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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2023


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

For the transition period from _____________ to _____________

Commission file number 1-7584

Transcontinental Gas Pipe Line Company, LLC

(Exact name of registrant as specified in its charter)

Delaware

74-1079400

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

2800 Post Oak Boulevard

Houston, Texas

77056

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (713) 215-2000

NO CHANGE

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

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 ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes þ No ¨

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.


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Transcontinental Gas Pipe Line Company, LLC

Index


			Page
Part I. Financial Information
Item 1. Financial Statements
Statement of Net Income – Three and Six Months Ended June 30, 2023 and 2022			4
Balance Sheet – June 30, 2023 and December 31, 2022			5
Statement of Changes in Member’s Equity – Three and Six Months Ended June 30, 2023 and 2022			7
Statement of Cash Flows – Six Months Ended June 30, 2023 and 2022			8
Notes to Financial Statements			9
Note 1 – Basis of Presentation			9
Note 2 – Revenue Recognition			9
Note 3 – Contingent Liabilities and Commitments			10
Note 4 – Debt and Financing Arrangements			11
Note 5 – ARO Trust			12
Note 6 – Fair Value Measurements			13
Note 7 – Transactions with Affiliates			14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 4. Controls and Procedures			18
Part II. Other Information			18
Item 1. Legal Proceedings			18
Item 1A. Risk Factors			18
Item 6. Exhibits			20

FORWARD-LOOKING STATEMENTS

The reports, filings, and other public announcements of Transcontinental Gas Pipe Line Company, LLC may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). 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.

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,” “assumes,” “guidance,” “outlook,” “in-service date,” 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:

•Our and our affiliates’ future credit ratings;

•Amounts and nature of future capital expenditures;

•Expansion and growth of our business and operations;

•Expected in-service dates for capital projects;


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•Financial condition and liquidity;

•Business strategy;

•Cash flow from operations or results of operations;

•Rate case filings;

•Natural gas prices, supply, and demand; and

•Demand for our services.

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:

•The impact of operational and developmental hazards and unforeseen interruptions;

•Development and rate of adoption of alternative energy sources;

•The strength and financial resources of our competitors and the effects of competition;

•Availability of supplies, including lower than anticipated volumes from third parties, and market demand;

•Volatility of pricing including the effect of lower than anticipated energy commodity prices;

•Changes in maintenance and construction costs, as well as our ability to obtain sufficient construction- related inputs, including skilled labor;

•The impact of existing and future laws and regulations, the regulatory environment, environmental matters, and litigation, as well as our ability to obtain necessary permits and approvals, and achieve favorable rate proceeding outcomes;

•Increasing scrutiny and changing expectations from stakeholders with respect to our environmental, social, and governance practices;

•The physical and financial risks associated with climate change;

•Our exposure to the credit risk of our customers and counterparties;

•Our ability to successfully expand our facilities and operations;

•Whether we are able to successfully identify, evaluate, and timely execute our capital projects and investment opportunities;

•Risks related to financing, including restrictions stemming from debt agreements, future changes in credit ratings as determined by nationally recognized credit rating agencies, 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 customers and suppliers);


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•Our costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;

•The risks resulting from outbreaks or other public health crises, including COVID-19;

•Changes in the current geopolitical situation, including the Russian invasion of Ukraine;

•Changes in U.S. governmental administration and policies;

•Risks associated with weather and natural phenomena, including climate conditions and physical damage to our facilities;

•Acts of terrorism, cybersecurity incidents, and related disruptions; 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 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, 2022, as filed with the SEC on February 27, 2023 as may be supplemented by disclosure in Part II, Item 1A. Risk Factors in subsequent Quarterly Reports on Form 10-Q.


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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Transcontinental Gas Pipe Line Company, LLC

Statement of Net Income

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Thousands)
Operating Revenues:
Natural gas transportation	$	618,398	$	614,043	$	1,242,138	$	1,235,580
Natural gas storage	45,128		49,159		92,804		93,317
Natural gas sales	55,899		43,371		77,671		59,016
Other	8,358		3,151		21,065		8,279
Total operating revenues	727,783		709,724		1,433,678		1,396,192

Operating Costs and Expenses:
Cost of natural gas sales	55,899		43,371		77,671		59,016

Operation and maintenance	115,179		129,019		245,378		240,315
General and administrative	52,904		57,090		107,678		108,639
Depreciation and amortization	127,568		130,670		252,935		263,232
Taxes — other than income taxes	27,483		25,727		54,141		52,841

Regulatory credit resulting from tax rate changes	(7,688)		(7,688)		(15,376)		(15,376)
Other (income) expense, net	(4,553)		(7,360)		(3,478)		(18,248)
Total operating costs and expenses	366,792		370,829		718,949		690,419

Operating Income	360,991		338,895		714,729		705,773

Other (Income) and Other Expenses:
Interest expense	81,042		82,184		162,138		164,621

Interest income	(22,851)		(4,542)		(43,387)		(5,644)

Allowance for equity and borrowed funds used during construction (AFUDC)	(17,949)		(5,793)		(33,532)		(10,650)

Miscellaneous other (income) expense, net	1,127		1,459		1,097		3,458
Total other (income) and other expenses	41,369		73,308		86,316		151,785

Net Income	$	319,622	$	265,587	$	628,413	$	553,988

See accompanying notes.


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Transcontinental Gas Pipe Line Company, LLC

Balance Sheet

(Unaudited)


	June 30, 2023		December 31, 2022
	(Thousands)
ASSETS
Current Assets:
Cash	$	—	$	—
Receivables:
Advances to affiliate	1,739,507		1,813,480
Trade	229,103		264,959
Affiliates	5,979		8,205
Other	3,929		2,795
Transportation and exchange gas receivables	21,728		9,256
Inventories:
Materials and supplies, at average cost	45,227		43,738
Gas available for customer nomination, at average cost	37,923		48,289
Gas in storage, at original cost	780		1,079
Regulatory assets	108,229		123,903
Other	8,693		32,838
Total current assets	2,201,098		2,348,542

Property, plant and equipment	18,630,844		18,239,745
Less-Accumulated depreciation and amortization	5,753,977		5,552,377
Total property, plant and equipment, net	12,876,867		12,687,368

Other Assets:
Regulatory assets	288,736		298,793
Right-of-use assets	56,407		59,235
Other	282,679		265,651
Total other assets	627,822		623,679

Total assets	$	15,705,787	$	15,659,589

(continued)

See accompanying notes.


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Transcontinental Gas Pipe Line Company, LLC

Balance Sheet

(Unaudited)


	June 30, 2023		December 31, 2022
	(Thousands)
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Payables:
Trade	$	200,736	$	184,906
Affiliates	43,384		54,303
Cash overdrafts	10,598		13,589
Transportation and exchange gas payables	13,541		5,140
Accrued liabilities:
Interest	76,150		76,255
Asset retirement obligations	34,622		27,484
Regulatory liabilities	53,650		57,047
Property and other taxes	49,153		30,526
Customer deposits	30,916		28,498
Customer advances	23,376		11,535
Other	25,365		20,462
Long-term debt due within one year	29,849		28,532
Total current liabilities	591,340		538,277

Long-Term Debt	5,242,688		5,251,799

Other Long-Term Liabilities:
Regulatory liabilities	964,742		963,969
Asset retirement obligations	537,482		535,479
Contract liabilities	178,619		183,898
Lease liability	59,376		63,074
Other	12,733		12,699
Total other long-term liabilities	1,752,952		1,759,119

Contingent Liabilities and Commitments (Note 3)

Member’s Equity:
Member’s capital	5,088,499		5,088,499
Retained earnings	3,030,308		3,021,895
Total member’s equity	8,118,807		8,110,394

Total liabilities and member’s equity	$	15,705,787	$	15,659,589

See accompanying notes.


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Transcontinental Gas Pipe Line Company, LLC

Statement of Changes in Member’s Equity

(Unaudited)


	Three Months Ended June 30,
	2023		2022
	(Thousands)
Member’s Capital:
Balance at beginning and end of period	$	5,088,499	$	5,088,499




Retained Earnings:
Balance at beginning of period	3,020,686		2,990,610
Net income	319,622		265,587
Cash distributions to parent	(310,000)		(250,000)

Balance at end of period	3,030,308		3,006,197
Total Member’s Equity	$	8,118,807	$	8,094,696

	Six Months Ended June 30,
	2023		2022
	(Thousands)
Member’s Capital:
Balance at beginning of period	$	5,088,499	$	4,960,499
Cash contributions from parent	—		128,000
Balance at end of period	5,088,499		5,088,499
Retained Earnings:
Balance at beginning of period	3,021,895		2,759,757
Net income	628,413		553,988
Cash distributions to parent	(620,000)		(307,548)
Balance at end of period	3,030,308		3,006,197
Total Member’s Equity	$	8,118,807	$	8,094,696

See accompanying notes.


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Transcontinental Gas Pipe Line Company, LLC

Statement of Cash Flows

(Unaudited)


	Six Months Ended June 30,
	2023		2022
	(Thousands)
OPERATING ACTIVITIES:
Net income	$	628,413	$	553,988
Adjustments to reconcile net cash provided (used) by operating activities:
Depreciation and amortization	252,935		263,232
Allowance for equity funds used during construction (equity AFUDC)	(27,296)		(8,555)
Regulatory credit resulting from tax rate changes	(15,376)		(15,376)
Changes in current assets and liabilities:
Affiliate receivables	2,226		(1,753)
Trade and other accounts receivable	34,721		16,255
Transportation and exchange gas receivables	(12,472)		(5,826)
Inventories	9,176		(16,644)
Regulatory assets	15,674		(11,321)
Other current assets	24,145		8,512
Affiliate payables	(10,919)		(16,776)
Trade accounts payable	(50,304)		(9,122)
Transportation and exchange gas payables	8,401		(1,550)
Accrued liabilities	29,584		(6,400)



Other, including changes in long-term assets and liabilities	(10,035)		(11,571)
Net cash provided (used) by operating activities	878,873		737,093

FINANCING ACTIVITIES:

Proceeds from other financing obligations	4,547		5,148

Payments on other financing obligations	(13,840)		(12,412)
Payments for debt issuance costs	—		(16)
Cash distributions to parent	(620,000)		(307,548)
Cash contributions from parent	—		128,000


Net cash provided (used) by financing activities	(629,293)		(186,828)

INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (1)	(312,521)		(185,045)
Contributions and advances for construction costs, net	15,880		(2,279)
Disposal of property, plant and equipment, net	(20,513)		(14,028)
Advances to affiliate, net	73,973		(340,945)
Purchase of ARO Trust investments	(10,830)		(10,127)
Proceeds from sale of ARO Trust investments	4,431		2,159
Net cash provided (used) by investing activities	(249,580)		(550,265)

Increase (decrease) in cash	—		—
Cash at beginning of period	—		—
Cash at end of period	$	—	$	—
_______________________
(1) Increases to property, plant and equipment, exclusive of equity AFUDC	$	(377,371)	$	(187,384)
Changes in related accounts payable and accrued liabilities	64,850		2,339
Capital expenditures	$	(312,521)	$	(185,045)

See accompanying notes.


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Transcontinental Gas Pipe Line Company, LLC

Notes to Financial Statements

(Unaudited)

Note 1 – Basis of Presentation

In this report, Transcontinental Gas Pipe Line Company, LLC (Transco) is at times referred to in the first person as “we,” “us” or “our.”

Transco is indirectly owned by The Williams Companies, Inc. (Williams), a publicly traded Delaware corporation. We own and operate an interstate natural gas pipeline system that is regulated by the Federal Energy Regulatory Commission (FERC).

General

Our accompanying interim financial statements do not include all the notes in our annual financial statements and, therefore, should be read in conjunction with our financial statements and notes thereto for the year ended December 31, 2022, in our Annual Report on Form 10-K. The accompanying unaudited financial statements include all normal recurring adjustments and others that, in the opinion of management, are necessary to present fairly our interim financial statements.

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 our financial statements and accompanying notes. Actual results could differ from those estimates.

Note 2 – Revenue Recognition

Revenue by Category

Our revenue disaggregation by major service line includes Natural gas transportation, Natural gas storage, Natural gas sales, and Other, which are separately presented on the Statement of Net Income.

Contract Liabilities

The following table presents a reconciliation of our contract liabilities:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Thousands)
Balance at beginning of period	$	191,826	$	202,392	$	194,464	$	205,030
Recognized in revenue	(2,641)		(2,641)		(5,279)		(5,279)
Balance at end of period	$	189,185	$	199,751	$	189,185	$	199,751


Notes (Continued)			Table of Contents

Remaining Performance Obligations

Our remaining performance obligations primarily include reservation charges on contracted capacity on our firm transportation and storage contracts with customers. Amounts from certain contracts included in the table below, which are subject to periodic review and approval by the FERC, reflect the rates for such services in our current FERC tariffs for the life of the related contracts; however, these rates may change based on future tariffs approved by the FERC. This table excludes the variable consideration component for commodity charges. Certain of our contracts contain evergreen and other renewal provisions for periods beyond the initial term of the contract. The remaining performance obligations as of June 30, 2023 do not consider potential future performance obligations for which the renewal has not been exercised and exclude contracts with customers for which the underlying facilities have not received FERC authorization to be placed into service.

The following table presents the amount of the contract liabilities balance expected to be recognized as revenue when performance obligations are satisfied and the transaction price allocated to the remaining performance obligations under certain contracts as of June 30, 2023.


	Contract Liabilities		Remaining Performance Obligations
	(Thousands)
2023 (six months)	$	5,286	$	1,254,753
2024 (one year)	10,568		2,405,611
2025 (one year)	10,566		2,260,166
2026 (one year)	10,566		1,947,179
2027 (one year)	10,566		1,645,657
Thereafter	141,633		10,795,163
Total	$	189,185	$	20,308,529

Accounts Receivable

Receivables from contracts with customers are included within Receivables - Trade and Receivables - Affiliates, and receivables that are not related to contracts with customers are included within the balance of Receivables - Advances to affiliate and Receivables - Other on our Balance Sheet.

Note 3 – Contingent Liabilities and Commitments

Environmental Matters

We have had studies underway for many years to test some of our facilities for the presence of toxic and hazardous substances such as polychlorinated biphenyls (PCBs) and mercury to determine to what extent, if any, remediation may be necessary. We have also similarly evaluated past on-site disposal of hydrocarbons at a number of our facilities. We have worked closely with and responded to data requests from the U.S. Environmental Protection Agency (EPA) and state agencies regarding such potential contamination of certain of our sites. We are conducting environmental assessments and implementing a variety of remedial measures that may result in increases or decreases in the total estimated costs. We also have a program for monitoring certain environmental activities at our Eminence storage facility. At June 30, 2023, we had a liability of approximately $11.7 million for the expected ongoing remediation and monitoring costs, $1.5 million recorded in Accrued liabilities- Other and $10.2 million recorded in Other Long-Term Liabilities - Other on the Balance Sheet. At December 31, 2022, we had a liability of approximately $11.8 million for the expected ongoing remediation and monitoring costs, $1.4 million recorded in Accrued liabilities- Other and $10.4 million recorded in Other Long-Term Liabilities - Other on the Balance Sheet.


Notes (Continued)			Table of Contents

We have been identified as a potentially responsible party (PRP) at various Superfund and state waste disposal sites. Based on present volumetric estimates and other factors, our estimated aggregate exposure for remediation of these sites is less than $0.5 million. The estimated remediation costs for all of these sites are included in the environmental liabilities discussed above. Liability under the Comprehensive Environmental Response, Compensation and Liability Act and applicable state law can be joint and several with other PRPs. Although volumetric allocation is a factor in assessing liability, it is not necessarily determinative; thus, the ultimate liability could be substantially greater than the amounts described above.

The EPA and various state regulatory agencies routinely propose and promulgate new rules, and issue updated guidance to existing rules. These rulemakings include, but are not limited to, rules for reciprocating internal combustion engine and combustion turbine maximum achievable control technology, review and updates to the National Ambient Air Quality Standards, and rules for new and existing source performance standards for volatile organic compounds and methane. We continuously monitor these regulatory changes and how they may impact our operations. Implementation of new or modified regulations may result in impacts to our operations and increase the cost of additions to Total property, plant, and equipment, net on the Balance Sheet for both new and existing facilities in affected areas; however, due to regulatory uncertainty on final rule content and applicability timeframes, we are unable to reasonably estimate the cost of these regulatory impacts at this time.

We consider prudently incurred environmental assessment and remediation costs and the costs associated with compliance with environmental standards to be recoverable through rates. Historically, with limited exceptions, we have been permitted recovery of environmental costs, and it is our intent to continue seeking recovery of such costs through future rate filings.

Other Matters

Various other proceedings are pending against us and are considered incidental to our operations.

Summary

We have disclosed all significant matters for which we are unable to reasonably estimate a range of possible loss. We estimate that for all matters for which we are able to reasonably estimate a range of loss, including those noted above and others that are not individually significant, our aggregate reasonably possible losses beyond amounts accrued for all of our contingent liabilities are immaterial to our expected future annual results of operations, liquidity and financial position. These calculations have been made without consideration of any potential recovery from third parties.

Note 4 – Debt and Financing Arrangements

Credit Facility

We, along with Williams and Northwest Pipeline LLC (Northwest), are party to a credit agreement with aggregate commitments available of $3.75 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. In the second quarter of 2023, the maturity date of our credit agreement was extended one year and now expires October 8, 2027. One participating lender, Credit Suisse AG, New York Branch, with a commitment of approximately $194 million did not extend their commitment beyond October 8, 2026. The amended credit agreement allows the co-borrowers to request up to two extensions of the maturity date each for an additional one-year period to allow a maturity date as late as October 8, 2029, under certain circumstances. Additionally, the amended credit agreement replaces the London Interbank Offered Rate with Term Secured Overnight Financing Rate as the benchmark interest rate index. We and Northwest are each able to borrow up to $500 million under the credit facility to the extent not otherwise utilized by the other co-borrowers. At June 30, 2023, no letters of credit have been issued and no loans were outstanding under the credit facility.


Notes (Continued)			Table of Contents

Commercial Paper

Williams participates in a $3.5 billion commercial paper program, and Williams’ management considers amounts outstanding under this program to be a reduction of available capacity under the credit facility. At June 30, 2023, Williams had no outstanding commercial paper.

Other Financing Obligations

Dalton Expansion Project

During the first six months of 2023, we received an additional $0.3 million of funding from a co-owner for its proportionate share of construction costs related to its undivided ownership interest in certain parts of the project. This additional funding is reflected in Long-Term Debt on the Balance Sheet. At June 30, 2023 and December 31, 2022, the amount included in Long-Term Debt on the Balance Sheet for this financing obligation was $248.2 million and $249.4 million, respectively, and the amount included in Long-term debt due within one year on the Balance Sheet for this financing obligation was $2.9 million and $2.8 million, respectively.

Atlantic Sunrise Project

During the first six months of 2023 and 2022, we received an additional $4.3 million and $1.3 million, respectively, of funding from a co-owner for its proportionate share of construction costs related to its undivided ownership interest in certain parts of the project. This additional funding is reflected in Long-Term Debt on the Balance Sheet. At June 30, 2023 and December 31, 2022, the amount included in Long-Term Debt on the Balance Sheet for this financing obligation was $775.7 million and $784.6 million, respectively, and the amount included in Long-term debt due within one year on the Balance Sheet for this financing obligation was $25.8 million and $24.6 million, respectively.

Leidy South Project

During the first six months of 2022, we received an additional $3.9 million of funding from a co-owner for its proportionate share of construction costs related to its undivided joint ownership interest in certain parts of the project. This additional funding is reflected in Long-Term Debt on the Balance Sheet. At June 30, 2023 and December 31, 2022, the amount included in Long-Term Debt on the Balance Sheet for this financing obligation was $75.6 million and $76.2 million, respectively, and the amount included in Long-term debt due within one year on the Balance Sheet for this financing obligation was $1.1 million and $1.1 million, respectively.

Note 5 – ARO Trust

We are entitled to collect in rates the amounts necessary to fund our asset retirement obligations (ARO). We deposit monthly, into an external trust account (ARO Trust), the revenues specifically designated for AROs. The ARO Trust carries a moderate risk portfolio. The Money Market Funds held in our ARO Trust are considered investments. The financial instruments held in our ARO Trust are measured at fair value and reported in Other Assets - Other on the Balance Sheet. However, in accordance with ASC Topic 980, Regulated Operations, both realized and unrealized gains and losses of the ARO Trust are ultimately recorded as regulatory assets or liabilities.

Pursuant to the approved stipulation and agreement in Docket No. RP18-1126 the annual funding obligation effective March 31, 2020 is approximately $16.0 million, with deposits made monthly.


Notes (Continued)			Table of Contents

Investments within the ARO Trust were as follows (in millions):


	June 30, 2023				December 31, 2022
	Amortized Cost Basis		Fair Value		Amortized Cost Basis		Fair Value
Money Market Funds	$	22.8	$	22.8	$	16.4	$	16.4
U.S. Equity Funds	52.6		110.8		52.7		96.1
International Equity Funds	31.7		38.0		31.6		35.2
Municipal Bond Funds	87.7		82.8		87.7		82.0
Total	$	194.8	$	254.4	$	188.4	$	229.7

Note 6 – Fair Value Measurements

The following table presents, by level within the fair value hierarchy, certain of our significant financial assets and liabilities. The carrying values of short-term financial assets that have variable interest rates (advances to affiliate), accounts receivable and accounts payable approximate fair value because of the short-term nature of these instruments. Therefore, these assets and liabilities are not presented in the following table.


					Fair Value Measurements Using
	Carrying Amount		Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Millions)
Assets (liabilities) at June 30, 2023:
Measured on a recurring basis:
ARO Trust investments	$	254.4	$	254.4	$	254.4	$	—	$	—
Additional disclosures:
Long-term debt, including current portion	(5,272.5)		(5,340.9)		—		(5,340.9)		—

Assets (liabilities) at December 31, 2022:
Measured on a recurring basis:
ARO Trust investments	$	229.7	$	229.7	$	229.7	$	—	$	—
Additional disclosures:
Long-term debt, including current portion	(5,280.3)		(5,361.7)		—		(5,361.7)		—

Fair Value Methods

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:

ARO Trust investments: We deposit a portion of our collected rates, pursuant to the terms of the Docket No. RP18-1126 rate case settlement, into the ARO Trust, which is specifically designated to fund future AROs. The ARO Trust invests in a portfolio of actively traded mutual funds that are measured at fair value on a recurring basis based on quoted prices in an active market and are reported in Other Assets - Other on the Balance Sheet. However, both realized and unrealized gains and losses are ultimately recorded as regulatory assets or liabilities. See Note 5 – ARO Trust for more information.


Notes (Continued)			Table of Contents

Long-term debt, including current portion: The disclosed fair value of our long-term debt is determined primarily by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. The fair value of the financing obligations associated with our Dalton, Atlantic Sunrise and Leidy South projects were determined using an income approach (see Note 4 – Debt and Financing Arrangements).

Note 7 – Transactions with Affiliates

We are a participant in Williams’ cash management program, and we make advances to and receive advances from Williams. Our advances to Williams totaled approximately $1.7 billion and $1.8 billion at June 30, 2023 and December 31, 2022, respectively. These advances are represented by demand notes and are classified as Receivables - Advances to affiliate on the Balance Sheet. The interest rate on these intercompany demand notes is based upon the daily overnight investment rate paid on Williams’ excess cash at the end of each month, which was approximately 4.9 percent at June 30, 2023. The interest income from these advances was $21.2 million and $40.5 million for the three and six months ended June 30, 2023, respectively, and $3.3 million and $3.5 million for the three and six months ended June 30, 2022, respectively. Such interest income is included in Other (Income) and Other Expenses - Interest income on the Statement of Net Income.

Included in Operating Revenues on the Statement of Net Income are revenues received from affiliates of $13.8 million and $26.0 million for the three and six months ended June 30, 2023, respectively, and $22.6 million and $43.7 million for the three and six months ended June 30, 2022, respectively.

Included in Cost of natural gas sales on the Statement of Net Income are costs of gas purchased from affiliates of $0.9 million and $4.3 million for the three and six months ended June 30, 2023, respectively, and $1.8 million and $7.2 million for the three and six months ended June 30, 2022, respectively. All gas purchases are made at market or contract prices.

We have no employees. Services necessary to operate our business are provided to us by Williams and certain affiliates of Williams. We reimburse Williams and its affiliates for all direct and indirect expenses incurred or payments made (including salary, bonus, incentive compensation and benefits) in connection with these services. Employees of Williams also provide general, administrative and management services to us, and we are charged for certain administrative expenses incurred by Williams. These charges are either directly identifiable or allocated to our assets. Direct charges are for goods and services provided by Williams at our request. Allocated charges are based on a three-factor formula, which considers revenues; property, plant and equipment; and payroll. In management’s estimation, the allocation methodologies used are reasonable and result in a reasonable allocation to us of our costs of doing business incurred by Williams. We have recorded $76.4 million and $160.5 million for the three and six months ended June 30, 2023, respectively, and $87.4 million and $167.0 million for the three and six months ended June 30, 2022, respectively, for these service expenses, which are primarily included in Operation and maintenance and General and administrative expenses on the Statement of Net Income.

We provide services to certain of our affiliates. We recorded reductions in operating expenses for services provided to and reimbursed by our affiliates of $4.2 million and $7.0 million for the three and six months ended June 30, 2023, respectively, and $2.1 million and $3.7 million for the three and six months ended June 30, 2022, respectively.

During July 2023, we declared and paid a cash distribution of $300 million to our parent.


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

General

The following discussion should be read in conjunction with our historical Financial Statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2022 Annual Report on Form 10-K and with the Financial Statements and accompanying notes contained in this Form 10-Q.

Results of Operations

This analysis discusses financial results of our operations for the six-month periods ended June 30, 2023 and 2022. Variances due to the 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.

We have cash out sales, which settle gas imbalances with shippers. In the course of providing transportation services to customers, we may receive different quantities of gas from shippers than the quantities delivered on behalf of those shippers. Additionally, we transport gas on various pipeline systems, which may deliver different quantities of gas on our behalf than the quantities of gas received from us. These transactions result in gas transportation and exchange imbalance receivables and payables. Our tariff includes a method whereby the majority of transportation imbalances are settled on a monthly basis through cash out sales or purchases. The cash out sales have no impact on our operating income.

Net Income for the first six months of 2023 of$628.4 million increased by $74.4 million (13 percent) when compared to the $554.0 million recognized during the first six months of 2022 due to the following significant variances:

Operating Revenues increased $37.5 million (3 percent) due primarily to:

•$18.7 million increase in Natural gas sales due to higher cash out volumes, partially offset by lower pricing (offset in Operating Costs and Expenses resulting in no net impact on our results of operations);

•$12.8 million increase in Other revenues primarily due to higher park and loan services; and

•$6.6 million increase in Natural gas transportation primarily due to higher short-term firm transportation.

Operating Costs and Expenses,excluding the Cost of natural gas sales, which directly offsets Natural gas sales in Operating Revenues, increased $9.9 million (2 percent). This increase was primarily attributable to:

•$14.8 million unfavorable change in Other (income) expense, net driven by a decrease in the deferral of ARO-related depreciation of $15.7 million (offset in Depreciation and amortization resulting in no net impact on our results of operations); and

•$5.1 million increase in Operation and maintenance costs primarily resulting from $10.3 million increase in costs related to outside services for pipeline inspection, right-of-way management, compressor station maintenance, partially offset by lower employee-related labor and benefits costs of $4.0 million and lower power-related costs of $2.4 million; partially offset by

•$10.3 million decrease in Depreciation and amortization primarily as a result of a decrease in ARO-related depreciation (offset in Other (income) expense, net resulting in no net impact on our results of operations), partially offset by an increase in additional assets placed into service.

Other (Income) and Other Expenses had a favorable change of $65.5 million primarily due to an increase of $37.0 million in affiliated interest income on our advances to Williams due to rising interest rates and a favorable change of $22.9 million in allowance for funds used during construction as a result of increased capital expenditures.


Management’s Discussion and Analysis (Continued)			Table of Contents

Pipeline Expansion Projects

Regional Energy Access

The Regional Energy Access Expansion involves an expansion of our existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in northeastern Pennsylvania to multiple delivery points in Pennsylvania, New Jersey, and Maryland. In January 2023, we received approval from the FERC for the project. We plan to place a portion of the project in service as early as the fourth quarter of 2023 and the remainder of the project in service by the fourth quarter of 2024. The project is expected to increase capacity by 829 thousand dekatherms per day (Mdth/d).

Southside Reliability Enhancement

The Southside Reliability Enhancement Project is an incremental expansion of our existing natural gas transmission system to provide firm transportation capacity from receipt points in Virginia and North Carolina to delivery points in North Carolina. In July 2023, we received approval from the FERC for the project. We plan to place the project into service as early as the fourth quarter of 2024 assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 423.4 Mdth/d.

Texas to Louisiana Energy Pathway

The Texas to Louisiana Energy Pathway Project involves an expansion of our existing natural gas transmission system to provide firm transportation capacity from receipt points in south Texas to delivery points in Texas and Louisiana. We filed our certificate application for the project with the FERC on August 9, 2022. We plan to place the project into service as early as the first quarter of 2025, assuming timely receipt of all necessary regulatory approvals. The project is expected to provide 364.4 Mdth/d of new firm transportation service through a combination of increasing capacity, converting interruptible capacity to firm, and utilizing existing capacity.

Southeast Energy Connector

The Southeast Energy Connector Project is an expansion of our existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in Mississippi and Alabama to a delivery point in Alabama. We filed our certificate application for the project with the FERC on August 22, 2022. We plan to place the project into service in the fourth quarter of 2024, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 150 Mdth/d.

Commonwealth Energy Connector

The Commonwealth Energy Connector Project involves an expansion of our existing natural gas transmission system to provide incremental firm transportation capacity in Virginia. We filed our certificate application for the project with the FERC on August 24, 2022. We plan to place the project into service as early as the fourth quarter of 2025, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 105 Mdth/d.


Management’s Discussion and Analysis (Continued)			Table of Contents

Alabama Georgia Connector

The Alabama Georgia Connector Project involves an expansion of our existing natural gas transmission system to provide incremental firm transportation capacity from our Station 85 pooling point in Alabama to customers in Georgia. We filed our certificate application for the project with the FERC on April 19, 2023. We plan to place the project into service as early as the fourth quarter of 2025, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 63.8 Mdth/d.

Carolina Market Link

The Carolina Market Link Project involves an expansion of our existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in Virginia to delivery points in South Carolina. We filed our prior notice application for the project with the FERC on May 31, 2023. We plan to place the project into service as early as the first quarter of 2024, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 78 Mdth/d.


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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, including our Senior Vice President and our Vice President and Chief Accounting Officer, 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, as amended) (Disclosure Controls) or our internal control 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 the company 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 Chief Accounting Officer. Based upon that evaluation, our Senior Vice President and our Vice President and Chief Accounting Officer concluded that these Disclosure Controls are effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes during the second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting.

PART II — OTHER INFORMATION.

Item 1. Legal Proceedings

Environmental

While it is not possible for us to predict the final outcome of any pending legal proceedings involving governmental authorities under federal, state, and local laws regulating the discharge of materials into the environment, we do not anticipate a material effect on our financial position if we were to receive an unfavorable outcome in any one or more of such proceedings. Our threshold for disclosing material environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.

Other

The additional information called for by this item is provided in Note 3 – Contingent Liabilities and Commitments, included in the Notes to Financial Statements included under Part I, Item 1. Financial Statements of this Form 10-Q, which information is incorporated by reference into this item.


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Item 1A. Risk Factors

Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022, includes certain risk factors that could materially affect our business, financial condition, or future results. Those Risk Factors have not materially changed.


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Item 6. Exhibits

The following instruments are included as exhibits to this report.


Exhibit Number						Description

2						Certificate of Conversion dated December 22, 2008 and effective December 31, 2008 (filed on February 24, 2011 as Exhibit 2.1 to our annual report on Form 10-K (File No. 001-07584) and incorporated herein by reference).

3.1						Certificate of Formation dated December 22, 2008 and effective December 31, 2008 (filed on February 24, 2011 as Exhibit 3.1 to our annual report on Form 10-K (File No. 001-07584) and incorporated herein by reference).

3.2						Amended and Restated Operating Agreement of Transcontinental Gas Pipe Line Company, LLC dated February 17, 2010 (filed on October 28, 2010 as Exhibit 3.2 to our quarterly report on Form 10-Q (File No. 001-07584) and incorporated herein by reference).

31.1*						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.

31.2*						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**						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.

101.INS*						XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH*						XBRL Taxonomy Extension Schema.

101.CAL*						XBRL Taxonomy Extension Calculation Linkbase.

101.DEF*						XBRL Taxonomy Extension Definition Linkbase.

101.LAB*						XBRL Taxonomy Extension Label Linkbase.

101.PRE*						XBRL Taxonomy Extension Presentation Linkbase.

104*						Cover Page Interactive Data File. The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101).


*			Filed herewith.
**			Furnished herewith.


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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.

TRANSCONTINENTAL GAS PIPE LINE COMPANY, LLC
(Registrant)

Date:

August 2, 2023

By:

/s/ Billeigh W. Mark

Billeigh W. Mark

Controller

(Principal Accounting Officer)