September 6, Via efiling. 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 September 6, 2016 Via efiling Ms. Kimberly D. Bose, Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C Re: Letter Order Pursuant to Northern Natural Gas Company Docket No. CP 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 August 24, Northern s response to the request is attached. 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 Page 1 of 1 Northern Natural Gas Company Data Response Form For Docket No. CP Requesting Party: Reference No: Requester s Name: Subject: FERC FERC-NL Jerry Pederson FERC Accounting Data Request Data Request: 1) For the Operating Expenses listed in Line No.1 on page 2 of Exhibit N, provide a breakdown of O&M Expenses by FERC account number and identify a further breakdown between labor and non-labor costs. Response: See attachment for breakdown of O&M costs by FERC account, between labor and non-labor and between Exhibit K facilities and blanket / 2.55(a) facilities. Posted: 9/6/2016 Responsibility: Laura Demman

3 Docket No. CP FERC-NL Northern Natural Gas Company Breakout of Operating Expenses Variable 2017 Portion 1 Operating Expenses $ 403,640 Exhibit K Portion: 2 Labor $ - Non-labor $ 26,927 $ 26, ,484 80, ,981 36, , , , , , , Total Non-Labor $ 338,918 $ 144,392 Blanket/2.55(a) Portion: 13 Labor $ - Non-labor $ 38, , Total Non-Labor $ 64,722

4 Page 1 of 1 Northern Natural Gas Company Data Response Form For Docket No. CP Requesting Party: Reference No: Requester s Name: Subject: FERC FERC-NL Jerry Pederson FERC Accounting Data Request Data Request: 2) After appropriately accounting for labor and non-labor costs, please calculate an incremental costbased reservation and usage rate for the Project based on your current rate design. Response: Please see the attached Exhibit N, page 2 showing the calculation of a reservation and usage rate. Posted: 9/6/2016 Responsibility: Laura Demman

5 Docket No. CP Exhibit N FERC-NL Page 2 of 7 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Incremental Cost of Service Operating Expenses Split Between Fixed and Variable Line No. Description Operating Expenses - Variable 1/ $ 144,392 2 Operating Expenses - Fixed 259,248 3 Total Operating Expenses $ 403,640 4 Depreciation and 5 Amortization Expenses 1,033,873 6 Taxes 7 Federal Income Tax 1,837,065 8 State Income Tax 351,126 9 Other 1,199, % 5,078, Total Cost of Service $ 9,903, Variable Cost of Service 2/ 475, Commodity Billing Determinants 3/ 22,756, Commodity Rate Fixed Cost of Service 9,428, Reservation Billing Determinants 4/ 748, Average Reservation Rate / See response to FERC NL Reflects non-labor compressor station costs. 2/ Under the existing rate design, 3.34% of Total Cost of Service is allocated to Variable Costs. Therefore, the Variable Cost of Service includes this result plus the Variable Operating Expenses. 3/ Determinants are based on a 100% Load factor of MDQ. 4/ Does not reflect impact of discounting.

6 Page 1 of 1 Northern Natural Gas Company Data Response Form For Docket No. CP Requesting Party: Reference No: Requester s Name: Subject: FERC FERC-NL Jerry Pederson FERC Accounting Data Request Data Request: 3) After appropriately accounting for labor and non-labor costs, please calculate an incremental costbased reservation rate and usage rate for the Project based on your current rate design, using a cost of service that does not include any costs incurred for facilities constructed under Northern s blanket certificate or Section 2.55 (a) of the Commission s regulations. Response: Please see the attached schedule. For purposes of calculating reservation and usage rates, Exhibit N, pages 2 through 7 are included, since there are multiple changes to amounts resulting from the removal of costs associated with blanket and 2.55(a) projects. Posted: 9/6/2016 Responsibility: Laura Demman

7 Docket No. CP Exhibit N FERC-NL Page 2 of 7 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Incremental Cost of Service Reflects Removal of Blanket/2.55(a) Projects Line No. Description Year 1 1 Operating Expenses - Variable 1/ $ 144,392 2 Operating Expenses - Fixed $ 194,526 3 Total Operating Expenses $ 338,918 4 Depreciation and 5 Amortization Expenses 2/ $661,022 6 Taxes 7 Federal Income Tax 3/ $ 1,174,555 8 State Income Tax 4/ $ 224,498 9 Other 5/ $ 766, % 6/ $ 3,246, Total Cost of Service $ 6,412, Variable Cost of Service 7/ 358, Commodity Billing Determinants 8/ 22,756, Commodity Rate Fixed Cost of Service 6,054, Reservation Billing Determinants 9/ 748, Average Reservation Rate / See response to FERC NL Reflects non-labor compressor station costs. 2/ From Exhibit N, Page 3, Line 14 3/ From Exhibit N, Page 7, Line 12 4/ From Exhibit N, Page7, Line 15 5/ From Exhibit N, Page 4, Line 2 6/ From Exhibit N, Page 5, Line 5 7/ Under the existing rate design, 3.34% of Total Cost of Service is allocated to Variable Costs. Therefore, the Variable Cost of Service includes this result plus the Variable Operating Expenses. 8/ Determinants are based on a 100% Load factor of MDQ. 9/ Does not reflect impact of discounting.

8 Docket No. CP Exhibit N FERC-NL Page 3 of 7 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Incremental Depreciation Expense Reflects Removal of Blanket/2.55(a) Projects Months in Line Service No. Description Year 1 Year 1 Rate 1/ 1 Depreciation Rate 1.50% 2 Capital Investments 3 Compression Facilities $ 32,864,682 4 Town Border Stations $ - 5 Main Line Extension $ - 6 Branch Lines $ 11,203,444 7 Underground Storage $ - 8 Reimbursible $ - 9 Sub-total $ 44,068, CIAC $ - 11 Total 2/ $ 44,068,126 Depreciation and Amortization Expense 12 Depreciation 1.50% 12 $661, CIAC 10.00% - 14 Incremental Depreciation Expense $661,022 1/ Depreciation rate of 1.50% was approved in NNG's Rate Case settlement in Docket No. RP / The total of $44,068,126 is from Exhibit K.

9 Docket No. CP Exhibit N FERC-NL Page 4 of 7 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Incremental Taxes Other Reflects Removal of Blanket/2.55(a) Projects Line No. Description Year 1 1 Ad Valorem Taxes $ 766,874 2 Total Taxes - Other $766,874

10 Docket No. CP Exhibit N FERC-NL Page 5 of 7 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Return Reflects Removal of Blanket/2.55(a) Projects Line No. Description Year 1 1 Plant $ 44,068,126 2/ Less: Accumulated Provision for 2 Depreciation and Amort. ($661,022) Accumulated Deferred 3 Income Taxes $ (8,843,362) 4 Total Rate Base $ 34,563,742 Total Rate of % 1/ $ 3,246,753 6 Return on Equity $ 2,170,916 7 Return on Debt $ 1,075,837 8 Total Return on Rate Base $ 3,246,753 1/ The 9.39% Rate of Return is based on a pre-tax return of 13.42% as stipulated in NNG's Rate Case settlement in Docket No. RP / The total of $44,068,126 is from Exhibit K.

11 Docket No. CP Exhibit N FERC-NL Page 6 of 7 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Incremental Deferred Taxes Reflects Removal of Blanket/2.55(a) Projects Line No. Description Year 1 1 Tax Plant (Excluding CIAC) $ - 2 Plant Addition $ 44,068,126 3 Total Plant $ 44,068,126 4 CIAC 5 Total Plant in Service $ 44,068,126 6 Accumulated Deferred Tax %: 7 Accumulated Tax Depreciation % (15 yrs) 52.50% 8 Accumulated CIAC Tax Depreciation % 9 Accumulated Tax Depreciation 1/ 23,135, Accumulated CIAC Tax Depreciation 11 Total Acccumulated Tax Depreciation 23,135, Acumulated Book Depreciation %: 13 Accumulated Book Depreciation % 2/ 1.50% 14 Accumulated CIAC Book Depreciation % (10 yrs) 15 Accumulated Book Depreciation 661, Accumulated CIAC Book Depreciation 17 Total Accumulated Book Depreciation 661, Accumulated Excess Tax Depreciation $ (22,474,744) 19 Effective Tax Rate 3/ % 20 Total end of year Accumulated Deferred 21 Taxes Balance $ (8,843,362) 1/ Reflects 50% Bonus Tax Depreciation. 2/ Depreciation rate of 1.50% was approved in NNG's Rate Case settlement in Docket No. RP / Includes composite state income tax rate of %.

12 Docket No. CP Exhibit N FERC-NL Page 7 of 7 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Federal and State Income Taxes Reflects Removal of Blanket/2.55(a) Projects Line No. Description Year 1 1 Return on Equity 1/ $ 2,170,916 2 Return on Debt 1/ $ 1,075,837 3 Total Return $ 3,246,753 Less: 4 Interest expense $ (1,075,837) Other Adjustments: 5 Amortization of AFUDC Equity 2/ $ 10,399 6 Subtotal $ (1,065,437) 7 Taxable Income After Adjustments $ 2,181,316 8 Federal Income Tax ( % of line 7) $ 1,174,556 9 Taxable Income Before Income Taxes $ 3,355,870 Federal Income Tax Applicable to : 10 Common Equity $ 1,168, Other Tax Adjustments $ 5, Total Federal Income Tax $ 1,174,555 State Income Tax Applicable to: 13 Common Equity $ 223, Other Tax Adjustments $ 1,070 Total State Income Tax 15 (6.6897% of Line 9) 3/ $ 224,498 1/ The 9.39% Rate of Return is based on a pre-tax return of 13.42% as stipulated in NNG's Rate Case settlement in Docket No. RP / AFUDC Equity is taxed as it is recovered. 3/ Northern's composite state income tax rate of % is the rate underlying NNG's rate case settlement in Docket No. RP

13 Page 1 of 1 Northern Natural Gas Company Data Response Form For Docket No. CP Requesting Party: Reference No: Requester s Name: Subject: FERC FERC-NL Jerry Pederson FERC Accounting Data Request Data Request: 4) Provide a comparison of the incremental cost-based reservation rate calculated in Questions 2 and 3 and Northern s applicable general system rates, illustrating whether the cost-based rates are less than the system rate. Response: The Northern Lights 2017 Expansion project has a combination of TFX and TF Rate Schedule contracts. The weighted average monthly reservation TFX Rate is (($15.153*5)+($5.683*7))/12 = $9.629 and the TF Rate is =(((($10.23+$ $15.153)/3)*5)+($5.683*7))/12= $ The rate computed in response to No. 2 is $ and the rate computed in response to No. 3 is $ Northern is not proposing to establish an incremental rate for this project. As Northern explained in the application, the project is a multi-year commitment to expand Northern s Market Area capacity in response to customers growth requirements. All of the Northern Lights projects must be analyzed on a cumulative basis rather than as individual projects. As the Commission has recognized in past certificates issued for the Northern Lights expansions, when Northern seeks to roll the costs into its system rates, Northern will bear the burden of demonstrating that the roll-in is warranted. Northern s existing customers are protected since they will not be subsidizing the project when viewed on a cumulative basis. Posted: 9/6/2016 Responsibility: Laura Demman

14 Page 1 of 1 Northern Natural Gas Company Data Response Form For Docket No. CP Requesting Party: Reference No: Requester s Name: Subject: FERC FERC-NL Jerry Pederson FERC Accounting Data Request Data Request: 5) In order to address whether existing shippers will subsidize an expansion, the Commission looks at the impact of the expansion on the pipeline s fuel percentages. Northern did not provide any analysis regarding fuel associated with the new compression. Please explain and provide a fuel study including work papers describing the impact the expansion project will have on Northern s current fuel rates using Northern s existing fuel rate design. Please provide enough information for the Commission to make a determination about the appropriateness of the fuel rate Northern intends to charge the expansion project shippers. Response: See attached analysis. The expansion project is not expected to the have an appreciable impact on Northern s Market Area fuel rates. Fuel use from all gas-fired compressor stations in the Market Area is taken into consideration in the computation of the fuel percentage. In addition, any difference between fuel consumed and fuel retained is tracked in the computation of the fuel percentage in accordance with Section 53A of Northern Natural Gas Company s FERC Gas Tariff. The resulting fuel percentage is applied to all receipts into the Market Area. Posted: 9/6/2016 Responsibility: Laura Demman

15 Northern Natural Gas Data Request No. FERC-NL Docket No. CP Impact of Northern Lights 2017 Expansion on current fuel rates. The Northern Lights 2017 Expansion (Project) enters Northern Natural Gas (Northern s) Market Area north of the Ventura, Iowa, interconnect with Northern Border Pipeline commonly referred to as Ventura North. Ventura North supplies natural gas to northern Iowa, Minnesota, the Upper Peninsula of Michigan and western Wisconsin. The Project design optimizes the Ventura North system such that the overall Market Area fuel rate is not expected to change appreciably. Ventura North fuel use makes up approximately 28.9% of Northern s Market Area fuel based on firm model conditions (17.8 MMcf/day/61.6 MMcf/day). The analysis assumes the customer will use primary contracted receipts. The grid nature of Northern s system generally allows customers to utilize receipt points other than those contracted, which can impact the fuel rate. Northern s Market Area grid system makes it difficult to estimate the precise impact due to various factors including total system load and market dynamics. Weather conditions also affect the overall system flow pattern and fuel usage. A detailed analysis of the Ventura North fuel usage has been completed (see Table below). The analysis utilized daily throughput data from November 1, 2013, to March 31, 2016, and covers a wide range of operating conditions. The incremental Project volume (75.9 MMcf/day winter and 52.2 MMcf/day summer) was added at a 64.6% load factor for winter and 41.1% load factor for summer. The load factors were based on historical analysis of residential stations in the Ventura North area and are representative of the incremental load. The analysis modeled compressor utilization at the existing mainline compressors including those at Ventura, Iowa; and Albert Lea, Owatonna, Faribault, Farmington, Hugo, North Branch, and Carlton, Minnesota; and the proposed second compressor unit at Northern s existing Faribault, Minnesota, compressor station. The estimated fuel rate was calculated by dividing the model total fuel usage by the total estimated delivery volume. Ancillary mainline modifications in the Project optimize Ventura North operation lowering the fuel rate on non-peak days. The modeled Ventura North fuel is reduced by % and would have a lesser impact on the overall Market Area fuel rate within which the Ventura North fuel is included.

16 Northern Natural Gas Data Request No. FERC-NL Ventura North Delivery Ranges (MMcf/day) Fuel in Model (MMcf/day) Existing Facilities Proposed Facilities Historical Flow Days in Range Historical + Incremental Volume Flow Projected Fuel used in Model (MMcf/day) Existing Facilities for Total Historical Days Proposed Facilities for Total Historical Days + Incremental Volume Docket No. CP Projected Delivery Volume Total Delivery Volume for Existing Facilities Total Delivery Volume for Proposed Facilities N/A , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,960.0 Totals , , ,043, ,074,010.0 Existing Proposed Fuel Use/Delivery Volume % %

17 Page 1 of 1 Northern Natural Gas Company Data Response Form For Docket No. CP Requesting Party: Reference No: Requester s Name: Subject: FERC FERC-NL Jerry Pederson FERC Accounting Data Request Data Request: 6) When calculating revenues during a rolled-in analysis, Commission policy requires the use of the existing applicable maximum recourse rate when the negotiated rate is greater than the existing applicable maximum recourse and the use of the negotiated rate if it is lower than the maximum recourse rate. Provide a revised rolled-in rate analysis as provided on Exhibit N, page 1 detailing the appropriate incremental revenue calculation as required by Commission policy described above. Response: See attached. Posted: 9/6/2016 Responsibility: Laura Demman

18 Docket No. CP FERC-NL Exhibit N Page 1 NORTHERN NATURAL GAS COMPANY Northern Lights 2017 Expansion Project Estimated Incremental Revenue at Maximum and Discounted Rates (In $000) LINE NO. DESCRIPTION INCREMENTAL REVENUES $ 4,921 $ 4,921 $ 4,921 $ 4,921 $ 4,921 2 INCREMENTAL COST OF SERVICE 1/ 9,903 9,656 9,427 9,213 9,014 3 DIFFERENCE $ (4,982) $ (4,735) $ (4,506) $ (4,292) $ (4,093) 1/ Includes costs for associated 2.55(a) and blanket projects.

19 Page 1 of 1 Northern Natural Gas Company Data Response Form For Docket No. CP Requesting Party: Reference No: Requester s Name: Subject: FERC FERC-NL Jerry Pederson FERC Accounting Data Request Data Request: 7) Provide support for the 33/67 percent ratio of debt to equity shown on Line Nos. 6 and 7 of Exhibit N, page 5. Response: Footnote 1 of Exhibit N, page 5, references the 9.39% based on the pre-tax return of 13.42% as stipulated in Northern s latest rate case settlement (Docket No. RP04-155). Please see the attached imputed capital structure and cost of capital as applied to the rate base in CP to arrive at the debt and equity return amounts reflected on lines 6 and 7. Posted: 9/6/2016 Responsibility: Laura Demman

20 Docket No. CP FERC NL NORTHERN NATURAL GAS COMPANY RP and RP Settlement Imputed Capitalization and Rate of Return Applied to CP Rate Base Capitalization Cost of Rate of CP CP Capitalization Percent Money Return Rate Base Return Debt $ 800,000, % 6.53% 3.11% $ 54,059,495 $ 1,682,665 Equity 878,587, % 12.00% 6.28% 54,059,495 3,395,426 Total $ 1,678,587, % 9.39% $ 5,078,091

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

22 VERIFICATION STATE OF NEBRASKA ) COUNTY OF DOUGLAS ) Laura Demman, being duly sworn, on oath, states that she is Vice President, Regulatory and Government Affairs, for Northern 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 tme and coixect to the best of her knowledge, infonnation and belief. Signed: Laura Demman Vice President, Regulatory and Government Affairs SUBSCRIBED AND SWORN TO, before me, this of September day Notary Public in and for Douglas County, Nebraska My commission expires: GENERAL NOIARY-State of Nebraska BARBARA a BISCHOFF My Comm. Exp. Dwiwnber 30, aais