Equity Method Investments

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

Ownership Interests

We have the following membership interests in these companies as of July 31, 2015 and October 31, 2014, respectively.



Equity Method Investment	Interest		Activity
Atlantic Coast Pipeline, LLC (ACP)	10	%	To develop, construct, own and operate approximately 550 miles of interstate natural gas pipeline with associated compression from West Virginia through Virginia into eastern North Carolina in order to provide interstate natural gas transportation services of Marcellus and Utica gas supplies into southeastern markets; regulated by the FERC
Cardinal Pipeline Company, LLC (Cardinal)	21.49	%	Intrastate pipeline located in North Carolina; regulated by the NCUC
Constitution Pipeline Company LLC (Constitution)	24	%	To develop, construct, own and operate approximately 120 miles of interstate natural gas pipeline, and related facilities, connecting shale natural gas supplies and gathering systems in Susquehanna County, Pennsylvania, to Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New York; regulated by the FERC
Hardy Storage Company (Hardy Storage)	50	%	Underground interstate storage facility located in Hardy and Hampshire Counties, West Virginia; regulated by the FERC
Pine Needle LNG Company, LLC (Pine Needle)	45	%	Interstate LNG storage facility located in North Carolina; regulated by the FERC
SouthStar Energy Services LLC (SouthStar)	15	%	Energy services company primarily selling natural gas in the unregulated retail gas market to residential, commercial and industrial customers in the eastern United States, primarily Georgia and Illinois

Accumulated Other Comprehensive Income (Loss)

As an equity method investor, we record the effect of certain transactions in our accumulated OCIL. Cardinal and Pine Needle enter into interest-rate swap agreements to modify the interest expense characteristics of their unsecured long-term debt which is nonrecourse to its members. SouthStar uses financial contracts in the form of futures, options and swaps, all considered to be derivatives, to moderate the effect of price and weather changes on the timing of its earnings; fair value of these financial contracts is based on selected market indices. Retirement benefits are allocated to SouthStar by its majority member with the activity of prescribed benefit expense items reflected in accumulated OCIL. For these transactions with these equity method investees, we record our share of movements in the market value of these hedged agreements and contracts and retirement benefit items in “Accumulated other comprehensive loss” in “Stockholders’ equity” in the Condensed Consolidated Balance Sheets; the detail of our share of the market value of the various financial instruments and the retirement benefits are presented in “Other Comprehensive Income (Loss), net of tax” in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Related Party Transactions

We have related party transactions as a customer of our investments. For each period of the three months and nine months ended July 31, 2015 and 2014, these gas costs and the amounts we owed to our equity method investees, as of July 31, 2015 and October 31, 2014 are as follows.



Related Party	Type of Expense	Cost of Gas ⁽¹⁾								Trade accounts payable ⁽²⁾
		Three Months				Nine Months				July 31,		October 31,
In thousands		2015		2014		2015		2014		2015		2014
Cardinal	Transportation costs	$	2,207	$	2,204	$	6,556	$	6,607	$	744	$	747
Hardy Storage	Gas storage costs	2,322		2,322		6,967		7,139		774		774
Pine Needle	Gas storage costs	2,833		2,935		8,609		8,429		955		989
Totals		$	7,362	$	7,461	$	22,132	$	22,175	$	2,473	$	2,510
⁽¹⁾In the Condensed Consolidated Statements of Operations and Comprehensive Income.
⁽²⁾ In the Condensed Consolidated Balance Sheets.

We have related party transactions as we sell wholesale gas supplies to SouthStar. For each period of the three months and nine months ended July 31, 2015 and 2014, our operating revenues from these sales and the amounts SouthStar owed us as of July 31, 2015 and October 31, 2014 are as follows.



	Operating Revenues ⁽¹⁾								Trade accounts receivable ⁽²⁾
	Three Months				Nine Months				July 31,		October 31,
In thousands	2015		2014		2015		2014		2015		2014
Operating revenues	$	475	$	1,402	$	1,058	$	2,309	$	158	$	460
⁽¹⁾ In the Condensed Consolidated Statements of Operations and Comprehensive Income.
⁽²⁾In the Condensed Consolidated Balance Sheets.

Other Information – Constitution

A subsidiary of The Williams Companies will be the operator of the pipeline. The total estimated cost of the project is $925 million, including an allowance for funds used during construction (AFUDC).

We have committed to contribute an amount in proportion to our ownership interest for the development and construction of the new pipeline, which is expected to cost approximately $830 million, excluding AFUDC, in total. Our total anticipated contributions are approximately $199.6 million. Our contributions for the quarter and fiscal year 2015 were $1.4 million and $11.2 million, respectively, with our total equity contribution for the project totaling $64.7 million to date. On December 2, 2014, the FERC issued a certificate of public convenience and necessity approving construction of the Constitution pipeline. The target in-service date of the project is the second half of 2016, which has been extended due to a longer than expected regulatory and permitting process. The capacity of the pipeline is 100% subscribed under fifteen-year service agreements with two Marcellus producer-shippers with a negotiated rate structure.

Other Information – ACP

A subsidiary of Dominion Resources, Inc. will be the operator of the pipeline. The total cost of the project is expected to be between $4.5 billion to $5 billion, excluding financing costs. Members anticipate obtaining project financing for 70% of the total costs during the construction period, and a project capitalization ratio of 50% debt and 50% equity when operational.

We have committed to contribute an amount in proportion to our ownership interest for the development and construction of the new pipeline. If project financing is obtained, our total expected contributions would be between $225 million to $250 million. Our contributions for the quarter and fiscal year 2015 were $3.1 million and $8.9 million, respectively, with contributions to the project beginning November 2014.

ACP is regulated by the FERC and subject to state and other federal approvals with a target in-service date of late 2018. The capacity of ACP is substantially subscribed by affiliates of the members of ACP and by other utilities and their related companies under twenty-year contracts.

In November 2014, the FERC authorized the ACP pre-filing process. In February 2015, ACP, along with Dominion Transmission, Inc. (DTI), filed a notice of intent to prepare its environmental impact statement for the project and DTI’s supply header project affecting ACP. ACP expects to file its FERC application in September 2015, receive the FERC certificate of public convenience and necessity in the summer of 2016 and begin construction thereafter.

On March 2, 2015, ACP entered into a Precedent Agreement with DTI for supply header transportation services. Under the Precedent Agreement, ACP is required to provide assurance of its ability to meet its financial obligations to DTI. DTI has informed ACP that ACP, independent of its members, is not currently creditworthy as required by DTI’s FERC Gas Tariff. ACP requested that its members provide proportionate assurance of ACP’s ability to meet its financial obligations under the Precedent Agreement, which the Piedmont member provided through an Equity Contribution Agreement between Piedmont and ACP where Piedmont committed to make funds available to the Piedmont member for it to pay and perform its obligations under the ACP Limited Liability Company Agreement. This commitment is capped at $15.2 million. This commitment ceases when DTI acknowledges that ACP is independently creditworthy in accordance with the Precedent Agreement, termination or expiration of the Precedent Agreement, or when we are no longer a member of ACP.

On July 13, 2015, the parent companies of the members of ACP entered into an indemnification agreement with an insurance company to secure surety bonds in connection with preparatory and pre-construction activities on the ACP project. Liability under the indemnification agreement is several and is capped at each member’s proportionate share, based on its membership interest in ACP, of losses, if any, incurred by the insurance company.