1998 Capital Expenditures — $77 million

Northwest’s 1997 operating profit matched the previous year’s, although results were negatively impacted by increased reserves for rates subject to refund that were collected in prior periods. A new rate design, effective March 1997, which provided Northwest the opportunity to achieve higher levels of short-term firm and interruptible transportation volumes, favorably impacted results. Significantly lower operating and maintenance costs also boosted performance.

Key Points
*Northwest negotiated a favorable settlement of its 1996 rate case that established a platform for rate stability until at least July 2000. Northwest has a goal not to file a new rate case before 2003.

*Northwest and Kern River combined activities as part of Williams’ move to a national pipeline. The organizational alignment contributed to a $2.2 million savings in general and administrative costs. In addition, performance improvement initiatives contributed to nearly a 15 percent, or $6.8 million, reduction of operating and maintenance costs.

Outlook
*We expect 1998 operating profit to approximate 1997 results.

*Capital expenditures for 1998 are expected to be $77 million, primarily for expansion and system reliability projects.

*The Columbia Gorge project is designed to increase capacity of our mainline between Stanfield, Ore., and Sumas, Wash., by 50 MMcfd, to 250 MMcfd. We will file for regulatory approval in first-quarter 1998, with the expansion expected to be operational by fourth-quarter 1999. The expansion will give Northwest a greater presence in the British Columbia, Portland and Seattle markets.

*We will file for regulatory approval in first-quarter 1998 to expand the Jackson Prairie storage facility in southwest Washington. The project, of which Northwest is
one-third owner, will provide an additional 3 Bcf of working gas capacity with a withdrawal rate of 300 MMcfd. This project is scheduled to be operational by fourth-quarter 1999.

*In first-quarter 1998, we will file for regulatory approval to design and market capacity on the Silver Gem lateral, a 121-mile pipeline originating on Northwest’s mainline between Buhl and Twin Falls, Idaho, and extending to Wells, Nev. The expansion, scheduled for service in fourth-quarter 1999, will transport 55 MMcfd of natural gas to a Wells fertilizer plant and 35 MMcfd to customers in the expanding Nevada market.

*Northwest’s system serves one of the nation’s fastest growing areas. Our access to diverse, low-priced gas supplies in major basins in western Canada, Wyoming, Colorado and New Mexico benefits our customers and places us in an enviable industry position. Our average contract life of 12.5 years far exceeds the industry average.