million under the New Credit Facility was available.

     Interest on borrowings under the New Credit Facility is payable at rates per annum equal to, at the option of the borrower: (1) a fluctuating base rate equal to Citibank, N.A.’s adjusted base rate plus an applicable margin, or (2) a periodic fixed rate equal to London Interbank Offered Rate (LIBOR) plus an applicable margin. The adjusted base rate will be the highest of (i) the federal funds rate plus 0.5 percent, (ii) Citibank, N.A.’s publicly announced base rate, and (iii) one month LIBOR plus 1.0 percent. WPZ pays a commitment fee (currently 0.5 percent) based on the unused portion of the New Credit Facility. The applicable margin and the commitment fee are based on the specific borrower’s senior unsecured long-term debt ratings.

     The New Credit Facility contains various covenants that limit, among other things, the borrowers’ and its respective subsidiaries’ ability to incur indebtedness, grant certain liens supporting indebtedness, merge or consolidate, sell all or substantially all of its assets, enter into certain affiliate transactions, make certain distributions during an event of default, and allow any material change in the nature of its business.

     Under the New Credit Facility, WPZ is required to maintain a ratio of debt to Earnings Before Income Taxes, Interest, Depreciation and Amortization (EBITDA) (each as defined in the New Credit Facility) of no greater than 5.00 to 1.00 for itself and its consolidated subsidiaries. The debt to EBITDA ratio is measured on a rolling four-quarter basis. For us and our consolidated subsidiaries, the ratio of debt to capitalization (defined as net worth plus debt) is not permitted to be greater than 55 percent. Each of the above ratios is tested at the end of each fiscal quarter (with the first full year measured on an annualized basis). At September 30, 2010, we are in compliance with this covenant.

     The New Credit Facility includes customary events of default. If an event of default with respect to a borrower occurs under the New Credit Facility, the lenders will be able to terminate the commitments for all borrowers and accelerate the maturity of the loans of the defaulting borrower under the New Credit Facility and exercise other rights and remedies.

     During February 2010, we borrowed $8.0 million under the New Credit Facility. We repaid the $8.0 million on April 1, 2010. As of September 30, 2010, there were no revolving credit loans outstanding under the New Credit Facility, and no letters of credit were issued by the participating institutions.

4. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

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

Cash, cash equivalents and advances to affiliate — The carrying amounts of these items approximates their fair value.

NORTHWEST PIPELINE GP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

Long-term debt — The fair value of our publicly traded long-term debt is valued using indicative period-end traded bond market prices. The carrying amount and estimated fair value of our long-term debt, including current maturities, were $693.6 million and $812.5 million, respectively, at September 30, 2010, and $693.4 million and $753.2 million, respectively, at December 31, 2009.

5. TRANSACTIONS WITH AFFILIATES

     Through January 31, 2010, we were a participant in Williams’ cash management program and made advances to and received advances from Williams. In accordance with Williams’ restructuring of its business, our participation in the Williams’ cash management program was terminated. In February 2010, our management committee authorized a cash distribution of $39.3 million. As of September 30, 2010, cash advances to Williams of $38.7 million remain outstanding. The balances owed by Williams to us pursuant to the cash management program at December 31, 2009 and September 30, 2010 are reflected as a reduction of our Owners’ Equity as the advances were not available to us as working capital. As a result of the restructuring, we became a participant in WPZ’s cash management program. At September 30, 2010, the advances due to us by WPZ totaled $70.2 million. The advances are represented by demand notes. The interest rate on the WPZ demand notes is based upon the overnight investment rate paid on WPZ’s excess cash, which was approximately 0.07 percent at September 30, 2010. We received interest income from advances to our affiliates of $11 thousand and $20 thousand during the three and nine months ended September 30, 2010, respectively, and $9 thousand and $60 thousand during the three and nine months ended September 30, 2009, respectively. Such interest income is included in “Other Income — net: Interest income — Affiliated” on the accompanying Condensed Statements of Income.

     Williams charges its subsidiary companies for management services provided by it and other affiliated companies. Such corporate expenses charged by Williams, WPZ, and other affiliated companies were $8.0 million and $24.2 million for the three and nine months ended September 30, 2010, respectively, and $9.1 million and $26.6 million for the three and nine months ended September 30, 2009, respectively. These expenses are included in “General and administrative expense” on the accompanying Condensed Statements of Income. Management considers the cost of these services to be reasonable.

     Northwest has no employees. Services are provided to us by an affiliate, Northwest Pipeline Services, LLC (NPS). In return, we reimburse NPS for all direct and indirect expenses it incurs or payments it makes (including salary, bonus, incentive compensation, pension and other benefits) in connection with these services. We were billed $15.0 million and $44.2 million in the three and nine months ended September 30, 2010, respectively, and $16.1 million and $46.2 million in the three and nine months ended September 30, 2009, respectively. Such expenses are primarily included in “General and administrative” and “Operation and maintenance” expenses on the accompanying Condensed Statement of Income.

     During the periods presented, our revenues include transportation transactions and rental of communication facilities with subsidiaries of Williams. Combined revenues for these activities totaled $0.9 million and $2.5 million for the three and nine months ended September 30, 2010, respectively, and $1.2 million and $9.0 million for the three and nine months ended September 30, 2009, respectively.

     Through July 2009, we leased the Parachute Lateral facilities from an affiliate. Under the terms of the operating lease, we paid monthly rent equal to the revenues collected from transportation services on the lateral less 3 percent to cover costs related to the operation of the lateral. This lease expense, totaling $0.9 million and $5.9 million for the three and nine months ended September 30, 2009, respectively, is included in “Operation and maintenance expense” on the accompanying Condensed Statements of Income. The lease was terminated on August 1, 2009.

     In October 2010, Williams Partners Operating LLC authorized a $15.0 million capital contribution to us to fund a portion of our expenditures for additions to property, plant and equipment.

     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.

NORTHWEST PIPELINE GP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

6. COMPREHENSIVE INCOME

     Comprehensive income is as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009*				2010				2009*
						(Restated)								(Restated)
						(Thousands of Dollars)
Net income		$	37,673			$	38,260			$	109,934			$	114,330
Amortization of cash flow hedges			(15	)			(16	)			(46	)			(47	)
Total comprehensive income		$	37,658			$	38,244			$	109,888			$	114,283

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

GENERAL

     Unless indicated otherwise, the following discussion should be read in conjunction with the consolidated financial statements and notes thereto included within Item 8 of our 2009 Annual Report on Form 10-K and with the condensed financial statements and notes thereto contained within this document.

RESULTS OF OPERATIONS

ANALYSIS OF FINANCIAL RESULTS

     This analysis discusses financial results of our operations for the nine-month periods ended September 30, 2010 and 2009. 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.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

     Our operating revenues decreased $13.7 million, or 4 percent. This decrease is primarily attributed to i) lower Parachute Lateral lease revenues of $6.1 million resulting from the termination of the Parachute Lateral lease on August 1, 2009, ii) lower other revenues of $2.9 million resulting from the absence of sublease income attributed to the restructuring of the Salt Lake City headquarters building lease, iii) lower firm transportation commodity revenues of $2.4 million due primarily to mild weather in our market area and lower off-system deliveries, and iv) lower revenues of $2.3 million resulting from the termination of the Everett Delta Lateral lease on November 9, 2009. The revenue decreases from the Parachute and Everett Delta laterals as well as the reduction in building sublease revenues are substantially offset by decreases in lease expenses as described below.

     Our transportation service accounted for 96 percent and 95 percent of our operating revenues for the nine-month periods ended September 30, 2010 and 2009, respectively. Natural gas storage service accounted for 4 percent of operating revenues for each of the nine-month periods ended September 30, 2010 and 2009.

     Total operating expenses decreased $8.4 million, or 5 percent, due primarily to i) the termination of the Parachute and Everett Delta leases, resulting in lower lease expense of $8.2 million and ii) the restructuring of the Salt Lake City headquarters building lease resulting in lower building lease expense of $3.5 million. These decreases were partially offset by higher property taxes of $2.8 million primarily attributed to a $2.6 million reduction in 2009 for lower than anticipated mill levies.

     Other income — net decreased $1.1 million, or 59 percent, due primarily to 2010 expenses of $1.2 million attributed to business development.

     Interest charges decreased $2.0 million, or 5 percent, due primarily to the full amortization of debt expense associated with a retired debt issue.

Operating Statistics

     The following table summarizes volumes and capacity in trillion British Thermal Units (TBtu) for the periods indicated:

		Nine Months Ended
		September 30,
		2010				2009
Total Throughput (1)			489				563
Average Daily Transportation Volumes			1.8				2.1
Average Daily Reserved Capacity Under Base Firm Contracts, excluding peak capacity			2.8				2.6
Average Daily Reserved Capacity Under Short- Term Firm Contracts (2)			0.3				0.5

CAPITAL EXPENDITURES

     We anticipate 2010 capital expenditures will be between $120 million and $140 million. Of this total, $95 million to $115 million is considered nondiscretionary due to legal, regulatory and/or contractual requirements. Our property, plant and equipment additions were $86.1 million and $110.5 million for the nine months ended September 30, 2010 and 2009, respectively.

CAPITAL PROJECTS

     The pipeline projects listed below are significant future pipeline projects for which we have significant customer commitments.

Jackson Prairie Underground Expansion

     The Jackson Prairie Storage Project, connected to our transmission system near Chehalis, Washington, is operated by Puget Sound Energy and is jointly owned by Puget Sound Energy, Avista Corporation and us. A phased capacity expansion is currently underway and a deliverability expansion was placed in service on November 1, 2008.

     As a one-third owner of Jackson Prairie, in early 2006, we held an open season for a new firm storage service based on our 100 million cubic feet per day share of the planned 2008 deliverability expansion and approximately 1.2 billion cubic feet of our share of the working natural gas storage capacity expansion being developed over approximately a six-year period from 2007 through 2012.

     As a result of the open season, four shippers have executed long-term service agreements for the full amount of incremental storage service offered at contract terms averaging 33 years. The firm service relating to storage capacity rights will be phased-in as the expanded working natural gas capacity is developed. Our one-third share of the deliverability expansion was placed in service on November 1, 2008 at a cost of approximately $16.0 million. Our estimated capital cost for the capacity expansion component of the new storage service is $6.1 million, primarily for base natural gas.

Sundance Trail Expansion

     In November 2009, we received approval from the FERC to construct approximately 16 miles of 30-inch loop between our existing Green River and Muddy Creek compressor stations in Wyoming as well as an upgrade to our existing Vernal compressor station, with service targeted to commence in November 2010. The total project, currently under construction, is estimated to cost approximately $56 million, including the cost of replacing the existing compression at Vernal, which will enhance the efficiency of our system. We executed a transportation service agreement to provide 150 MDth per day of firm transportation service from the Greasewood and Meeker Hubs in Colorado for delivery to the Opal Hub in Wyoming. We will collect our maximum system rates under the firm service agreement, and have received approval from the FERC to roll-in the Sundance Trail Expansion costs in any future rate cases.

Item 4. Controls and Procedures

     Our management, including our Senior Vice President and our Vice President and Treasurer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act) (Disclosure Controls) or our internal 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 Northwest 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 and our Vice President and Treasurer. Based upon that evaluation, our Senior Vice President and our Vice President and Treasurer concluded that these Disclosure Controls are effective at a reasonable assurance level.

Third-Quarter 2010 Changes in Internal Controls

     There have been no changes during the third quarter of 2010 that have materially affected, or are reasonably likely to materially affect, our Internal Controls.

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 Condensed Financial Statements included under Part I, Item 1. Financial Statements of this report, which information is incorporated by reference.

Item 1A. RISK FACTORS.

     Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009, includes certain risk factors that could materially affect our business, financial condition or future results. Those Risk Factors have not materially changed.

Item 6. EXHIBITS.

     The following instruments are included as exhibits to this report.

Exhibit		Description
3(a)		Statement of Partnership Existence of Northwest Pipeline GP (filed October 2, 2007 as Exhibit 3.1 to Northwest’s current report on Form 8-K) and incorporated herein by reference.
3(b)		Amended and Restated General Partnership Agreement of Northwest Pipeline GP (filed January 30, 2008 as Exhibit 3.1 to Northwest’s current report on Form 8-K) and incorporated herein by reference.
31(a)*		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(b)*		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(a)**		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.

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.

Date: October 28, 2010

EXHIBIT INDEX

Exhibit		Description
3(a)		Statement of Partnership Existence of Northwest Pipeline GP (filed October 2, 2007 as Exhibit 3.1 to Northwest’s current report on Form 8-K) and incorporated herein by reference.
3(b)		Amended and Restated General Partnership Agreement of Northwest Pipeline GP (filed January 30, 2008 as Exhibit 3.1 to Northwest’s current report on Form 8-K) and incorporated herein by reference.
31(a)*		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(b)*		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(a)**		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.