Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 20182019

or

o  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:  001-35358

TC PipeLines, LP

(Exact name of registrant as specified in its charter)

877-290-2772

(Registrant’s telephone number, including area code)

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 x                    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes x                    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o                    No x

Securities registered pursuant to Section 12(b) of the Exchange Act:

As of May 1, 2018,7, 2019, there were 71,306,396 of the registrant’s common units outstanding.

Table of Contents

TC PIPELINES, LP

TABLE OF CONTENTS

All amounts are stated in United States dollars unless otherwise indicated.

DEFINITIONS

The abbreviations, acronyms, and industry terminology used in this quarterly report are defined as follows:

Unless the context clearly indicates otherwise, TC PipeLines, LP and its subsidiaries are collectively referred to in this quarterly report as “we,” “us,” “our” and “the Partnership.” We use “our pipeline systems” and “our pipelines” when referring to the Partnership’s ownership interests in Gas Transmission Northwest LLC (GTN), Northern Border Pipeline Company (Northern Border), Bison Pipeline LLC (Bison), Great Lakes Gas Transmission Limited Partnership (Great Lakes), North Baja Pipeline, LLC (North Baja), Tuscarora Gas Transmission Company (Tuscarora), Portland Natural Gas Transmission System (PNGTS) and Iroquois Gas Transmission System, LP (Iroquois).

PART I

FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report includes certain forward-looking statements. Forward-looking statements are identified by words and phrases such as: “anticipate,” “assume, “ “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “forecast,” “should,” “predict,” “could,” “will,” “may,” and other terms and expressions of similar meaning. The absence of these words, however, does not mean that the statements are not forward-looking. These statements are based on management’s beliefs and assumptions and on currently available information and include, but are not limited to, statements regarding anticipated financial performance, future capital expenditures, liquidity, dropdown opportunities, market or competitive conditions, regulations, organic or strategic growth opportunities, contract renewals and ability to market open capacity, business prospects, outcome of regulatory proceedings and cash distributions to unitholders.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results predicted. Factors that could cause actual results and our financial condition to differ materially from those contemplated in forward-looking statements include, but are not limited to:

·                  the ability of our pipeline systems to sell available capacity on favorable terms and renew expiring contracts which are affected by, among other factors:

·                  demand for natural gas;

·                  changes in relative cost structures and production levels of natural gas producing basins;

·                  natural gas prices and regional differences;

·                  weather conditions;

·                  availability and location of natural gas supplies in Canada and the United States (U.S.) in relation to our pipeline systems;

·                  competition from other pipeline systems;

·                  natural gas storage levels; and

·                  rates and terms of service;

·                  the performance by the shippers of their contractual obligations on our pipeline systems;

·                  the outcome and frequency of rate proceedings or settlement negotiations on our pipeline systems;

·                  the impact of Public Law No. 115-97, commonly known as the Tax Cuts and Jobs Act (“2017 Tax Act and the 2018 FERC ActionsAct”) enacted on December 22, 2017 on our future operating performance;

·                  other potential changes in the taxation of master limited partnerships (MLPs)partnership (MLP) investments by state or federal governments;governments such as the elimination of pass-through taxation or tax deferred distributions;

·                  increases in operational or compliance costs resulting from changes in laws and governmental regulations affecting our pipeline systems, particularly regulations issued by the Federal Energy Regulatory Commission (FERC), the U.S. Environmental Protection Agency (EPA) and U.S. Department of Transportation (DOT);

·                  the impact of downward changes in oil and natural gas prices, including the effects on the creditworthiness of our shippers;

·                  our ongoing ability to grow distributions through acquisitions, accretive expansions or other growth opportunities, including the timing, termsstructure and closure of futurefurther potential acquisitions;

·                  potential conflicts of interest between TC PipeLines GP, Inc., our general partner (General Partner), TransCanada Corporation, (TransCanada)now known as TC Energy Corporation and us;

·                  the impactfailure to comply with debt covenants, some of any impairment charges;which are beyond our control;

·                  the ability to maintain secure operation of our information technology including management of cybersecurity threats, acts of terrorism and related distractions;

·                  the expected impactimplementation of future accounting changes and ultimate outcome of commitments and contingent liabilities (if any);

·                  the impact of any impairment charges;

·                  changes in the political environment;

·                  operating hazards, casualty losses and other matters beyond our control;

·                  the overall increase in the allocated management and operational expenses to our pipeline systems for services performed by TC Energy Corporation; and

·                  the level of our indebtedness, including the indebtedness of our pipeline systems, increase of interest rates, and the availability of capital;capital.

·        unfavorable conditions in capital and credit markets, inflation and fluctuations in interest rates; and

·        the overall increase in the allocated management and operational expenses on our pipeline systems for functions performed by TransCanada.

These are not the only factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Other factors described elsewhere in this document, or factors that are unknown or unpredictable, could also have material adverse effects on future results. These and other risks are described in greater

detail in Part II, Item 1A. “Risk Factors” of this report and in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 20172018 as filed with the SEC on February 26, 2018.21, 2019. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. All forward-looking statements are made only as of the date made and except as required by applicable law, we undertake no obligation to update any forward-looking statements to reflect new information, subsequent events or other changes.

PART I — FINANCIAL INFORMATION

Item 1.           Financial Statements

TC PIPELINES, LP

CONSOLIDATED STATEMENTS OF INCOME

(a)         Recast to consolidate PNGTS (Refer to Note 2).

(b)        Net income per common unit prior to recast (Refer to Note 2).

The accompanying notes are an integral part of these consolidated financial statements.

TC PIPELINES, LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(a)              Recast to consolidate PNGTS (Refer to Note 2).

The accompanying notes are an integral part of these consolidated financial statements.

TC PIPELINES, LP

CONSOLIDATED BALANCE SHEETS

Contingencies (Note 16)

Variable Interest Entities (Note 17)16)

Subsequent Events (Note 19)17)

The accompanying notes are an integral part of these consolidated financial statements.

TC PIPELINES, LP

CONSOLIDATED STATEMENT OF CASH FLOWS

(a)         Recast to consolidate PNGTS (Refer to Note 2).

The accompanying notes are an integral part of these consolidated financial statements.

TC PIPELINES, LP

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ EQUITY

(a)     LossesGain (Losses) related to cash flow hedges reported in Accumulated Other Comprehensive LossAOCI and expected to be reclassified to Net income in the next 12 months are estimated to be $4$1 million. These estimates assume constant interest rates over time; however, the amounts reclassified will vary based on actual value of interest rates at the date of settlement.

The accompanying notes are an integral part of these consolidated financial statements.

TC PIPELINES, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1    ORGANIZATION

TC PipeLines, LP and its subsidiaries are collectively referred to herein as the Partnership. The Partnership was formed by TransCanada PipeLines Limited, a wholly owned subsidiary of TransCanada Corporation (TransCanadanow known as TC Energy Corporation (TC Energy Corporation together with its subsidiaries collectively referred to herein as TransCanada)TC Energy), to acquire, own and participate in the management of energy infrastructure assets in North America.

The Partnership owns its pipeline assets through an intermediate general partnership, TC PipeLines Intermediate GP, LLC and three intermediate limited partnerships (ILPs), TC GL Intermediate Limited Partnership, TC PipeLines Intermediate Limited Partnership and TC Tuscarora Intermediate Limited Partnership.

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements and related notes have been prepared in accordance with United States generally accepted accounting principles (GAAP) and amounts are stated in U.S. dollars. The results of operations for the three months ended March 31, 20182019 and 20172018 are not necessarily indicative of the results that may be expected for the full fiscal year.

The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 20172018 included in our Annual Report on Form 10-K. That report contains a more comprehensive summary of the Partnership’s significant accounting policies. In the opinion of management, the accompanying consolidated financial statements contain all of the appropriate adjustments, all of which are normally recurring adjustments unless otherwise noted, and considered necessary to present fairly the financial position of the Partnership, the results of operations and cash flows for the respective periods. Our significant accounting policies are consistent with those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017,2018, except as described in Note 3, Accounting Pronouncements.

Basis of Presentation

The Partnership consolidates its interests in entities over which it is able to exercise control. To the extent there are interests owned by other parties, these interests are included inas non-controlling interests. The Partnership uses the equity method of accounting for its investments in entities over which it is able to exercise significant influence.

Acquisitions by the Partnership from TransCanadaTC Energy are considered common control transactions. WhenIf businesses are acquired from TransCanadaTC Energy that will be consolidated by the Partnership, the historical consolidated financial statements are required to be recast, except net income per common unit, to include the acquired entities for all periods presented.

WhenIf the Partnership acquires an asset or an investment from TransCanada,TC Energy, which will be accounted for by the equity method, the financial information is not required to be recast and the transaction is accounted for prospectively from the date of the acquisition.

On June 1, 2017,U.S. federal and certain state income taxes are the Partnership acquiredresponsibility of the partners and are not reflected in these consolidated financial statements. The tax effect of the Partnership’s activities accrues to its partners. The Partnership’s taxable income or loss, which may vary substantially from a subsidiary of TransCanada an additional 11.81 percent interest in PNGTS, that resultedthe net income or loss reported in the Partnership owning a 61.71 percent interestconsolidated statement of operations, is includable in PNGTS.  As a resultthe U.S. federal income tax returns of the Partnership owning a 61.71 percent interest in PNGTS, the Partnership’s historical financial information has been recast, except net income per common unit, to consolidate PNGTS for all the periods presented ineach partner.

In instances where the Partnership’s consolidated financial statements. Additionally, this acquisition was accountedentities are subject to state income taxes, the asset-liability method is used to account for as transaction between entities under common control, similar to poolingtaxes. This method requires the recognition of interests, whereby thedeferred tax assets and liabilities for future tax consequences attributable to the differences between the financial statement carrying amount of PNGTS were recorded at TransCanada’s carrying value.existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are classified as non-current on our consolidated balance sheet.

Also, on June 1, 2017, the Partnership acquired from subsidiaries of TransCanada a 49.34 percent interest in Iroquois. Accordingly, this transaction was accounted for as a transaction between entities under common control, similar to pooling of interest, whereby the equity investment in Iroquois was recorded at TransCanada’s carrying value and was accounted for prospectively from the date of acquisition.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, as of the date of the financial statements, and the

reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ from these estimates.

NOTE 3    ACCOUNTING PRONOUNCEMENTS

Changes in Accounting Policies effective January 1, 2018

Revenue from contracts with customers

In 2014, the Financial Accounting Standards Board (FASB) issued new guidance on revenue from contracts with customers. The new guidance requires that an entity recognize revenue from these contracts in accordance with a prescribed model. This model is used to depict the transfer of promised goods or services to customers in amounts that reflect the total consideration to which it expects to be entitled during the term of the contract in exchange for those promised goods or services. Goods or services that are promised to a customer are referred to as the Partnership’s “performance obligations.” The total consideration to which the Partnership expects to be entitled can include fixed and variable amounts. The Partnership has variable revenue that is subject to factors outside the Partnership’s influence, such as market volatility, actions of third parties and weather conditions. The Partnership considers this variable revenue to be “constrained” as it cannot be reliably estimated, and therefore recognizes variable revenue when the service is provided.

The new guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue recognition and the related cash flows. The new guidance was effective January 1, 2018, was applied using the modified retrospective transition method, and did not result in any material differences in the amount and timing of revenue recognition. Refer to Note 6 - Revenues, for further information related to the impact of adopting the new guidance and the Partnership’s updated accounting policies related to revenue recognition from contracts with customers.

Hedge Accounting

In August 2017, the FASB issued new guidance on hedge accounting, making more financial and nonfinancial hedging strategies eligible for hedge accounting. The new guidance amends the presentation requirements relating to the change in fair value of a derivative and additional disclosure requirements include cumulative basis adjustments for fair value hedges and the effect of hedging on individual statement of income line items. This new guidance is effective January 1, 2019 with early adoption permitted. The Partnership has elected to apply this guidance effective January 1, 2018. Application of this guidance did not have a material impact on its consolidated financial statements.

Future accounting changes

Leases

In February 2016, the FASBFinancial Accounting Standards Board (FASB) issued new guidance on the accounting for leases. The new guidance amends the definition of a lease requiringsuch that, in order for an arrangement to qualify as a lease, the customerlessee is required to have both (1) the right to obtain substantially all of the economic benefits from the use of the asset and (2) the right to direct the use of the asset in order for the arrangement to qualify as a lease.asset. The new guidance also establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and corresponding lease liability on the consolidated balance sheet for all leases with a term longer than 12twelve months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.consolidated statements of income. The new guidance does not make extensive changes to previous lessor accounting.

Under the new guidance, the Partnership determines if an arrangement is a lease at inception. Operating leases are recognized as ROU assets and included in Property, plant and equipment while corresponding liabilities are included in “Accounts payable and other”, and “Other long-term liabilities” on the consolidated balance sheet.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the Partnership’s leases do not provide an implicit rate, the Partnership uses an incremental borrowing rate that approximates its borrowing cost based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Partnership will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term and included in “Operation and maintenance expenses” in the consolidated statements of income.

The new guidance was effective January 1, 2019 and was applied using optional transition relief which allowed entities to initially apply the new lease standard at adoption and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This transition option allowed us to not apply the new guidance, including disclosure requirements, to the comparative periods presented.

We elected available practical expedients and exemptions upon adoption which allowed us:

·                  not to reassess prior conclusions on existing leases regarding lease identification, lease classification and initial direct costs under the new standard

·                  to carry forward the historical lease classification and our accounting treatment for land easements on existing agreements

·                  to not recognize ROU assets or lease liabilities for leases that qualify for the short-term lease recognition exemption

·                  to not separate lease and non-lease components for all leases for which we are the lessee

·                  to use hindsight in determining the lease term and assessing ROU assets for impairment.

In the application of the new guidance, assumptions and judgements are used to determine the following:

·                  whether a contract contains a lease and the duration of the lease term including exercising lease renewal options. The lease term for all of the Partnership’s leases includes the non-cancellable period of the lease plus any additional periods covered by either the Partnership’s option to extend (or not to terminate) the lease that the Partnership is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor; and

·                  the discount rate for the lease.

The standard did not impact our previously reported results and did not have material impact on the Partnership’s consolidated balance sheet, consolidated statements of income or consolidated statement of cash flows at the date of adoption.

The most significant change as a result of the adoption was the recognition of ROU assets and lease liabilities for operating leases which was approximately $0.6 million at January 1, 2019 and $0.5 million at March 31, 2019. For the three months

ended March 31, 2019, the Partnership’s operating lease cost was not material to the Partnership’s consolidated results. The weighted average remaining term and discount rate of the Partnership’s operating leases was approximately 2.63 years and 3.57 percent, respectively.

Fair Value Measurement

In August 2018, the FASB issued new guidance on accountingthat amends certain disclosure requirements for land easements which provides an optional transition practical expedient to not evaluate existing or expired land easements not accounted forthe fair value measurements as leases prior to entity’s adoption of the new guidance. An entity that elects this practical expedient is required to apply it consistently to allpart of its existing or expired land easements not previously accounted for as leases.

The new guidance is effective on January 1, 2019, with early adoption permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period

presented in the financial statements, with certain practical expedients available. The Partnership is continuing to identify and analyze existing lease agreements to determine the effect of adoption of the new guidance on its consolidated financial statements. The Partnership is also addressing system and process changes necessary to compile the information to meet the recognition and disclosure requirements of the new guidance. The Partnership continues to monitor and analyze additional guidance and clarification provided by FASB.

Goodwill Impairment

In January 2017, the FASB issued new guidance on simplifying the test for goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill to measure the impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.framework project. This new guidance is effective January 1, 2020, and will be applied prospectively, however, early adoption of certain or all requirements is permitted. The Partnership elected to adopt this guidance effective first quarter 2019. The guidance was applied retrospectively and did not have a material effect on the Partnership’s consolidated financial statements.

Future accounting changes

Measurement of credit losses on financial instruments

In June 2016, the FASB issued new guidance that significantly changes how entities measure credit losses for most financial assets and certain other financial instruments that are not measured at fair value through net income.income (loss). The new guidance amends the impairment model of financial instruments basing it on expected losses rather than incurred losses. These expected credit losses will be recognized as an allowance rather than as a direct write down of the amortized cost basis. The new guidance is effective January 1, 2020 and will be applied using a modified retrospective approach. We are currently evaluating the impact of the adoption of this guidance and have not yet determined the effect on our consolidated financial statements.

Consolidation

In October 2018, the FASB issued new guidance for determining whether fees paid to decision makers and service providers are variable interests for indirect interests held through related parties under common control. This new guidance is effective January 1, 2020, and will be applied on a retrospective basis, however early adoption is permitted. The Partnership is currently evaluating the timing and impact of adoption of this guidance and has not yet determined the effect on its consolidated financial statements.

NOTE 4  REGULATORY

In December 2016, FERC issued a Notice of Inquiry (NOI) RegardingIroquois, Tuscarora, and Northern Border took the Commission’s Policy for Recovery of Income Tax Costs (Docket No. PL17-1-000) requesting initial comments regarding howactions listed below to address any “double recovery” resulting from FERC’s current income tax allowance and rate of return policies that had been in effect since 2005.

Docket No. PL17-1-000 is a direct response to United Airlines, Inc., et al. v. FERC (United), a decision issuedconclude the issues impacting their pipelines as contemplated by the U.S. Court of Appeals for the District of Columbia Circuit in July 2016 in which the D.C. Circuit directed FERC to explain how a pass-through entity such as an MLP receiving a tax allowance and a return on equity derived from the discounted cash flow (DCF) methodology did not result in “double recovery” of taxes.

On December 22, 2017, the President of the United States signed into law H.R.1, originally known as the Tax Cuts and Jobs Act (the “2017 Tax Act”).  This legislation provides for major changes to U.S. corporate federal tax law including a reduction of the federal corporate income tax rate. We are a non-taxable limited partnership for federal income tax purposes, and federal income taxes owed as a result of our earnings are the responsibility of our partners, therefore no amounts have been recorded in the Partnership’s financial statements with respect to federal income taxes as a result of the 2017 Tax Act.

OnAct and certain FERC actions that began in March 15,of 2018, FERC issued (1) a revised Policy Statement to address the treatment of income taxes for ratemaking purposes for MLPs, (2) a Notice of Proposed Rulemaking (NOPR) proposing interstate pipelines file a one-time report to quantify the impact of the federal income tax rate reduction and the revised Policy Statement could have on a pipeline’s Return on Equity (ROE) assuming a single-issue adjustment to a pipeline’s rates, and (3) an NOI seeking comment on how FERC should address changes related to accumulated deferred income taxes and bonus depreciation (collectively, the “2018 FERC Actions”). Each is further described below.

FERCnamely FERC’s Revised Policy Statement on Treatment of Income Tax Allowance Cost Recovery in MLP Pipeline Rates

FERC changed its long-standing policy on the treatment of income tax amounts to be included in pipeline rates and other assets subject to cost of service rate regulation held within an MLP.  The revisedTaxes (Revised Policy Statement no longer permits entities organized as MLPs to recover an income tax allowance in their cost of service rates.

TransCanada filed a Request for Clarification and If Necessary Rehearing of FERC’s revised Policy Statement on April 16, 2018, addressing concerns over the lack of clarity around entities with ownership shared between an MLPStatement) and a corporation as well as other related concerns. In the request, TransCanada sought clarification or rehearing on several bases:Final Rule that FERC erred in not assessing the propriety of income tax allowances for pipelines onestablished a case-by-case basis; that FERC overturned applicable legal precedent expressly not affectedschedule by United; that FERC failed to consider the effects of its revised policy on industry; and that FERC failed to exhibit reasoned decision making or to support its decision with substantial evidence on the record.

NOPR on Tax Law Changes for Natural Gas Companies

The NOPR proposes that by a deadline to be set in final rule-making,which interstate pipelines must either (i) file a new uncontested rate settlement or comply with a rule that would require companies to(ii) file a one-time report, called FERC Form No. 501-G, that quantifiesquantified the rate impact of 2017 Tax Act and, with respect to pipelines held by MLPs, the FERC’s revised Policy Statement. Concurrent with filing the one-time report, each pipeline would have four options:

· make a limited Natural Gas Act Section 4 filing to reduce its rates by the percentage reduction in its cost of service shown in its FERC Form No. 501-G

· commit to file either a pre-packaged uncontested rate settlement or a general Section 4 rate case if it believes that using the limited Section 4 option will not result in just and reasonable rates. If the pipeline commits to file either by December 31, 2018, FERC will not initiate a Natural Gas Act Section 5 investigation of its rates prior to that date

· file a statement explaining its rationale for why it does not believe the pipeline’s rates must change

· take no action other than filing the one-time 501-G report. FERC would then consider whether to initiate a Section 5 investigation of any pipeline that has not submitted a limited Section 4 rate reduction filing or committed to file a general Section 4 rate case.

TransCanada submitted comments on the NOPR on April 25, 2018. Following the requisite public comment period, we expect FERC to issue final order(s) in the late summer or early fall of 2018. We continue to evaluate this NOPR and our next course of action, however, we do not expect an immediate or a retroactive impact from the NOPR or the revised Policy Statement described above.

NOI Regarding the Effect of the 2017 Tax Act on Commission-Jurisdictional RatesFERC-regulated pipelines and the impact of the Revised Policy Statement on pipelines held by an MLP (collectively “2018 FERC Actions”).

InIroquois

On February 28, 2019, Iroquois filed an uncontested settlement with FERC to address the NOI, FERC seeks comment to determine what additional action as a result ofissues contemplated by the 2017 Tax Act if any,and 2018 FERC Actions via an amendment to its prior 2016 settlement (2019 Iroquois Settlement). Among the terms of the 2019 Iroquois Settlement, Iroquois agreed to reduce its existing maximum system rates by 6.5 percent to be implemented in two phases, (i) effective March 1, 2019, a 3.25 percent rate reduction and (ii) effective April 1, 2020, an additional 3.25 percent rate reduction, which is the remaining one-half of the total 6.5 percent rate reduction from the 2016 settlement rates. The 2019 Iroquois Settlement, which was approved by FERC on May 2, 2019, preserved the 2016 settlement moratorium on further rate changes until September 1, 2020. Unless superseded by a subsequent rate case or settlement, Iroquois will be required to have new rates in effect on March 1, 2023.

Tuscarora

On March 15, 2019, Tuscarora filed an uncontested settlement with FERC to address the issues contemplated by the 2017 Tax Act and 2018 FERC Actions via an amendment to its prior 2016 settlement (2019 Tuscarora Settlement). Among the terms of the 2019 Tuscarora Settlement, Tuscarora agreed to reduce its existing maximum system rates by 1.7 percent effective February 1, 2019 through to July 31, 2019. The existing maximum rates will decrease by an additional 10.8 percent for the period August 1, 2019 through the term of the settlement. Tuscarora is required to have new rates in effect on February 1, 2023. Tuscarora and its customers also agreed on a moratorium on further rate changes until January 31, 2023. The 2019 Tuscarora Settlement, which was approved by FERC related toon May 2, 2019, will also reflect an elimination of the tax allowance previously recovered in rates along with accumulated deferred income taxes collected from shippers(ADIT) for rate-making purposes.

Northern Border

On April 4, 2019, Northern Border filed a petition for approval with FERC to amend the settlement agreement reached with its customers in anticipation of ultimately being paid2017.  Unless superseded by a subsequent rate case or settlement, effective January 1, 2020, the additional 2 percent rate reduction implemented on February 1, 2019 will be extended to the Internal Revenue Service, but which no longer accurately reflect the future income tax liability. The NOI also seeks comment on the elimination of bonus depreciation for regulated natural gas pipelines and other effectsJuly 1, 2024 as part of the 2017 Tax Act.

We plan to submit comments in response to the NOI by the due date of May 21, 2018.

Impairment Considerations

As noted under Note 2, the preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions with respect to values or conditions, which cannot be known with certainty, that affect the reported amount of assets and liabilities at the date of the financial statements. Although we believe these estimates and assumptions are reasonable, actual results could differ.

We review plant, property and equipment and equity investments for impairment whenever events or changes in circumstances indicate the carrying value of the asset may not be recoverable.

Goodwillamended settlement agreement. The amendment is tested for impairment on an annual basis or more frequently if events or changes in circumstance indicate that it might be impaired. We can initially make this assessment based on qualitative factors. If we conclude that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, an impairment test is not performed.pending approval from FERC.

Until the proposed 2018 FERC Actions are finalized, implementation requirements are clarified, including the applicability to assets partially-owned by a MLP or held in non-MLP structures, and we have fully evaluated our respective alternatives to minimize the potential negative impact of the 2018 FERC Actions on our future operating performance and cash flows, we believe that it is not more likely than not that the fair values of our reporting units are less than their respective carrying values. Therefore, a goodwill impairment test was not performed. Also, we have determined there is no indication that the carrying values of plant, property and equipment and equity investments potentially impacted by the 2018 FERC Actions are not recoverable.

We will continue to monitor developments and assess our goodwill for impairment. We will also review our property, plant and equipment and equity investments for recoverability as new information becomes available.

At December 31, 2017, the estimated fair value of our investment in Great Lakes exceeded its carrying value by less than 10 percent. There is a risk that the 2018 FERC Actions, once finalized, could result in an impairment charge to our equity method goodwill on Great Lakes amounting to $260 million at March 31, 2018 (December 31, 2017 — $260 million). Additionally, since the estimated fair value of Tuscarora exceeded its carrying value by less than 10 percent in its most recent valuation, there is also a risk that the $82 million goodwill at March 31, 2018 (December 31, 2017 - $82 million) related to Tuscarora could be negatively impacted by the 2018 FERC Actions.

NOTE 5    EQUITY INVESTMENTS

The Partnership has equity interests in Northern Border, Great Lakes and Iroquois. The pipeline systems owned by these entities are regulated by FERC. The pipeline systems of Northern Border and Great Lakes are operated by subsidiaries of TransCanada.TC Energy. The Iroquois pipeline system is operated by Iroquois Pipeline Operating Company, a wholly owned subsidiary of Iroquois. The Partnership uses the equity method of accounting for its interests in its equity investees. The Partnership’s equity investments are held through our ILPs that are considered to be variable interest entities (VIEs) (Refer to Note 17)16).

(a)              Equity earnings from Northern Border is net of the 12-year amortization of a $10 million transaction fee paid to the operator of Northern Border at the time of the Partnership’s acquisition of an additional 20 percent interest in April 2006.

(b)             The Partnership acquired a 49.34% interest in Iroquois on June 1, 2017.

Distributions from Equity Investments

Distributions received from equity investments forin the quarterthree months ended March 31, 2019 were $58 million (March 31, 2018 were— $45 million (2017 — $28 million;)million) of which, $2 million (2017(March 31, 2018 - none)$2 million) was considered a return of capital and is included in Investing activities“Investing Activities” in the Partnership’s consolidated statement of cash flows. The return of capital was related to our investment in Iroquois (see further discussion below).

Northern Border

The Partnership did not have undistributed earnings from Northern Border for the three months ended March 31, 20182019 and 2017.2018.

The summarized financial information provided to us by Northern Border is as follows:

(a)                   No current maturities as of March 31, 20182019 and December 31, 2017.2018. At March 31, 2019, Northern Border is in compliance with all its financial covenants.

Great Lakes

The Partnership made an equity contribution to Great Lakes of $45 million in the first quarter of 2018.2019 (March 31, 2018 - $4 million). This amount represents the Partnership’s 46.45 percent share of a $9an $11 million cash call from Great Lakes to make a scheduled debt repayment.

The Partnership did not have undistributed earnings from Great Lakes for the three months ended March 31, 20182019 and 2017.2018.

The summarized financial information provided to us by Great Lakes is as follows: