INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Condensed Consolidated Financial Statements include the accounts of our wholly owned subsidiaries who have investments in unconsolidated affiliates. These investments are in joint venture, energy-related businesses that are accounted for under the equity method.

OWNERSHIP INTERESTS

We have the following membership interests in these companies as of December 31, 2016.



Entity Name	Interest	Activity
Cardinal Pipeline Company, LLC (Cardinal)	21.49%	Intrastate pipeline located in North Carolina; regulated by the NCUC
Pine Needle LNG Company, LLC (Pine Needle)	45%	Interstate LNG storage facility located in North Carolina; regulated by the FERC
Hardy Storage Company, LLC (Hardy Storage)	50%	Underground interstate storage facility located in Hardy and Hampshire Counties, West Virginia; regulated by the FERC
Constitution Pipeline Company LLC (Constitution)	24%	To develop, construct, own and operate 124 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
Atlantic Coast Pipeline, LLC (ACP)	7%	To develop, construct, own and operate 600 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

Our ownership interest in each entity is included in "Investments in equity method unconsolidated affiliates" within "Investments and Other Assets" on the Condensed Consolidated Balance Sheets. As of December 31, 2016 and October 31, 2016, our investment balances are as follows.



	December 31,		October 31,
(in millions)	2016		2016
Cardinal	$	13.9	$	14.2
Pine Needle	16.3		16.6
Hardy Storage	43.4		42.1
Constitution	92.4		93.1
ACP	46.2		33.2
Total investments in equity method unconsolidated affiliates	$	212.2	$	199.2

Our proportionate share of earnings or losses from these unconsolidated affiliates recorded as equity in earnings of unconsolidated affiliates and included within "Other Income and Expense" on the Condensed Consolidated Statements of Operations and Comprehensive Income are $2.3 million and $4.6 million for the two months ended December 31, 2016 and 2015, respectively.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

As an equity method investor, we record the effect of certain transactions in our accumulated other comprehensive income (loss). 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. For these transactions with these unconsolidated affiliates, we record our share of movements in the market value of these hedged agreements and contracts in "Accumulated other comprehensive loss" within "Equity" on the Condensed Consolidated Balance Sheets; the detail of our share of the market value of the various financial instruments are presented in "Other Comprehensive Income (Loss), net of tax" on the Condensed Consolidated Statements of Operations and Comprehensive Income.

RELATED PARTY TRANSACTIONS

We have related party transactions as a customer of our investments. For the two months ended December 31, 2016 and 2015, these gas costs and the amounts we owed to our unconsolidated affiliates, as of December 31, 2016 and October 31, 2016, are as follows.



Related Party	Type of Expense	Cost of Natural Gas ⁽¹⁾				Accounts Payable to Affiliated Companies ⁽²⁾
		December 31,		December 31,		December 31,		October 31,
(in millions)		2016		2015		2016		2016
Cardinal	Transportation costs	$	1.5	$	1.5	$	0.7	$	0.7
Pine Needle	Gas storage costs	1.7		1.9		0.9		0.9
Hardy Storage	Gas storage costs	1.5		1.5		0.8		0.8
Totals		$	4.7	$	4.9	$	2.4	$	2.4

⁽¹⁾In the Condensed Consolidated Statements of Operations and Comprehensive Income.
⁽²⁾ In the Condensed Consolidated Balance Sheets.

OTHER INFORMATION ON OUR EQUITY METHOD INVESTMENTS

Constitution

On April 22, 2016, the New York State Department of Environmental Conservation (NYSDEC) denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed legal actions in the U.S District Court for the Northern District of New York and in the U.S Court of Appeals for the Second Circuit (U.S. Court of Appeals) challenging the legality and appropriateness of the NYSDEC’s decision. Both courts granted Constitution's motions to expedite the schedules for the legal actions. On November 16, 2016, oral arguments were heard in the U.S. Court of Appeals.

Constitution remains steadfastly committed to pursuing the project and intends to pursue all available options to challenge the NYSDEC's decision. In light of the denial of the certification, Constitution revised its target in-service date of the project to be as early as the second half of 2018, assuming that the challenge process is satisfactorily and promptly concluded.

In July 2016, Constitution requested and the FERC approved an extension of the construction period and in-service deadline of the project to December 2018. Also in July, the FERC denied the New York Attorney General's (NYAG) complaint and request for a stay of the certificate order authorizing the project on the grounds that Constitution had improperly cut trees along the proposed route. The FERC found the complaint procedurally deficient and that there was no justification for a stay; it did find the filing constituted a valid request for investigation and thus referred the matter to FERC staff for further examination as may be appropriate. On November 22, 2016, the FERC denied the NYAG's request for reconsideration of this order.

Since April 2016 with the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. As a result, we evaluate our investment in the Constitution project for OTTI. In this period, we applied the methodology as described in Note 1 and Note 11 to the Consolidated Financial Statements in our Form 10-K for the year ended October 31, 2016, and there have been no material changes regarding legal and regulatory proceedings that affected this period's assessment. At this time, we believe we do not have an OTTI and have not recorded any impairment charge to reduce the carrying value of our investment. However, to the extent that the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward as legal and regulatory actions progress, our conclusions with respect to OTTI could change and may require that we recognize an impairment charge of up to our recorded investment in the project, net of any cash and working capital returned. We will continue to monitor and update our OTTI analysis as required. Different assumptions could affect the timing and amount of any charge recorded in a period.

Pending the outcome of the matters described above, and when construction proceeds, we remain committed to fund an amount in proportion to our ownership interest for the development and construction of the new pipeline. Our total anticipated contributions are approximately $229.3 million. Our contributions for the two months ended December 31, 2016 were $0.2 million, with our total equity contributions for the project totaling $85.0 million to date.

ACP

Our total anticipated contributions based on our ownership percentage for the ACP project are expected to be between $350.0 million to $385.0 million based upon updated projections that include the cost to reroute segments of the pipeline impacting U.S. Forest Service lands. Our contributions for the two months ended December 31, 2016 were $12.1 million, with our total equity contributions for the project totaling $58.1 million to date. The targeted in-service date remains the second half of 2019.

On August 12, 2016, the FERC issued its notice of schedule for environmental review of the project and issued its draft environmental impact statement (EIS) on December 30, 2016 indicating that the proposed pipeline would not cause significant harm to the environment or protected populations. Under the notice of schedule, we anticipate that the FERC will issue its final EIS by June 30, 2017.

On March 2, 2015, ACP entered into a Precedent Agreement with Dominion Transmission, Inc. (DTI) for supply header transportation services that required ACP to provide assurance of its ability to meet its financial obligations to DTI. As 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. Based on our current ownership percentage, this commitment is capped at $10.6 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.