TF-1 Contract 100002

Rate Schedule TF-1 Service Agreement

Contract No. 100002

THIS SERVICE AGREEMENT (Agreement) by and between Northwest Pipeline LLC (Transporter) and Cascade Natural Gas Corporation (Shipper) is made and entered into on July 28, 2025 and restates the Service Agreement made and entered into on July 10, 2018.

WHEREAS:

Effective November 1, 1992, to conform to the provisions of the approved Joint Offer of Settlement in Docket No. CP92-79, the original Replacement Firm Transportation Agreement dated July 31, 1991 (contract #100002), as amended August 20, 1992 and November 1, 1992, superseded and replaced both a firm sales Service Agreement dated May 25, 1989 and a Firm Transportation Agreement dated June 24, 1988, to provide a partial conversion of Shipper's firm sales Contract Demand to firm Transportation Contract Demand and to establish unilateral evergreen rights.
Significant events and previous amendments of Contract 100002 reflected in the contract restatement include:
1. By Amendment dated October 20, 1993 the conversion of Shipper's remaining firm sales Contract Demand to firm Transportation Contract Demand was implemented, effective November 1, 1993.
2. By Amendment dated October 24, 1995 the primary contract term end date was extended from October 31, 2014 to April 30, 2015.
3. Effective April 1, 1998, the Agreement was amended to combine 19,006 Dths per day from the U&I meter station and 8,314 MMBtu per day from the Moses Lake meter station. The U&I meter station and the Moses Lake meter station were removed and replaced with one station located in close proximity to the U&I meter station, which capacity was equivalent to the two stations, as outlined in a Letter Agreement dated April 1, 1998. The minimum contract delivery pressure was to be 300 psig. (Northwest would not be under any obligation to provide 300 psig in the event that Cascade exceeded an hourly rate of 1,207 Dths during that gas flow day.)
4. Effective August 1, 2000, the Agreement was amended to remove the Green Circle Farms delivery point, which was taken out of service on May 6, 1999.
5. Shipper was allocated a total of 7,352 Dth of temporary firm transportation capacity at receipt points south of the Green River Compressor Station, per the amendment dated July 15, 1996. Shipper agreed to reassign said volumes to points north of the Green River Compressor Station upon termination of the temporary capacity. Termination notice for the temporary firm transportation capacity was given on May 10, 2000 to be effective October 1, 2000. Transporter and Shipper amended Exhibit A of the Agreement to provide for the reassignment of the temporary firm transportation capacity.
6. Shipper elected to cease paying the Facility Cost-of-Service charge reflected on Exhibit "C" and reimbursed Transporter for the remaining net book value of the Tumwater Compressor Station. Effective July 1, 2002, Transporter and Shipper removed Exhibit "C" from the Service Agreement.
7. Effective October 18, 2005, Transporter and Shipper amended the Agreement to: (i) reallocate 133 Dth/day from the Pendleton delivery point to the Mission Tap delivery point, and (ii) replace the Piceance receipt point with the Hatch Gulch receipt point; all as reflected on Exhibit A.
8. Effective May 16, 2006, Transporter and Shipper amended the Agreement to remove the La Maquina receipt point and reallocate 1,000 Dth/day of MDQ from the La Maquina receipt point to the Blanco receipt point.
9. Effective February 26, 2007, Transporter and Shipper amended the Agreement to extend the primary term of the Agreement from April 30, 2015 to April 30, 2020, and to replace the grandfathered unilateral evergreen provision with the standard unilateral evergreen provision, and revise Exhibit B to reference the order previously accepting the non-conforming provision thereon.
10. Effective April 1, 2011, Transporter and Shipper amended the Agreement to remove the Maximum Daily Delivery Obligation from the City of Sumas delivery point and correspondingly increase the Lynden delivery point due to Shipper's request to permanently disconnect the City of Sumas Meter Station.
11. Effective September 1, 2011, Transporter and Shipper amended the Agreement to remove 763 Dth/d from the Painter N.R.U. receipt point and add 763 Dth/d to the Opal Plant receipt point thereby increasing the Opal Plant receipt point from 26,869 Dth/d to 27,632 Dth/d.
12. Effective September 1, 2012, Transporter and Shipper amended the Agreement as part of a contract term negotiation to extend the primary term end date from April 30, 2020 to October 31, 2032 and to add a nonconforming MDDO Realignment provision and FERC approval to Exhibit B in exchange for Transporter awarding various other capacity to Shipper. Additionally, Shipper permanently released 1,000 Dth/d of Contract Demand on Offer No. 34199 reducing their Contract Demand from 206,123 Dth/d to 205,123 Dth/d.
13. Effective April 1, 2013, Transporter and Shipper amended the Agreement, as part of a contract term negotiation to realign MDDOs from the Wenatchee delivery point (3,320 Dth/d) to the Selah delivery point (823 Dth/d) and to the Moxee City delivery point (2,497 Dth/d). This amendment reduced Shipper's MDDOs at the Wenatchee delivery point from 7,195 Dth/d to 3,875 Dth/d and created an incremental 1,421 Dth/d of capacity that Shipper acquired on a different Agreement.
14. Effective July 10, 2013, Transporter and Shipper agreed to remove the FERC Approval non-conforming provision from Exhibit B and transfer Shipper's right to realign its MDDOs that was granted to Shipper as part of a negotiation to extend Shipper's contract without a contract-specific OFO from Exhibit B onto Exhibit A under the new Contract-Specific OFO Parameters field that FERC approved on March 19, 2013 in Docket No. RP13-555 provided the MDDO realignments are: (1) to delivery points with posted available capacity at a point already existing on this Agreement; and (2) not in violation with Transporter's New Contract Prohibition as contained in the Settlement Agreement for Reduction in Displacement Reliance, dated May 1, 2001, and the Settlement Agreement for Reduction in Displacement Reliance Through the Columbia River Gorge Corridor, dated July 27, 2001.
15. By Amendment dated September 6, 2013 and effective May 1, 2020, Transporter and Shipper agreed to reallocate 12,523 Dth/day from the Bellingham II delivery location, reducing the Bellingham II delivery location to 24,977 Dth/d, to the Bellingham Ferndale delivery location, increasing the Bellingham Ferndale location to 30,023 Dth/d. The increased capacity accommodating this amendment is through an upgrade at the Bellingham Ferndale meter station pursuant to a facilities agreement executed between Transporter and Shipper on August 29, 2013.
16. By restatement effective September 18, 2015, Transporter and Shipper agreed to restate the Agreement in its most current form of service and made the following changes to realign capacity between Contract Nos. 100002 and 135384 in order to provide Cascade with a Right of First Refusal on the Shelton lateral:
a. Realigned 24,977 Dth/d from the Bellingham II Delivery location and 5,023 Dth/d from the Sedro/Woolley delivery location to the Bremerton (Shelton) delivery location. To create the capacity on the Shelton lateral, the Parties agreed to make a simultaneous amendment on Cascade’s Contract No. 135384 to realign 30,000 Dth/d from the Bremerton (Shelton) delivery location to Sedro/Woolley;
b. Included a contract-specific flow order (CSOFO) of 4,745 Dth/d from the Sedro/Woolley delivery location to Bellingham II delivery location effective upon the execution of this contract restatement through April 30, 2020; however, due to a system limitation the CSOFO started October 1, 2015;
c. Revised the “Specified contract-specific OFO conditions or alternative actions” field on Exhibit A to provide Shipper with the right to comply with the CSOFO described in Recital B, Paragraph 15.b above using a different contract as an alternative action that is acceptable to Transporter, and clarify that the CSOFO is incremental to Shipper’s Realignment or Must-flow OFOs obligations;
d. Transferred the Exhibit C from Contract No. 135384 to this Agreement.
Additionally, since the future Amendment dated September 6, 2013 and effective May 1, 2020 was superseded to accommodate the contract changes described in Recital B Paragraph 16, upon execution of this Agreement, Transporter and Shipper executed a new future amendment to be effective May 1, 2020 to amend the Exhibit A as follows:
a. Removed the CSOFO described above in Recital B, Paragraph 16.b;
b. Removed the “Specified contract-specific OFO conditions or alternative actions” described above in Recital B, Paragraph 16.c;
c. Realigned 12,523 Dth/d from the Bellingham II delivery location to the Bellingham Ferndale delivery location, which went into service in November 20, 2015.
17. By restatement effective July 10, 2018, Transporter and Shipper agreed to realign 3,995 Dth/d of primary receipt point rights (MDQ's) from Hatch Gulch to Great Divide to facilitate the permanent disconnect of the Hatch Gulch meter station from Transporter's system.
18. By Amendment dated April 5, 2019 and effective May 1, 2020, Transporter and Shipper amended Exhibit A pursuant to the second half of Recital B, Paragraph 16 above.
19. By Amendment dated June 20, 2019, Transporter and Shipper amended the Agreement to realign 10,000 Dth/d from the Bremerton (Shelton) delivery point to the Grays Harbor delivery point reducing the Bremerton (Shelton) delivery point from 37,102 Dth/d to 27,102 Dth/d. The parties also agreed to realign 3,789 Dth/d from the Starr Road receipt point to the Palouse receipt point; thus reducing the Starr Road receipt point from 27,055 Dth/d to 23,266 Dth/d and adding the Palouse receipt point for 3,789 Dth/d.
In addition, due to the path-shortening from Starr Road to Palouse, the parties agreed to incorporate an OFO alternative actions on Exhibit A of the Agreement in lieu of a contract-specific OFO to reinstate Shipper’s southbound Must-flow OFO obligation.
20. Effective April 1, 2020, Shipper permanently released to Puget Sound Energy, Inc. 2,000 Dth/d of its Contract Demand from Sumas Receipt (1,160 Dth/d) and Opal Plant (840 Dth/d) to the Wenatchee delivery location (3,091 Dth/d). Puget Sound Energy, Inc.'s Agreement number is 143460.
21. By Amendment dated April 28, 2020 and effective May 1, 2020, Transporter and Shipper amended the Agreement to:
a. remove that portion of the CSOFO Parameters and "Specified contract-specific OFO conditions or alternative actions" which expired on April 30, 2020;
b. reallocate 12,523 Dth/d from the Bellingham II delivery location, reducing the Bellingham II delivery location to 0 Dth/d and increasing the Bellingham (Ferndale) delivery location to 30,023 Dth/d, as described in Recital B, Paragraph 16 (a), (b) and (c) in the restatement of the Agreement dated July 10, 2018. To accommodate this amendment, the delivery capacity at the Bellingham (Ferndale) meter station was increased through an upgrade at Shipper's expense pursuant to a facilities agreement entered into between Transporter and Shipper on August 29, 2013, which went into service on November 20, 2015; and
c. reallocate 3,995 Dth/d of MDQs from Great Divide/Piceance Cr. Rec. to Yellow Creek to facilitate the temporary disconnect of the Great Divide meter station from Transporter's system.
22. By Amendment dated June 11, 2020 and effective July 1, 2020, Transporter and Shipper amended the Agreement to realign 1,074 Dth/d of primary receipt point rights (MDQs) from Starr Road to Palouse, thus reducing the Starr Road receipt point from 23,266 Dth/d to 22,192 Dth/d and increasing the Palouse receipt point from 3,789 Dth/d to 4,863 Dth/d.
23. Transporter and Shipper further agree to restate the Agreement in its most current form of service.

THEREFORE, in consideration of the premises and mutual covenants set forth herein, Transporter and Shipper agree as follows:

Tariff Incorporation. Rate Schedule TF-1 and the General Terms and Conditions (GT&C) that apply to Rate Schedule TF-1, as such may be revised from time to time in Transporter's FERC Gas Tariff (Tariff), are incorporated by reference as part of this Agreement, except to the extent that any provisions thereof may be modified by non-conforming provisions herein.
Transportation Service. Subject to the terms and conditions that apply to service under this Agreement, Transporter agrees to receive, transport and deliver natural gas for Shipper, on a firm basis. The Transportation Contract Demand, the Maximum Daily Quantity at each Primary Receipt Point, and the Maximum Daily Delivery Obligation at each Primary Delivery Point are set forth on Exhibit A. If contract-specific OFO parameters are set forth on Exhibit A, whenever Transporter requests during the specified time period, Shipper agrees to flow gas as requested by Transporter, up to the specified volume through the specified transportation corridor.
Transportation Rates. Shipper agrees to pay Transporter for all services rendered under this Agreement at the rates set forth or referenced herein. Reservation charges apply to the Transportation Contract Demand set forth on Exhibit A. The Maximum Base Tariff Rates (Recourse Rates) set forth in the Statement of Rates in the Tariff, as revised from time to time, that apply to the Rate Schedule TF-1 customer category identified on Exhibit A, will apply to service hereunder unless and to the extent that discounted Recourse Rates or awarded capacity release rates apply as set forth on Exhibit A or negotiated rates apply as set forth on Exhibit D. Additionally, if applicable under Section 21 or 29 of the GT&C, Shipper agrees to pay Transporter a facilities charge as set forth on Exhibit C.
Transportation Term. This Agreement becomes effective on the effective date set forth on Exhibit A. The primary term begin date for the transportation service hereunder is set forth on Exhibit A. This Agreement will remain in full force and effect through the primary term end date set forth on Exhibit A and, if Exhibit A indicates that an evergreen provision applies, through the established evergreen rollover periods thereafter until terminated in accordance with the notice requirements under the applicable evergreen provision.
Non-Conforming Provisions. All aspects in which this Agreement deviates from the Tariff, if any, are set forth as non-conforming provisions on Exhibit B. If Exhibit B includes any material non-conforming provisions, Transporter will file the Agreement with the Federal Energy Regulatory Commission (Commission) and the effectiveness of such non-conforming provisions will be subject to the Commission acceptance of Transporter's filing of the non-conforming Agreement.
Capacity Release. If Shipper is a temporary capacity release Replacement Shipper, any capacity release conditions, including recall rights, are set forth on Exhibit A.
Exhibit / Addendum to Service Agreement Incorporation. Exhibit A is attached hereto and incorporated as part of this Agreement. If any other Exhibits apply, as noted on Exhibit A to this Agreement, then such Exhibits also are attached hereto and incorporated as part of this Agreement. If an Addendum to Service Agreement has been generated pursuant to Sections 11.5 or 22.12 of the GT&C of the Tariff, it also is attached hereto and incorporated as part of this Agreement.
Regulatory Authorization. Transportation service under this Agreement is authorized pursuant to the Commission regulations set forth on Exhibit A.
Superseded Agreements. When this Agreement takes effect, it supersedes, cancels and terminates the following agreement(s): Service Agreement dated July 01, 2020, but the following Amendments and/or Addendum to Service Agreement which have been executed but are not yet effective are not superseded and are added to and become an Amendment and/or Addendum to this agreement: None

IN WITNESS WHEREOF, Transporter and Shipper have executed this Agreement as of the date first set forth above.


Cascade Natural Gas Corporation		Northwest Pipeline LLC
By: /S/		By: /S/
Name: ERIC WOOD		Name: GARY VENZ
Title: MANAGER GAS SUPPLY		Title: Director Commercial Services

EXHIBIT C

Dated and Effective July 28, 2025

to the

Rate Schedule TF-1 Service Agreement

(Contract No. 100002)

between Northwest Pipeline LLC

and Cascade Natural Gas Corporation

INCREMENTAL FACILITIES PAYMENT OBLIGATION

DESCRIPTION OF FACILITIES:

The facilities contemplated by Section 21 or 29 of the GT&C to provide service under this agreement include the following:
The facilities contemplated by Section 21 or 29 of the GT&C to provide service under this agreement include the following: The regulator assembly at the interconnect between Northwest's mainline and Grays Harbor lateral and the compressor restages at the Tumwater compressor station of the Grays Harbor and Olympia/Shelton laterals installed pursuant to the Facilities Agreement between Transporter and Shipper dated January 17, 2007.
RESPONSIBILITY FOR FACILITIES COSTS:

Pursuant to Section 21 or 29 of the GT&C, Shipper is responsible to pay for the facilities described above and has elected the payment option set forth below.
TERMS AND CONDITIONS OF FACILITIES PAYMENT:
1. Type of Charge: Incremental facilities charge.
2. Charge $31,000.00
  The initial monthly cost-of-service charge for the restaging of the Centaur compressor will be adjusted and trued up annually to reflect actual costs incurred by Transporter, using the methodology set forth below:
  MONTHLY FACILITY CHARGE ANNUAL TRUE-UP METHODOLOGY
  Definitions
  The terms below will have the following meanings for purposes of this Exhibit “C”:
  “ Directly Assigned Transmission O&M ” means all costs in FERC Accounts 853-870, but excluding FERC Account 861.
  “ Directly Assigned Transmission O&M Labor ” means only the labor costs in FERC Accounts 853-870, but excluding FERC Account 861.
  “ Directly Assigned Transmission O&M Labor Ratios ” means the ratio of Directly Assigned Transmission O&M Labor of the Interconnect Facilities to the total Directly Assigned Transmission O&M Labor of the transmission system.
  “ Indirectly Assigned Transmission O&M ” means all costs in FERC Accounts 850-852 and 861.
  “ A&G ” means all costs in FERC Accounts 920-932.
  “ Total O&M ” means all costs in FERC Accounts 800-870 and A&G.
  “ Total O&M Labor Ratios ” means the ratio of Total O&M labor related costs assigned to the Interconnect Facilities to the Total O&M labor related costs assigned to the transmission and storage system.
  “ Transmission Communication Point Ratios ” means the total communication points utilized in the Interconnect Facilities to the total communication points utilized in the transmission system.
  “ Transmission & Storage Communication Point Ratios ” means the total communication points utilized in the Interconnect Facilities to the total communication points utilized in the transmission and storage system.
  “ Miles of Pipe Ratios ” means the total miles of pipe for the Interconnect Facilities to the total miles of pipe for the transmission system.
  Facility Charge Components
  During the Amortization Period, the Facility Charge will be calculated annually and will include all of Northwest’s costs associated with the design, permitting, construction, ownership, operation and maintenance of the Interconnect Facilities, including without limitation, operating and maintenance expenses, administrative and general expenses, depreciation and net negative salvage (“ NNS ”), income taxes, other taxes, return on debt and return on equity.
  Operation and Maintenance (O&M) Expense
  Directly Assigned Transmission O&M related to the Interconnect Facilities is accumulated in a separate project cost center.
  Indirectly Assigned Transmission O&M is allocated using a combination method, which allocates: (1) costs in FERC Accounts 850 and 861 based on Directly Assigned Transmission O&M Labor Ratios, and (2) costs in FERC Accounts 851 and 852 based fifty-percent (50%) on Miles of Pipe Ratios and fifty-percent (50%) on Transmission Communication Point Ratios.
  A&G is allocated in accordance with the FERC approved Kansas-Nebraska methodology.
  If these allocation methods change in any future FERC rate proceeding, then the above costs will be allocated consistent with the methods underlying such rate proceeding.
  Depreciation and NNS
  Direct depreciation expense for the gross direct plant for the Interconnect Facilities is calculated on a straight-line methodology over the Amortization Period.
  Indirect depreciation expense includes general and intangible plant depreciation and amortization that is allocated using a combination method, which allocates: (1) the depreciation related to costs in FERC Accounts 389-399, excluding Account 397, based on Total O&M Labor Ratios, and (2) the depreciation and amortization related to costs in FERC Accounts 301-303 and 397 based fifty-percent (50%) on Miles of Pipe Ratios and fifty-percent (50%) on Transmission & Storage Communication Point Ratios .
  If these allocation methods change in any future FERC rate proceeding, then the above costs will be allocated consistent with the methods underlying such rate proceeding.
  NNS is calculated using gross direct plant for the Interconnect Facilities, multiplied by the NNS rate developed for the transmission system.
  If the NNS rate changes in any future FERC rate proceeding, then the NNS rate will be revised consistent with the NNS rate developed for the transmission system in such rate proceeding or as otherwise specified in such rate proceeding.
  Federal and State Income Taxes
  The federal income tax expense is based on the IRS federal income tax rate in effect for the period of the cost-of-service calculation. The state income tax expense is based on the average weighted state income tax rates in effect for the period of the cost-of-service calculation.
  Taxes Other Than Income Taxes
  Ad Valorem taxes are based on the rate(s) used to determine the taxes paid in the county or counties where the Interconnect Facilities are located multiplied by the total average net plant of the Interconnect Facilities and the general and intangible plant assigned to the Interconnect Facilities.
  Payroll taxes are allocated to the Interconnect Facilities based on the Total O&M Labor Ratios.
  Other taxes not mentioned above, such as state franchise taxes and state sales and use taxes, are allocated to the Interconnect Facilities based on the appropriate combination method ratios used to allocate indirect depreciation expense discussed above.
  If these principles or allocation methods change in any future FERC rate proceeding, then the above taxes will be determined consistent with the principles or methods underlying such rate proceeding.
  Return on Rate Base
  Return on Rate Base is calculated by multiplying Rate Base by the Rate of Return.
  Rate of Return
  Return on debt and equity and the applicable capital structure are based upon the last litigated or settled general rate case where the components are stated.
  Rate Base
  Rate Base includes both direct and indirect rate base. Direct Rate Base equals gross direct plant less accumulated depreciation and accumulated deferred income taxes related to the Interconnect Facilities. Indirect Rate Base equals gross general and intangible plant for the same accounts identified in the indirect depreciation expense discussed above less related accumulated depreciation and accumulated deferred income taxes, plus working capital allocated to the Interconnect Facilities. Working capital includes materials and supplies and prepaid expenses.
  Rate Base is calculated on an annual basis using a 13-month average (12 months of the current calendar year and the last month of the prior calendar year, if available).
  Gross direct plant is based upon actual initial costs for the Interconnect Facilities. Any additional capital expenditures will be added to gross direct plant in the year incurred. To the extent that the gross direct plant has not been fully depreciated prior to the expiration of the Amortization Period, the remaining net book value of the Interconnect Facilities, including any related accumulated deferred income taxes, will be included as part of the final cost-of-service calculation.
  Indirect Rate Base is allocated to the Interconnect Facilities based on the same combination method ratios used to allocate indirect depreciation expense discussed above.
  If these allocation methods change in any future FERC rate proceeding, then the indirect Rate Base will be allocated consistent with the methods underlying such rate proceeding.
  Billing Period
  The Billing Period is the twelve months ending March 31 of each year. The Facility Charge will be invoiced under this Agreement in equal monthly installments over a twelve-month period, unless a shorter period is applicable at the beginning and/or ending of the Term.
  Facility Charge True-up:
  True-up Period
  The True-up Period is based on a calendar year ending December 31 (or partial calendar year if the Facility Charge is in effect for only a portion of a calendar year).
  True-up Calculation
  The difference between: (1) the latest Facility Charge cost-of-service calculation for the True-up Period, and (2) the amount billed during the True-up Period plus carrying costs, as defined below, will be invoiced or credited as a lump sum during the month following the Billing Period.
  A new estimated Facilities Charge will be calculated for the next Billing Period.
  Carrying Costs
  Carrying costs are calculated using the interest computed in conformance with FERC regulations from the date of each collection through the date of the refund or billing, as applicable.
  Adjustments for FERC Rate Proceedings
  To the extent that any part of a True-up Period falls within a subject-to-refund period wherein any of the principles or allocation methods described above are subject to change, initial billings will be based on the principles and allocation methods used by Northwest in calculating its subject-to-refund base tariff rates. If the principles or allocation methods finally approved in such rate proceeding differ from those used by Northwest in calculating its subject-to-refund base tariff rates, then the difference between the Facility Charge previously billed and the Facility Charge subsequently calculated using the principles and allocation methods finally approved in such rate proceeding will be refunded or billed for the applicable billings. Such refund or billing will occur in the next True-up Period and will include interest computed in conformance with FERC regulations from the date of each collection through the date of the refund or billing.
  Audit Rights
  Accounting records and work papers for the True-up Period will be available for audit or review at Northwest’s offices for 180 days after the true-up for each year is invoiced. Information will be deemed correct if not challenged during that 180-day period.
3. Term of Charge:20 years, commencing on the in-service date of the facilities, which was November 1, 2009.
4. Accelerated Payment:In the event that Shipper, prior to the end of the primary term stated in 3.c of this exhibit, makes the election granted in Section 21.7(a) of the General Terms and Conditions of Transporter's Tariff to cease paying the Delivery Facilities Cost-of-Service charge (Buy-Out), the Shipper will reimburse Northwest for the Net Book Value of the Facilities, including any Related Income Taxes, and Shipper will continue to be responsible for all future Cost-of-Service items relating to the Facilities. Such remaining future Cost-of-Service items will be calculated by Transporter in a manner that is consistent with the methodology set forth in 3.b of this exhibit. Transporter and Shipper have agreed, that Net Book Value and Related Income Taxes in Section 21.7(a) of the General Terms and Conditions of Transporter's Tariff shall mean: (a) Net Book Value - The Net Book Value used for a Buy-Out is the total gross investment in the Facilities described in the Facilities Agreement less the book depreciation that has been included in the facilities surcharge paid by the Shipper since the inception of the Facilities Agreement. The Net Book Value is not reduced by any amount included in the facilities surcharge for an asset removal obligation. (b) Related Income Taxes - The current Federal and State income taxes payable by Northwest upon receipt of the Net Book Value less the income tax benefit received by Northwest resulting from the Facilities. The income tax benefit received by Northwest from the Facilities is the sum of: 1) the present value of any future tax benefits received by Northwest from the tax depreciation of the Facilities after the effective date of the Buy-Out, discounted at the rate of return as defined in 3.b of this exhibit as of the date of the effective date of the Buy-Out, and 2) the balance of Accumulated Deferred Income Tax (ADIT) as of the effective date of the Buy-Out. The ADIT is based on the difference between Tax and Book depreciation. Book depreciation includes any asset removal obligation that has been recovered from the Shipper. The Related Income Taxes also includes a gross-up calculation to cover the income tax that Northwest must pay on the Related Income Taxes that are collected from the Shipper.