May 22, Ms. Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C

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1 Northern Natural Gas Company P.O. Box 3330 Omaha, NE May 22, 2017 Ms. Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C Re: OEP/DPC/CB-1 Northern Natural Gas Company Lake Mills Compressor Station Docket No. CP (x)(3) Dear Ms. Bose: Northern Natural Gas Company (Northern) hereby submits for filing with the Federal Energy Regulatory Commission (FERC) under the above-referenced docket, Northern s responses to the FERC data request issued May 17, Northern s response to the request is attached. Northern also is attaching a revised Attachment B and a breakdown of the costs within the other category. The revised Attachment B adjusts the dollar amounts between the labor and other categories listed in the Attachment B that was filed with the prior notice filing March 15, Total Costs remain the same. A copy of this response is being served to each person whose name appears on the official service list for this proceeding. Any questions regarding this filing should be directed to the undersigned at (402) Respectfully submitted, /s/ Michael T. Loeffler Michael T. Loeffler Senior Director, Certificates and External Affairs cc: Parties of Record

2 Lake Mills Compressor Station Attachment B Revision 1 Description Costs Materials $15,822,740 Labor $8,001,934 Other $6,675,326 Total $30,500,000

3 Item (other category) Cost Environmental TCP survey 20,000 Environmental Inspector 160,000 Emissions testing 12,000 Tribal monitoring 100,000 Labor 110,000 Construction Support X-ray 108,000 Survey 30,000 Labor 391,300 Inspection 600,000 Test 10,000 Engineering support Labor 550,000 Right of Way Total 519,433 Contingency 1,436,627 Construction Overheads 974,750 AFUDC 1,057, Escalation 595,800 TOTAL OTHER 6,675,326

4 Docket No. CP Northern Natural Gas Lake Mills Compressor Station Project Accounting: In Attachment B, Northern Natural Gas Company lists as a component of construction a Line Item titled Other for $7,244,945. Explain if this amount includes any overhead and/or the capitalized allowance for funds used during construction (AFUDC). If this amount includes overhead and/or AFUDC, provide the estimated overhead and AFUDC. RESPONSE: The Other costs for the Lake Mills Project includes the following overhead and AFUDC costs: Overhead $ 974,750 AFUDC $1,057,416 In addition, for AFUDC, provide the following worksheets in Microsoft Excel. Include all supporting explanations, notes, formulas, and calculations: a. The worksheet computations on a monthly basis to support the AFUDC. Identify the debt and equity AFUDC amounts. RESPONSE: Exhibit 1 demonstrates the methodology that will be used to calculate monthly AFUDC for the Lake Mills Compressor Station Project based on the formula provided below. AFUDC base = Prior month project to date payments & AFUDC + ½ (current month payments) For the month assets are placed in service, the AFUDC base is the sum of one half of the prior month project to date payments including AFUDC plus one fourth of the current month payments. See the formula below. AFUDC base = ½ (prior month project to date payments + AFUDC) + ¼ (current month payments) Monthly AFUDC debt and equity accrual amounts are then determined based on the monthly rates derived using the methodology provided in the response to item (b) below, multiplied by the AFUDC base for the month.

5 Docket No. CP Northern Natural Gas Lake Mills Compressor Station Project b. The computation and methodology to support the debt/equity cost rates used to derive the AFUDC rate. RESPONSE: Actual monthly AFUDC rates are determined using the methodology shown on Exhibits 2, 3 and 4 for years 2015, 2016 and 2017 respectively. Northern does not have any short-term debt instruments; therefore, the proration calculation for short-term and long-term debt is not applicable. As shown on the attached file, Northern first calculates its annual AFUDC rate for the current year based on its capital structure, as of December 31 of the prior year. Northern s capital structure is based on its total proprietary capital reported on page 112 of its FERC Form 2, line 14, and the sum of long-term debt also reported on page 112 on lines 17 and 20. Northern uses an equity rate of 12% for its AFUDC calculation, which is the imputed return on equity from Northern s consolidated rate case settlement (Docket Nos. RP and RP04-155), which was approved by the Commission. Northern s debt rate is its weighted average cost of debt per the calculations shown on the attached schedule, which was 4.961% as of December 31, Once Northern has determined its annual AFUDC rate it uses the formula below to determine its monthly AFUDC rate, compounded semi-annually. Monthly AFUDC Rate = [(1+annual AFUDC rate/2)^2^(1/12)]-1 In 2013, the FERC staff audited Northern s sister company Kern River Gas Transmission Company, to evaluate Kern River s compliance with the Commission s accounting and reporting requirements for calculating and accruing AFUDC. The final audit report filed in Docket No. FA contained no audit findings or recommendations. The Commission further explained the method used by Kern River to determine its AFUDC rate did not exceed the maximum rate permitted by the Commission nor did it compound more frequently than semi-annually. The same AFUDC methodology used by Kern River and audited by FERC staff is used by Northern to calculate and accrue its AFUDC as described above.

6 VERIFICATION STATE OF NEBRASKA ) COUNTY OF DOUGLAS ) Laura Demman, being duly sworn, on oath, states that she is Vice President, Regulatory and Govemment Affairs, for Noithem Natural Gas Company and is duly authorized to make this affidavit; that she has read the foregoing Data Response of such Company and is familiar with the contents thereof; that all the facts therein are true and coitcct to the best of her Icnowledge, information and belief. Signed: Laura Demman Vice President, General Counsel and Regulatory Affairs SUBSCRIBED AND SWORN TO, before me, this / f day of May My commission expires: Notaiy Public in and for Douglas County, Nebraska

7 CERTIFICATE OF SERVICE I hereby certify that I have this day seived the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated this day of May fichael T. toeffler Sr. Director of Certificates P.O. Box 3330 Omaha, Nebraska Telephone: (402) Fax: (402)