UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q (Mark One)



QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
March31June30,21 r


TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ____________ _ Commission file number 1-4174



THEWILLIAMSCOMPANIES,INC.

(Exact name of registrant as specified in its charter)



DELAWARE
73-0569878

(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)


ONE WILLIAMS CENTER

TULSA, OKLAHOMA
74172-0172

(Address of principal executive offices)
(Zip Code) Registrants telephone number, including area code: (918)573-2000 NO CHANGE



(Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section13 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 No 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 No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer
Acceleratedfiler
Non-acceleratedfiler
Smallerreportingcompany

(Donotcheckifasmallerreportingcompany)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes No Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



Class
Shares Outstanding at
AprilJuly 7 05
Common Stock, $1 par value
74
8,961,4829,711,274



The Williams Companies, Inc. Index



Page

Part I. Financial Information

Item1. Financial Statements

Consolidated Statement of Income Three and Six Months Ended MarchJune 310,21 n 04 6

Consolidated Statement of Comprehensive Income Three and Six Months Ended MarchJune 310,21 n 04 7

Consolidated Balance Sheet MarchJune 310,21 n eebr3,21
8

Consolidated Statement of Changes in Equity ThreeSix Months Ended MarchJune 310,21
9

Consolidated Statement of Cash Flows ThreeSix Months Ended MarchJune 310,21 n 04 10

Notes to Consolidated Financial Statements
11

Item2. Managements Discussion and Analysis of Financial Condition and Results of Operations
2830

Item3. Quantitative and Qualitative Disclosures About Market Risk
4753

Item4. Controls and Procedures
548

Part II. Other Information
548

Item1. Legal Proceedings
4854

Item1A. Risk Factors
55


Item6. Exhibits
507
Certain matters contained in this report include forward-looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to anticipated financial performance, managements plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.
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Levels of dividends to stockholders;


The status, expected timing, and expected outcome of our proposed acquisition of all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (Acquisition of WPZ Public Units);
1


The status, expected timing, and expected outcome of the unsolicited proposal for us to be acquired in an all-equity transaction (Unsolicited Proposal) and our Board of Directors ongoing review of strategic alternatives;


Our future credit ratings;


Amounts and nature of future capital expenditures;


Expansion and growth of our business and operations;


Financial condition and liquidity;
1


Business strategy;


Cash flow from operations or results of operations;


Seasonality of certain business components;


Natural gas, natural gas liquids and olefins supply, prices and demand;


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:


Satisfaction of the conditions to the completion of the Acquisition of WPZ Public Units, including receipt of the approval of our stockholders;


The results of our Board of Directors ongoing review of strategic alternatives;


Whether WPZ will produce sufficient cash flows to provide the level of cash distributions we expect;


Whether we are able to pay current and expected levels of dividends;


Availability of supplies, market demand, and volatility of prices;


Inflation, interest rates, fluctuation in foreign exchange rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);


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


Whether we are able to successfully identify, evaluate and execute investment opportunities;


Our ability to acquire new businesses and assets and successfully integrate those operations and assets into our existing businesses, as well as successfully expand our facilities;


Development of alternative energy sources;


Teipc foeainladdvlpethzrsadufrse nerpin;

Costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation, and rate proceedings;
2


Our costs and funding obligations for defined benefit pension plans and other postretirement benefit plans;


Changes in maintenance and construction costs;


Changes in the current geopolitical situation;


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


Risks related to financing, including restrictions stemming from our debt agreements, future changes in our credit ratings, as well as the credit rating of WPZ as determined by nationally-recognized credit rating agencies and the availability and cost of capital;


Teaon fcs itiuin rmadcptlrqieet forivsmnsadjitvnue nwihw atcpt;

Risks associated with weather and natural phenomena, including climate conditions;
2


Acts of terrorism, including cybersecurity threats and related disruptions;


Additional risks described in our filings with the 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 to 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, Item1A. Risk Factors in our Annual Report on Form 10-K for the year ended December31, 2014
.
, and Part II, Item 1A. Risk Factors of this Form 10-Q.
3 DEFINITIONS
The following is a listing of certain abbreviations, acronyms, and other industry terminology used throughout this Form 10-Q.
Measurements : Barrel : One barrel of petroleum products that equals 42 U.S. gallons Bcf : One billion cubic feet of natural gas Bcf/d : One billion cubic feet of natural gas per day British Thermal Unit (Btu) : A unit of energy needed to raise the temperature of one pound of water by one degree Fahrenheit Dekatherms (Dth) : A unit of energy equal to one million British thermal units Mbbls/d : One thousand barrels per day Mdth/d : One thousand dekatherms per day MMcf/d : One million cubic feet per day MMdth : One million dekatherms or approximately one trillion British thermal units MMdth/d : One million dekatherms per day TBtu : One trillion British thermal units Consolidated Entities : ACMP: Access Midstream Partners, L.P. prior to its merger with Pre-merger WPZ Cardinal: Cardinal Gas Services, L.L.C. Constitution: Constitution Pipeline Company, LLC Gulfstar One: Gulfstar One LLC Jackalope: Jackalope Gas Gathering Services, L.L.C Northwest Pipeline: Northwest Pipeline LLC Pre-merger WPZ: Williams Partners L.P. prior to its merger with ACMP Transco: Transcontinental Gas Pipe Line Company, LLC WPZ: Williams Partners L.P. Partially Owned Entities : Entities in which we do not own a 100 percent ownership interest and which, as of
March31June 30, 2015, we account for as an equity-method investment, including principally the following: Aux Sable: Aux Sable Liquid Products LP Bluegrass Pipeline: Bluegrass Pipeline Company LLC Caiman II: Caiman Energy II, LLC Discovery: Discovery Producer Services LLC Gulfstream: Gulfstream Natural Gas System, L.L.C. Laurel Mountain: Laurel Mountain Midstream, LLC Moss Lake: Moss Lake Fractionation LLC and Moss Lake LPG Terminal LLC OPPL: Overland Pass Pipeline Company LLC UEOM: Utica East Ohio Midstream LLC
4
Government and Regulatory: EPA: Environmental Protection Agency FERC: Federal Energy Regulatory Commission SEC:
U.S. Securities and Exchange Commission Other : B/B Splitter: Butylene/Butane splitter RGP Splitter: Refinery grade propylene splitter Fractionation: The process by which a mixed stream of natural gas liquids is separated into constituent products, such as ethane, propane, and butane GAAP: U.S. generally accepted accounting principles IDR: Incentive distribution right NGLs: Natural gas liquids; natural gas liquids result from natural gas processing and crude oil refining and are used as petrochemical feedstocks, heating fuels, and gasoline additives, among other applications NGL margins : NGL revenues less Btu replacement cost, plant fuel, transportation, and fractionation PDH facility: Propane dehydrogenation facility
5 PART I FINANCIAL INFORMATION
The Williams Companies, Inc. Consolidated Statement of Income (Unaudited)



Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions, except per-share amounts)

Revenues:

Service revenues
$
1,
197241
$
825
$
2,438

$
8191,644

Product sales
5
19
930
98
853
1,117
1,783


Total revenues
1,
716
1,749
839
1,678
3,555
3,427


Costs and expenses:

Product costs
4
62
769
94
724
956
1,493


Operating and maintenance expenses
387
298
437
308
824
606


Depreciation and amortization expenses
4278
214
855
428

Selling, general, and administrative expenses
1
96
150
74
136
370
286


Net insurance recoveries Geismar Incident
(1
26
)
(42
)
(126
)
(16
19
)

Other (income) expensenet
17
17
40
27
57
44


Total costs and expenses
1,4
8947
1,3
2967
2,936
2,696


Operating income (loss)
227
420
392
311
619
731


Equity earnings (losses)
5193
37
144

(
4811
)

Other investing income (loss) net
149
18
9
32


Interest incurred
(2738
)
(192
)
(551

)
(
169361
)

Interest capitalized
2216
29
38
58

Other income (expense)net
1634
4
50

15

Income (loss)
from continuing operations before income taxes
43
247
266
207
309
454


Provision (benefit) for income taxes
30
51
83
84
113
135

Income (loss) from continuing operations
183
123
196
319

Income (loss) from discontinued operations
4
4


Net income (loss)
1
383
127

196
323

Less: Net income (loss) attributable to noncontrolling interests
(57
)
56
69
24
12
80


Net income (loss) attributable to The Williams Companies, Inc.
$
70114
$
103
$
184
$
243

Amounts attributable to The Williams Companies, Inc.:

Income (loss) from continuing operations
$
114
$
99
$
184
$
239

Income (loss) from discontinued operations
4
4

Net income (loss)
$
114
$
103
$
184

$
140243

Basic earnings (loss) per common share:

Income (loss) from continuing operations
$
.15
$
.14
$
.25
$
.34

Income (loss) from discontinued operations
.01
.01

Net income (loss)
$
.0915
$
.15
$
.25

$
.2035

Weighted-average shares (thousands)
74
8,079
684,773
9,253
696,553
748,669
690,695


Diluted earnings (loss) per common share:

Income (loss) from continuing operations
$
.15
$
.14
$
.24
$
.34

Income (loss) from discontinued operations
.01
.01

Net income (loss)
$
.0915
$
.15
$
.24

$
.2035

Weighted-average shares (thousands)
752,
028
688,904
775
700,696
752,403
694,832


Cash dividends declared per common share
$
.58900
$
.4250
$
1.17
0
$
.
4028275 See accompanying notes.
6
The Williams Companies, Inc. Consolidated Statement of Comprehensive Income (Unaudited)



Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions)

Net income (loss)
$
1
383
$
127

$
196
$
323

Other comprehensive income (loss):

Foreign currency translation adjustments, net of taxes of
$16($6) and $10 in 2015 and ($9) and ($8) in 2014, respectively
(910
37
(8
5 )
(447
)

Pension and other postretirement benefits:

Amortization of prior service cost (credit) included in net periodic benefit cost, net of taxes of $10 and $1 in 2015 and $1 and $2 in 04 epciey (1
)
(1
)
(2
)
(2
)

Amortization of actuarial (gain) loss included in net periodic benefit cost, net of taxes of ($4) and ($38) in 2015 and ($4) and ($7) in 04 epciey 7
6
14
12

Other comprehensive income (loss)
(8916
42
(73

)
(39
)
3

Comprehensive income (loss)
(76
)
157
199
169
123
326


Less: Comprehensive income (loss) attributable to noncontrolling interests
(9274
37
(18

)
5693

Comprehensive income (loss) attributable to The Williams Companies, Inc.
$
1625
$
132
$
141

$
101233
See accompanying notes.
7
The Williams Companies, Inc. Consolidated Balance Sheet (Unaudited)



March31June30, 2015
December31,
2014

(Millions, except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents
$
341204
$
240

Accounts and notes receivable net:

Trade and other
7482
972

Income tax receivable
609
167

Deferred income tax asset
68
67
67

Inventories
200168
231

Other current assets and deferred charges
20635
213

Total current assets
1,
622426
1,890

Investments
8,
319712
8,400

Property, plant, and equipment, at cost
3
7,1988,070
36,435

Accumulated depreciation and amortization
(8,662981
)
(8,354
)

Property, plant and equipment net
2
8,5369,089
28,081

Goodwill
1,145
1,120

Other intangible assets net of accumulated amortization
10,19158
10,453

Regulatory assets, deferred charges, and other
64433
619

Total assets
$
5
0,4571,163
$
50,563

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable
$
7283
$
865

Accrued liabilities
801924
900

Commercial paper
1,743
798

Long-term debt due within one year
801378
4

Total current liabilities
2,3303,768
2,567

Long-term debt
21,690285
20,888

Deferred income taxes
4,
577665
4,712

Other noncurrent liabilities
2,2794
2,224

Contingent liabilities (Note 12)

Equity:

Sokodr qiy

Common stock (960 million shares authorized at $1 par value;
7834 million shares issued at MarchJune 310, 2015 and 782 million shares
issued at December 31, 2014)
78
34
782

Capital in excess of par value
14,779812
14,925

Retained deficit
(
5,9146,243
)
(5,548
)

Accumulated other comprehensive income (loss)
(39584
)
(341
)

Treasury stock, at cost (35 million shares of common stock)
(1,041
)
(1,041
)

Total stockholders equity
8,2127,928
8,777

Noncontrolling interests in consolidated subsidiaries
11,
369243
11,395

Total equity
19,58171 20,172

Total liabilities and equity
$
5
0,4571,163
$
50,563
See accompanying notes.
8
The Williams Companies, Inc. Consolidated Statement of Changes in Equity (Unaudited)



The Williams Companies, Inc., Stockholders

Common Stock
Capitalin Excess of ParValue
Retained Deficit
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Total Stockholders Equity
Noncontrolling Interests
Total Equity

(Millions)

Balance December31, 2014
$
782
$
14,925
$
(5,548
)
$
(341
)
$
(1,041
)
$
8,777
$
11,395
$
20,172

Net income (loss)
70
70
(57
)
13
184
184
12
196


Other comprehensive income (loss)
(
543
)
(
543
)
(350
)
(8973
)

Cash dividends common stock
(434876
)
(434876
)
(434876
)

Dividends and distributions to noncontrolling interests
(
228462
)
(
228462
)

Stock-based compensation and related common stock issuances, net of tax
12
17
18
18
48
50
50


Changes in ownership of consolidated subsidiaries, net
(1630
)
(1630
)
2
560
9
76

Contributions from noncontrolling interests
26
26
57
57


Other
(21
)
(3

)
(24
)
8
6
15
11


Net increase (decrease) in equity
1
(146
2
(113
)
(695

)
(
4366
)
(
54849
)
(
565152
)
(261,001
)
(591
)

Balance
March31June30,21
$
7834
$
14,779812
$
(
5,9146,243
)
$
(39584
)
$
(1,041
)
$
8,2127,928
$
11,
369243
$
19,58171 See accompanying notes.
9 The Williams Companies, Inc. Consolidated Statement of Cash Flows (Unaudited)



Three mSix Months eEnded
MarchJune 310,
2015
2014

(Millions)

OPERATING ACTIVITIES:

Net income (loss)
$
1396
$
196323

Adjustments to reconcile to net cash provided (used) by operating activities:

Depreciation and amortization
427
214
855
428


Provision (benefit) for deferred income taxes
2108
(96
)
31

Amortization of stock-based awards
46
23
11

Cash provided (used) by changes in current assets and liabilities:

Accounts and notes receivable
3050
1
67

Inventories
3264
(
2781
)

Other current assets and deferred charges
9
22
(45
)
(37
)


Accounts payable
(7548
)
(1634
)

Accrued liabilities
(1067
)
670

Other, including changes in noncurrent assets and liabilities
18(36
)

529
Net cash provided (used) by operating activities
669
446
1,483
759


FINANCING ACTIVITIES:

Proceeds from (payments of) commercial paper net
(799
)
942
(22
56
)

Proceeds from long-term debt
5,
255
1,496
720
4,935


Payments of long-term debt
(
3,6484,922
)

Proceeds from issuance of common stock
10
14
21
3,408


Dividends paid
(434876
)
(
276567
)

Dividends and distributions paid to noncontrolling interests
(
228462
)
(147296
)

Contributions from noncontrolling interests
26
63
57
122


Payments for debt issuance costs
(279
)
(1137
)

Othernet
332
1
57

Net cash provided (used) by financing activities
188
929
483
7,356


INVESTING ACTIVITIES:

Property, plant, and equipment:

Capital expenditures (1)
(8321,654
)
(
7931,839
)

Net proceeds from dispositions
6
28

Purchase of business
(112
)

Purchases of and contributions to equity-method investments
(483
)
(246
)
(228
Cash held for ACMP Acquisition
(5,995

)

Othernet
159
23
241
116


Net cash provided (used) by investing activities
(7562,002
)
(
9927,936
)


Increase (decrease) in cash and cash equivalents
101
383
(36
)
179


Cash and cash equivalents at beginning of year
240
681

Cash and cash equivalents at end of period
$
341204
$
1,064860

_________

()nrae opoet,pat n qimn
$
(7381,554
)
$
(
8401,789
)

Changes in related accounts payable and accrued liabilities
(94100
)
(50

)
47

Capital expenditures
$
(8321,654
)
$
(
7931,839
)
See accompanying notes.
10
The Williams Companies, Inc. Notes to Consolidated Financial Statements (Unaudited)
Note 1 General, Description of Business, and Basis of Presentation General Our accompanying interim consolidated financial statements do not include all the notes in our annual financial statements and, therefore, should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014, in
our Annual Report on Form 10-KExhibit 99.1 of our Form 8-K dated May 6, 2015. 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 the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Unless the context clearly indicates otherwise, references in this report to we, our, us, or like terms refer to The Williams Companies, Inc. and its subsidiaries. Unless the context clearly indicates otherwise, references to we, our, and us include the operations in which we own interests accounted for as equity-method investments that are not consolidated in our financial statements.When we refer to our equity investees by name, we are referring exclusively to their businesses and operations. Merger On February 2, 2015, we completed the merger of our consolidated master limited partnerships, Williams Partners L.P. (Pre-merger WPZ) and Access Midstream Partners, L.P. (ACMP) (Merger). The merged partnership is named Williams Partners L.P. Under the terms of the merger agreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the Merger. In conjunction with the Merger, each Pre-merger WPZ common unit held by the public was exchanged for 0.86672 ACMP common units.Each Pre-merger WPZ common unit held by us was exchanged for 0.80036 ACMP common units.Prior to the closing of the Merger, the Class D limited partner units of Pre-merger WPZ, all of which were held by us, were converted into WPZ common units on a one -for-one basis pursuant to the terms of the WPZ partnership agreement. Following the Merger, we own approximately 60 percent of the merged partnership, including the general partner interest and incentive distribution rights (IDRs). In this report, we refer to the post-merger partnership as WPZ and the pre-merger entities as Pre-merger WPZ and ACMP. DescripAcquisition of Business Our operations are located principally in the United StatesWPZ Public Units On May 12, 2015, we entered into and are organized into the Williams Partners and Williams NGL& Petchem Services reportable segments. All remaining business activities are included in Other. For periods after the ACMP Acquisition (See Note 2 Acquisition ), the former Access Midstream segment is now reported within Williams Partners. For periods prior to the ACMP Acquisition, the former Access Midstream segment is now reported within Other. Prior periods segment disclosures have been recast. Williams Partners Williams Partners consists of our consolidated master limited partnership, Williams Partners L.P. (WPZ), and primarily includes gas pipeline and midstream businesses. WPZs gas pipeline businesses primarily consist ofgreement for a unit-for-stock transaction whereby we will acquire all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (Acquisition of WPZ Public Units). Each such WPZ common unit will be converted into the right to receive 1.115 shares of our common stock. In the event this agreement is terminated under certain circumstances, we could be required to pay a $410 million termination fee to WPZ, of which we currently own approximately 60 percent , including the interests of the general partner and IDRs. Such termination fee would be settled through a reduction of quarterly incentive distributions we are entitled two interstate natural gas pipelines, which are Transcontinental Gas Pipe Line Company, LLC (Transco) and Northwest Pipeline LLC (Northwest Pipeline), and several joint venture investments in interstate and intrastate naturreceive from WPZ (such reduction not to exceed $102.5 million per quarter). Strategic Alternatives On June 21, 2015, we publicly announced in a press release that we had received and subsequently rejected an unsolicited proposal to acquire us in an all-equity transaction. The unsolicited proposal gwas pipeline systems, including a 50 percent equity-method investmentcontingent on the termination of our pending Acquisition of WPZ Public Units. Our Board of Directors has authorized a process to explore a range
11
Notes (Continued)
of strategic alternatives, which could include, among other things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan. Description of Business Our operations are located principally in the United States and are organized into the Williams Partners and Williams NGL& Petchem Services reportable segments. All remaining business activities are included in Other. For periods after the ACMP Acquisition (see Note 2 Acquisitions ), the former Access Midstream segment is reported within Williams Partners. For periods prior to the ACMP Acquisition, the results associated with our former equity-method investment in Access Midstream are reported within Other. Prior periods segment disclosures have been recast. Williams Partners Williams Partners consists of our consolidated master limited partnership, Williams Partners L.P. (WPZ), and primarily includes gas pipeline and midstream businesses. WPZs gas pipeline businesses primarily consist of two interstate natural gas pipelines, which are Transcontinental Gas Pipe Line Company, LLC (Transco) and Northwest Pipeline LLC (Northwest Pipeline), and several joint venture investments in interstate and intrastate natural gas pipeline systems, including a 50 percent equity-method investment in Gulfstream Natural Gas System, L.L.C., and a 41 percent interest in Constitution Pipeline Company, LLC (Constitution) (a consolidated entity). WPZs midstream businesses primarily consist of (1)natural gas gathering, treating, and processing; (2)natural gas liquid (NGL) fractionation, storage and transportation; (3)oil transportation; and (4)olefins production. The primary service areas are concentrated in major producing basins in Colorado, Texas, Oklahoma, Kansas, New Mexico, Wyoming, the Gulf of Mexico, Louisiana, Pennsylvania, West Virginia, New York, and Ohio which include the Marcellus and Utica shale plays as well as the Eagle Ford, Haynesville, Barnett, Mid-Continent, and Niobrara areas. The midstream businesses includes equity-method investments in natural gas gathering and processing assets and NGL fractionation and transportation assets, including a 4962 percent equity-method investment in Utica East Ohio Midstream, LLC (UEOM), a 50 percent equity-method investment in the Delaware basin gas gathering system in the Mid-Continent region, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC, a 58 percent equity-method investment in Caiman Energy II, LLC, a 60 percent equity-method investment in Discovery Producer Services LLC, a 50 percent equity-method investment in Overland Pass Pipeline, LLC, and Appalachia Midstream Services, LLC, which owns an approximate average 45 percent equity-method investment interest in 11 gas gathering systems in the Marcellus Shale. Subsequent to March 31, 2015, WPZ announced an agreement to acquire an additional equity interest in UEOM. Refer to Note 14 Subsequent Events for further information. The midstream businesses also include our Canadian midstream operations, which are comprised of an oil sands offgas processing plant near Fort McMurray, Alberta, an NGL/olefin fractionation facility and butylene/butane splitter facility at Redwater, Alberta, and the Boreal Pipeline. Williams NGL& Petchem Services Williams NGL & Petchem Services includes certain other domestic olefins pipeline assets and certain Canadian growth projects under development (including a propane dehydrogenation facility and a liquids extraction plant). Other Other includes other business activities that are not operating segments, as well as corporate operations. Basis of Presentation Consolidated master limited partnership As of March31June30, 2015 , we own approximately 60 percent of the interests in WPZ, including the interests of the general partner, which are wholly owned by us, and IDRs. The previously described Merger and other equity issuances by WPZ had the combined net impact of increasing Noncontrolling interests in consolidated subsidiaries by $260 million and decreasing Capital in excess of par value by $163 million and Deferred income taxes by $97 million in the Consolidated Balance Sheet . WPZ is self-funding and maintains separate lines of bank credit and cash management accounts and also has a commercial paper program. (See Note 9 Debt and Banking Arrangements .) Cash distributions from WPZ to us, including any associated with our IDRs, occur through the normal partnership distributions from WPZ to all partners. Discontinued operations Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to our continuing operations. Accounting standards issued but not yet adopted In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-2 Amendments to the Consolidation Analysis (ASU 2015-2). ASU 2015-2 alters the models used to determine
12
Notes (Continued)
consolidation conclusions for certain entities, including limited partnerships, and may require additional disclosures. ThThe previously described Merger and other equity issuances by WPZ had the combined net impact of increasing Noncontrolling interests in consolidated subsidiaries by $256 million and decreasing Capital in excess of par value by $160 million and Deferred income taxes by $96 million in the Consolidated Balance Sheet . WPZ is self-funding and maintains separate lines of bank credit and cash management accounts and also has a commercial paper program. (See Note 9 Debt and Banking Arrangements .) Cash distributions from WPZ to us, including any associated with our IDRs, occur through the normal partnership distributions from WPZ to all partners. Discontinued operations Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to our continuing operations. Accounting standards issued but not yet adopted In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU is effective for financial statements is) 2015-11 Simplifying the Measurement of Inventory (ASU 2015-11). ASU 2015-11 simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, in scope inventory should be measured for reporting periods beginning after December 15, 2015 and interim periods within the reporting periods with either retrospective or modified retrospective presentation allowed. We will adopt the standard in the first quarter of 2016. We are currentlyat the lower of cost and net realizable value. The new standard is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. We are evaluating the impact of the new standard. In May 2015, the FASB issued ASU 2015-07 Fair Value Measurement (Topic 820) Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-07). ASU 2015-17 removes from the fair value hierarchy investments measured using the net asset value per share (or its equivalent) practical expedient.The standard primarily impacts certain investments included in our employee benefit plans. The guidance is effective for financial statements issued for reporting periods beginning after December 15, 2015, and interim periods within the reporting periods and requires retrospective presentation. Early adoption is permitted. We are evaluating the impact of the new standard onand our consolidated financial statementstiming for adoption. In April 2015, the FASB issued ASU 2015-3 Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (ASU 2015-3). ASU 2015-3 simplifies the presentation of debt issuance costs by requiring such costs be presented as a deduction from the corresponding debt liability. The guidance is effective for financial statements issued for reporting periods beginning after December 15, 2015, and interim periods within the reporting periods and requires retrospective presentation. We will adopt the standard in the first quarter of 2016. We are evaluating the impact of the new standardare evaluating the impact of the new standard. In February 2015, the FASB issued ASU 2015-2 Amendments to the Consolidation Analysis (ASU 2015-2). ASU 2015-2 alters the models used to determine consolidation conclusions for certain entities, including limited partnerships, and may require additional disclosures. The ASU is effective for financial statements issued for reporting periods beginning after December 15, 2015, and interim periods within the reporting periods with either retrospective or modified retrospective presentation allowed. We are currently evaluating the impact of the new standard on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures.The standard is effective for annual reporting periods beginning after December 15, 20167, and interim periods within the reporting period.The FASB has recently proposed delaying the effective date of ASC 606 to annual and interim periods beginning after December 15, 2017. Accordingly, if the FASB chooses to delay the effective date to December 15, 2017, we would plan to adopt this standard in the first quarter of 2018.ASC 606 allows either full retrospective or modified retrospective transition and early adoption is not permitted for annual periods beginning after December 15, 2016. We continue to evaluate both the impact of this new standard on our consolidated financial statements and the transition method we will utilize for adoption.
13
Notes (Continued)
Note
2 Acquisition
s
ACMP
We acquired control of ACMP on July 1, 2014 (ACMP Acquisition). Our basis in ACMP reflects business combination accounting, which, among other things, requires identifiable assets acquired and liabilities assumed to be measured at their acquisition-date fair values.
The following table presents the allocation of the acquisition-date fair value of the major classes of the assets acquired, which are presented in the Williams Partners segment, liabilities assumed, and noncontrolling interest at July1, 2014. Changes
sinceto the preliminary allocation disclosed in our Annual Report onExhibit 99.1 of our Form 108-K for the year ended December 31,dated May 6, 2015, which were recorded in the first quarter of 20145, reflect an increase of $150 million in pProperty, plant, and equipment net and $25 million in gGoodwill , and a decrease of $168 million in oOther intangible assets and $7 million in iInvestments .Teeajsmnsdrn h esrmn eidwr o osdrdsgiiatt eur ersetv eiin forfnnilsaeet.


(Millions)

Accounts receivable
$
168

Other current assets
63

Investments
5,865

Property, plant, and equipment net
7,165

Goodwill
499

Other intangible assets
8,841

Current liabilities
(408
)

Debt
(4,052
)

Other noncurrent liabilities
(9
)

Noncontrolling interest in ACMPs subsidiaries
(958
)

Noncontrolling interest in ACMP
(6,544
)
13Eagle Ford Gathering System In May 2015, WPZ acquired a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility in the Eagle Ford shale for $112 million . The acquisition was accounted for as a business combination, and the preliminary allocation of the acquisition-date fair value of the major classes of assets acquired include $60 million of Property, plant, and equipment, at cost and $52 million of Other intangible assets net of accumulated amortization in the Consolidated Balance Sheet .
UEOM Equity-Method Investment In June 2015, WPZ acquired an approximate 13 percent additional equity interest in its equity-method investment, UEOM, for $357 million . Following the acquisition WPZ owns approximately 62 percent of UEOM. However, WPZ continues to account for this as an equity-method investment because WPZ does not control UEOM due to the significant participatory rights of its partner. In connection with the acquisition of the additional interest, we have agreed to waive approximately $2 million of our WPZ IDR payments each quarter through 2017. Note 3 Variable Interest Entities As of June30, 2015 , we consolidate the following variable interest entities (VIEs): Gulfstar One WPZ owns a 51 percent interest in Gulfstar One LLC (Gulfstar One), a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE. Gulfstar One includes a proprietary floating-production system, Gulfstar FPS, and associated pipelines which provide production handling and gathering services for the Tubular Bells oil and
14

Notes (Continued)
Note 3 Variable Interest Entities As of March31, 2015 , we consolidate the following variable interest entities (VIEs): Gulfstar One WPZ owns a 51 percent interest in Gulfstar One LLC (Gulfstar One), a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Gulfstar Ones economic performance. WPZ, as construction agent for Gulfstar One, designed, constructed, and installed a proprietary floating-production system, Gulfstar FPS , and associated pipelines which began providing production handling and gathering services for the Tubular Bells oil and gas discovery in the eastern deepwater Gulf of Mexico in the fourth quarter of 2014. WPZ received certain advance payments from the producer customers. In certain circumstances, the producer customers could be responsible for Gulfstar Ones unrecovered portion of the firm price of building the facilities if the production handling agreement is terminatedgas discovery in the eastern deepwater Gulf of Mexico. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Gulfstar Ones economic performance. Construction of an expansion project is underway that will provide production handling and gathering services for the Gunflint oil and gas discovery in the eastern deepwater Gulf of Mexico. The expansion project is expected to be in service in the first quarter of 2016. The current estimate of the total remaining construction costs for the expansion project is approximately $11699 million , which weis expect willed to be funded with revenues received from customers and capital contributions from WPZ and the other equity partner on a proportional basis. Constitution WPZ owns a 41 percent interest in Constitution, a subsidiary that, due to shipper fixed-payment commitments under its long-term firm transportation contracts, is a VIE. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Constitutions economic performance. WPZ, as construction agentmanager for Constitution, is building a pipeline connecting ourits gathering system in Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and the Tennessee Gas Pipeline systems. WPZ plans to place the project in service in the second half of 2016 and estimates the total remaining construction costs of the project to be approximately $6034 million , which is expected to be funded with capital contributions from WPZ and the other equity partners on a proportional basis. Cardinal WPZ owns a 66 percent interest in Cardinal Gas Services, L.L.C (Cardinal), a subsidiary that, provides gathering services for the Utica region and is a VIE due to certain risks shared with customers, is a VIE. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Cardinals economic performance. WPZ, as operator for Cardinal, designed, constructed, and installed associated pipelines which provide production handling and gathering services for the Utica region. WPZ has received certain advance payments from the equity partners during the construction process. Future constructFuture expansion activity which is expected to be funded with capital contributions from WPZ and the other equity partners on a proportional basis. Jackalope WPZ owns a 50 percent interest in Jackalope Gas Gathering Services, L.L.C (Jackalope), a subsidiary that, provides gathering and processing services for the Powder River basin and is a VIE due to certain risks shared with customers, is a VIE. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Jackalopes economic performance. WPZ, as operator for Jackalope, designed, constructed, and installed associated pipelines which provide production handling and gathering services for the Niobrara region. Although still under construction, parts of Jackalope are operating and made limited contributions to operations in 2014 and the first quarter of 2015. WPZ has received certain advance payments from the equity partner during the construction process. Future construction activity whichFuture expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis.
1
45
Notes (Continued)
The following table presents amounts included in our Consolidated Balance Sheet that are for the use or obligation of our consolidated VIEs.



March31June30, 2015
December 31, 2014
Classification

(Millions)

Assets (liabilities):

Cash and cash equivalents
$
5891
$
113
Cash and cash equivalents

Accounts receivable
7159
52
Accounts and notes receivable, net, rd n te

Other current assets
3
3
Other current assets and deferred charges

Property, plant and equipment
, net
2,8
7782
2,794
Property, plant and equipment net

Goodwill
107
103
Goodwill

Other intangible assets, net
1,4
7461
1,493
Other intangible assets, e facmltdaotzto

Other noncurrent assets
3
14
Regulatory assets, deferred charges, and other

Accounts payable
(4032
)
(48
)
Accounts payable

Accrued liabilities
(3622
)
(36
)
Accrued liabilities

Current deferred revenue
(4563
)
(45
)
Accrued liabilities

Noncurrent deferred income taxes
(13
)
Deferred income taxes

Asset retirement obligation
(945
)
(94
)
Other noncurrent liabilities

Noncurrent deferred revenue associated with customer advance payments
(38957
)
(395
)
Other noncurrent liabilities Note 4 Other Income and Expenses The following table presents certain losses reflected in Other (income) expensenet within Costs and expenses in our Consolidated Statement of Income :



Three Months Ended
June 30,
Six Months Ended
June 30,

2015
2014
2015
2014

(Millions)

Williams Partners

Amortization of regulatory assets associated with asset retirement obligations
$
9
$
8
$
17
$
17

Impairment of certain assets (See Note 11)
24
17
27
17
GimrIcdn nJn1,21,a xlso n ieocre tWlim atesGimroeispat h niet(esa niet edrdtefclt eprrl nprbeadrsle nsgiiathmn iaca,adoeainlefcs ttetm fteicdn,w a nuac oeaefrrpi n elcmn ot,ls rdcin n diinlepne eae oteicdn sflos


Poet aaeadbsns nerpincvrg ihacmie e-curnelmto 50mlinadrtnin ddcils f$0mlinprocrec o rprydmg n atn eido 0dy e curnefrbsns nerpin


General liability coverage with per-occurrence and aggregate annual limits of $610 million and retentions (deductibles) of $2 million per occurrence;
16
Notes (Continued)


Workers compensation coverage with statutory limits and retentions (deductibles) of $1 million total per occurrence.
During the first quarter of 2014, wWe received $1256 million of insurance recoveries related to the Geismar Incident and incurred $6 millionduring the three and six months ended June30, 2015 , and we received $50 million and $175 million during the three and six months ended June30, 2014 , respectively. The three and six month periods ended June30, 2014 , also include $8 million and $14 million , respectively, of related covered insurable expenses incurred in excess of our retentions (deductibles). These amounts are reported within Williams Partners and reflected as a net gain in Net insurance recoveries Geismar Incident in the Consolidated Statement of Income . Since June 2013, we have settled claims associated with $480 million of available property damage and business interruption coverage for a total of $422 million . This total includes $126 million expected to be received during the second quarter of 2015. The remaining insurance limits total approximatelyAdditional Items Selling, general, and administrative expenses includes $1 million and $26 million for the three and six months ended June30, 2015 , respectively, and $2 million for the three and six months ended June 30, 2014, primarily related to professional advisory fees associated with the ACMP Acquisition and Merger, reported within the Williams Partners segment. Selling, general, and administrative expenses for the three and six months ended June30, 2015 , also includes $4 million and $8 million , respectively, of related employee transition costs reported within the Williams Partners segment, in addition to $7 million and $13 million , respectively, of general corporate expenses associated with integration and re-alignment of resources. Operating and maintenance expenses for the three and six months ended June30, 2015 , includes $8 million and $12 million , respectively, of transition costs reported within the Williams Partners segment. Additionally, Interest incurred includes $2 million for the six months ended June 30, 2015, and $9 million for the three and six months ended June30, 2014, of transaction-related financing costs. The six months ended June30, 2014 , includes $19 million of project development costs related to the Bluegrass Pipeline Company LLC (Bluegrass Pipeline) reported within Williams NGL & Petchem Services and reflected in Selling, general, and administrative expenses in the Consolidated Statement of Income . Equity earnings (losses) for the six months ended June30, 2014 , include $70 million of losses reported within Williams NGL & Petchem Services related to the write-off of previously capitalized project development costs by Bluegrass Pipeline, Moss Lake Fractionation LLC, and Moss Lake LPG Terminal LLC after our management decided to discontinue further funding of the projects. These entities were dissolved in the fourth quarter of 2014. The three and six month periods ended June30, 2015 , each include $9 million , and the three and six month periods ended June30, 2014 , include $14 million and $207 million and we are vigorously pursuing collection.
15
, respectively, of interest income associated with a receivable related to the sale of certain former Venezuela assets reflected in Other investing income (loss) net in the Consolidated Statement of Income . Due to changes in circumstances that led to late payments and increased uncertainty regarding the recovery of the receivable, we began accounting for the receivable under a cost recovery model in first quarter 2015. In second quarter 2015, we received a payment greater than the remaining carrying amount of the receivable, which resulted in the recognition of interest income. The three and six month periods ended June30, 2015 , include $19 million and $36 million , respectively, and the three and six month periods ended June 30, 2014, include $7 million and $10 million , respectively, of allowance for equity funds used during construction (AFUDC) reported within Williams Partners in Other income (expense)net below Operating income (loss) . AFUDC increased during 2015 due to the increase in spending on various Transco expansion projects and Constitution. Other income (expense)net below Operating income (loss) includes a $14 million gain for the three and six month periods ended June30, 2015 , resulting from the early retirement of certain debt.
17

Notes (Continued)
Additional Items Selling, general, and administrative expenses in 2015 includes $25 million of professional advisory fees associated with the Merger and $4 million of related employee transition costs, reported primarily within the Williams Partners segment, in addition to $6 million of general corporate expenses associated with integration and re-alignment of resources. Operating and maintenance expenses in 2015 also includes $4 million of related employee transition costs reported within the Williams Partners segment. The three months ended March31, 2014 , includes $19 million of project development costs related to the Bluegrass Pipeline Company LLC (Bluegrass Pipeline) reported within Williams NGL & Petchem Services and reflected in Selling, general, and administrative expenses in the Consolidated Statement of Income . Equity earnings (losses) for the three months ended March31, 2014 includes $70 million of losses reported within Williams NGL & Petchem Services related to the write-off of previously capitalized project development costs by Bluegrass Pipeline, Moss Lake Fractionation LLC, and Moss Lake LPG Terminal LLC after our management decided to discontinue further funding of the projects. These entities were dissolved in the fourth quarter of 2014. The three months ended March31, 2014 , includes $13 million of interest income associated with a receivable related to the sale of certain former Venezuela assets reflected in Other investing income (loss) net in the Consolidated Statement of Income . Due to changes in circumstances that have led to late payments and increased uncertainty regarding the recovery of the receivable, we have begun accounting for the receivable under a cost recovery model. As a result, no interest income was recognized in the first quarter of 2015. Other income (expense)net below Operating income (loss) includes $17 million and $3 million for allowance for equity funds used during construction (AFUDC) reported within Williams Partners for the three months ended March 31, 2015 and 2014, respectively. AFUDC increased during 2015 due to the increase in spending on various Transco expansion projects and Constitution. Nt rvso Bnft o noeTxsTePoiin(eei)fricm ae nlds



Three mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions)

Current:

Federal
$
$
(24
)
$
$
1
137

State
51
(1
)
1
4


Foreign
2
23
4
5


2
144
3
(22
)
5
122


Deferred:

Federal
25
(96
73
95
98
(1

)

State
3
(1
)
6
2
5

Foreign
48
5
8
9

80
106
108
13


28
(93
)

Total provision (benefit)
$
83
$
84
$
11
30
$
5135
The effective income tax rate for the total provision for the three months ended
March31June30, 2015 , is less than the federal statutory rate primarily due to the impact of nontaxable noncontrolling interests, partially offset by taxes on foreign operations. The effective income tax rate for the total provision for the six months ended June30, 2015 , is greater than the federal statutory rate primarily due to a $14 million tax provision associated with an adjustment to the prior year taxable foreign income, taxes on foreign operations, and the effect of state income taxes, partially offset by the impact of nontaxable noncontrolling interests. The effective income tax rate for the total provision for the three months ended March31June30, 2014, is greater than the federal statutory rate primarily due to a provision associated with a revision of our estimate of the undistributed earnings related to the contribution of certain Canadian operations to WPZ, taxes on foreign operations, and the effect of state income taxes, partially offset by the impact of nontaxable noncontrolling interests. The effective income tax rate for the total provision for the six months ended June30, 2014 , is less than the federal statutory rate primarily due to a tax benefit related to ourthe contribution of certain Canadian operations to WPZ
16
in the first quarter of 2014 and the impact of nontaxable noncontrolling interests, partially offset by the effect of state income taxes and taxes on foreign operations. During the next 12 months, we do not expect ultimate resolution of any unrecognized tax benefit associated with domestic or international matters to have a material impact on our unrecognized tax benefit position.
18

Notes (Continued)
and the impact of nontaxable noncontrolling interests, partially offset by the effect of state income taxes and taxes on foreign operations. During the next 12 months, we do not expect ultimate resolution of any unrecognized tax benefit associated with domestic or international matters to have a material impact on our unrecognized tax benefit position. Note 6 Earnings (Loss) Per Common Share from Continuing Operations



Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Dollars in millions, except per-share amounts; shares in thousands)

Net iIncome (loss) from continuing operations attributable to The Williams Companies, Inc. available to common stockholders for basic and diluted earnings (loss) per common share
$
114
$
99
$
70184
$
140239

Basic weighted-average shares
74
8,079
684,773
9,253
696,553
748,669
690,695


Effect of dilutive securities:

Nonvested restricted stock units
2,2171,755
2,091
1,985

2,09
64

Stock options
1,7
150
2,0
1734
1,732
2,025


Convertible debentures
17
18
17
18

Diluted weighted-average shares
752,
028
688,904
775
700,696
752,403
694,832


Net incomeEarnings (loss) per common share from continuing operations:
Basic
$
.0915
$
.14
$
.25

$
.2034

Diluted
$
.0915
$
.14
$
.24

$
.2034
Note 7 Employee Benefit Plans Net periodic benefit cost (credit) is as follows:



PninBnft

Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions)

Components of net periodic benefit cost:

Service cost
$
145
$
10
$
29
$
20

Interest cost
14
15
29
3
16

Expected return on plan assets
(18
)
(19
)
(1937
)
(38

)

Amortization of net actuarial loss
1
1
0
10
21
1
9
Net periodic benefit cost
$
21
$
16
17
Notes (Continued)
$
42
$
32




Other Postretirement Benefits

Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions)

Components of net periodic benefit cost (credit):

Service cost
$
$
$
1
$
1

Interest cost
2
23
4
5


Expected return on plan assets
(3
)
(3
)
(6
)
(6
)

Amortization of prior service credit
(4
)
(5
)
(8
)
(10
)

Amortization of net actuarial loss
1
1

Reclassification to regulatory liability
1
1
2
2

Net periodic benefit cost (credit)
$
(3
)
$
(4
)

$
(6
)
$
(8
)
19
Notes (Continued)
Amortization of prior service credit and net actuarial loss included in net periodic benefit cost (credit) for our other postretirement benefit plans associated with Transco and Northwest Pipeline are recorded to regulatory assets/liabilities instead of other comprehensive income (loss). The amounts of amortization of prior service credit recognized in regulatory liabilities were $23 million for the three months ended June 30, 2015 and 2014, respectively, and $5 million and $36 million for the threesix months ended March31June30, 2015 and 2014 , respectively. During the threesix months ended March31June30, 2015 , we contributed $1632 million to our pension plans and $13 million to our other postretirement benefit plans. We presently anticipate making additional contributions of approximately $4732 million to our pension plans and approximately $63 ilo oorohrpsrtrmn eei ln ntermidro 05 oe8Ivnois


March31June30, 2015
December 31,
2014

(Millions)

Natural gas liquids, olefins, and natural gas in underground storage
$
12295
$
150

Materials, supplies, and other
783
81

$
200168
$
231
Note 9 Debt and Banking Arrangements Long-Term Debt Issuances and retirements On April 15, 2015, WPZ paid $783 million , including a redemption premium, to early retire $750 million of 5.875 percent senior notes due 2021
. At March 31, 2015, we classified the $798 million carrying value of these notes in Long-term debt due within one year in the Consolidated Balance Sheet with a carrying value of $797 million . On March 3, 2015, WPZ completed a public offering of $1.25 billion of 3.6 percent senior unsecured notes due 2022, $750 million of 4 percent senior unsecured notes due 2025, and $1 billion of 5.1 percent senior unsecured notes due 2045. WPZ used the net proceeds to repay amounts outstanding under its commercial paper program and credit facility, to fund capital expenditures, and for general partnership purposes. WPZ retired $750 million of 3.8 percent senior unsecured notes that matured on February 15, 2015.
18
Commercial Paper Program As of June 30, 2015, WPZ had $1,743 million of Commercial paper outstanding under its $3 billion commercial paper program with a weighted average interest rate of 0.55 percent .
20

Notes (Continued)
Commercial Paper Program As of April 29, 2015, WPZ had $521 million of Commercial paper outstanding under its $3 billion commercial paper program. CrdtFclte nFbur ,21,w nee noaCei gemn ihageaecmimnsrmiiga 15blin,adtecei aiiisfrPemre P n CPwr emntdi oncinwt h egr P loetrdit 35blincei aiiy



MarchJune 310,21

Stated Capacity
Outstanding

(Millions)


WMB

Loans
$
1,500
$
3
750

Swingline loans sublimit
50

Letters of credit sublimit
675

Letters of credit under certain bilateral bank agreements
156

WPZ

Loans (1)
3,500

Swingline loans sublimit
150

Letters of credit sublimit
1,125
2

Letters of credit under certain bilateral bank agreements
3
On February 3, 2015, WPZ entered into a $1.5 billion short-term credit facility. In accordance with its terms, this facility terminated on March 3, 2015, upon the completion of the previously described debt offering. WPZ did not borrow under this credit facility. Note 10 Stockholders Equity The following table presents the changes in Accumulated other comprehensive income (loss) by component, net of income taxes:





(1)
In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of WPZs credit facility inclusive of any outstanding amounts under its commercial paper program. On February 3, 2015, WPZ entered into a $1.5 billion short-term credit facility. In accordance with its terms, this facility terminated on March 3, 2015, upon the completion of the previously described debt offering. WPZ did not borrow under this credit facility. Note 10 Stockholders Equity The following table presents the changes in Accumulated other comprehensive income (loss) by component, net of income taxes:



Cash Flow Hedges
Foreign Currency Translation
Pensionand Other Post Retirement Benefits
Total

(Millions)

Balance at December31, 2014
$
(1
)
$
31
$
(371
)
$
(341
)

Other comprehensive income (loss) before reclassifications
(6055
)
(6055
)

Amounts reclassified from accumulated other comprehensive income (loss)
6
6
12
12


Other comprehensive income (loss)
(6055
)
612
(
543
)

Balance at MarchJune 310,21
$
(1
)
$
(294
)
$
(3
659
)
$
(39584
)
219
Notes (Continued)
Reclassifications out of Accumulated other comprehensive income (loss) are presented in the following table by component for the
threesix months ended March31June30,21




Component
Reclassifications
Classification

(Millions)

Pension and other postretirement benefits:

Amortization of prior service cost (credit) included in net periodic benefit cost
$
(23
)
Note 7 Employee Benefit Plans

Amortization of actuarial (gain) loss included in net periodic benefit cost
1122
Note 7 Employee Benefit Plans

Total pension and other postretirement benefits, before income taxes
19
Income tax benefit
(37
)
Provision (benefit) for income taxes

Reclassifications during the period
$
612
Note 11 Fair Value Measurements and Guarantees The following table presents, by level within the fair value hierarchy, certain of our financial assets and liabilities. The carrying values of cash and cash equivalents, accounts receivable, commercial paper, 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 PricesIn Active Marketsfor Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)

(Millions)

Assets (liabilities) at MarchJune 310,21:
Measured on a recurring basis:

ARO Trust investments
$
603
$
603
$
603
$
$

Energy derivatives assets designated as hedging instruments
1
1
1

Energy derivatives assets not designated as hedging instruments
2
2
2

Energy derivatives liabilities not designated as hedging instruments
(2
)
(2
)
(2
)

Additional disclosures:

Notes receivable and other
136
1
64
13
3
128

Long-term debt, including current portion (1)
(2
2,4871,660
)
(2
3,0031,635
)
(2
3,0031,635
)

Guarantee
(30
)
(25
)
(25
)


Assets (liabilities) at December 31, 2014:

Measured on a recurring basis:

ARO Trust investments
$
48
$
48
$
48
$
$

Energy derivatives assets not designated as hedging instruments
3
3
3
1
2

Eeg eiaie iblte o eintda egn ntuet
(2
)
(2
)
(2
)

Additional disclosures:

Notes receivable and other
30
57
4
53

Long-term debt, including current portion (1)
(20,887
)
(21,131
)
(21,131
)

Guarantee
(31
)
(27
)
(27
)
___________________________________ (1) Excludes capital leases
2
02
Notes (Continued)
Fair Value Methods We use the following methods and assumptions in estimating the fair value of our financial instruments: Assets and liabilities measured at fair value on a recurring basis ARO Trust investments : Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust (ARO Trust) that is specifically designated to fund future asset retirement obligations (ARO). 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, is classified as available-for-sale, and is reported in Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet. Both realized and unrealized gains and losses are ultimately recorded as regulatory assets or liabilities. Energy derivatives : Energy derivatives include commodity based exchange-traded contracts and over-the-counter (OTC) contracts, which consist of physical forwards, futures, and swaps that are measured at fair value on a recurring basis. The fair value amounts are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements. Further, the amounts do not include cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions. Energy derivatives assets are reported in Other current assets and deferred charges and Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet. Energy derivatives liabilities are reported in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheet. Reclassifications of fair value between Level 1, Level 2, and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter. No transfers between Level 1 and Level 2 occurred during the six months ended June30, 2015 or 2014 . Additional fair value disclosures Notes receivable and other: Notes receivable and other consists of various notes, including a receivable related to the sale of certain former Venezuela assets. The disclosed fair value of this receivable is determined by an income approach. We calculated the net present value of a probability-weighted set of cash flows utilizing assumptions based on contractual terms, historical payment patterns by the counterparty, future probabilities of default, our likelihood of using arbitration if the counterparty does not perform, and discount rates. We determined the fair value of the receivable to be $8 million at June30, 2015 . We began accounting for the receivable under a cost recovery model in first-quarter 2015, and in second-quarter 2015, we received a payment greater than the carrying amount of the receivable. As a result, the carrying value of this receivable is zero at June30, 2015 . See Note 4 Other Income and Expenses for interest income associated with this receivable. The current and noncurrent portions of our receivables are reported in Accounts and notes receivable net, Other current assets and deferred charges , and Regulatory assets, deferred charges, and other , respectively, in the Consolidated Balance Sheet. Long-term debt : The disclosed fair value of our long-term debt is determined 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. Guarantee : The guarantee represented in the table consists of a guarantee we have provided in the event of nonpayment by our previously owned communications subsidiary, Williams Communications Group (WilTel), on a lease performance obligation that extends through 2042. To estimate the disclosed fair value of the guarantee, an estimated default rate is applied to the sum of the future contractual lease payments using an income approach. The estimated default rate is determined by obtaining the average cumulative issuer-weighted corporate default rate based on the credit rating of WilTels current owner and the term of the underlying obligation. The default rate is published by Moodys Investors Service. This guarantee is reported in Accrued liabilities in the Consolidated Balance Sheet.
23

Notes (Continued)
Fair Value Methods We use the following methods and assumptions in estimating the fair value of our financial instruments: Assets and liabilities measured at fair value on a recurring basis ARO Trust investments : Transco deposits a portion of its collected rates, pursuant to its rAssets measured at fair value on a nonrecurring basis During the second quarter of 2015, we recorded impairment charges of $20 million for our Williams Partners segment associated with certain surplus equipment reported in Property, plant, and equipment, ate case settlement, into an external trust (ARO Trust) that is specifically designated to fund future asset retirement obligations (ARO). 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, is classified as available-for-sale, and isost in the Consolidated Balance Sheet . The estimated fair value of this equipment at June 30, 2015, is $17 million . The estimated fair value is determined by a market approach based on our analysis of observable inputs in the principal market. These impairment charges are repcortded in Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet. Both realized and unrealized gains and losses are ultimately recorded Other (income) expensenet within Costs and expenses in the Consolidated Statement of Income . These nonrecurring fair value meas uregulatory assets or liabilities. Energy derivatives : Energy derivatives incments fall within Level 3 of the fair valude commodity based exchange-traded contracts and over-the-counter (OTC) contrachierarchy. Certain of these assets, which consist of physical forwards, futures, and swaps that are measured at fair value on a recurring basis. The fair value amountsere previously presented as held for sale, but are now reported as held for use. Guarantees We are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements. Further, the amounts do not include cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions. Energy derivatives assets are reported iquired by our revolving credit agreements to indemnify lenders for certain taxes required to be withheld from payments due to the lenders and for certain tax payments made by the lenders. The maximum potential amount of future payments under these indemnifications is based on Other current assets and deferred charges and Regulatory assets, related borrowings and such future payments cannot currently be defterred charges, and other in the Consolidated Balance Sheet. Energy derivatives liabilities are reported in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheet. Reclassifications of fair value between Level 1, Level 2, and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter. No transfers between Level 1 and Level 2 occurred during the three months ended March31, 2015 or 2014 . Additional fair value disclosures Notes receivable and other: Notes receivable and other consists of various nomined. These indemnifications generally continue indefinitely unless limited by the underlying tax regulations and have no carrying value. We have never been called upon to perform under these indemnifications and have no current expectation of a future claim. Regarding our previously described guarantee of WilTels lease performance, the maximum potential exposure is approximately $33 million at June30, 2015 . Our exposure declines systematically throughout the remaining term of WilTels obligation. Note 12 Contingent Liabilities Indemnification of WPX We have agreed to indemnify our former affiliates, including a receivable related to the sale of ceWPX and its subsidiaries, related to the following matter. Reportain former Venezuela assets. The disclosed fair value of this receivable is determined by an income approach. We calculated the net present value of a probability-weighted set of cash flows utilizing assumptions based on contractual terms, historical payment patterns by the counterparty, future probabilities of default, our likelihood of using arbitrg of natural gas-related information to trade publications Direct and indirect purchasers of natural gas in various states filed class actions against WPX and others alleging the manipulation of published gas price indices and seeking unspecified amounts of damages. Such actions were transferred to the Nevada federal district court for consolidation iof the counterparty does not perform, and discount rates. We determined the fair value of the receivable to be $12 million at March31, 2015 . The carrying value of this receivable is $8 million at March31, 2015 . The current and noncurrent pordiscovery and pre-trial issues. Because of the uncertainty around the remaining pending unresolved issues, including an insufficient descriptions of our receivables are reported in Accountthe purported classes and notes receivable, net and Regulatory assets, deferred charges, and other , respectively, in the Consolidated Balher related matters, we cannot reasonably estimate a rancge Sheet. Long-term debt : The disclosed fair value of our long-term debt is determined 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. Guarantee : The guarantee represented in the table consists of a guarantee we have provided in the event of nonpayment by our previously owned communications subsidiary, Williams Communications Group (WilTel), on a lease performance obligation that extends through 2042. To estimate the disclosed fair value of the guarantee, an estimated default rate is applied to the sum of the future contractual lease payments using an income approach. The estimated default rate is determined by obtaining the average cumulative issuer-weighted corporate default rate based on the credit rating of WilTels current owner and the term of the underlying obligation. The default rate is published by Moodys Investors Service. This guarantee iof potential exposure at this time. However, it is reasonably possible that the ultimate resolution of these actions and our related indemnification obligation could result in future charges that may be material to our results of operations. In connection with this indemnification, we have an accrued liability balance associated with this matter, and as a result, have exposure to future developments in this matter. Other Legal Matters Geismar Incident As a result of the previously discussed Geismar Incident, there were two fatalities and numerous individuals (including employees and contractors) reported injuries, which varied from minor to serious. We are addressing the following matters in connection with the Geismar Incident. On October 21, 2013, the EPA issued an Inspection Report pursuant to the Clean Air Acts Risk Management Program following its inspection of the facility on June 24 through 28, 2013. The report notes the EPAs preported in Accrued liabilities in the Consolidated Balance Sheet. Guarantees We are required by our revolving credit agreements to indemnify lenders for certain taxes required to be withheld from payments due to the lenders and for certain tax payments made by the lenders. The maximum potential amount of future payments under these indemnifications is based on the related borrowings and such future payments cannotliminary determinations about the facilitys documentation regarding process safety, process hazard analysis, as well as operating procedures, employee training, and other matters. On June 16, 2014, we received a request for information related to the Geismar Incident from the EPA under Section 114 of the Clean Air Act to which we responded on August 13, 2014. The EPA could issue penalties pertaining to final determinations.
2
14
Notes (Continued)
currently be determined. These indemnifications generally continue indefinitely unless limited by the underlying tax regulations and have no carrying value. We have never been called upon to perform under these indemnifications and have no current expectation of a future claim. Regarding our previously described guarantee of Wiltels lease performance, the maximum potential exposure is approximately $34 million at March31, 2015 . Our exposure declines systematically throughout the remaining term of WilTels obligation. We have provided guarantees in the event of nonpayment by our previously owned subsidiary, WPX Energy, Inc. (WPX), on certain contracts, primarily a natural gas purchase contract extending through 2023. We estimate the maximum undiscounted potential future payment obligation under these remaining guarantees is approximately $39 million at March31, 2015 . Our recorded liability for these guarantees, which considers our estimate of the fair value of the guarantees, is insignificant. Note 12 Contingent Liabilities Indemnification of WPX We have agreed to indemnify our former affiliate, WPX and its subsidiaries, related to the following matter. Reporting of natural gas-related information to trade publications Direct and indirect purchasers of natural gas in various states filed class actions against WPX and others alleging the manipulation of published gas prMultiple lawsuits, including class actions for alleged offsite impacts, property damage, customer claims, and personal injury, have been filed against us. To date, we have settled certain of the personal injury claims for an aggregate immaterial amount that we have recovered from our insurers. The trial for certain plaintiffs claiming personal injury, that was set to begin on June 15, 2015 in Iberville Parish, Louisiana, has been continued or postponed for at least 120 days. For these and all other unsettled lawsuits, we believe it is probable that additional losses will be incurred, while for the others we believe it is only reasonably possible that losses will be incurred. However, due to ongoing litigation concerning defenses to liability, the number of individual plaintiffs, limited information as to the nature and extent of all plaintiffs damages, and the ultimate outcome of all appeals, we are unable to reliably estimate any such losses at this time. We believe that it is probable that any ultimate losses incurred will be covered by our general liability insurance policy, which has an aggregate annual limit of $610 million and retention (deductible) of $2 million per occurrence. Alaska refinery contamination litigation In 2010, James West filed a class action lawsuit in state court in Fairbanks, Alaska on behalf of individual property owners whose water contained sulfolane contamination allegedly emanating from the Flint Hills Oil Refinery in North Pole, Alaska. The suit named our subsidiary, Williams Alaska Petroleum Inc. (WAPI), and Flint Hills Resources Alaska, LLC (FHRA), a subsidiary of Koch Industries, Inc., as defendants. We owned and operated the refinery until 2004 when we sold it to FHRA. We and FHRA made claims under the pollution liability insurance policey indices and seeking unspecified amounts of damages. Such actions were transferred to the Nevada federal district court for consolidation of discovery and pre-trial issues. In 2011, the Nevada district court granted WPXs joint motions for summary judgment to preclude the plaintiffs state law claims because the federal Natural Gas Act gives the FERC exclusive jurisdiction to resolve those issues. Thssued in connection with the sale of the North Pole refinery to FHRA. We and FHRA also filed claims against each other seeking, among other things, contractual indemnification alleging that the other party caused the sulfolane contamination. In 2011, we and FHRA settled the James West claim. We and FHRA subsequently filed motions for summary judgment on the others claims. On July 8, 2014, the court dismissed all FHRAs claims and entered judgment for us. On August 6, 2014, FHRA appealed the courts decision to the Alaska Supreme Court. We court also denied the plaintiffs class certification motion as moot. The plaintiffs appealed the courts ruling and on April10, 2013, the Ninth Circuit Court of Appeals reversed the district court and remanded the cases to the district court to permit the plaintiffs to pursue their state antitrust claims for natural gas sales that were not subject to FERC jurisdiction under the Natural Gas Acrently estimate that our reasonably possible loss exposure in this matter could range from an insignificant amount up to $32 million , although uncertainties inherent in the litigation process, expert evaluations, and jury dynamics might cause our exposure to exceed that amount.
On AprilNovember 216, 20154, the U.S. Supreme Court upheld a Ninth Circuit ruling that revived state law claims in multi-district litigationCity of North Pole (North Pole) filed suit in Alaska state court in Fairbanks against WPXFHRA and others, rejecting arguments that the claims are preempted by the Natural Gas Act. The U.S. Supreme Court remanded the cases to the Nevada district court for further proceedings. Because of the uncertainty around the remaining pending unresolved issues, including an insufficient description of the purported classes and other related matters, we cannot reasonably estimate a range of potWAPI, alleging nuisance and violations of municipal and state statutes based upon the sulfolane contamination allegedly emanating from the North Pole refinery. North Pole claims an unspecified amount of past and future damages as well as punitive damages against WAPI. FHRA filed cross-claims against us.
Independent of the litigation matter described in the preceding paragraphs, in 2013, the Alaska Department of Environm
ential exposures at this time. However, it is reasonaConservation (ADEC) indicated that it views FHRA and us as responsiblye possible that the ultimate resolution of these items and our related indemnification obligation could result in future charges that may be material to our results of operations. In connection with this indemnification, we have an accrued liability balance associated with this matter, and as a result, have an indirect exposure to futurarties, and that it intended to enter a compliance order to address the environmental remediation of sulfolane and other possible contaminants including cleanup work outside the refinerys boundaries. On March 6, 2014, the State of Alaska filed suit against FHRA and us in state court in Fairbanks seeking injunctive relief and damages in connection with the sulfolane contamination. On May 5, 2014, FHRA filed cross-claims against us in the State of Alaska suit, and FHRA also seeks injunctive relief and damages. Due to the ongoing assessment of the dlevelopments in this matter. Other Legal Matters Geismar Incident As a result of the previously discussed Geismar Incident, there were two fatalities and numerous individuals (including employees and contractors) reported injuries, which varied from minor to serious. We are addressing the following matters i and extent of sulfolane contamination and the ultimate cost of remediation and division of costs among the potentially responsible parties, we are unable to estimate a range of exposure at this time.
Shareholder litigation
In July 2015, a purported stockholder of us filed a putative class and derivative actio
n connection with the Geismar Incident. On October 21, 2013, the EPA issued an Inspection Report pursuant to the Clean Air Acts Risk Management Program following its inspection of the facility on June 24 through 28, 2013. The report notes the EPAs preliminary determinations about the facilitys documentation regarding process safety, process hazard analysis, as well as operating procedures, employee training, and o behalf of us in the Court of Chancery of the State of Delaware.The action names as defendants certain members of our Board of Directors (Individual Defendants), as well as WPZ, and names us as a nominal defendant. Among other things, the action seeks to enjoin the Acquisition of WPZ Public Units and seeks monetary damages, including the repayment of the $410 million termination fee that may become payable by us, in certain circumstances, if there were a termination of ther matters. On June 16, 2014, we received a request for information related to the Geismar Incident from the EPA under Section 114 of the Clean Air Act to which we responded on August 13, 2014. The EPA could issue penalties perterger agreement for the Acquisition of WPZ Public Units. The action alleges, among other things, that the Individual Defendants breached their fiduciary duties owed to us and our stockholders by fainling to final determinations.adequately evaluate an
2
25
Notes (Continued)
Multiple lawsuits, including class actions for alleged offsite impacts, property damage, customer claims, and personal injury, have been filed against us. The first trial for certain plaintiffs claiming approximately $45 million in personal injury damages is set to begin on June 15, 2015 in Iberville Parish, Louisiana. For these and all other unsettled lawsuits, in the event of an adverse ruling, we intend to appeal and we expect any ultimate losses to be covered by our general liability insurance policy, whicunsolicited proposal to acquire us in an all-equity transaction and by putting their personal interests ahead of the interests of us and our stockholders in connection with that unsolicited proposal. The action further alleges that WPZ aided and abetted the alleged breaches. We cannot reasonably estimate a range of potential loss at this time. Royalty Matters Certain of our customers, including one major customer, have been named in various lawsuits alleging underpayment of royalties. In certain of these cases, we have also been named as a defendant based on allegations that we improperly participated with thas an aggregate annual limit of $610 million and retention (deductible) of $2 million per occurrence. For these matters, we believe it is reasonably possible that losses will be incurred. However, due to ongoing litigation concerning defenses to liability, the number of individual plaintiffs, limited information as to the nature and extent of all plaintiffs damages, and the ultimate outcome of all appealt major customer in causing the alleged royalty underpayments. We have also received subpoenas from the United States Department of Justice and the Pennsylvania Attorney General requesting documents relating to the agreements between us and our major customer and calculations of the major customers royalty payments. We believe that the claims asserted to date are subject to indemnity obligations owed to us by that major customer. Due to the preliminary status of the cases, we are unable to reliably estimate a range of reasonably possible loss at this time. We believe that it is probable that any ultimate losses incurred will be covered by insurance. Alaska refinery contamination litigation In 2010, James West filed a class action lawsuit in stliability at this time. Environmental Matters We are a participant in certain environmental activities in various stages including assessment studies, cleanup operations and remedial processes ate couert ain Fairbanks, Alaska on behalf of individual property owners whose water contained sulfolane contamination allegedly emanating from the Flint Hills Oil Refinery in North Pole, Alaska. The suit named our subsidiary, Williams Alaska Petroleum Inc. (WAPI), and Flint Hills Resources Alaska, LLC (FHRA), a subsidiary of Koch Industries, Inc., as defendants. We owned and operated the refinery until 2004 when we sold it to FHRA. We and FHRA made claims under the pollution liability insurance policy issued in connection with the sale of the North Pole refinery to FHRA. We and FHRA also filed claims against each other seeking, among other things, contractual indemnification alleging that the other party caused the sulfolane contamination. Insites, some of which we currently do not own. We are monitoring these sites in a coordinated effort with other potentially responsible parties, the EPA, and other governmental authorities. We are jointly and severally liable along with unrelated third parties in some of these activities and solely responsible in others. Certain of our subsidiaries have been identified as potentially responsible parties at various Superfund and state waste disposal sites. In addition, these subsidiaries have incurred, or are alleged to have incurred, various other hazardous materials removal or remediation obligations under environmental laws. As of June30, 20115 , we and FHRA settled the James West claim. We and FHRA subsequently filed mothave accrued liabilities totaling $41 millions for summary judgment on the others claims. On July 8, 2014, the court dismissed all FHRAs claims and these matters, as discussed below. Our accrual reflects the most likely costs of cleanup, which are gentered judgment for us. On August 6, 2014, FHRA appealed the courts decision to the Alaska Supreme Court. We currently estimate that our reasonably possible loss exposure in this ally based on completed assessment studies, preliminary results of studies or our experience with other similar cleanup operations. Certain assessment studies are still in process for which the ultimatter could range from an insignificant amount up to $32 million , although uncertainties inherent in the litigation process, expert evaluations, and jury dynamics might cause our exposure to exceed that amount.
On November 26, 2014, the City of North Pole (North Pole) filed suit in Alaska state c
outcome may yield significantly different estimates of most likely costs. Any incremental amount in excess of amounts currently accrued cannot be reasonably estimated at this time due to uncertainty about the actual number of contaminated sites ultimately identified, the actual amournt in Fairbanks against FHRA and WAPI, alleging nuisance and violations of municipal and state statutes based upon the sulfolane contamination allegedly emanating from the North Pole refinery. North Pole claims an unspecified amount of past and future damagand extent of contamination discovered and the final cleanup standards mandated by the EPA and other governmental authorities. The EPA and various state regulatory agencies routinely promulgate and propose new rules, as well as punitive damages against WAPI.
Independent of the litigation matter described in the preceding paragraphs, in 2013, the Alaska Department of Environmental Conservation (ADEC) indicated that it views FHRA and us as responsible parties, and that it intended to enter a compliance order to address the environmental remediation of sulfolane and other possible contaminants including cleanup work outside the refinerys boundaries. On March 6, 2014, the State of Alaska filed suit against FHRA and us in state court in Fairbanks seeking injunctive relief and damages in connection with
nd issue updated guidance to existing rules.More recent rules and rulemakings include, but are not limited to, rules for reciprocating internal combustion engine maximum achievable control technology, new air quality standards for ground level ozone, one hour nitrogen dioxide emission limits, and new air quality standards impacting storage vessels, pressure valves, and compressors.We are unable to estimate the costs of asset additions or modifications necessary to comply with these new regulations due to uncertainty created by the various legal challenges to these regulations and the need for further sulfolane contaminpecific regulatory guidance. Continuing operation.s On May 5, 2014, FHRA filed cross-claims against us in the State of Alaska suit, and FHRA also seeks injunctive relief and damages. Due to the ongoing assessment of the level and extent of sulfolane contamination and the ultimate cost of remediation and division of costs among the potentially responsible parties, we are unable to estimate a range of exposure at this time. Royalty Matters Certain of our customers, including one major customer, have been named in various lawsuits alleging underpayment of royalties. In certain of these cases, we have also been named as a defendant based on allegations that we improperly participated with that major customer in causing the alleged royalty underpayments. We have also received subpoenas from the United States Department of Justice and the Pennsylvania Attorney General requesting documents relating to the agreements between us and our major customer and calculaur interstate gas pipelines are involved in remediation activities related to certain facilities and locations for polychlorinated biphenyls, mercury, and other hazardous substances.These activities have involved the EPA and various state environmental authorities, resulting in our identification as a potentially responsible party at various Superfund waste sites.At June30, 2015 , we have accrued liabilities of $10 million for these costs.We expect that these costs will be recoverable through rates. We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At June30, 2015 , we have accrued liabilities totaling $8 million for these costs. Former operations, including operations classified as discontinued We have potential obligations in connection with assets and businesses we no longer operate. These potential obligations include remediation activities at the directions of the major customers royalty payments. We believe that the claims asserted to date are subject to indemnity obligfederal and state environmental authorities and the indemnifications owed to us by that major customer. Due to the preliminary status of the cases, we are unable to estimate a range off the purchasers of certain of these assets and businesses for environmental and other liability at thies exis time.ng
2
36
Notes (Continued)
Environmental Matters We are a participant in certain environmental activities in various stages including assessment studies, cleanup operations and remedial processes at certain sites, some of which we currently do not own. We are monitoring these sites in a coordinated effort with other potentially responsible parties, the EPA, and other governmental authorities. We are jointly and severally liable along with unrelated third parties in some of these activities and solely responsible in others. Certain of our subsidiaries have been identified as potentially responsible parties at various Superfund and state waste disposal sites. In addition, these subsidiaries have incurred, or are alleged to have incurred, various other hazardous materials removal or remediation obligations under environmental laws. As of March31, 2015 , we have accrued liabilities totaling $43 million for these matters, as discussed below. Our accrual reflects the most likely costs of cleanup, which are generally based on completed assessment studies, preliminary results of studies or our experience with other similar cleanup operations. Certain assessment studies are still in process for which the ultimate outcome may yield significantly different estimates of most likely costs. Any incremental amount in excess of amounts currently accrued cannot be reasonably estimated at this time due to uncertainty about the actual number of contaminated sites ultimately identified, the actual amount and extent of contamination discovered and the final cleanup standards mandated by the EPA and other governmental authorities. The EPA and various state regulatory agencies routinely promulgate and propose new rules, and issue updated guidance to existing rules.More recent rules and rulemakings include, but are not limited to, rules for reciprocating internal combustion engine maximum achievable control technology, new air quality standards for ground level ozone, one hour nitrogen dioxide emission limits, and new air quality standards impacting storage vessels, pressure valves, and compressors.We are unable to estimate the costs of asset additions or modifications necessary to comply with these new regulations due to uncertainty created by the various legal challenges to these regulations and the need for further specific regulatory guidance. Continuing operations Our interstate gas pipelines are involved in remediation activities related to certain facilities and locations for polychlorinated biphenyls, mercury, and other hazardous substances.These activities have involved the EPA and various state environmental authorities, resulting in our identification as a potentially responsible party at various Superfund waste sites.At March31, 2015 , we have accrued liabilities of $10 million for these costs.We expect that these costs will be recoverable through rates. We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At March31, 2015 , we have accrued liabilities totaling $8 million for these costs. Former operations, including operations classified as discontinued We have potential obligations in connection with assets and businesses we no longer operate. These potential obligations include remediation activities at the direction of federal and state environmental authorities and the indemnification of the purchasers of certain of these assets and businesses for environmental and other liabilities existing a h ietesl a osmae.Orrsosblte eaet h prtoso h sesadbsnse ecie eo.

Fre giutrlfriie n hmcloeain n omrrti erlu n eiigoeain;

Former petroleum products and natural gas pipelines;


Former petroleum refining facilities;


Former exploration and production and mining operations;


Former electricity and natural gas marketing and trading operations.

24
At June30, 2015 , we have accrued environmental liabilities of $23 million related to these matters. Other Divestiture Indemnifications Pursuant to various purchase and sale agreements relating to divested businesses and assets, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breach of warranties, tax, historic litigation, personal injury, property damage, environmental matters, right of way and other representations that we have provided. At June30, 2015 , other than as previously disclosed, we are not aware of any material claims against us involving the indemnities; thus, we do not expect any of the indemnities provided pursuant to the sales agreements to have a material impact on our future financial position. Any claim for indemnity brought against us in the future may have a material adverse effect on our results of operations in the period in which the claim is made. In addition to the foregoing, various other proceedings are pending against us which are incidental to our operations.
Summary We have disclosed our estimated range of reasonably possible losses for certain matters above, as well as all significant matters for which we are unable to reasonably estimate a range of possible loss. We estimate that for all other matters for which we are able to reasonably estimate a range of loss, our aggregate reasonably possible losses beyond amounts accrued 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 13 Segment Disclosures Our reportable segments are Williams Partners and Williams NGL& Petchem Services. All remaining business activities are included in Other. (See Note 1 General, Description of Business, and Basis of Presentation .) Performance Measurement Prior to first quarter of 2015, we evaluated segment operating performance based on Segment profit (loss) from operations. Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA (earnings before interest, taxes, depreciation and amortization). This measure represents the basis of our internal financial reporting and is the primary performance measure used by our chief operating decision maker in measuring performance and allocating resources among our reportable segments. Prior period segment disclosures have been recast to reflect this change.
27

Notes (Continued)
At March31, 2015 , we have accrued environmental liabilities of $25 million related to these matters. Other Divestiture Indemnifications Pursuant to various purchase and sale agreements relating to divested businesses and assets, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breach of warranties, tax, historic litigation, personal injury, property damage, environmental matters, right of way and other representations that we have provided. At March31, 2015 , other than as previously disclosed, we are not aware of any material claims against us involving the indemnities; thus, we do not expect any of the indemnities provided pursuant to the sales agreements to have a material impact on our future financial position. Any claim for indemnity brought against us in the future may have a material adverse effect on our results of operations in the period in which the claim is made. In addition to the foregoing, various other proceedings are pending against us which are incidental to our operations.
Summary We have disclosed our estimated range of reasonably possible losses for certain matters above, as well as all significant matters for which we are unable to reasonably estimate a range of possible loss. We estimate that for all other matters for which we are able to reasonably estimate a range of loss, our aggregate reasonably possible losses beyond amounts accrued 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 13 Segment Disclosures Our reportable segments are Williams Partners and Williams NGL& Petchem Services. All remaining business activities are included in Other. (See Note 1 General, Description of Business, and Basis of Presentation .) Performance Measurement Prior to first quarter of 2015, we evaluated segment operating performance based on Segment profit (loss) from operations. Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA (earnings before interest, taxes, depreciation and amortization). This measure represents the basis of our internal financial reporting and is the primary performance measure used by our chief operating decision maker in measuring performance and allocating resources among our reportable segments. Prior period segment disclosures have been recast to reflect this change.
We define Modified EBITDA as follows: Net income (loss) before: Income (loss) from discontinued operations; rvso bnft o noetxs neeticre,nto neetcptlzd qiyerig lse) te netn noe(os e;Dpeito n mriainepne;Aceinepneascae ihastrtrmn biain o orgltdoeain.

This measure is further adjusted to include our proportionate share (based on ownership interest) of Modified EBITDA from our equity-method investments calculated consistently with the definition described above.
25
Notes (Continued)
h olwn al elcstercniito fSgetrvne oTtlrvne srpre nteCnoiae ttmn fIcm n oa sesb eotbesget



Williams Partners
Williams NGL&Petchem Services (1)
Other
Eliminations
Total

(Millions)

Three mMonths eEnded MarchJune 310,21

Segment revenues:

Service revenues

External
$
1,
192231
$
1
$
59
$
$
1,
197241

Internal
2138
(
2138
)

Total service revenues
1,
192
26
231
1
47

(
2138
)
1,
197241

Product sales

External
5
198
5
198

Internal
1
(1
)

Total product sales
5
199
(1
)

5
198

Total revenues
$
1,711830
$
1
$
2647
$
(2139
)
$
1,716839


Three mMonths eEnded MarchJune 310,21

Segment revenues:

Service revenues

External
$
763
$
$
562
$
$
81925

Internal
34
(
34
)

Total service revenues
763
66
(4
)
825

Product sales

External
853
853

Internal

Total product sales
853
853

Total revenues
$
1,616
$
$
66
$
(4
)
$
1,678


Six Months Ended June 30, 2015

Segment revenues:

Service revenues

External
$
2,423
$
1
$
14
$
$
2,438

Internal
59
(
359
)

Total service revenues
2,423
1
73
(59
)
2,438

Product sales

External
1,117
1,117

Internal
1
(1
)

Total product sales
1,118
(1
)
1,117
28
Notes (Continued)



Williams Partners
Williams NGL&Petchem Services (1)
Other
Eliminations
Total

(Millions)

Total revenues
$
3,541
$
1
$
73
$
(60
)
$
3,555


Six Months Ended June 30, 2014

Segment revenues:

Service revenues

External
$
1,526
$
$
118
$
$
1,644

Internal
7
(7
)

Total service revenues
1,526
125
(7

)
8191,644

Product sales

External
930
930
1,783
1,783


Internal

Total product sales
930
930
1,783
1,783


Total revenues
$
1,6933,309
$
$
1259
$
(37
)
$
1,7493,427


March31June30,21

Total assets
$
49,28450,040
$
656731
$
1,
101064
$
(584672
)
$
5
0,4571,163

December31, 2014

Total assets
$
49,322
$
612
$
1,220
$
(591
)
$
50,563



_________________


(1)
Includes certain projects under development and thus nominal reported revenues to date.
26
Notes (Continued)
h olwn al elcstercniito fMdfe BTAt e noe(os srpre nteCnoiae ttmn fIcm



Three
mMonths eEnded March 31June 30,
Six Months Ended June 30
,
2015
2014
2015
2014

(Millions)

Modified EBITDA by Segment:

Williams Partners
$
8171,053
$
596
$
1,870

$
7081,304

Williams NGL & Petchem Services
(53
)
(8
)
(8

)
(1008
)

Other
5(4
)
60
(4
)
11
8
812
666
1,046
648
1,858
1,314


Accretion expense associated with asset retirement obligations for nonregulated operations
(6 (9
)
(6
)
(15

)
(39
)

Depreciation and amortization expenses
(4278
)
(214
)
(855
)
(428
)

Equity earnings (losses)
5193
37
144

(
4811
)

Other investing income (loss) net
149
18
9
32


Proportional Modified EBITDA of equity-method investments
(1
3683
)
(113
)
(319

)
(28141
)

Interest expense
(262
)
(163
)
(
513
)
(
140303
)

(Provision) benefit for income taxes
(30(83
)
(84
)
(113

)
(
5135
)

Income (loss) from discontinued operations, net of tax
4
4

Net income (loss)
$
1
383
$
127

$
196
Note 14 Subsequent Events On April 6, 2015, WPZ announced its agreement to acquire an additional 21 percent equity interest in UEOM for approximately $575 million , subject to the right of the other member of UEOM to participate in the transaction. If the other member exercises this right, WPZ would acquire an approximate 13 percent interest and the other member would acquire an approximate 8 percent interest. On April 15, 2015, WPZ redeemed $750 million of 5.875 percent senior notes due 2021. (See Note 9 Debt and Banking Arrangements .)
27
$
323
29

Item2 Managements Discussion and Analysis of Financial Condition and Results of Operations General We are an energy infrastructure company focused on connecting North Americas significant hydrocarbon resource plays to growing markets for natural gas, NGLs, and olefins. Our operations are located principally in the United States, but span from the deepwater Gulf of Mexico to the Canadian oil sands, and are organized into the Williams Partners and Williams NGL& Petchem Services reportable segments. All remaining business activities are included in Other.
For periods after the ACMP Acquisition, the former Access Midstream segment is now reported within Williams Partners. For periods prior to the ACMP Acquisition, the former Access Midstream segment is now reported within Other. Prior periods segment disclosures have been recast. Williams Partners Williams Partners consists of our consolidated master limited partnership, WPZ, which includes gas pipeline and midstream businesses. The gas pipeline businesses include interstate natural gas pipelines and pipeline joint project investments; and the midstream businesses provide natural gas gathering, treating, and processing services; NGL production, fractionation, storage, marketing and transportation; deepwater production handling and crude oil transportation services; an olefin production business and is comprised of several wholly owned and partially owned subsidiaries and joint project investments. As of March31June30, 2015, we own approximately 60 percent of the interests in WPZ, including the interests of the general partner, which is wholly owned by us, and IDRs. Williams Partners' gas pipeline businesses consist primarily of Transco and Northwest Pipeline. Our gas pipeline business also holds interests in joint venture interstate and intrastate natural gas pipeline systems including a 50 percent equity-method investment interest in Gulfstream and a 41 percent interest in Constitution. As of December 31, 2014, Transco and Northwest Pipeline own and operate a combined total of approximately 13,600 miles of pipelines with a total annual throughput of approximately 3,870 TBtu of natural gas and peak-day delivery capacity of approximately 14 MMdth of natural gas. WPZs midstream businesses primarily consist of (1)natural gas gathering, treating, and processing; (2)natural gas liquid (NGL) fractionation, storage and transportation; (3)oil transportation; and (4)olefins production. The primary service areas are concentrated in major producing basins in Colorado, Texas, Oklahoma, Kansas, New Mexico, Wyoming, the Gulf of Mexico, Louisiana, Pennsylvania, West Virginia, New York, and Ohio which include the Marcellus and Utica shale plays as well as the Eagle Ford, Haynesville, Barnett, Mid-Continent, and Niobrara areas. The midstream businesses include equity-method investments in natural gas gathering and processing assets and NGL fractionation and transportation assets, including a 4962 percent equity-method investment in Utica East Ohio Midstream, LLC (UEOM)EOM, a 50 percent equity-method investment in the Delaware basin gas gathering system in the Mid-Continent region, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC, a 58 percent equity-method investment in Caiman Energy II, LLC, a 60 percent equity-method investment in Discovery Producer Services LLC, a 50 percent equity-method investment in Overland Pass Pipeline, LLC, and Appalachia Midstream Services, LLC, which owns an approximate average 45 percent equity-method investment interest in 11 gas gathering systems in the Marcellus Shale. Subsequent to March 31, 2015, WPZ announced an agreement to acquire an additional equity interest in UEOM. Refer to Note 14 Subsequent Events for further information. The midstream businesses also include our Canadian midstream operations, which are comprised of an oil sands offgas processing plant near Fort McMurray, Alberta, an NGL/olefin fractionation facility and butylene/butane splitter facility at Redwater, Alberta, and the Boreal Pipeline.
28
Williams Partners ongoing strategy is to safely and reliably operate large-scale, interstate natural gas transmission and midstream infrastructures where our assets can be fully utilized and drive low per-unit costs. We focus on consistently attracting new business by providing highly reliable service to our customers and utilizing our low cost-of-capital to invest in growing markets, including the deepwater Gulf of Mexico, the Marcellus Shale, the Gulf Coast Region, the Canadian oil sands, and areas of increasing natural gas demand. Williams Partners interstate transmission and related storage activities are subject to regulation by the FERC and as such, our rates and charges for the transportation of natural gas in interstate commerce, and the extension, expansion
30

Managements Discussion and Analysis (Continued)
Williams Partners ongoing strategy is to safely and reliably operate large-scale, interstate natural gas transmission and midstream infrastructures where our assets can be fully utilized and drive low per-unit costs. We focus on consistently attracting new business by providing highly reliable service to our customers and utilizing our low cost-of-capital to invest in growing markets, including the deepwater Gulf of Mexico, the Marcellus Shale, the Gulf Coast Region, the Canadian oil sands, and areas of increasing natural gas demand. Williams Partners interstate transmission and related storage activities are subject to regulation by the FERC and as such, our rates and charges for the transportation of natural gas in interstate commerce, and the extension, expansion or abandonment of jurisdictional facilities and accounting, among other things, are subject to regulation. The rates are established through the FERCs ratemaking process. Changes in commodity prices and volumes transported have little near-term impact on these revenues because the majority of cost of service is recovered through firm capacity reservation charges in transportation rates. Williams NGL& Petchem Services Williams NGL & Petchem Services includes certain other domestic olefins pipeline assets and certain Canadian growth projects under development, including a propane dehydrogenation facility and a liquids extraction plant. These projects are under development and thus have had limited operating revenues to date. In the future, we anticipate contributing to WPZ the assets and projects that comprise this segment. The transaction will be subject to execution of an agreement, review, and recommendation by the Conflicts Committee of the general partner of WPZ, and approval of both our and WPZs Board of Directors. Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be read in conjunction with the consolidated financial statements and notes thereto of this Form10-Q and our annual consolidated financial statements and notes thereto in Exhibit 99.1 of our 2014 Form 108-K filed February25dated May 6, 2015. Dividends In MarchJune 2015 , we paid a regular quarterly dividend of $0.589 per share, which was 4439 percent higher than the same period last year. Overview of ThreeSix Months Ended March31June30, 2015 Net income (loss) attributable to The Williams Companies, Inc. , for the threesix months ended March31June30, 2015 , decreased $7059 million compared to the threesix months ended March31June30, 2014 , primarily due to the absence of insurance proceeds in the first quarter of 2015 compared to $125 million in the first quarter of 2014 andhigher depreciation expense caused by significant projects that have gone into service in 2014 and 2015, increased interest expense associated with new debt issuances, as well as declines in NGL margins driven by 6059 percent lower prices, partially offset by. These decreases were partially offset by new fee revenue associated with certain growth projects that were placed in service in 2014 and 2015 and the absence of equity losses in 2014 fromassociated with the discontinuance of the Bluegrass Pipeline project. See additional discussion in Results of Operations. Abundant and low-cost natural gas reserves in the United States continue to drive strong demand for midstream and pipeline infrastructure. We believe that we have successfully positioned our energy infrastructure businesses for significant future growth. Williams Partners Access Merger On October 26Acquisition of WPZ Public Units On May 12, 20145, we announced that our consolidated master limited partnerships Pre-merger WPZ and ACMP ententered into an agreement for a unit-for-stock transaction whereby we will acquire all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (Acquisition of WPZ Public Units). Each such WPZ common unit will be converted into a merger agreement and on February 2, 2015, the merger was completed (Merger). The merged partnership was renamed Williams Partners L.P. Underthe right to receive 1.115 shares of our common stock. In the event this agreement is terminated under certain circumstances, we could be required to pay a $410 million termination fee to WPZ, of which we currently own approximately 60 percent, including the intermests of the merger agreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the Merger. In conjunction with the Merger, each Pre-merger WPZ common unit held by the public was exchanged for 0.86672 ACMP common units. Each WPZ common unit held by us was exchanged for 0.80036 ACMP common units. Prior to the closigeneral partner and IDRs. Such termination fee would be settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $102.5 million per quarter). Strategic Alternatives On June 21, 2015, we publicly announced in a press release that we had received and subsequently rejected an unsolicited proposal to acquire us in an all-equity transaction. The unsolicited proposal was contingent on the termination of our pending Acquisition of WPZ Public Units. Our Board of Directors has authorized a process to explore a range of the Mergstrategic alternatives, which could include, among other, the Class D limited partner units of Pre-merger
29
ings, a merger, a sale of us, or continuing to pursue our existing operating and growth plan.
31

Managements Discussion and Analysis (Continued)
W
illiams Partners Access Merger On February 2, 2015, we completed a merger of our consolidated master limited partnerships, Pre-merger WPZ and ACMP (Merger). The merged partnership was renamed Williams Partners L.P. Under the terms of the merger agreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the Merger. In conjunction with the Merger, each Pre-merger WPZ common unit held by the public was exchanged for 0.86672 ACMP common units. Each WPZ common unit held by us was exchanged for 0.80036 ACMP common units. Prior to the closing of the Merger, the Class D limited partner units of Pre-merger WPZ, all of which were held by us, were converted into WPZ common units on a one-for-one basis pursuant to the terms of the Pre-merger WPZ partnership agreement. Following the Merger, we own an approximate 60 percent of the merged partnership, including the general partner interest and incentive distribution rights. Geismar Incident and Plant Expansion On June13, 2013, an explosion and fire occurred at William Partners Geismar olefins plant. The incident (Geismar Incident) rendered the facility temporarily inoperable and resulted in significant human, financial, and operational effects. The plant resumed consistent operations in late March 2015 and the facility is expected to produce ethylene at the base plants production rate through May. The process to achieve its full expanded production rate will be ongoing through June. We expect oGeismar plant ramped up in the second quarter of 2015 and the expanded plant is now online. Our total property damage and business interruption loss to exceeded our $500 million policy limit. Since June 2013, we have settled claims associated with $480 million of available property damage and business interruption coverage for a total of $422 million. This total includes $126 million which is expected to bwe received in the second quarter of 2015. The remaining insurance limits total approximately $20 million and we are vigorously pursuing collection. Northeast Connector In May 2015, the Northeast Connector project was placed into service, which increased additional firm transportation capacity to 100 Mdth/d from Transcos Station 195 in southeastern Pennsylvania to the Rockaway Delivery Lateral. Rockaway Delivery Lateral In May 2015, Transcos Rockaway Delivery Lateral expansion between Williams Transco transmission pipeline and the National Grid distribution system was placed in service, which enabled us to begin providing 647 Mdth/d of additional firm transportation service to a distribution system in New York. Mobile Bay South III In April 2015, Transcos Mobile Bay South III expansion south from Station 85 in west central Alabama to delivery points along the line was placed into service, which enabled us to begin providing 225 Mdth/d of additional firm transportation service on the Mobile Bay Lateral. Bucking Horse Gas Processing Facility The Bucking Horse gas processing plant (Bucking Horse) began operating in February 2015. Bucking Horse, is located in Converse County, Wyoming, and adds 120 MMcf/d of processing capacity in the Powder River basin Niobrara Shale play. Processed volumes at Bucking Horse have continued to increase through the firstsecond quarter of 2015 as existing rich gas production was re-directed from other third-party processing facilities. Bucking Horse has led to higher gathering volumes on Jackalope as previously curtailed production has increased due to the additional processing capability. UEOM Subsequent to March 31, 2015, WPZ announced an agreement to acquire additional equity interest in UEOM. Refer to Note 14 Subsequent Events in the Notes to Consolidated Financial Statements for further information. Volatile commodity prices NGL margins were approximately 59 percent lower in the first three months of 2015 compared to the same period of 2014 driven primarily by lower non-ethane NGL prices partially offset by higher volumes . NGL margins are defined as NGL revenues less any applicable Btu replacement cost, plant fuel, and third-party transportation and fractionation. Per-unit NGL margins are calculated based on sales of our own equity volumes at the processing plants. Our equity volumes include NGLs where we own the rights to the value from NGLs recovered at our plants under both keep-whole processing agreements, where we have the obligation to replace the lost heating value with natural gas, and percent-of-liquids agreements whereby we receive a portion of the extracted liquids with no obligation to replace the lost heating value.
30

32

Managements Discussion and Analysis (Continued)
The following graph illustrates the effects of margin volatility, notably the decline in equity ethane sales driven by reduced recoveriEagle Ford Gathering System In May 2015, WPZ acquired a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility capable of handling up to 100 MMcf/d in the Eagle Ford shale for $112 million. The acquisition will immediately contribute approximately 20 MMcf/d to the existing Eagle Ford throughput of approximately 400 MMcf/d. UEOM In June 2015, WPZ acquired an approximate 13 percent equity interest in UEOM for approximately $357 million, increasing our ownership from 49 percent to approximately 62 percent. Volatile commodity prices NGL margins were approximately 59 percent lower in the first six months of 2015 compared to the same period of 2014 driven primarily by 60 percent lower non-ethane prices partially offset by lower natural gas feedstock prices . NGL margins are defined as NGL revenues less any applicable Btu replacement cost, plant fuel, and third-party transportation and fractionation. Per-unit NGL margins are calculated based on sales of our own equity volumes at the processing plants. Our equity volumes include NGLs where we own the rights to the value from NGLs recovered at our plants under both keep-whole processing agreements, where we have the obligation to replace the lost heating value with natural gas, and percent-of-liquids agreements whereby we receive a portion of the extracted liquids with no obligation to replace the lost heating value. The following graph illustrates the effects of margin volatility and NGL production and sales volume,a ela h agndfeeta ewe taeadnnehn rdcsadterltv i ftoepout.


Williams NGL & Petchem Services Texas Belle Pipeline In March 2015, the Texas Belle Pipeline (Texas Belle) went into service in the Houston Ship Channel area. Texas Belle is a 32-mile pipeline that transports NGLs and was designed to deliver butanes and natural gasolines from Mont Belvieu, Texas, to new demand in the Houston Ship Channel area. Texas Belle is one of several projects under development that will provide open access, service-focused purity NGL and olefin transportation options to customers that have traditionally been primarily served by proprietary pipeline systems. These projects are a collection of pipeline systems developed in collaboration with producers and consumers to connect new supply sources to growing demand throughout the Gulf Coast region. Company Outlook Our strategy is to provide large-scale energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas, natural gas products, and crude oil that exists in North America. We seek to accomplish this through further developing our scale positions in current key markets and basins and entering new growth markets and basins where we can become the large-scale service provider. We will maintain a strong commitment to safety, environmental stewardship, operational excellence and customer satisfaction. We believe that accomplishing these goals will position us to deliver an attractive return to our shareholders.
Following the sharp decline in energy commodity prices in fourth quarter 2014, we expect crude oil, NGLs, and olefins prices to remain at lower levels throughout 2015 as compared to 2014 average prices, which will have an adverse
31
33
Managements Discussion and Analysis (Continued)
effect on our operating results and cash flows. Fee-based businesses are a significant component of our portfolio and have further increased as a result of the ACMP Acquisition. This serves to somewhat reduce the influence of commodity price fluctuations on our operating results and cash flows. However, due in part to lower natural gas prices, we anticipate that o The potential impact of commodity price changes on our business for the remainder of 2015 is further discussed in the following Company Outlook. Williams NGL & Petchem Services Texas Belle Pipeline In March 2015, the Texas Belle Pipeline (Texas Belle) went into service in the Houston Ship Channel area. Texas Belle is a 32-mile pipeline that transports NGLs and was designed to deliver butanes and natural gasolines from Mont Belvieu, Texas, to new demand in the Houston Ship Channel area. Texas Belle is one of several projects under development that will provide open access, service-focused purity NGL and olefin transportation options to customers that have traditionally been primarily served by proprietary pipeline systems. These projects are a collection of pipeline systems developed in collaboration with producers and consumers to connect new supply sources to growing demand throughout the Gulf Coast region. Company Outlook As previously discussed, we are currently evaluating a range of strategic alternatives that could include, among other things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan. The following discussion reflects continued pursuit of our existing operating and growth plan. Our strategy is to provide large-scale energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas, natural gas products, and crude oil that exists in North America. We seek to accomplish this through further developing our scale positions in current key markets and basins and entering new growth markets and basins where we can become the large-scale service provider. We will maintain a strong commitment to safety, environmental stewardship, operational excellence and customer satisfaction. We believe that accomplishing these goals will position us to deliver an attractive return to our shareholders.
Following the sharp decline in energy commodity prices in fourth quarter 2014, we expect crude oil, NGLs, and olefins prices to remain at lower levels throughout 2015 as compared to 2014 a
verallge producer drilling economics will decrease slightly. This may reduce our gathering volumes available for both fee-based and keep-whole processingices, which will have an adverse effect on our operating results and cash flows. Fee-based businesses are a significant component of our portfolio and have further increased as a result of the ACMP Acquisition. This serves to somewhat reduce the influence of commodity price fluctuations on our operating results and cash flows. However, we anticipate producer activities will be impacted by lower natural gas prices which may reduce our gathering and processing volumes from the current levels. Our business plan for 2015 continues to reflect both significant capital investment and continued dividend growth as compared to 2014. We continue to manage expenditures as appropriate without compromising safety and compliance. Our planned consolidated capital investments for 2015 total between $3.96 billion and $4.59 billion. We expect to maintain an attractive cost of capital and reliable access to capital markets, both of which will allow us to pursue development projects and acquisitions. Potential risks and obstacles that could impact the execution of our plan include:


General economic, financial markets, or industry downturn;


Lower than anticipated energy commodity prices and margins;


Decreased volumes from third parties served by our midstream business;


Unexpected significant increases in capital expenditures or delays in capital project execution;


Lower than expected distributions, including IDRs, from WPZ. WPZs liquidity could also be impacted by a lack of adequate access to capital markets to fund its growth;


Limited availability of capital due to a change in our financial condition, interest rates, market or industry conditions;
34
Managements Discussion and Analysis (Continued)


Downgrade of our credit ratings and associated increase in cost of borrowings;


Cutrat rdtadpromners;

Changes in the political and regulatory environments;


Physical damages to facilities, including damage to offshore facilities by named windstorms;


Rdcdaalblt fisrnecvrg. We continue to address these risks through disciplined investment strategies, sufficient liquidity from cash and cash equivalents and available capacity under our credit facilities. In 2015, we anticipate an overall improvement in operating results compared to 2014 primarily due to increases in olefins volumes associated with the repair and expansion of the Geismar plant and in our fee-based businesses primarily as a result of the ACMP Acquisition, partially offset by lower NGL margins and higher operating expenses associated with the growth of our business.
The following factors, among others, could impact our businesses in 2015. Commodity price changes NGL and olefin price changes have historically correlated somewhat with changes in the price of crude oil, although NGL, olefin, crude, and natural gas prices are highly volatile, and difficult to predict. Commodity margins are highly dependent upon regional supply/demand balances of natural gas as they relate to NGL margins, while olefins are impacted by global supply and demand fundamentals. NGL products are currently the preferred feedstock for ethylene and propylene production, and are expected to remain advantaged over crude-based feedstocks into the foreseeable future. We continue to benefit from our strategic feedstock cost advantage in propylene production from Canadian oil sands offgas.
32
Managements Discussion and Analysis (Continued)
olwn h hr eln noealeeg omdt rcsi h orhqatro 04 eatcpt h olwn rnsi 05 oprdt 04


Natural gas and ethane prices are expected to be
at or below 2014 levelslower primarily due to higher inventory levels in the marketplace.

Non-ethane prices, including propane, are expected to be lower primarily due to oversupply and the sharp decline in crude oil prices.


Olefins prices, including propylene, ethylene, and the overall ethylene crack spread, are expected to be lower than 2014 levels due to the lower prices of crude oil and correlated products.
Gteig rnprain rcsig n G ae oue h rwho aua a rdcinspotn u ahrn n rcsigvlmsi matdb rdcrdiln ciiis hc r nlecdb omdt rcs nldn aua a,ehn n rpn rcs nadto,tentrldciei rdcinrtsi rdcn ra matteaon fgsaalbefrgteigadpoesn.

Following the ACMP Acquisition, we began consolidating our Access Midstream business results of operations effective July 1, 2014. As such, we expect an increase in overall results for our Access Midstream business in 2015 compared to 2014 associated with a full year of consolidated results.


In the Gulf Coast region, we expect higher production handling volumes in 2015, following the completion of Gulfstar FPS in the fourth quarter of 2014.
35
Managements Discussion and Analysis (Continued)


We anticipate higher natural gas transportation revenues at Transco compared to 2014, as a result of expansion projects placed into service in 2014 and anticipated to be placed in service in 2015.


In the northeast region, we anticipate growth in our natural gas gathering volumes compared to the prior year as our infrastructure grows to support
drillingproducer ciiisi h ein


Volumes in the Haynesville area at our Access Midstream business are expected to be higher in 2015 as compared to 2014 primarily due to an increase in well connections in the area.


We expect an increase in volumes in 2015, as compared to 2014 at our Access Midstream business in the Utica area primarily due to the build out of the Cardinal system, relieving compression constraints and adding new well connections.


In the western region, we anticipate an unfavorable impact in
equity NGL volumeNGL marginsi 05cmae o21,piaiydet h hr eln nNLpie.

I 05 u oetcbsnse niiaeacniuto fproswe twl o eeooia orcvrehn.Oei rdcinvlms

Our Gulf olefins business anticipates higher ethylene volumes in 2015 compared to 2014 substantially due to the repair and expansion of the Geismar plant, which restarted in February 2015turned to operations in late March.Ohr

Operating results from our equity-method investments are expected to be higher in 2015 compared to 2014 primarily due to the completion of Discoverys Keathley Canyon Connector lateral in the first quarter of 2015 and an anticipated increase in volumes as well as our increased ownership interest in UEOM. These increases are
33
Managements Discussion and Analysis (Continued)
fstb nepce eraei eut rmoreut-ehdivsmn nteDlwr ai a ahrn ytmpiaiydet eeemnto frtsi soito ihacnrc xeso.

Amounts recognized under minimum volume commitments at our Access Midstream business in the Barnett area are expected to increase in 2015 compared to 2014.


We expect higher operating expenses in 2015 compared to 2014, related to our growing operations in the northeast region and expansion projects at Transco, partially offset by cost reductions and synergies associated with the ACMP Acquisition. Expansion Projects We expect to invest between $3.47 billion and $4.1 billion of capital among our business segments in 2015. Our ongoing major expansion projects include the following: Williams Partners Access Midstream Projects We plan to expand our gathering infrastructure in the Eagle Ford, Mid-Continent, Utica, and Marcellus shale regions in order to meet our customers production plans. The expansion of the gathering infrastructure includes the addition of new facilities, well connections, and gathering pipeline to the existing systems.
Oak Grove Expansion We plan to expand our processing capacity at our Oak Grove facility by adding a second 200MMcf/d cryogenic natural gas processing plant, which, based on our customers needs, is expected to be placed into service at the end of 2016. Susquehanna Supply Hub We will continue to expand the gathering system in the Susquehanna Supply Hub in northeastern Pennsylvania that is needed to meet our customers production plans. The expansion of the gathering infrastructure includes additional compression and gathering pipeline to the existing system. Atlantic Sunrise In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system along with greenfield facilities to provide incremental firm transportation capacity from the northeastern Marcellus producing area to markets along Transcos mainline as far south as Station 85 in west central Alabama. We plan to place the project into service during the second half of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,700 Mdth/d. Leidy Southeast In December 2014, we received approval from the FERC to expand Transcos existing natural gas transmission system from the Marcellus Shale production region on Transcos Leidy Line in Pennsylvania to delivery points along its mainline as far south as Station 85 in west central Alabama. In March 2015, we began providing firm transportation service through the mainline portion of the project on an interim basis, until the in-service date of the project as a whole. We plan to place the remainder of the project into service during the fourth quarter of 2015 and expect it to increase capacity by 525 Mdth/d.
Constitution Pipeline In December 2014, we received approval from the FERC to construct and operate the jointly owned Constitution pipeline. We also received a Notice of Complete Application from the New York Department of Environmental Conservation in December 2014. We currently own 41 percent of Constitution with three other parties holding 25 percent, 24 percent, and 10 percent, respectively. We will be the operator of Constitution. The 124-mile Constitution
34

36

Managements Discussion and Analysis (Continued)
pipeline will connect ourOak Grove Expansion We plan to expand our processing capacity at our Oak Grove facility by adding a second 200MMcf/d cryogenic natural gas processing plant, which, based on our customers needs, is expected to be placed into service at the end of 2016. Susquehanna Supply Hub We will continue to expand the gathering system in the Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New YorkSupply Hub in northeastern Pennsylvania that is needed to meet our customers production plans. The expansion of the gathering infrastructure includes additional compression and gathering pipeline to the existing system. Atlantic Sunrise In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system along with greenfield facilities to provide incremental firm transportation capacity from the northeastern Marcellus producing area to markets along Transcos mainline as far south as Station 85 in west central Alabama. We plan to place the project into service during the second half of 20167, with an expected capacity of 650 Mdth/d. The pipeline is fully subscribed with two shippers.
Northeast Connector In May
assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,700 Mdth/d. Leidy Southeast In December 2014, we received FERC approval from the FERC to expand Transcos existing natural gas transmission system from southeastern Pennsylvania to the proposed Rockaway Delivery Lateral. In December 2014, we placed a portion of the project into service, which enabled us tothe Marcellus Shale production region on Transcos Leidy Line in Pennsylvania to delivery points along its mainline as far south as Station 85 in west central Alabama. In March 2015, we begian providing 65 Mdth/d of firm transportation from Station 195 to the Rockaway Delivery Lateral junctionservice through the mainline portion of the project on an interim basis, until the in-service date of the project as a whole. We plan to place the remainder of the project into service during the secondfourth quarter of 2015. In total, the project is expected and expect it to increase capacity by 100525 Mdth/d.
Rockaway Delivery Lateral In MayConstitution Pipeline In December 2014, we received FERC approval to construct a three-mile offshore lateral to a distributionfrom the FERC to construct and operate the jointly owned Constitution pipeline. We also received a Notice of Complete Application from the New York Department of Environmental Conservation in December 2014. We currently own 41 percent of Constitution with three other parties holding 25 percent, 24 percent, and 10 percent, respectively. We will be the operator of Constitution. The 124-mile Constitution pipeline will connect our gathering system in Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New York. We plan to place the project into service during the second quarterhalf of 20156, and the capacity of the lateral is expected to be 647with an expected capacity of 650 Mt/. Virginia Southside In November 2013, we received approval from the FERC to expand Transcos existing natural gas transmission system from New Jersey to a proposed power station in Virginia and delivery points in North Carolina. In December 2014, we placed a portion of the project into service, which enabled us to begin providing 250 Mdth/d of additional firm transportation service through the mainline portion of the project on an interim basis, until the in-service date of the project as a whole. We plan to place the remainder of the project into service during the third quarter of 2015. In total, the project is expected to increase capacity by 270Mdth/d.
Rock Springs In March 2015, we received approval from the FERC to expand Transcos existing natural gas transmission system from New Jersey to a proposed generation facility in Maryland. The project is planned to be placed into service in third quarter 2016, assuming timely receipt of all other necessary regulatory approvals, and is expected to increase capacity by 192 Mdth/d.
37
Managements Discussion and Analysis (Continued)
Hillabee In November 2014, we filed an application with the FERC for approval of the initial phases of Transcos Hillabee Expansion project, which involves an expansion of its existing natural gas transmission system from Station 85 in west central Alabama to a proposed new interconnection with Sabal Trail Transmission's system in Alabama. The project will be constructed in phases, and all of the project expansion capacity will be leased to Sabal Trail Transmission. We plan to place the initial phases of the project into service during the second quarters of 2017 and 2020, assuming timely receipt of all necessary regulatory approvals, and together they are expected to increase capacity by 1,025 Mdth/d.
Gulf Trace In December 2014, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from Station 65 in St. Helena Parish, Louisiana westward to a new interconnection with Sabine Pass Liquefaction in Cameron Parish, Louisiana. We plan to place the project into service during the first half of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,200 Mdth/d. Dalton In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from Station 210 in
35
New Jersey to markets in northwest Georgia. We plan to place the project into service in 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 448 Mdth/d. Garden State In February 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system to provide incremental firm transportation capacity from Station 210 in New Jersey to a new interconnection on our Trenton Woodbury Lateral in New Jersey. The project will be constructed in phases and is expected to increase capacity by 180 Mdth/d. We plan to place the initial phase of the project into service during the fourth quarter of 2016 and the remaining portion in the third quarter of 2017, assuming timely receipt of all necessary regulatory approvals. Virginia Southside II In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from New Jersey and Virginia to our Brunswick Lateral in Virginia. We plan to place the project into service during the fourth quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and expect it to increase capacity by 250 Mdth/d. New York Bay In July 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system to provide incremental firm transportation capacity from Pennsylvania to the Rockaway Delivery Lateral transfer point and the Narrows meter station in Richmond County, New York. We plan to place the project into service during the fourth quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 115 Mdth/d.
Redwater Expansion As part of a long-term agreement to provide gas processing services to a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta, we are increasing the capacity of the Redwater facilities where NGL/olefins mixtures will be fractionated into an ethane/ethylene mix, propane, polymer grade propylene, normal butane, an alkylation feed and condensate. This capacity increase is expected to be placed into service during the fourth quarter of 2015.
38

Managements Discussion and Analysis (Continued)
New Jersey to markets in northwest Georgia. We plan to place the project into service in 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 448 Mdth/d. Garden State In February 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system to provide incremental firm transportation capacity from Station 210 in New Jersey to a new interconnection on our Trenton Woodbury Lateral in New Jersey. The project will be constructed in phases and is expected to increase capacity by 180 Mdth/d. We plan to place the initial phase of the project into service during the fourth quarter of 2016 and the remaining portion in the third quarter of 2017, assuming timely receipt of all necessary regulatory approvals. Virginia Southside II In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from New Jersey and Virginia to our Brunswick Lateral in Virginia. We plan to place the project into service during the fourth quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and expect it to increase capacity by 250 Mdth/d.
Redwater Expansion As part of a long-term agreement to provide gas processing services to a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta, we are increasing the capacity of the Redwater facilities where NGL/olefins mixtures will be fractionated into an ethane/ethylene mix, propane, polymer grade propylene, normal butane, an alkylation feed and condensate. This capacity increase is expected to be placed into service during the fourth quarter of 2015.
Williams NGL& Petchem Services Canadian PDH Facility We are planning to build a PDH facility in Alberta that will significantly increase production of polymer-grade propylene. Start-up for the PDH facility is expected to occur in the second half of 20189. The new PDH facility is expected to produce approximately 1.1 billion pounds annually, significantly increasing Williams production of polymer-grade propylene currently at 180 million pounds annually. Canadian NGL Infrastructure Expansion As part of a long-term agreement to provide gas processing to a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta, we are building a new liquids extraction plant and an interconnection with the Boreal Pipeline, owned by our Williams Partners segment. The interconnection will enable transportation of the NGL/olefins mixture on the Boreal pipeline from the new liquids extraction plant to the Redwater facilities, owned by our Williams Partners segment. We plan to place the new liquids extraction plant and interconnection with Boreal into service during the fourth quarter of 2015, and expect initial NGL/olefins recoveries of approximately 12 Mbbls/d. To mitigate ethane price risk associated with our processing services, we have a long-term agreement for ethane sales to a third-party customer. Gulf Coast NGL and Olefin Infrastructure Expansion In November 2012, we acquired 10 liquids pipelines in the Gulf Coast region.The acquired pipelines will be combined with an organic build-out of several projects to expand our petrochemical services in that region.The projects include the construction and commissioning of pipeline systems capable of transporting various purity natural gas liquids and olefins products in the Gulf Coast region. The Texas Belle pipeline started providing isobutane service in the first quarter of 2015 and is expected to be available for natural gasoline service in the thirdfirst quarter of 20156. Additional projects under development and/ or construction are expected to be placed into service in 2016 and 2017.
3
69
Managements Discussion and Analysis (Continued)
Results of Operations Consolidated Overview The following table and discussion is a summary of our consolidated results of operations for the three
and six months ended March31June30, 2015 , compared to the three and six months ended March31June30,21 h eut foeain ysgetaedsusdi ute ealfloigti osldtdoeve icsin



Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
$Change*
%Change*
2015
2014
$Change*
%Change*

(Millions)
(Millions)

Revenues:

Service revenues
$
1,
197241
$
825
+416
+50
%
$
2,438

$
819
+378
1,644
+794

+4
68
%

Product sales
5
19
930
-411
-44
98
853
-255
-30
%
1,117
1,783
-666
-37

%

Total revenues
1,
716
1,749
839
1,678
3,555
3,427


Costs and expenses:

Product costs
4
62
769
94
724
+230
+32
%
956
1,493

+
5307
+
4036
%

Operating and maintenance expenses
387
298
-89
437
308
-129
-42
%
824
606
-218

-3
06
%

Depreciation and amortization expenses
4278
214
-2134
-100
%
855
428
-427

-100
%

Selling, general, and administrative expenses
1
96
150
-46
74
136
-38
-28
%
370
286
-84

-
3129
%

Net insurance recoveries Geismar Incident
(1
26
)
(42
)
+84
+200
%
(126
)
(16
19
)
-
119
-100
35
-22

%

Other (income) expense net
17
17
40
27
-13
-48
%
57
44
-13
-30

%

Total costs and expenses
1,4
8947
1,3
2967
2,936
2,696


Operating income (loss)
227
420
392
311
619
731


Equity earnings (losses)
51
(48
93
37
+56
+151
%
144
(11

)
+99155
NM

Other investing income (loss) net
149
18

-
149
-
10050
%
9
32
-23
-72

%

Interest expense
(262
)
(163
)
-99
-61
%
(
513
)
(
140303
)
-
111210
-
769 %

Other income (expense) net
1634
4
+30
NM
50

15
+
145 NM

Income (loss)
from continuing operations before income taxes
43
247
266
207
309
454


Provision (benefit) for income taxes
30
51
+21
+41
83
84
+1
+1
%
113
135
+22
+16
%

Income (loss) from continuing operations
183
123
196
319

Income (loss) from discontinued operations
4
-4
-100
%
4
-4
-100

%

Net income (loss)
1
383
127

196
323

Less: Net income (loss) attributable to noncontrolling interests
(57
)
56
+113
NM
69
24
-45
-188
%
12
80
+68
+85
%


Net income (loss) attributable to The Williams Companies, Inc.
$
70114
$
103
$
184

$
140243





*
+ = Favorable change; - = Unfavorable change; NM = A percentage calculation is not meaningful due to a change in signs, a zero-value denominator, or a percentage change greater than 200.

40
Managements Discussion and Analysis (Continued)
Three months ended March31June30, 2015 vs. three months ended March31June30, 2014 Service revenues increased primarily due to contributions from operations acquired in the ACMP Acquisition in third quarter 2014. Additionally, production handling, gathering, processing, and transportation fee revenue all increased related to construction projects that have been placed into service, including Gulfstar One in the fourth quarter of 2014, expansion projects placed in service by Transco in late 2014 and in 2015, and new well connections and the completion of various compression projects in the Northeast, and expansion projects placed in service by Transco in late 2014 and in 2015. A decrease in Canadian construction management revenues related to narrowing our focus to internal customer construction projects partially offset these increases. Product sales decreased primarily due to lower NGL and crude oil marketing sales associated with sharp declines in NGL and crude oil prices and crude oil volume. A decrease in Canadian construction management revenues reflecting a shift to internal customer construction projects partially offset these increases. Product sales decreased primarily due to lower marketing sales driven by lower prices across all products, partially offset by higher non-ethane volumes. Equity NGL sales also decreased associated with sharp declines in NGL prices, partially offset by higher NGL volumes. These decreases were partially offset by higher olefin sales associated with the Geismar plant that returned to operations in late March 2015. Product costs decreased primarily due to lower marketing purchases related to lower per-unit costs partially offset by higher non-ethane volumes. Natural gas purchases associated with the production of equity NGLs also decreased primarily related to lower natural gas prices, partially offset by higher volumes. These decreases were partially offset by an increase in olefin feedstock purchases primarily related to the Geismar plant return to operations. Operating and maintenance expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, the return to operations of the Geismar plant, and new projects placed in service, as well as planned maintenance at our Canadian facilities. These increases are partially offset by a decrease in Canadian construction management expenses that reflects a shift to internal customer construction projects. Depreciation and amortization expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition and from depreciation on new projects placed in service, including Gulfstar One. Selling, general, and administrative expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, including $13 million of merger and transition-related costs recognized in 2015, as well as $7 million of costs associated with exploring potential strategic alternatives. Net insurance recoveries Geismar Incident changed favorably primarily due to the receipt of $126 million of insurance recoveries in 2015 as compared to the receipt of $50 million of insurance recoveries in 2014. Other (income) expense net within Operating income (loss) changed unfavorably primarily due to $24 million of impairments of certain assets at Williams Partners in 2015 compared to $17 million in 2014. Operating income (loss) changed favorably primarily due to increased service revenues at Williams Partners related to construction projects placed in service, higher insurance recoveries related to the Geismar Incident, contributions from the operations acquired in the ACMP Acquisition, and $34 million higher olefin margins primarily due to $50 million of margins contributed by our Geismar plant that returned to operations in 2015. These increases were partially offset by higher operating, maintenance, and depreciation expenses related to construction projects placed in service and the start-up of the Geismar plant, $56 million lower NGL margins driven by lower prices, 2015 costs related to WPZs merger and integration of ACMP, and higher impairments as previously discussed. Equity earnings (losses) changed favorably primarily due to $42 million related to contributions from Appalachia Midstream Investments and UEOM acquired in the ACMP Acquisition and a $25 million increase at Discovery primarily related to the completion of the Keathley Canyon Connector in early 2015. Interest expense increased due to an $86 million increase in Interest incurred primarily due to new debt issuances in 2014 and 2015 and new interest expense associated with debt assumed in conjunction with the ACMP Acquisition, partially offset by the absence of a $9 million ACMP Acquisition-related financing fee incurred in the second quarter of 2014 and lower interest due to 2015 debt retirements. In addition, Interest capitalized decreased $13 million primarily related to construction projects that have been placed into service, partially offset by new capitalized interest associated with assets acquired in the ACMP Acquisition. (See Note 2 Acquisitions and Note 9 Debt and Banking Arrangements of Notes to Consolidated Financial Statements.)
41
Managements Discussion and Analysis (Continued)
Other income (expense) net below Operating income (loss) changed favorably primarily due to a $14 million gain on early debt retirement in April 2015, as well as a $12 million benefit related to an increase in allowance for equity funds used during construction (AFUDC) associated with an increase in spending on various Transco expansion projects and Constitution. Provision (benefit) for income taxes changed favorably primarily due to the absence of a second-quarter 2014 provision associated with a revision of our estimate of the undistributed earnings related to the contribution of certain Canadian operations to WPZ, partially offset by higher pretax income in 2015. See Note 5 Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods. The increase in Net income (loss) attributable to noncontrolling interests related to our investment in WPZ is primarily due to improved operating results at WPZ and higher noncontrolling interest ownership percentages, partially offset by the impact of increased income allocated to the WPZ general partner, held by us, associated with IDRs. In addition, there was an increase related to our investment in Gulfstar One associated with its start up in 2014 and an increase related to our investments in Cardinal and Jackalope due to the consolidation of these entities following the ACMP Acquisition in third quarter 2014. Six months ended June30, 2015 vs. six months ended June30, 2014 Service revenues increased primarily due to contributions from operations acquired in the ACMP Acquisition in third quarter 2014. Additionally, production handling, gathering, processing, and transportation fee revenue all increased related to construction projects that have been placed into service, including Gulfstar One in the fourth quarter of 2014, expansion projects placed in service by Transco in late 2014 and in 2015, and new well connections and the completion of various compression projects in the Northeast. A decrease in Canadian construction management revenues reflect a shift to internal customer construction projects partially offset these increases. Product sales decreased primarily due to lower marketing sales driven by lower prices across all product
s, partially offset by higher non-ethane NGL volumes. Equity NGL sales also decreased associated with sharp declines in NGL prices, partially offset by higher NGL volumes.
37
a decline in NGL prices, partially offset by higher NGL volumes. These decreases were partially offset by an increase in olefin sales primarily due to the resumption of our Geismar operations. Product costs decreased primarily due to lower marketing costs related to lower per-unit costs across all products, partially offset by higher non-ethane volumes, as well as a decrease in natural gas purchases associated with the production of equity NGLs driven by lower per-unit natural gas costs as a result of the significant decline in energy commodity prices during the fourth quarter of 2014, partially offset by higher volumes. These decreases were partially offset by an increase in olefin feedstock purchases primarily related to the Geismar plant return to operations. Operating and maintenance expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, the return to operations of the Geismar plant in addition to new projects placed in service, and planned maintenance at our Canadian facilities. These increases are partially offset by a decrease in Canadian construction management expenses that reflect a shift to internal customer construction projects. Depreciation and amortization expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition and from depreciation on new projects placed in service, including Gulfstar One. Selling, general, and administrative expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, including $47 million of merger and transition-related costs recognized in 2015, as well as $7 million of costs associated with exploring potential strategic alternatives. These increases are partially offset by the absence of $19 million of project development costs incurred in 2014 related to the Bluegrass Pipeline reflecting 100 percent of such costs. The 50 percent noncontrolling interest share of these costs are presented in Net income attributable to noncontrolling interests. Net insurance recoveries Geismar Incident changed unfavorably primarily due to the receipt of $126 million of insurance recoveries in 2015 as compared to the receipt of $175 million of insurance recoveries in 2014.
42

Managements Discussion and Analysis (Continued)
Product costs decreased primarily due to lower NGL and crude oil marketing purchases related to sharp declines in prices and lower crude oil volumes, partially offset by higher NGL volumes. In addition, natural gas purchaOther (income) expense net within Operating income changed unfavorably primarily due to $27 million of impairments of certain assets associated with the production of equity NGLs decreased due to lower natural gas prices, partially offset by higher volumes. Operating and maintenance expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, partially offset by at Williams Partners in 2015 compared to $17 million in 2014. Operating income (loss) changed unfavorably primarily due to higher operating, maintenance, and decprease in Canadian construction management expenses related to narrowing our focus to internal customer construction projects. Depreciation and amortization expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition and due to depreciation on new projecciation expenses related to construction projects placed in service and the start-up of the Geismar plant, $118 million lower NGL margins driven by lower prices, 2015 costs prelacted in service, including Gulfstar One. Selling, general, and administrative expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, including $35 million of merger and transition-related costs recognized in 2015to WPZs merger and integration of ACMP, lower insurance recoveries related to the Geismar Incident, lower marketing margins, and higher impairments as previously discussed. These indecreases awere partially offset by the absence of $19 million of project development costs expensed during the first quincreased service revenues at Williams Partner of 2014s related to the Bluegrass Pipeline. The unfavorable change in Net insurance recoveries Geismar Incident is due to the receipt of $125 million of insurance recoveries in 2014. Operating income (loss) changed unfavorably primarily due to the absence of insurance recoveries related to the Geismar Incident, higher expenses primarily related to the operatconstruction projects placed in service, contributions from the operations acquired in the ACMP Acquisition, the absence of 2014 Bluegrass project development costs, and $15 million higher olefin margins primarily due to $44 millions of and merger with ACMP andmargins construction projects placed into service, $62 million lower NGL margins, and $19 million lower olefin product margins. These decreases are partially offset by increases in service revenue primarily related to contributions from ACMP, construction projects placed in service, and the absence of 2014 project development expenses related to Bluegrass Pipelineibuted by our Geismar plant that returned to operations in 2015, partially offset by lower olefin margins at our RGP splitter and at our Canadian operations. Equity earnings (losses) changed favorably primarily due to the absence of $779 million of equity losses recognized in 2014from Bluegrass Pipeline and Moss Lake in 2014 related primarily related to the underlying write-off of previously capitalized project development costs at Bluegrass Pipeline and Moss Lake. In addition, equity-method investments at ACMP, includ. In addition, contributions from Appalachia Midstream Investments and UEOM acquired ing the Appalachia Midstream Investments, contributed $33 million of 2015 equity earningsCMP Acquisition increased 2015 equity earnings by $77 million and a $23 million increase at Discovery is primarily related to the completion of the Keathley Canyon Connector in early 2015. Thisese increase wass are partially offset by $8 million reflectingthe absence of 2014 equity earnings related to our former equity investment in ACMP and our share of impairments recorded by Laurel Mountain in 2015. Other investing income (loss) net for 2014 reflects $13 million ofchanged unfavorably primarily due to lower interest income associated with a receivable related to the sale of certain former Venezuela assets. Due to changes in circumstances that have led to late payments and increased uncertainty regarding the recovery of the receivable, we have begun accounting for the receivable under a cost recovery model. As a result, no interest income was recognized in the first quarter of 2015. Interest expense increased due toInterest expense increased due to a $190 million increase in Interest incurred primarily due to new debt issuances in 2014 and 2015 and new interest expense associated with debt assumed in conjunction with the ACMP Acquisition. This increase was partially offset by the absence of a $1049 million increase in Interest incurred primarily due to new debt issuances in 2014 and 2015 and new interest expense associated with debt from ACMPof ACMP Acquisition transaction-related financing fee incurred in the second quarter of 2014 and lower interest due to 2015 debt retirements. In addition, Interest capitalized decreased $720 million primarily related to construction projects that have been placed into service in the Northeast and to Gulfstar One, partially offset by new capitalized interest attributable to ACMP. (See Note 2 Acquisition and Note 9 Debt and Banking Arrangements of Notes to Consolidated Financial Statements.) Other income (expense) net below Operating income (loss) changed favorably primarily due to a $1426 million benefit related to an increase in allowance for equity funds used during construction (AFUDC) relassociated towith an increase in spending on various Transco expansion projects and Constitution, as well as a $14 million gain on early debt retirement in April 2015. Provision (benefit) for income taxes changed favorably primarily due to lower pretax income. See Note 5 Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods. The favorable changdecrease in Net income (loss) attributable to noncontrolling interests related to our investment in WPZ is primarily due to lower operating results at WPZ, the impact of increased income allocated to the WPZ general partner, held by us, associated with IDRs, and the impact of increased income allocated to WPZs Class D units, held by us, related to the accelerated amortization of a beneficial conversion feature in advance of the Merger. These are offset with an unfavorable changincrease related to our investment in Gulfstar One associated with its start up in 2014, an unfavorable change
38
increase related to our former investment in Bluegrass Pipeline associated with our partners share of 2014 project development costs expensed by Bluegrass Pipeline, and an increase related to our investments in Cardinal and Jackalope due to consolidation of these entities following the ACMP Acquisition in third quarter 2014. Period-Over-Period Operating Results - Segments Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA . Note 13 Segment Disclosures of Notes to Consolidated Financial Statements includes a reconciliation of this non-GAAP measure to Net income (loss) . Management uses Modified EBITDA because it is an accepted financial indicator used by investors to compare company performance. In addition, management believes that this measure provides
43

Managements Discussion and Analysis (Continued)
related to our investment in Bluegrass Pipeline associated with the our partners share of 2014 project development costs expensed by Bluegrass Pipeline, and an unfavorable change related to our investments in Cardinal and Jackalope due to the consolidation of these entities following the ACMP Acquisition in third quarter 2014. Period-Over-Period Operating Results - Segments Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA . Note 13 Segment Disclosures of Notes to Consolidated Financial Statements includes a reconciliation of this non-GAAP measure to Net income (loss) . Management uses Modified EBITDA because it is an accepted financial indicator used by investors to compare company performance. In addition, management believes that this measure provides ivsosa nacdprpcieo h prtn efrac forast.Mdfe BTAsol o ecniee nioaino sasbttt o esr fpromnepeae nacrac ihGA.Wlim ates


Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions)

Segment revenues
$
1,
71830
$
1,616
$
3,54
1 $
1,6933,309

Segment costs and expenses
(1,03086
)
(1,124
)
(2,116

)
(
1,1582,282
)

Net insurance recoveries Geismar Incident
1
26
42
126
16
19

Proportional Modified EBITDA of equity-method investments
1
36
54
83
62
319
116


Williams Partners Modified EBITDA
$
8171,053
$
596
$
1,870

$
7081,304
Three months ended
March31June 30, 2015 vs. three months ended March31June 30, 2014 Modified EBITDA increased primarily due to the acquisition of ACMP during the third quarter of 2014. Additionally, service revenues increased due to the start-up of Gulfstar One. Partially offsetting these increases to modified EBITDA is the absence, resuming our Geismar operations, an increase in net insurance recoveries associated with the Geismar Incident, and initiating service of Gulfstar One during fourth quarter 2014. Partially offsetting these increases are decreases in NGL margins as a result of a significant decline in energy commodity prices that began during the fourth quarter of 2014. A more detailed discussion of Segment revenues and Segment costs and expenses follows. The increase in Segment revenues includes:


A $468 million increase in service revenues primarily due to $352 million additional revenues associated with the ACMP Acquisition during 2014, $66 million in increased revenues associated with the start-up of operations at Gulfstar One during the fourth quarter of 2014, and $31 million in higher fees associated with increased volumes and additional contributions from expanded processing facilities at Williams Partners northeast gathering and processing operations. Additionally, service revenues reflect a $38 million increase in natural gas transportation fees due to new Transco projects placed in service in 2014 and 2015.


A $65 million increase in olefin sales primarily due to resuming our Geismar operations.


A $245 million decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher volumes (more than offset in marketing purchases).


A $77 million decrease in revenues from our equity NGLs reflecting a decrease of $89 million due to lower NGL prices, partially offset by a $12 million increase associated with higher NGL volumes. The decrease in Segment costs and expenses includes:


A $249 million decrease in marketing purchases primarily due to a decrease in per-unit costs, partially offset by higher volumes (substantially offset in marketing revenues).


A $21 million decrease in the costs associated with the production of equity NGLs primarily due to decreased natural gas prices.


A $14 million gain associated with early retirement of certain debt.


A $12 million benefit related to an increase in AFUDC related to an increase in spending on various Transco expansion projects and Constitution.
44
Managements Discussion and Analysis (Continued)


A $176 million increase in operating costs primarily due to new expenses associated with operations acquired in the ACMP Acquisition, additional costs associated with resuming our Geismar operations and increased maintenance and repair expenses.


A $32 million increase in olefin feedstock purchases primarily due to resuming our Geismar operations.


A $28 million increase in SG&A primarily due to additional expenses associated with operations acquired in the ACMP Acquisition.


An increase in other costs including $24 million of impairments of certain assets in 2015 compared to $17 million in 2014. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to investments acquired in the ACMP Acquisition and higher Discovery earnings associated with increased fees attributable to the completion of the Keathley Canyon Connector in the first quarter of 2015. Six months ended June30, 2015 vs. six months ended June30, 2014 Modified EBITDA increased primarily due to the acquisition of ACMP during the third quarter of 2014, initiating service of Gulfstar One during the fourth quarter 2014 and increased fee revenue associated with contributions from new and expanded facilities. Partially offsetting these increases to modified EBITDA is the reduction
of insurance recoveries related to the Geismar Incident and a decrease in NGL margins as a result of a significant decline in energy commodity prices durbeginning in the fourth quarter of 2014. A more detailed discussion of Segment revenues and Segment costs and expenses follows. The increase in Segment revenues includes:


An $897 million increase in service revenues primarily due to $666 million additional revenues associated with the ACMP Acquisition during 2014, $122 million in increased revenues associated with the start-up of operations at Gulfstar One during the fourth quarter of 2014, and $73 million in higher fees associated with increased volumes and additional contributions from expanded processing facilities at Williams Partners northeast gathering and processing operations. Additionally, service revenues reflect a $58 million increase in natural gas transportation fees due to new Transco projects placed in service in 2014 and 2015.


A $58 million increase in olefin sales primarily due to resuming our Geismar operations during 2015.


A $538 million decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher volumes (substantially offset in marketing purchases).


A $429167 million indecrease in service revenues primarily due to $314 million additional revenues associated with the ACMP Acquisition during 2014, $55 million in increased revenues associated with the start-up of operations at Gulfstar One during the fourth quarterrevenues from our equity NGLs reflecting a decrease of $2014, and $42 million in higher gathering fees associated with increased volumes and additional contributions from expanded processing facilities at Williams Partners northeast gathering and6 million due to lower NGL proicessing operations. Additionally, service revenues reflect, partially offset by a $2239 million increase in natural gas transportation fees due to new Transco projects placed in service in 2014 and 2015associated with higher NGL volumes.

A
n $29318 million decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher volumes (offset in marketing purchases).revenues associated with various other products. The decrease in Segment costs and expenses includes:


A
n $89527 million decrease in revenues from our equity NGLmarketing purchases primarily reflectingdue to a decrease of $109 million due to lower NGL prices, partially offset by a $20 million increase associated with higher NGL volumin per-unit costs, partially offset by higher volumes (more than offset in marketing revenues).

A $
2148 million decrease in revenuethe costs associated with various other products. The decrease in Segment costs and expenses includion of equity NGLs primarily due to decreased natural gas prices:.


A $2
786 million decrease in marketing purchases primarily duebenefit related to an increase in AFUDC related to a den increase in sper-unit costs, partially offset by higher volumes (more than offset in marketing revenues)nding on various Transco expansion projects and Constitution.
3945
Managements Discussion and Analysis (Continued)


A $
2714 million decrease in the costs associated with the production of equity NGLs primarily due to decreased natural gas pricesgain associated with early retirement of certain debt.

A $
14306 million benefit related to an increase in AFUDC related to an increase in spending on various Transco expansion projects and Constitutionincrease in operating costs primarily due to new expenses associated with operations acquired in the ACMP Acquisition, resuming operations at our Geismar facility and increased maintenance and repair expenses.

A $912 million deincrease in costs associated with various other productsSG&A primarily due to additional expenses associated with operations acquired in the ACMP Acquisition, including $32 million of merger and transition-related costs recognized in 2015.

A $
13843 million increase in operating costs primarily due to new expenses associated with operations acquired in the ACMP Acquisilefin feedstock purchases associated with resuming our Geismar operations.

A
$63 million increase in Selling, general and administrative expenses (SG&A) primarily due to new expenses associated with Access Midstream,other costs including $297 million of merger and transition related expensesimpairments of certain assets in 2015 compared to $17 million in 2014. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to investments acquired in the ACMP Acquisition and higher Discovery earnings associated with increased fees attributable to the completion of the Keathley Canyon Connector in the first quarter of 2015. Additionally, Caiman II reflects higher earnings of $98 million due to the return to service of a plant that was damaged for a period in 2014 and the results of assets placed into service in 2014 and 2015. Partially offsetting these increases were $114 million lower earnings at Laurel Mountain resulting primarily from $89 ilo fipimns n oe ahrn esrsligfo oe ahrn ae nee ontrlgspie.Wlim G&PthmSrie



Three mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions)

Segment revenues
$
1
$
$
1
$

Segment costs and expenses
$(4
)
(6
)

(
59
)
$
(239
)

Proportional Modified EBITDA of equity-method investments
(
772
)
(79

)

Williams NGL & Petchem Services Modified EBITDA
$
(53
)
$
(8
)
$
(8

)
$
(10
08
) Three months ended
March31June30, 2015 vs. three months ended March31June30, 2014 The favorable change in Modified EBITDA is due primarily to the absence of equity losses from Bluegrass Pipeline and Moss Lake as well as costs incurred during the second quarter of 2014 related to the development of the Bluegrass Pipeline. Six months ended June30, 2015 vs. six months ended June30, 2014 The favorable change in Modified EBITDA is due primarily to the absence of equity losses from Bluegrass Pipeline and Moss Lake as well as costs incurred during the first quarter of 2014 related to the development of the Bluegrass Pipeline. Segment costs and expenses decreased primarily due to $19 million of project development costs expensed during the first quarter of 2014 related to the Bluegrass Pipeline and higher expensed development costs related to other projects. The favorable change in Proportional Modified EBITDA of equity-method investments is due to the absence of the write-off of previously capitalized project development costs at Bluegrass Pipeline and Moss Lake during the first quarter of 2014.
46
Managements Discussion and Analysis (Continued)
te



Three
mMonths eEnded
March 31June 30,
Six Months Ended
June 30
,
2015
2014
2015
2014

(Millions)

Segment revenues
$
2647
$
66
$
73

$
1259

Segment costs and expenses
(2651
)
(59
)
(77

)
(52111
)

Proportional Modified EBITDA of equity-method investment
5
13
104


Other Modified EBITDA
$
(4
)
$
58
40
Managements Discussion and Analysis (Continued)
60
$
(4
)
$
118

Modified EBITDA decreased as the
consolidated results from the businesses acquired in the ACMP Acquisition are presented within Williams Partners for periods subsequent to the July 1, 2014, acquisition. For periods prior to that date, Other includes the proportional Modified EBITDA of our former equity-method investment in ACMP. The decrease in Segment revenues and Segment costs and expenses reflect a shift from external service contracts to internal services provided by our Canadian construction management company, partially offset by costs associated with integration and re-alignment of resources with the ACMP transaction, and costs associated with exploring potential strategic alternatives. The three and six months ended March31June30, 2014 included Proportional Modified EBITDA of equity-method investment related to our investment in ACMP that we accounted for as an equity-method investment for the first half of 2014. (See Note 2 Acquisitions of Notes to Consolidated Financial Statements.)
41 47
Managements Discussion and Analysis (Continued)
Managements Discussion and Analysis of Financial Condition and Liquidity Outlook We seek to manage our businesses with a focus on applying conservative financial policy in order to maintain investment-grade credit metrics. We continue to transition to an overall business mix that is increasingly fee-based. Although our cash flows are impacted by fluctuations in energy commodity prices, that impact is somewhat mitigated by certain of our cash flow streams that are not directly impacted by short-term commodity price movements, including:


Fr eadadcpct eevto rnprainrvne ne ogtr otat;

Fee-based revenues from certain gathering and processing services. We believe we have, or have access to, the financial resources and liquidity necessary to meet our requirements for working capital, capital and investment expenditures, dividends and distributions, debt service payments, and tax payments, while maintaining a sufficient level of liquidity. Liquidity Based on our forecasted levels of cash flow from operations and other sources of liquidity, we expect to have sufficient liquidity to manage our businesses in 2015. Our internal and external sources of consolidated liquidity to fund working capital requirements, capital and investment expenditures, debt service payments, dividends and distributions, and tax payments include:


Cash and cash equivalents on hand;


Cash generated from operations, including cash distributions from WPZ and our equity-method investees based on our level of ownership and incentive distribution rights;


Cash proceeds from issuances of debt and/or equity securities;


Use of our credit facility. These sources are available to us at either the parent or subsidiary level, as applicable, and are expected to be available to certain of our subsidiaries, particularly equity and debt issuances. WPZ is expected to be self-funding through its cash flows from operations, its credit facility and/or commercial paper program, and its access to capital markets. We anticipate our more significant uses of cash to be:


Mitnneadepnincptlepniue;

Contributions to our equity-method investees to fund their expansion capital expenditures;


Interest on our long-term debt;


Quarterly dividends to our shareholders. Potential risks associated with our planned levels of liquidity and the planned capital and investment expenditures discussed above include those previously discussed in Company Outlook .
4
2
8
Managements Discussion and Analysis (Continued)
As of
March31June30, 2015 , we had a working capital deficit (current liabilities, inclusive of commercial paper outstanding and long-term debt due within one year, in excess of current assets) of $708 million . However, we note the following about our available liquidity.2.342 billion . Excluding the impact of the $1.743 billion in commercial paper outstanding, which we consider to be a reduction of WPZs credit facility capacity as noted in the table below, our working capital deficit is $599 million . Our available liquidity to cover this deficit is as follows:



March31June30,21

Available Liquidity
WPZ
WMB
Total

(Millions)

Cash and cash equivalents
$
277186
$
6418
$
341204

Capacity available under our $1.5 billion credit facility (1)
1,1
250
1,1
250

Capacity available to WPZ under its $3.5 billion credit facility less amounts outstanding under its $3 billion commercial paper program (2)
3,500
3,500
1,757
1,757


$
3,7771,943
$
1,1
689
$
4,9663,111





(1)
The highest amount outstanding under our credit facility during 2015 was $4
250 million. At March31June30,21 ewr ncmlac ihtefnnilcvnnsascae ihti rdtfclt.SeNt etadBnigArneet fNtst osldtdFnnilSaeet o diinlifraino u rdtfclt.

(2)
In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of WPZs credit facility inclusive of any outstanding amounts under its commercial paper program.
WPZ has $1.743 billion of commercial paper outstanding at June 30, 2015. The highest amount outstanding under WPZs commercial paper program and credit facility during 2015 was $3.1 billion. At March31June30, 2015 , WPZ was in compliance with the financial covenants associated with this credit facility and the commercial paper program. See Note 9 Debt and Banking Arrangements of Notes to Consolidated Financial Statements for additional information on WPZs credit facility, WPZs commercial paper program, and termination of WPZs short-term facility. Acquisition of WPZ Public Units We may issue approximately 275 million shares of common stock associated with the agreement for the Acquisition of WPZ Public Units. In the event that agreement is terminated under certain circumstances, we could be required to pay a $410 million termination fee to WPZ, of which we currently own approximately 60 percent, including the interests of the general partner and IDRs. Such termination fee would be settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $102.5 million per quarter). See Note 1 General, Description of Business, and Basis of Presentation of Notes to Consolidated Financial Statements for additional information on the Acquisition of WPZ Public Units. Debt Issuances and Retirements On April 15, 2015, WPZ paid $783 million, including a redemption premium, to retire $750 million of 5.875 percent senior notes due 2021. On March 3, 2015, WPZ completed a public offering of $1.25 billion of 3.6 percent senior unsecured notes due 2022, $750 million of 4 percent senior unsecured notes due 2025, and $1 billion of 5.1 percent senior unsecured notes due 2045. WPZ used the net proceeds to repay amounts outstanding under its commercial paper program and credit facility, to fund capital expenditures, and for general partnership purposes. WPZ retired $750 million of 3.8 percent senior unsecured notes that matured on February 15, 2015. Shelf Registrations On February 25May 11, 2015, WPZwe filed a shelf registration statement for the offer and sale from time to time of common units representing limited partner interests in WPZ having an aggregate offering price of up to $1 billion, as a well-known seasoned issuer. These sales will be made over a period of time and from time to time in transactions at prices which are market prices prevailing at the time of sale, prices related to market price or at negotiated prices. Such sales will be made pursuant to an equity distribution agreement between WPZ and certain banks who may act as sales agents or purchase for its own accounts as principals. As of March31, 2015 , no common units have been issued under this registration. Distributions from Equity-Method Investees The organizational documents of entities in which we have an equity-method interest generally require distribution of their available cash to their members on a quarterly basis. In each case, available cash is reduced, in part, by reserves appropriate for operating their respective businesses.helf registration statement includes a prospectus describing some of the general terms that may apply to the registered securities and
4
39
Managements Discussion and Analysis (Continued)
the general manner in which they may be offered. This filing allows us or our selling securityholders, who will be named in a prospectus supplement, from time to time to offer to sell debt securities, preferred stock, common stock, purchase contracts, warrants, or units. Each time we or a selling securityholder sells securities pursuant to such prospectus, we will provide a supplement to the prospectus that contains specific information about the offering and the specific terms of the securities offered. We may sell these securities directly to investors, or through agents, dealers, or underwriters as designated from time to time, or through a combination of these methods, on a continuous or delayed basis. As of June 30, 2015, no securities have been issued under this registration. On February 25, 2015, WPZ filed a shelf registration statement for the offer and sale from time to time of common units representing limited partner interests in WPZ having an aggregate offering price of up to $1 billion. These sales will be made over a period of time and from time to time in transactions at prices which are market prices prevailing at the time of sale, prices related to market price or at negotiated prices. Such sales will be made pursuant to an equity distribution agreement between WPZ and certain banks who may act as sales agents or purchase for its own accounts as principals. As of June30, 2015 , no common units have been issued under this registration. Distributions from Equity-Method Investees The organizational documents of entities in which we have an equity-method interest generally require distribution of their available cash to their members on a quarterly basis. In each case, available cash is reduced, in part, by reserves appropriate for operating their respective businesses. Cei aig u blt obro oe sipce yorcei aig n h rdtrtnso P.Tecretrtnsaea olw:


Rtn gny Outlook
Senior Unsecured Debt Rating
Corporate CreditRating


WMB:
Standard & Poors
StableCredit Watch
BB+

BB+
BBB

Moodys Investors Service
StableRatings Under Review
Baa3
N/A

Fitch Ratings
NegaRating Watch Positv
BBB-
N/A


WPZ:
Standard & Poors
StableCredit Watch
BBB
BBB

Moodys Investors Service
StablNegative Baa2
N/A

Fitch Ratings
NegativStable BBB
N/A
As previously discussed, on June 21, 2015, we publicly announced in a press release that our Board of Directors has authorized a process to explore a range of strategic alternatives after it had received and subsequently rejected an unsolicited proposal for us to be acquired in an all-equity transaction. Following this announcement, on June 22, 2015, the credit ratings agencies affirmed and/or revised the outlook and ratings as noted in the table above. While Fitch Ratings made no changes to the outlook for either WMB or WPZ on this date, the other agencies revised the outlook of both WMB and WPZ noting the uncertainty associated with these events.
Credit rating agencies perform independent analyses when assigning credit ratings. No assurance can be given that the credit rating agencies will continue to assign us investment grade ratings even if we meet or exceed their current criteria for investment grade ratios. A downgrade of our credit rating might increase our future cost of borrowing and would require us to post additional collateral with third parties, negatively impacting our available liquidity. As of March31June30, 2015 , we estimate that a downgrade to a rating below investment grade for us or WPZ could require us to post up to $666 thousand1.1 million or $24032million, respectively, in additional collateral with third parties.
50
Managements Discussion and Analysis (Continued)
aia n netetEpniue aho u uiessi aia-nesv,rqiigivsmn ougaeo nac xsigoeain n opywt aeyadevrnetlrgltos h aia eurmnso hs uiesscnitpiaiyo:

Mitnnecptlepniue,wihaegnrlyntdsrtoay nldn:()aia xedtrsmd orpaeprilyo ul ercae sesi re omiti h xsigoeaigcpct forast n oetn hi sfllvs 2epniue hc r adtr n/resnilt opywt asadrgltosadmiti h eiblt foroeain;ad()eti elcneto xedtrs


Expansion capital expenditures, which are generally more discretionary than maintenance capital expenditures, including: (1)expenditures to acquire additional assets to grow our business, to expand and upgrade plant or pipeline capacity and to construct new plants, pipelines and storage facilities; and (2)well connection expenditures which are not classified as maintenance expenditures. The following table provides summary information related to our actual and expected capital expenditures, purchases of businesses, and contributions to equity-method investments for 2015. Included are gross increases to our property, plant, and equipment, including changes related to accounts payable and accrued liabilities:



2015 Estimate
ThreeSix Months Ended
MarchJune 310,21

(Millions)

Maintenance
$
490
$
62149

Expansion
3,785
7592,000

Total
$
4,275
$
8212,149
See Company Outlook - Expansion Projects for discussions describing the general nature of these expenditures.
44
Managements Discussion and Analysis (Continued)
Sources (Uses) of Cash



Three mSix Months eEnded
MarchJune 310,
2015
2014

(Millions)

Net cash provided (used) by:

Operating activities
$
6691,483
$
446759

Financing activities
188
929
483
7,356


Investing activities
(7562,002
)
(
9927,936
)

Increase (decrease) in cash and cash equivalents
$
101(36
)

$
383179
Operating activities The factors that determine operating activities are largely the same as those that affect Net income (loss) , with the exception of noncash expenses such as Depreciation and amortization and Provision (benefit) for deferred income taxes . Our Net cash provided (used) by operating activities was also impacted by net favorable changes in operating working capital and the inclusion of contributions in 2015 from consolidating the businesses acquired in the ACMP Acquisition. Financing activities Significant transactions include:


$799$942 million in 2015 and $225 million in 2014 net paid onof net proceeds from Pscmeca ae;

$
430226 million received in 2015 from our credit facility borrowings;in 2014 net paid on WPZs commercial paper;
51
Managements Discussion and Analysis (Continued)



$
421.895 mbillion paid in 2015 on our credit facility borrownet received in 2014 from our debt offerig;

$2.992 billion in 2015 and $
1.4962.74 ilo n21 e eevdfo Psdb feig;

$
750 m1.533 billion paid in 2015 on WPZs debt retirements;

$
1.832 b895 million received in 2015 and $300 million received in 20154 from WPZsour rdtfclt orwns


$
2.472 b915 million paid in 2015 on WPZsour rdtfclt orwns


$
434 million in 2015 and $276 million in 2014 paid for quarterly dividends on common stock1.832 billion received in 2015 from WPZs credit facility borrowings;

$2
28 m.472 billion in 2015 and $147 million in 2014 paid for dividends and distributions to noncontrolling interests. Investing activities Significant transactions include:paid in 2015 on WPZs credit facility borrowings;


Capital expenditures of $832 million in 2015 and $793 million in 2014 $3.378 billion received in 2014 from our equity offering;

Purchases of and contributions to our equity-method investments of $83 million in 2015 and $228 million in 2014.
45
Managements Discussion and Analysis (Continued)
Off-Balance Sheet Financing Arrangements and Guarantees of Debt or Other Commitments We have various other guarantees and commitments which are disclosed in Note 3 Variable Interest Entities , Note 11 Fair Value Measurements and Guarantees , and Note 12 Contingent Liabilities of Notes to Consolidated Financial Statements. We do not believe these guarantees or the possible fulfillment of them will prevent us from meeting our liquidity needs.
46
Item3 Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our current interest rate risk exposure is related primarily to our debt portfolio and has not materially changed during the first three months of 2015 . Foreign Currency Risk Our foreign operations, whose functional currency is the local currency, are located in Canada. Net assets of our foreign operations were approximately $1.2 billion and $1.3 billion at March31, 2015 and December31, 2014 , respectively. These investments have the potential to impact our financial position due to fluctuations in the local currency arising from the process of translating the local functional currency into the U.S. dollar. As an example, a 20 percent change in the functional currency against the U.S. dollar would have changed Total stockholders equity by approximately $148 million at March31, 2015 .
47
Item4 Controls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules13a - 15(e) and 15d - 15(e) of the Securities Exchange Act) (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 Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial 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 first quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting. PART II. OTHER INFORMATION Item1. Legal Proceedings Environmental Certain reportable legal proceedings involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment are described below. While it is not possible for us to predict the final outcome of the proceedings which are still pending, we do not anticipate a material effect on our consolidated financial position if we receive an unfavorable outcome in any one or more of such proceedings.
In November 2013, we became aware of deficiencies with the air permit for the Ft. Beeler gas processing facility located in West Virginia. We notified the EPA and the West Virginia Department of Environmental Protection and are working to bring the Ft. Beeler facility into full compliance. At March31, 2015 , we have accrued liabilities of $300,000 for potential penalties arising out of the deficiencies. On November 7, 2014, the New Mexico Environment Departments Air Quality Bureau (Bureau) issued a Notice of Violation (NOV) to Williams Four Corners LLC (Williams) for the El Cedro Gas Treating Plant alleging a failure by Williams to limit emissions to the allowable emission rates in violation of permit requirements, and for the failure to timely file initial and excess emission reports. The NOV followed an April 2014 inspection at the plant. Williams
48
has provided Corrective Action Verification information to the Bureau and has entered into a Tolling Agreement to allow for additional time - until May 31, 2015 - for the parties to resolve the alleged violations. Other The additional information called for by this item is provided in Note 12 Contingent Liabilities of the Notes to Consolidated Financial Statements included under Part I, Item1. Financial Statements of this report, which information is incorporated by reference into this item.
49
Item6.Exhibits
$876 million in 2015 and $567 million in 2014 paid for quarterly dividends on common stock;


$462 million in 2015 and $296 million in 2014 paid for dividends and distributions to noncontrolling interests;

Exhibit No.
Description

$57 million in 2015 and $122 million in 2014 received in contributions from noncontrolling interests. Investing activities Significant transactions include:

Exhibit3.1
Amended and Restated Certificate of Incorporation (filed on May 26, 2010, as Exhibit 3.1 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 3.2
By-Laws (filed on August 27, 2014, as Exhibit 3.1 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).
Capital expenditures of $1.654 billion in 2015 and $1.839 billion in 2014;

Exhibit 4.1
First Supplemental Indenture, dated as of February2, 2015, among Williams Partners L.P., Williams Partners Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.6 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.2
First Supplemental Indenture, dated as of February2, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.5 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).
$112 million paid to purchase a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility in the Eagle Ford shale;

Exhibit 4.3
Seventh Supplemental Indenture, dated as of February2, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.4 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.4
Eighth Supplemental Indenture, dated as of March 3, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on March 3, 2015 as Exhibit 4.1 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).
Purchases of and contributions to our equity-method investments of $483 million in 2015 and $246 million in 2014;

Exhibit 4.5
Third Supplemental Indenture among Williams Partners L.P., ACMP Finance Corp. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.2 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.6
Fourth Supplemental Indenture dated February 2, 2015, by and among Williams Partners L.P., ACMP Finance Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on February 3, 2015, as Exhibit 4.1 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).
Cash held for ACMP Acquisition of $5.995 billion in 2014. Off-Balance Sheet Financing Arrangements and Guarantees of Debt or Other Commitments We have various other guarantees and commitments which are disclosed in Note 3 Variable Interest Entities , Note 11 Fair Value Measurements and Guarantees , and Note 12 Contingent Liabilities of Notes to Consolidated Financial Statements. We do not believe these guarantees or the possible fulfillment of them will prevent us from meeting our liquidity needs.
52
Item3 Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our current interest rate risk exposure is related primarily to our debt portfolio and has not materially changed during the first six months of 2015 . Foreign Currency Risk Our foreign operations, whose functional currency is the local currency, are located in Canada. Net assets of our foreign operations were approximately $1.3 billion at both June30, 2015 and December31, 2014 . These investments have the potential to impact our financial position due to fluctuations in the local currency arising from the process of translating the local functional currency into the U.S. dollar. As an example, a 20 percent change in the functional currency against the U.S. dollar would have changed Total stockholders equity by approximately $168 million at June30, 2015 .
53
Item4 Controls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules13a - 15(e) and 15d - 15(e) of the Securities Exchange Act) (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 Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial 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 2015 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting. PART II. OTHER INFORMATION Item1. Legal Proceedings Environmental Certain reportable legal proceedings involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment are described below. While it is not possible for us to predict the final outcome of the proceedings which are still pending, we do not anticipate a material effect on our consolidated financial position if we receive an unfavorable outcome in any one or more of such proceedings. In November 2013, we became aware of deficiencies with the air permit for the Ft. Beeler gas processing facility located in West Virginia. We notified the EPA and the West Virginia Department of Environmental Protection and are working to bring the Ft. Beeler facility into full compliance. At June30, 2015 , we have accrued liabilities of $220,000 for potential penalties arising out of the deficiencies. On November 7, 2014, the New Mexico Environment Departments Air Quality Bureau (Bureau) issued a Notice of Violation (NOV) to Williams Four Corners LLC (Williams) for the El Cedro Gas Treating Plant alleging a failure by Williams to limit emissions to the allowable emission rates in violation of permit requirements, and for the failure to timely file initial and excess emission reports. The NOV followed an April 2014 inspection at the plant. Williams
54
has provided Corrective Action Verification information to the Bureau and has entered into a First Amended Tolling Agreement to allow for additional timeuntil November 30, 2015for the parties to resolve the alleged violations. Other The additional information called for by this item is provided in Note 12 Contingent Liabilities of the Notes to Consolidated Financial Statements included under Part I, Item1. Financial Statements of this report, which information is incorporated by reference into this item. Item 1A. Risk Factors Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014, includes certain risk factors that could materially affect our business, financial condition, or future results. Those Risk Factors have not materially changed, except as set forth below: Our receipt of the Unsolicited Proposal and review of strategic alternatives may be disruptive to our business. On June 21, 2015, we publicly announced in a press release that we had received the Unsolicited Proposal and rejected it. The Unsolicited Proposal was contingent upon the termination of our pending Acquisition of WPZ Public Units. Our Board of Directors has authorized a process to explore a range of strategic alternatives, which could include, among other things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan. Exploring strategic alternatives may create a significant distraction for our management team and Board of Directors and require us to expend significant time and resources and incur expenses for advisors. Moreover, the review of strategic alternatives may disrupt our business by causing uncertainty among current and potential employees, suppliers, customers and investors. The selection and execution of a strategic alternative may lead to similar disruptions, and parties advocating for alternatives not selected may solicit support for such other alternatives, causing further disruption. Additionally, certain of our officers are subject to change in control agreements, pursuant to which the officers may be entitled to severance payments and benefits upon a termination of their employment by us without cause or by them for good reason in connection with a change of control of Williams (each as defined in the applicable agreement). The change of control arrangements may not be adequate to allow us to retain critical employees during a time when a change of control is being proposed or is imminent. These disruptions, alone or in combination, could negatively impact our business, financial condition, results of operations and our stock price. The consummation of the Acquisition of WPZ Public Units could be delayed or may fail to occur, and could negatively affect our stock price. Our Board of Directors has authorized a process to explore a range of strategic alternatives, which could include, among other things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan. During the review of strategic alternatives process, we continue to work towards the completion of the Acquisition of WPZ Public Units. The announcement that we received the Unsolicited Proposal may make it more difficult to obtain the approval of our stockholders, which could prevent the consummation of the Acquisition of WPZ Public Units. The consummation of the Acquisition of WPZ Public Units is also subject to the satisfaction or waiver of conditions to closing contained in the merger agreement, including the approval of our stockholders. The satisfaction of such conditions to closing are not always within the parties control and, in some cases, are dependent on the actions of third parties including the SEC. In addition, the merger agreement provides certain termination rights that, in specified circumstances, give either or both of us and WPZ the ability to terminate the merger agreement. The failure to satisfy or waive a closing condition or the occurrence of an event giving rise to a termination right could delay or prevent the consummation of the Acquisition of WPZ Public Units. If the Acquisition of WPZ Public Units is not consummated, the market price of our common stock could decline. If the merger agreement is terminated under certain specified circumstances, we may be required to pay a termination fee of $410 million to WPZ, which would be settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $102.5 million per quarter).
55
The Unsolicited Proposal is contingent upon the termination of the Acquisition of WPZ Public Units. If the Acquisition of WPZ Public Units is consummated, some third parties could be discouraged from considering or proposing an acquisition of us, including the third party that submitted the Unsolicited Proposal, which may cause the market price of our common stock to decline.
56
Item6.Exhibits


Exhibit 4.7
Fifth Supplemental Indenture among Williams Partners L.P., ACMP Finance Corp. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.3 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 10.1
Form of Leveraged Performance Unit Award Agreement dated January 1, 2015 between Williams and Walter Bennett (filed on February 25, 2015 as Exhibit 10.14 to The Williams Companies, Inc.s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.2
Form of 2015 Performance-Based Restricted Stock Unit Agreement among Williams and certain employees and officers (filed on February 25, 2015 as Exhibit 10.15 to The Williams Companies, Inc.s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.3
Form of 2015 Time-Based Restricted Stock Unit Agreement among Williams and certain employees and officers (filed on February 25, 2015 as Exhibit 10.16 to The Williams Companies, Inc.s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference).
50



Exhibit No.
Description


Exhibit
10.4
Form of 2015 Nonqualified Stock Option Agreement
2.1
Agreement and Plan of Merger dated as of May 12, 2015, by and
among The Williams and certain employees and officers (filed on February 25Companies, Inc., SCMS LLC, Williams Partners L.P., and WPZ GP LLC (filed on May 13, 2015 as Exhibit 102.17 to The Williams Companies, Inc.s annualcurrent report on Form 108-K (File No. 01014 n noprtdhri yrfrne.
Exhibit
10.5
Second
3.1
Amended and Restated Credit Agreement dated as of February2, 2015, between The Williams Companies, Inc.s, the lenders named therein, and Citibank, N.A. as Administrative Agertificate of Incorporation as supplemented (filed on February 3May 26, 20140, as Exhibit 103.1 to The Williams Companies, Inc.s current report on Form 8-K (File No. 0-47)adicroae eenb eeec)

Exhibit
10.6
Second Amended and Restated Credit Agreement dated as of February2, 2015, between Williams Partners L.P. (formerly known as Access Midstream Partners, L.P.), Northwest Pipeline LLC, Transcontinental Gas Pipeline Company, LLC, as co-borrowers, the lenders named therein, and Citibank, N.A. as Administrative Agent (filed on February 3
3.2
By-Laws (filed on August 27
, 20154, as Exhibit10 3.1 to The Williams Partners L.PCompanies, Inc.s current report on Form 8-K (File No. 001-3483104174)adicroae eenb eeec)

Exhibit 10.7
Form of Amended and Restated Commercial Paper Dealer Agreement, dated as of February2, 2015, between Williams Partners L.P., as Issuer, and the Dealer party thereto (filed on February3, 2015 as Exhibit 10.3 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 10.8
Credit Agreement dated as of February3, 2015, between Williams Partners L.P., the lenders named therein, and Barclays Bank PLC as Administrative Agent (filed on February3, 2015 as Exhibit 10.2 to Williams Partners L.P.s current report on Form8-K (File No. 001-34831) and incorporated herein by reference).

*Exhibit 12
Computation of Ratio of Earnings to Combined FxdCags

*Exhibit 31.1
Certification of Chief 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.

*Exhibit 31.2
Certification of Chief 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.

**Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*xii11IS XBRL Instance Document.

*Exhibit101.SCH
XBRL Taxonomy Extension Schema.

*Exhibit101.CAL
XBRL Taxonomy Extension Calculation Linkbase.

*Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase.

*Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase.

*Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase.



*Filed herewith. **Furnished herewith.
Management con


Pursuant to Item 601(b)(2) of Regulation S-K, the regis
tracnt or compensatory plagrees to furnish supplementally a copy of any or arrangemenmitted exhibit or schedule to the SEC upon request.
5
17
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.



T HE W ILLIAMS C OMPANIES , I NC .

(Registrant)


/s/ T ED T. T IMMERMANS

Ted T. Timmermans

Vice President, Controller and Chief Accounting Officer (Duly Authorized Officer and Principal Accounting Officer)
AprilJuly30, 2015
EHBTIDX


Exhibit No.
Description


Exhibit 2.1
Agreement and Plan of Merger dated as of May 12, 2015, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P., and WPZ GP LLC (filed on May13, 2015 as Exhibit 2.1 to The Williams Companies, Inc.s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit3.1
Amended and Restated Certificate of Incorporation as supplemented (ie nMy2,21,a xii . oTeWlim opne,Icscretrpr nFr8K(ieN.01014 n noprtdhri yrfrne.
Exhibit 3.2
By-Laws (filed on August 27, 2014, as Exhibit 3.1 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 4.1
First Supplemental Indenture, dated as of February2, 2015, among Williams Partners L.P., Williams Partners Finance Corporation and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.6 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.2
First Supplemental Indenture, dated as of February2, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.5 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.3
Seventh Supplemental Indenture, dated as of February2, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.4 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.4
Eighth Supplemental Indenture, dated as of March 3, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on March 3, 2015 as Exhibit 4.1 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.5
Third Supplemental Indenture among Williams Partners L.P., ACMP Finance Corp. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.2 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.6
Fourth Supplemental Indenture dated February 2, 2015, by and among Williams Partners L.P., ACMP Finance Corp. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on February 3, 2015, as Exhibit 4.1 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 4.7
Fifth Supplemental Indenture among Williams Partners L.P., ACMP Finance Corp. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.3 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 10.1
Form of Leveraged Performance Unit Award Agreement dated January 1, 2015 between Williams and Walter Bennett (filed on February 25, 2015 as Exhibit 10.14 to The Williams Companies, Inc.s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.2
Form of 2015 Performance-Based Restricted Stock Unit Agreement among Williams and certain employees and officers (filed on February 25, 2015 as Exhibit 10.15 to The Williams Companies, Inc.s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference).



Exhibit No.
Description


Exhibit 10.3
Form of 2015 Time-Based Restricted Stock Unit Agreement among Williams and certain employees and officers (filed on February 25, 2015 as Exhibit 10.16 to The Williams Companies, Inc.s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.4
Form of 2015 Nonqualified Stock Option Agreement among Williams and certain employees and officers (filed on February 25, 2015 as Exhibit 10.17 to The Williams Companies, Inc.s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.5
Second Amended and Restated Credit Agreement dated as of February2, 2015, between The Williams Companies, Inc.s, the lenders named therein, and Citibank, N.A. as Administrative Agent (filed on February 3, 2014 as Exhibit 10.1 to The Williams Companies, Inc.s current report on Form 8-K (File 001-04174) and incorporated herein by reference).

Exhibit 10.6
Second Amended and Restated Credit Agreement dated as of February2, 2015, between Williams Partners L.P. (formerly known as Access Midstream Partners, L.P.), Northwest Pipeline LLC, Transcontinental Gas Pipeline Company, LLC, as co-borrowers, the lenders named therein, and Citibank, N.A. as Administrative Agent (filed on February 3, 2015 as Exhibit10.1 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 10.7
Form of Amended and Restated Commercial Paper Dealer Agreement, dated as of February2, 2015, between Williams Partners L.P., as Issuer, and the Dealer party thereto (filed on February3, 2015 as Exhibit 10.3 to Williams Partners L.P.s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference).

Exhibit 10.8
Credit Agreement dated as of February3, 2015, between Williams Partners L.P., the lenders named therein, and Barclays Bank PLC as Administrative Agent (filed on February3, 2015 as Exhibit 10.2 to Williams Partners L.P.s current report on Form8-K (File No. 001-34831) and incorporated herein by reference).

*Exhibit 12
Computation of Ratio of Earnings to Combined FxdCags

*Exhibit 31.1
Certification of Chief 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.

*xii 12 Certification of Chief 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.

**Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Exhibit101.INS
XBRL Instance Document.

*xii11SH XBRL Taxonomy Extension Schema.

*Exhibit101.CAL
XBRL Taxonomy Extension Calculation Linkbase.

*Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase.

*Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase.

*Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase.



Exhibit No.
Description
*Filed herewith. **Furnished herewith.


*Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase.



*Filed herewith. **Furnished herewith. Management contract or compensatory plan or arrangemen
Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon request