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
September30March31, 20156 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 OctoberMay 26, 20156

Common Stock, $1 par value
7
49,764,7350,527,387


The Williams Companies, Inc. Index



Page

Part I. Financial Information

Item1. Financial Statements

Consolidated Statement of Operations Three
and Nine Months Ended SeptemberMarch 301, 20156 and 20145
7

Consolidated Statement of Comprehensive Income (Loss) Three
and Nine Months Ended SeptemberMarch 301, 20156 and 20145
8

Consolidated Balance Sheet
SeptemberMarch 301, 20156 and December 31, 20145
9

Consolidated Statement of Changes in Equity
NinThree Months Ended SeptemberMarch 301, 20156
10

Consolidated Statement of Cash Flows
NinThree Months Ended SeptemberMarch 301, 20156 and 20145
11

Notes to Consolidated Financial Statements
12

Item2. Managements Discussion and Analysis of Financial Condition and Results of Operations
363

Item3. Quantitative and Qualitative Disclosures About Market Risk
6052

Item4. Controls and Procedures
6153

Part II. Other Information
6153

Item1. Legal Proceedings
6153

Item1A. Risk Factors
6254

Item6. Exhibits
564
The reports, filings, and other public announcements of The Williams Companies, Inc. (Williams) may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are forward-looking statements within the meaning of Section27A of the Securities Act of 1933, as amended
(Securities Act), and Section21E of the Securities Exchange Act of 1934, as amended. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.
(Exchange Act). 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.
All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements.
Fradloigsaeet a eietfe yvrosfrso od uha niiae,blee,ses ol,my hud otne,etmts xet,frcss ned,mgt ol,ojcie,tres lne,ptnil rjcs ceue,wl,asms udne ulo,i evc aeo te iia xrsin.Teefradloigsaeet r ae nmngmnsblesadasmtosado nomto urnl vial omngmn n nld,aogohr,saeet eadn:

The status, expected timing and expected outcome of the proposed ETC Merger;


Statements regarding the proposed ETC Merger;


Our beliefs relating to value creation as a result of the proposed ETC Merger;


Benefits and synergies of the proposed ETC Merger;
1


Future opportunities for the combined company;


Other statements regarding Williams and Energy Transfers future beliefs, expectations, plans, intentions, financial condition or performance;
1


Expected levels of cash distributions by Williams Partners L.P. (WPZ) with respect to general partner interests, incentive distribution rights and limited partner interests;


Levels of dividends to Williams stockholders;


Future credit ratings of Williams and WPZ;


Amounts and nature of future capital expenditures;


Expansion and growth of our business and operations;


Financial condition and liquidity;


Business strategy;


Cash flow from operations or results of operations;


Seasonality of certain business components;


Natural gas, natural gas liquids, and olefins prices, supply, 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 proposed ETC Merger, including receipt of the approval of Williams stockholders;


The timing and likelihood of completion of the proposed ETC Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the proposed merger that could reduce anticipated benefits or cause the parties to abandon the proposed transaction;


The possibility that the expected synergies and value creation from the proposed ETC Merger will not be realized or will not be realized within the expected time period;


The risk that the businesses of Williams and Energy Transfer will not be integrated successfully;


Disruption from the proposed ETC Merger making it more difficult to maintain business and operational relationships;


The risk that unexpected costs will be incurred in connection with the proposed ETC Merger;
2


The possibility that the proposed ETC Merger does not close, including due to the failure to satisfy the closing conditions;


Whether WPZ will produce sufficient cash flows to provide the level of cash distributions we expect;
2


Whether Williams is 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 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;


The impact of operational and developmental hazards and unforeseen interruptions;


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


Williams 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 debt agreements, future changes in credit ratings as determined by nationally-recognized credit rating agencies and the availability and cost of capital;


The amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate;


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


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 announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.
3
disclaim any obligations to and do not intend to update the above list or announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.
In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.
Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K filed with the SEC on February256, 20156 n nPr I tm1.Rs atr nti urel eoto om1-.4
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
September30March31, 20156 , 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 L PL vradPs ieieCmayLCUO:UiaEs hoMdtemLC 5
Government and Regulatory: EPA: Environmental Protection Agency FERC: Federal Energy Regulatory Commission SEC: Securities and Exchange Commission Other : Energy Transfer or ETE: Energy Transfer Equity, L.P. ETC: Energy Transfer Corp LP Merger Agreement : Merger Agreement and Plan of Merger of Williams with Energy Transfer and certain of its affiliates ETC Merger: Merger wherein Williams will be merged into ETC CCR: Contingent consideration right B/B Splitter: Butylene/Butane splitter G pitr eieygaepoyeeslte rcinto:Tepoesb hc ie temo aua a iud ssprtdit osiun rdcs uha tae rpn,adbtn AP ..gnrlyacpe conigpicpe D:Icniedsrbto ih Gs aua a iud;ntrlgslqisrsl rmntrlgspoesn n rd i eiigadaeue sptohmclfesok,haigfes n aoieadtvs mn te plctosNLmris:NLrvne esBurpaeetcs,patfe,tasotto,adfatoainPHfclt:Poaedhdoeainfclt
6
PART I FINANCIAL INFORMATION
The Williams Companies, Inc. Consolidated Statement of Operations (Unaudited)



Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

(Millions, except per-share amounts)

Revenues:

Service revenues
$
1,2329 $
1,1
27
$
3,677
$
2,771
97

Product sales
560
942
1,677
2,725
431
519


Total revenues
1,
799
2,069
5,354
5,49
660
1,71
6
Costs and expenses:

Product costs
426
807
1,382
2,300
318
462


Operating and maintenance expenses
403
412
1,227
1,018
391
387


Depreciation and amortization expenses
4
32
369
1,287
79
45
42
7
Selling, general, and administrative expenses
177
171
547
457
221
196


Net insurance recoveries Geismar Incident
(126
)
(161
)

Other (income) expensenet
5
3
62
4
23
1
7
Total costs and expenses
1,
443398
1,
762
4,379
4,458
489

Operating income (loss)
356
307
975
1,038
262
227


Equity earnings (losses)
9
27
66
236
5
51

Gain on remeasurement of equity-method investment
2,522
2,522

Impairment of equity-method investments
(
461
)
(461
112
)

Other investing income (loss) net
18
11
27
43

Interest incurred
(
280306
)
(26273
)
(831
)
(623
)

Interest capitalized
1
75
52
55
110
22

Other income (expense)net
20
10
70
15
16

Income (loss) from continuing operations before income taxes
(
23811
)
2,706
71
3,160
43

Provision (benefit) for income taxes
(65
)
998
48
1,133
2
30


Income (loss) from continuing operations
(173
)
1,708
23
2,027

Income (loss) from discontinued operations
4

Net income (loss)
(173 )
1
,708
23
2,031
3

Less: Net income (loss) attributable to noncontrolling interests
(13352
(57

)
30
(121
)
110

Net income (loss) attributable to The Williams Companies, Inc.
$
(4065
)
$
1,678
$
144
$
1,921
70

Amounts attributable to The Williams Companies, Inc.:

Income (loss) from continuing operations
$
(40
)
$
1,678
$
144
$
1,917

Income (loss) from discontinued operations
4

Net income (loss)
$
(40
)
$
1,678
$
144
$
1,921

Basic earnings (loss) per common share:

Income (loss) from continuing operations
$
(.05
)
$
2.24
$
.19
$
2.70

Income (loss) from discontinued operations

Net income (loss)
$
(.059
)
$
2.24
$
.19
$
2.70
.09

Weighted-average shares (thousands)
7
49,824
747,412
749,059
709,80
50,332
748,07
9
Diluted earnings (loss) per common share:

Income (loss) from continuing operations
$
(.05
)
$
2.22
$
.19
$
2.68

Income (loss) from discontinued operations

Net income (loss)
$
(.059
)
$
2.22
$
.19
$
2.68
.09

Weighted-average shares (thousands)
7
49,82450,332
752,0
64
752,621
714,119
28

Cash dividends declared per common share
$
.6400
$
.5
600
$
1.8100
$
1.3875
8
See accompanying notes.
7
The Williams Companies, Inc. Consolidated Statement of Comprehensive Income (Loss) (Unaudited)



Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

(Millions)

Net income (loss)
$
(173 )
$
1
,708
$
23
$
2,031
3

Other comprehensive income (loss):

Cash flow hedging activities:

Net unrealized gain (loss) from derivative instruments, net of taxes
6
6

Reclassifications into earnings of net derivative instruments (gain) loss, net of taxes
(4
)
(4
Foreign currency translation adjustments, net of taxes of ($15) and $16 in 2016 and 2015, respectively
89
(95

)

Foreign currency translation adjustments, net of taxes of $14 and $24 in 2015 and $13 and $5 in 2014, respectively
(74
)
(51
)
(159
)
(58
)

Pension and other postretirement benefits:

Amortization of prior service cost (credit) included in net periodic benefit cost, net of taxes of $1
and $2 in 2015 and $1 and $3 in 2014, respectivelyin 2015
(1
)
(2
)
(3
1
)

Amortization of actuarial (gain) loss included in net periodic benefit cost, net of taxes of ($53) and ($134) in 20156 and ($4) and ($11) in 20145, respectively
7
65
21
18
7

Other comprehensive income (loss)
(6593
(89

)
(46
)
(138
)
(43
)

Comprehensive income (loss)
(23880
(76

)
1,662
(115
)
1,988

Less: Comprehensive income (loss) attributable to noncontrolling interests
(15781
(92

)
12
(175
)
105

Comprehensive income (loss) attributable to The Williams Companies, Inc.
$
(81 )
$
1
,650
$
60
$
1,883
6
See accompanying notes.
8
The Williams Companies, Inc. Consolidated Balance Sheet (Unaudited)



SeptMarch31,
2016
Dec
ember301, 2015
December31,
2014

(Millions, except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents
$
12564
$
24100
Accounts and notes receivable (net of allowance of $6 at March 31, 2016 and $3 at December 31, 2015):
Trade and other
7
04
972
33
1,034


Income tax receivable
6
167
Deferred income tax asset
s
73
67
42
42


Inventories
1
56
231
42
127


Other current assets and deferred charges
200174
21
37

Total current assets
1,2641
1,
890527

Investments
87,198
8,400
81
7,336


Property, plant, and equipment, at cost
3
8,761
36,435
9,606
39,039


Accumulated depreciation and amortization
(9,
285783
)
(
8,3549,460
)

Property, plant
, and equipment net
29,
476
28,081
823
29,579


Goodwill
1,145
1,120
47
47


Other intangible assets net of accumulated amortization
10,053
10,453
9,881
9,970


Regulatory assets, deferred charges, and other
68314
5619

Total assets
$
50,81948,807
$
50,56349,020

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable
$
72639
$
865744

Accrued liabilities
1,225
900
939
1,078


Commercial paper
1
,530
798
35
499


Long-term debt due within one year
377
4
976
176


Total current liabilities
3,8582,789
2,
56497
Long-term debt
2
1,8053,701
2
03,88812

Deferred income tax
liabilities
4,582248
4,
712218

Other noncurrent liabilities
2,
314445
2,2
2468

Contingent liabilities (Note 132)
Equity:

Stockholders equity:

Common stock (960 million shares authorized at $1 par value;
78
45 million shares issued at SeptemberMarch 301, 20156 and 7824 million shares
issued at December 31, 201
45)
7845
78
24

Capital in excess of par value
14,833
14,925807

Retained deficit
(
6,7648,508
)
(
5,5487,960
)

Accumulated other comprehensive income (loss)
(425378
)
(
341442
)

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

Total stockholders equity
7,387
8,777
5,691
6,148


Noncontrolling interests in consolidated subsidiaries
10,873
11,395
9,933
10,077


Total equity
1
8,260
20,172
5,624
16,225


Total liabilities and equity
$
50,81948,807
$
50,56349,020
See accompanying notes.
9
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, 20145
$
7824
$
14,925807
$
(
5,5487,960
)
$
(
341442
)
$
(1,041
)
$
8,7776,148
$
1
1,3950,077
$
20,17216,225

Net income (loss)
144
144
(121
(65
)
(65
)
52
(13

)
23

Other comprehensive income (loss)
(864
)
(84
)
(54
)
(138
)
64
29
93


Cash dividends common stock
(1,356480
)
(1,356480
)
(1,356480
)

Dividends and distributions to noncontrolling interests
(704236
)
(704236
)

Stock-based compensation and related common stock issuances, net of tax
21
66
68
68
13
14
14


Changes in ownership of consolidated subsidiaries, net
(155
5
(
8 )
(1583
)
252
94

Contributions from noncontrolling interests
85
85
16
16


Other
(48
(3

)
(45
)3
20
16
8

Net increase (decrease) in equity
2
(92
1
26
(548

)
(1,21664
(457

)
(8144 )
(
1,390601
)
(522
)
(1,912
)

Balance
September30March31, 20156
$
7845
$
14,833
$
(
6,764
8,508
) $
(425378
)
$
(1,041
)
$
7,3875,691
$
10,879,933 $
1
8,2605,624
See accompanying notes.
10
The Williams Companies, Inc. Consolidated Statement of Cash Flows (Unaudited)



NinThree Months Ended
SeptemberMarch 301,
2016
2015
2014

(ilos

OPERATING ACTIVITIES:

Net income (loss)
$
23(13
)

$
2,0313

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

Depreciation and amortization
1,287
79
445
42
7
Provision (benefit) for deferred income taxes
41
1,042
2
28


Impairment of equity-method investments
461112

Amortization of stock-based awards
65
36
21
23


Gain on remeasurement of equity-method investment
(2,522
)

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

Accounts and notes receivable
374
(106
)
298
300


Inventories
76
(89
(16
)
32

Other current assets and deferred charges
(6
)
(49
)
16
9


Accounts payable
(
13723
)
(75

)
60

Accrued liabilities
(1645
)
(1206 )

Other, including changes in noncurrent assets and liabilities
(82
)
30
18

Net cash provided (used) by operating activities
2,086
1,104
779
669


FINANCING ACTIVITIES:

Proceeds from (payments of) commercial paper net
727
39
(365
)
(799
)


Proceeds from long-term debt
2,6,885
6,1345,255

Payments of long-term debt
(
5,5631,991
)
(83,648
)

Proceeds from issuance of common stock
27
3,414
6
10


Proceeds from sale of limited partner units of consolidated partnership
55

Dividends paid
(1,356480
)
(986434
)

Dividends and distributions paid to noncontrolling interests
(704236
)
(509228
)

Contributions from noncontrolling interests
8516
26
0

Payments for debt issuance costs
(338
)
(4027
)

Special distribution from Gulfstream
396

Othernet
42
24
1
33


Net cash provided (used) by financing activities
506
7,527
(369
)
188


INVESTING ACTIVITIES:

Property, plant, and equipment:

Capital expenditures (1)
(
2,425513
)
(
2,943832
)

Net proceeds from dispositions
3
35
24

Purchases of businesses, net of cash acquired
(112
)
(5,958
)

Purchases of and contributions to equity-method investments
(52963
)
(
8345
)

Distributions from unconsolidated affiliates in excess of cumulative earnings
251
165
109
93


Othernet
10597
366
Net cash provided (used) by investing activities
(2,707(346
)
(9,010756
)

Increase (decrease) in cash and cash equivalents
(115
)
(379
)
64
101


Cash and cash equivalents at beginning of year
100
240
681

Cash and cash equivalents at end of period
$
12564
$
30241

_________

(1)Increases to property, plant, and equipment
$
(
2,311525
)
$
(2,902738
)

Changes in related accounts payable and accrued liabilities
(1112
(9
4 )
(41
)

Capital expenditures
$
(
2,425513
)
$
(
2,943832
)
See accompanying notes.
11
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, 201
45, in Exhibit 99.1 of our Form 8-K dated May 6, 2015our Annual Report on Form 10-K. The accompanying unaudited financial statements include all normal recurring adjustments and others that, in the opinion of management, are necessary to present fairly our interim financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in 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 Williams, we, our, us, or like terms refer to The Williams Companies, Inc. and its subsidiaries. Unless the context clearly indicates otherwise, references to Williams, 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. Energy Transfer Merger Agreement On September 28, 2015, we entered into an Agreement and Plan of Merger (Merger Agreement) with Energy Transfer Equity, L.P. (Energy Transfer) and certain of its affiliates. The Merger Agreement provides that, subject to the satisfaction of customary closing conditions, we will be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger), with ETC surviving the ETC Merger. Energy Transfer formed ETC as a limited partnership that will be treated as a corporation for U.S. federal income tax purposes. Upon completion of the ETC Merger, ETC will be publicly traded on the New York Stock Exchange under the symbol ETC. At the effective time of the ETC Merger, each issued and outstanding share of our common stock (except for certain shares, such as those held by us or our subsidiaries and any held by ETC and its affiliates) will be canceled and automatically converted into the right to receive, at the election of each holder and subject to proration as set forth in the Merger Agreement (collectively Merger Consideration):

1.8716 common shares representing limited partnership interests in ETC (ETC common shares) (Stock Consideration); or


$43.50 in cash (Cash Consideration); or


$8.00 in cash and 1.5274 ETC common shares (Mixed Consideration). Elections to receive the Stock Consideration or the Cash Consideration will be subject to proration to ensure that the aggregate number of ETC common shares and the aggregate amount of cash paid in the ETC Merger will be the same as if all electing shares of our common stock received the Mixed Consideration. In addition, our stockholders will receive a special one-time dividend of $0.10 per share of Williams common stock, to be paid to holder of record immediately prior to the closing of the ETC Merger and contingent upon consummation of the ETC Merger. In connection with the ETC Merger, Energy Transfer will subscribe for a number of ETC common shares at the transaction price, in exchange for the amount of cash needed by ETC to fund the cash portion of the
mMerger cConsideration (the Parent Cash Deposit), and, as a result, based on the number of shares of Williams common stock outstanding as
12
Notes (Continued)
(the Parent Cash Deposit), and, as a result, based on the number of shares of Williams common stock outstanding as of the date thereof, will own approximately 19 percent of the outstanding ETC common shares immediately after the effective time of the ETC Merger (which percentage will become approximately 17 percent after giving effect to the anticipated grant of awards under the Energy Transfer Corp LP 2016 Long-Term Incentive Plan following the ETC Merger). Immediately following the completion of the ETC Merger and of the LE GP, LLC (the general partner for Energy Transfer) merger with and into Energy Transfer Equity GP, LLC, ETC will contribute to Energy Transfer all of the assets and liabilities of Williams in exchange for the issuance by Energy Transfer to ETC of a number of Energy Transfer Class E common units equal to the number of ETC common shares issued to our stockholders in the ETC Merger plus the number of ETC common shares issued to Energy Transfer in consideration for the Parent Cash Deposit (such contribution, together with the ETC Merger and the other transactions contemplated by the Merger Agreement, the Merger Transactions). To address potential uncertainty as to how the newly listed ETC common shares, as a new security, will trade relative to Energy Transfer common units, each ETC common share issued in the ETC Merger, as well as the ETC common shares issued to Energy Transfer in connection with the Parent Cash Deposit, will have attached to it one contingent consideration right (CCR). The terms of the CCRs are fully described in the form of CCR Agreement attached to the Merger Agreement as Exhibit H to Exhibit 2.1 of our Current Report on Form 8-K dated September 29, 2015. The receipt of the mMerger cConsideration is expected to be tax-free to our stockholders, except with respect to any cash consideration received. Completion of the Merger Transactions is subject to the satisfaction or waiver of a number of customary closing conditions as set forth in the Merger Agreement, including approval of the ETC Merger by our stockholders, receipt of required regulatory approvals in connection with the Merger Transactions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and effectiveness of a registration statement on Form S-4 registering the ETC common shares (and attached CCRs) to be issued in connection with the Merger Transactions. TermETC filed its inaition of WPZ Merger Agreal Form S-4 registration statement Oon May 12, 2015, we entered into an agreement for a unit-for-stock transaction whereby we would have acquired all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (WPZ Merger Agreement). On September 28November 24, 2015, and Amendments No. 1, 2, 3, and 4 to Form S-4 on January 12, 2016, March 7, 2016, March 23, 2016, and April 18, 2016, respectively. Amendments No. 5 and 6 were both filed on May 4, 2016. We and Energy Transfer have agreed with the United States Federal Trade Commission not to consummate the ETC Merger before May 31, 2016. On April 6, 20156, prior to our entry into the Merger Agreement, we entered into a Termination Agreementwe announced that we have commenced litigation against Energy Transfer and RKelease (Termination Agreement), terminating the WPZ Merger Agreement. Wcy L. Warren, Energy Transfers largest unitholder, in response to the private offering by Energy Transfer of Series A Convertible aPre required to pay a $428 million termination fee to WPZ, of which we currently own approximately 60 percent , including the interests of the general partner and incentive distribution rights (IDRs). Such termination fee will settle through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $209 million per quarter). The next distribution from WPZ in November 2015 will be reduced by $209 million related to this termination fee. ACMP Merger On Februarferred Units that Energy Transfer disclosed on March 9, 2016. The litigation against Energy Transfer seeks to unwind the private offering of the Series A Convertible Preferred Units. On April 14, 2016, the Delaware Chancery Court granted our request to expedite the litigation, and on April 22, 2016, the court agreed to schedule a hearing during the week of June 13, 2016 regarding our request to unwind the private offering. The litigation against Mr. Warren is for tortious, or wrongful, interference with the Merger Agreement as a result of the private offering of the Series A Convertible Preferred Units. On May 23, 20156, we completed the merger of our consolidated master limited partnerships, Williams Partners L.P. (Pre-merger WPZ) and Access Midstream Partners, L.P. (ACMP) (ACMP Merger). The merged partnership is named Williams Partners L.P. UEnergy Transfer and LE GP, LLC filed an answer and counterclaim. The counterclaim asserts that we materially breached our obligations under the terms of the mMerger aAgreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the ACMP Merger. In conjunction with the ACMP 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 ACMP Merger, the Class D limited partner units of Pre-merger WPZ, all of which were held by us, were conv by (i) blocking Energy Transfers attempts to complete a public offering of the Convertible Units, including, among other things, by declining to allow our independent registered public accounting firm to provide the auditor consent required to be included in the registration statement for a public offering, and (ii) bringing the action against Mr.Warren in the District Court of Dallas County, Texas. We believe that Energy Transfer and LE GP, LLCs counterclaim is without merit. On May 1, 2016, Williams and Energy Transfer enterted into WPZ common units on a one -for-one basisAmendment No. 1 to the Merger Agreement (Amendment), pursuant to which the teforms of the WPZ partnership agreement. Following the ACMP Merger, we own approximately 60 percent of the merged partnership, including the general partner interest and IDRs. In this report, we refer to the post-merger partnership as WPZ and the pre-merger entities as Pre-merger WPZ and ACMP.election (Form of Election), through which our stockholders will elect their preferred form of Merger Consideration, will be mailed to our stockholders on the same date as the proxy statement related to our stockholder meeting to consider and vote upon the ETC Merger. In addition, the Amendment changes
13
Notes (Continued)
Description of Business Our operations are located principally in the United Statesthe deadline for receipt of the Form of Election by the exchange agent from 30 days prior to the closing of the ETC Merger to the earlier of (i) 20 business days after the mailing of the Form of Election to our stockholders and (ii) three business days prior to the anticipated closing date of the ETC Merger. Termination of WPZ Merger Agreement 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 Acquisitions ), the former Access Midstream segment is reported within Williams Partners. For periodgreement for a unit-for-stock transaction whereby we would have acquired all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (WPZ Merger Agreement). On September 28, 2015, prior to our entry into the Merger Agreement, we entered into a Termination Agreement and Release (Termination Agreement), terminating the WPZ Merger Agreement. Under the terms of the Termination Agreement, we are required to pay a $428 million termination fee to WPZ, of which we currently own approximately 60 percent , including the interests of the general partner and incentive distribution rights (IDRs). Such termination fee will settle through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $209 million per quarter). The distributions from WPZ in November 2015 and February 2016 were each reduced by $209 million related to this termination fee. The next distribution from WPZ in May 2016 will be reduced by the final $10 million related to this termination fee. ACMP Merger On February 2, 2015, Williams Partners L.P. merged with and into Access Midstream Partners, L.P. (ACMP Merger). For the purpose of these financial statements and notes, Williams Partners L.P. (WPZ) refers to the renamed merged partnership, while Pre-merger Access Midstream Partners, L.P. (ACMP) and Pre-merger Williams Partners L.P. (Pre-merger WPZ) refer to the separate partnerships prior to the ACMP Acquisiconsummation, of the results associated with our former equity-method investment in Access Midstream are reported withiACMP Merger and subsequent name change. The net assets of Pre-merger WPZ and ACMP were combined at our historical basis. Our basis in ACMP reflected our business combination accounting resulting from acquiring control of ACMP on July 1, 2014 (ACMP Acquisition). Description of Business We are a Delaware corporation whose common stock is listed and traded on Other. Prior periods segment disclosures have been recast New York Stock Exchange. 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. Williams Partners Williams Partners consists of our consolidated master limited partnership, 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. (Gulfstream), and a 41 percent interest in Constitution Pipeline Company, LLC (Constitution) (a consolidated entity), which is under development. WPZs midstream businesses primarily consist of (1)natural gas gathering, treating, compression, and processing; (2)natural gas liquid (NGL) fractionation, storage, and transportation; (3)oilcrude oil production handling and 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 areasBarnett, Eagle Ford, Haynesville, Marcellus, Niobrara, and Utica shale plays as well as the Mid-Continent region. The midstream businesses include equity-method investments in natural gas gathering and processing assets and NGL fractionation and transportation assets, including a 62 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 (Appalachia Midstream Investments). 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 September30, 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.
14
Notes (Continued)
The pMid-Continent revgiously described ACMP Merger and other equity issuances by WPZ had the combined net impact of increasing Noncontrolling interests in consolidated subsidiaries by $252 million and decreasing Capital in excess of par value by $158 million and Deferred income taxes by $94 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 10 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. Discon, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC (Laurel Mountain), a 58 percent equity-method investment in Caiman Energy II, LLC (Caiman II), a 60 percent equity-method investment in Discovery Producer Services LLC (Discovery), a 50 percent equity-method investment in Overland Pass Pipeline, LLC (OPPL), and Appalachia Midstream Services, LLC, which owns equity-method investments with an approximate average 45 percent inued 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 September 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-16 Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (ASU 2015-16). ASU 2015-16 requires an entity to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined; record, in the same terest in multiple gathering systems in the Marcellus Shale (Appalachia Midstream Investments). The midstream businesses also include our Canadian midstream operations, which are comprised of an oil sands offgas processing plant near Fort McMurray, Alberta, and an NGL/olefin fractionation facility at Redwater, Alberta. Williams NGL& Petchem Services Williams NGL & Petchem Services includes certain domestic olefins pipeline assets, a liquids extraction plant near Fort McMurray, Alberta, that began operatiodns financial statements, the effect on earnings of changes in depreciation, amortization, o March 2016, and a propane dehydrogenation facility under development in Canada. Other oOther income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date; and present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by linludes other business activities that are not operating segments, as well as corporate operations. Basis of Presentation Consolidated master limited partnership As of March31, 2016 , we own approximately 60 percent of the interests in WPZ, a variable interest entity (VIE) (see Note 2 Variable Interest Entities ), including the intem that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The new standard is effective for interimrests of the general partner, which are wholly owned by us, and IDRs. 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 Bannual periods beginning after December 15, 2015, with early adoption permitted for financial statements that have not been issued. We do not expect the new standard will have a significant impact on our consolidated financial statements. In August 2015, the FASB issued ASU 2015-15 Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (ASU 2015-15). In ASU 2015-15 the FASB stated that the guidance in ASU 2015-03 did not address thking Arrangements .) Cash distributions from WPZ to us, including any associated with our IDRs, occur through the normal partnership distributions from WPZ to all partners. Significant risks and uncertainties We have previously announced that our business plan for 2016 includes the expectation of proceeds from planned asset monetizations. We have identified our Canadian operations, which have a net book value of Property, plant, and equipment of approximately $1.7 billion as of March 31, 2016, as one possible source for such proceeds and have prescentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements, and entitiely engaged in marketing efforts to identify potentially interested parties and indications of value. As a re permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. The new standard is effective for financial statements issued for interim and annual reporting periods beginning after December 15sult of these developments and the influence of the current low-price commodity environment on market values, we performed an impairment evaluation of these assets as of March 31, 20156, and requires retrospective presentation, concurrent with ASU 2015-03. We do not expect the new standard will have a material impact on our consolidated financial statements. In July 2015, the FASB issued ASU 2015-11 Simplifying the Measurement of Inventory (ASU 2015-11). ASU 2015-11 simplifies the guidancewhich considered probability-weighted scenarios of undiscounted future net cash flows pursuant to the guidance of Accounting Standards Codification (ASC) Topic 360. These included scenarios involving the continued ownership and operation onf 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 at 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 on our consolidated financial statements and our timing for adoption. In May 2015, the FASB issued ASU 2015-07 Fair Value Measurement (Topic 820) Disclosures for Investments in Certain Entities That Calculatassets, as well as selling all of or a partial interest in the assets at assumed transaction prices below our carrying value. As a result of this evaluation, we determined that no impairment was required as of March 31, 2016. As the marketing process continues and our cash flow and probability assumptions are updated, it is reasonably possible that a portion of the Property, plant, and equipment net of our Canadian operations may be Ndet Asset Value per Share (or Its Equivalent) (ASU 2015-07). ASU 2015-07 ermined to be unremcoves 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 standard is effective for financial statements issued for interim and annual reporting periods beginning after December 15, 2015, and requires retrospective presentation. Early adoption is permitted. We are evaluating the impact of the new standard on our crable and thus result in a significant impairment as early as the second quarter of 2016. The primary factors that may affect this determination are the structure and likelihood of a sale and the level of proceeds estimated to be received. Discontinued operations Unless indicated otherwise, the information in the Notes to Consolidated fFinancial sStatements and our timing for adoption. In April 2015, the FASB issued ASU 2015-03 Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). ASU 2015-03 simplifies the presentation of debt issuance costs by requiringrelates to our continuing operations.
15
Notes (Continued)
such costs be presented as a deduction from the corresponding debt liability. The standard is effective for financial statements issuedAccounting standards issued but not yet adopted In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09 Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The objective of ASU 2016-09 is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard is effective for interim and annual reporting periods beginning after December 15, 2015, and requires retrospective presentation. Adoption of this standard would result in the presentation of $125 million and $108 million of debt issuance costs as of September 30, 2015 and6. Early adoption is permitted; all of the amendments included in the new standard must be adopted in the same period. The new standard requires varying transition methods for the different categories of amendments. We are evaluating the impact of the new standard on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) (ASU 2016-02). ASU 2016-02 establishes a comprehensive new lease accounting model.The new standard clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset. The new standard is effective for interim and annual periods beginning after December 315, 2014, respectively, as a direct reduction from debt in our consolidated balance sheet. The standard will have no impact on our consolidated statements of income and cash flows. In February 2015, the FASB issued ASU 2015-02 Amendments to the Consolidation Analysi8. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. We are evaluating the impact of the new standard on our consolidated financial statements. In November 2015, the FASB issued ASU 2015-17 Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU 2015-0217). ASU 2015-02 alters the models used to determine consolidation conclusions for certain entities, including limited partnerships, and may require additional disclosures17 requires that deferred income tax liabilities and assets be presented as noncurrent in a classified statement of financial position. The new standard is effective for financial statements issued for interim and annual reporting periods beginning after December 15, 20156, with either retprospective or modified retrospective presentation allowed. We are evaluating the impact of the new standardEarly adoption is permitted. Adoption of this standard will result in a change to the presentation of deferred taxes in our Consolidated Balance Sheet as the current deferred tax balance will be reclassified to a noncurrent deferred tax balance. The standard will have no impact on our cConsolidated financial statementStatement of Operations and Consolidated Statement of Cash Flows. In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards CodificationSC 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.In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14). Per ASU 2015-14, the standard is effective for interim and annual reporting periods beginning after December 15, 2017.ASC 606 allows either full retrospective or modified retrospective transition and early adoption is 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. Note 2 Acquisitions
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 to the preliminary allocation disclosed in Exhibit 99.1 of our Form 8-K dated May 6, 2015, which were recorded in the first quarter of 2015, reflect an increase of $150 million in Property, plant, and equipment and $25 million in Goodwill , and a decrease of $168 million in Other intangible assets and $7 million in Investments . These adjustments during the measurement period were not considered significant to require retrospective revisions of our financial statements.



(Millions)

Accounts receivable
$
168

Other current assets
63

Investments
5,865

Property, plant, and equipment
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
)
Variable Interest Entities On January 1, 2016, we adopted ASU 2015-02 Amendments to the Consolidation Analysis," which eliminated certain presumptions related to a general partner interest in a master limited partnership. As a result of adopting this new accounting standard, we now consider our consolidated master limited partnership a VIE. We are the primary beneficiary of WPZ because we have the power to direct the activities that most significantly impact WPZs economic performance.
1
Notes (Continued)
Eagle 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 includes $80 million of Property, plant, and equipment, at cost and $32 million of Other intangible assets net of accumulated amortization in the Consolidated Balance Sheet . Changes to the preliminary allocation disclosed in the second quarter of 2015 reflect an increase of $20 million in Property, plant, and equipment, at cost , and a decrease of $20 million in Other intangible assets net of accumulated amortization .
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 September30, 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 gas 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 half of 2016. The current estimate of the total remaining construction cost for the expansion project is approximately $145 million , which is expected 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 manager for Constitution, is building a pipeline connecting its 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 fourth quarter of 2016 and estimates the total remaining construction cost of the project to be approximately $598 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. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Cardinals economic performance. Future expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis.
17
Notes (Continued)
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. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Jackalopes economic performance. Future expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis. The following table presents amounts included in our Consolidated Balance Sheet that are for the use or obligation of our consolidated VIE
The following table presents amounts included in our Consolidated Balance Sheet that are for the use or obligation of WPZ and/or its subsidiaries, and which comprise a significant portion of our consolidated assets and liabilities



September30March31,
201
56
December 31, 201
45
Classification

(Millions)

Assets (liabilities):

Cash and cash equivalents
$
8103
$
1173 Cash and cash equivalents

Accounts
receivable
53
52
and notes receivable - net
726
1,026

Accounts and notes receivable net, Trade and other

Inventories
141
127
Inventories

Other current assets
2
3
159
190

Other current assets and deferred charges

Investments
7,181
7,336
Investments

Property, plant and equipment net
2
,937
2,794
8,816
28,593

Property, plant and equipment net

Goodwill
1047
10347
Goodwill

Other intangible assets net
1,448
1,493
9,880
9,969

Other intangible assets net of accumulated amortization

ORegulatory assets, deferred charges, and other noncurrent assets
1497
479

Regulatory assets, deferred charges, and other

Accounts payable
(39648
)
(48625
)
Accounts payable

Accrued liabilities including current asset retirement obligations
(693
)
(757
)
Accrued liabilities
(11
Commercial paper
(135
)
(499
)
Commercial paper

Long-term debt due within one year
(976

)
(3176 )
Accrued liabilitiesLong-term debt due within one year

Current deferred revenue
(62
Long-term debt
(18,504

)
(4519,001
)
Accrued liabilitiesLong-term debt

Noncurrent dDeferred income taxes
(13
liabilities
(126
)
(119

)
Deferred income tax liabilitie

ANoncurrent asset retirement obligations
(
92876
)
(94857
)
Other noncurrent liabilities

Noncurrent deferred revenue associated with customer advance payments
(342
Regulatory liabilities, deferred income and other noncurrent liabilities
(1,220

)
(3951,066
)
Other noncurrent liabilities
Note 4 Investing Activities Investing Income
During the third quarter of 2015, we recognized other-than-temporary pre-tax impairment charges of $458 million and $3 million related to WPZs equity-method inve
The assets and liabilities presented in the table above also include the consolidated interests of the following individual VIEs within WPZ: 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 customents in the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, respectively (see Note 12 Fair Value Measurements and Guarantees .) We also recognized a loss of $16 million within Equity earnings (losses) in the Consolidated Statement of Operations associated with our share of underlying property impairments at certain of the Appalachia Midstream Investments. These items are reported within the Williams Pr 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 gas 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 third quartners segment. Gain on remeasurement of equity-method investment Gain on remeasurement of equity-method investment of $2.522 billion for the three and nine months ended September30, 2014 , is a result of remeasuring our equity-method investment in ACMP to a preliminary acquisition-date fair value of $4.6 billion when we obtained control and consolidated ACMP following the ACMP Acquisition. of 2016. The current estimate of the total remaining construction cost for the expansion project is approximately $108 million , which is expected 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
1
87
Notes (Continued)
Equity earnings (losses) Equity earnings (losses) for the three and ndirect the activities that most significantly impact Constitutions economic performance. WPZ, as construction manager for Constitution, is responsible for constructing the proposed pipeline mconths ended September30, 2014 , include $19 million of equity losses associated with our share of certain compensation-related costs at ACMP that were triggered by the ACMP Acquisition. Equity earnings (losses) for the nine months ended September30, 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 dissolvednecting its gathering system in Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and the Tennessee Gas Pipeline systems. The project in-service date is targeted as early as the second half of 2018 (see Note 14 Subsequent Event ) and the total remaining cost of the project is estimated to be approximately $616 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. WPZ ins the fourth quarter of 2014. Interest income and other The three and nine months ended September30, 2015 , include $18 million and $27 million , respectively, and the three and nine months ended September30, 2014 , include $14 million and $41 million , respectively, ofprimary beneficiary because it has the power to direct the activities that most significantly impact Cardinals economic performance. Future expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis. Jackalope WPZ owns a 50 percent interest incom Jackalope Gassociated with a receivable related to the sale of certain former Venezuela assets reflected in Other investing income (loss) net 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. WPZ ins the Consolidated Statement of Operations . 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 fprimary beneficiary because it has the power to direct the activities that most significantly impact Jackalopes economic performance. Future expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis. Note 3 Investing Activities Investing Income
F
irst -quarter 2015. Subsequently, we received payments greater than the remaining carrying amount of the receivable, which resulted in the recognition of interest income. Investments Accrued liabilities in the Consolidated Balance Sheet reflects a special distribution WPZ received on September24, 2015, of $396 million from Gulfstream related to WPZs proportional share of proceeds from new debt issued by Gulfstream. The new debt was issued to refinance Gulfstreams current debt maturities and WPZ will contribut6 other-than-temporary impairment charges include $59 million and $50 million related to WPZs equity-method investments in the Delaware basin gas gathering system and Laurel Mountain, respectively (see Note 11 Fair Value Measurements and Guarantees ). Interest income and other The three months ended March31, 2016 , includes $18 million of income associated with a payment received on a receivable related to the sale of certain former Venezuela assets reflected in Other investing income (loss) net in the Consolidated Statement of Operations . Although the carrying amount of the receivable its proportional share of amounts necessary to fund those current debt maturities when due. Note 5 Other Income and Expenses The following table presents certain gains or losses reflected in Other (income) expensenet within Costs and expenses in our Consolidated Statement of Operations :zero , there are two remaining payments due to us (see Note 11 Fair Value Measurements and Guarantees ). Summarized Results of Operations for Certain Equity-Method Investments The table below presents aggregated selected income statement data for our investments in Discovery, Gulfstream, OPPL, Appalachia Midstream Investments, and UEOM, which are considered significant.



Three Months Ended

September 30,
Nine Months Ended
September 30
March 31,
2016
2015

(Millions)

Gross revenue
$
300
$
246

Operating income
177
113

Net income
157
96
18
Notes (Continued)
Note 4 Other Income and Expenses The following table presents certain gains or losses reflected in Other (income) expensenet within Costs and expenses in our Consolidated Statement of Operations :



Three Months Ended
March 31,

20146
2015
2014

(Millions)

Williams Partners

Amortization of regulatory assets associated with asset retirement obligations
$
8
$
8
$
25
$
25

Impairment of certain aNet foreign currency exchange (gains) lossets (See Note 12)
2
29
17
1)
11
(5
)

Williams NGL&Petchem Services


Net gain related to partial acreage dedication releasGain on sale of unused pipe
(1
20
)
(12
) Geismar Incident On June13, 2013, an explosion and fire occurred at Williams Partners Geismar olefins plant. The incident rendered the facility temporarily inoperable (Geismar Incident). We received $126 million and $175 million of insurance recoveries related to the Geismar Incident during the nine months ended September30, 2015 and 2014 , respectively. The nine months ended September30, 2014 , also includes $14 million 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 Operations .
19
Notes (Continued)
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 . ACMP Acquisition & Merger Certain ACMP Acquisition and ACMP Merger costs included in Selling, general, and administrative expenses , Operating and maintenance expenses, and Interest incurred are as follows:


Selling, general, and administrative expenses includes $26 million for the nine months ended September30, 2015 , and $17 million and $19 million for the three and nine months ended September30, 2014 , respectively, primarily related to professional advisory fees associated with the ACMP Acquisition and ACMP Merger, reported within the Williams Partners segment.


Selling, general, and administrative expenses for the three and nine months ended September30, 2015 , also includes $1 million and $9 million , respectively, of related employee transition costs reported within the Williams Partners segment, in addition to $7 million and $20 million , respectively, of general corporate expenses associated with integration and re-alignment of resources. Selling, general, and administrative expenses for the three and nine months ended September30, 2014 , also includes $4 million of related employee transition costs reported within the Williams Partners segment, in addition to $3 million of general corporate expenses associated with integration and re-alignment of resources.

(1)
Primarily relates to losses incurred on foreign currency transactions and the remeasurement of U.S. dollar denominated current assets and liabilities within our Canadian operations. ACMP Merger and Transition


Selling, general, and administrative expenses for the three months ended March31, 2016 , and March31, 2015 , includes $5 million and $29 million , respectively, primarily related to professional advisory fees and employee transition costs associated with the ACMP Merger and transition. These costs are primarily reflected within the Williams Partners segment. Selling, general, and administrative expenses for the three months ended March31, 2015 , also includes $6 million of general corporate expenses associated with integration and re-alignment of resources.


Operating and maintenance expenses includes $4 million for the three months ended March31, 2015 , of transition costs reported from the ACMP Merger within the Williams Partners segment.


Interest incurred includes transaction-related financing costs of $2 million for the three months ended March31, 2015 , from the ACMP Merger. Additional Items


Service revenues have been reduced by $15 million for the three months ended March31, 2016 , related to potential refunds associated with a ruling received in certain rate case litigation within the Williams Partners segment.


Selling, general, and administrative expenses for the three months ended March31, 2016 , includes $6 million of costs associated with our evaluation of strategic alternatives within the Other segment.


Operating and maintenance expenses includes $10 million Selling, general, and administrative expenses for the ninthree months ended September30March31, 20156 , andincludes $34 million for the three and nine months ended September30, 2014 , of transition costs reported within the Williams Partners segof project development costs related to a proposed propane dehydrogenation facility in Alberta within the Williams NGL& Petchem Services segment. Beginning in the first quarter of 2016, these costs did not qualify for capitalization based on our strategy to limit further investment and either sell the project or obtain a partner to fund additional developmn.

Interest incurred includes $2 million for the nine months ended September30, 2015 , and $9 million for the nine months ended September30, 2014 , of transaction-related financing costs. Additional Items Selling, general, and administrative expenses includes $18 million and $25 million for the three and nine months ended September30, 2015 , respectively, of costs associated with our evaluation of strategic alternatives. The nine months ended September30, 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 Operations . The three and ninSelling, general, and administrative expenses and Operating and maintenance expenses for the three months ended September30March31, 20156 , include $216 million and $57 million , respectively, and the three and nine months ended September30, 2014 , include $10 million and $20 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 nine months ended September30, 2015 , resulting from the early retirement of certain debin severance and other related costs associated with an approximate 10 percent reduction in workforce primarily within the Williams Partners segment.
2019
Notes (Continued)
Note 6 Provision (Benefit) for Income Taxes The Provision (benefit) for income taxes includes:


Other income (expense)net below Operating income (loss) includes $21 million and $19 million for allowance for equity funds used during construction for the three months ended March31, 2016 , and March31, 2015 , respectively, primarily within the Williams Partners segment. Note 5 Provision (Benefit) for Income Taxes The Provision (benefit) for income taxes includes:



Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

(Millions)

Current:

Federal
$
$
(15
)
$
$
98

State
(2
)
1
2

Foreign
2
2
6
7

2
(15
)
7
107

Deferred:

Federal
(605
)
911
38
910
25

State
(6
)
98
(4
)
10
7
3
Foreign
(1
)
4
7
13

(67
)
1,013
41
1,026
2
28



Total p
Provision (benefit) for income taxes
$
(65
)
2
$
998
$
48
$
1,13
30
The effective income tax rate for the total
benefitprovision for the three months ended September30March31, 20156 , is less thanunfavorable relative to the federal statutory rate primarily due to the effect of state income taxes and the impact of nontaxable noncontrolling interests, partially offset by the effect of state income taxes and taxes on foreign operations. The effective income tax rate for the total provision for the ninthree months ended September30March31, 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 and taxes on foreign operations, partially offset by the impact of nontaxable noncontrolling interests and the effect of state income taxes. The effective income tax rate for the total provision for the three months ended September30, 2014 , is greater than the federal statutory rate primarily due to the effect of state income taxes, partially offset by taxes on foreign operations and the impact of nontaxable noncontrolling interests. The effective income tax rate for the total provision for the nine months ended September30, 2014 , is greater than the federal statutory rate primarily due to the effect of state income taxes and taxes on foreign operations, partially offset by a tax benefit related to the contribution of certain Canadian operations to WPZ in the first quarter of 2014 and the impact of nontaxable noncontrolling interests. The federal and state income tax provisions for the three and nine months ended September30, 2014 include the tax effect of a $2.5 billion gain associated with remeasuring our equity-method investment to fair value as a result of the ACMP Acquisition. (See Note 4 Investing Activities .)he effect of state income taxes, partially offset by the impact of nontaxable noncontrolling interests. 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.
2
10
Notes (Continued)
Note 76 Earnings (Loss) Per Common Share from Continuing Operations



Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

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

INet income (loss) from continuing operations trbtbet h ilasCmais n.aalbet omnsokodr o ai n iue anns(os e omnsae $
(4065
)
$
1,678
$
144
$
1,91
70

Basic weighted-average shares
7
49,824
747,412
749,059
709,80
50,332
748,07
9
Effect of dilutive securities:

Nonvested restricted stock units
2,
424
1,900
2,205
217

Stock options
2,210
1,662
2,087
1,715

Convertible debentures
18
18
7

Diluted weighted-average shares
(1)
749,824
752,064
752,621
714,119

750,332
752,028


EarningsNet income (loss) per common share from continuing operations:
Basic
$
(.059
)
$
2.24
$
.19
$
2.70
.09

Diluted
$
(.059
)
$
2.22
$
.19
$
2.68
.09
Note 7 Employee Benefit Plans Net periodic benefit cost (credit) is as follows:





(1)
For the three months ended September 30, 2015, 1.7 million weighted-average nonvested restricted stock units and 1.5 million weighted-average stock options have been excluded from the computation of diluted earnings per common share as their inclusion would be antidilutive due to our loss from continuing operations attributable to The Williams Companies, Inc. Note 8 Employee Benefit Plans Net periodic benefit cost (credit) is as follows:



Pension Benefits

Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

(Millions)

Components of net periodic benefit cost:

Service cost
$
154
$
1
0
$
44
$
30
4

Interest cost
14
15
43
46
15

Expected return on plan assets
(
219
)
(19
)
(56
)
(57
)

Amortization of net actuarial loss
8
11
10
32
29

Net actuarial loss from settlements
1
1

Net periodic benefit cost
$
22
$
16
$
64
$
48
22
Notes (Continued)
21



Other Postretirement Benefits

Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

(Millions)

Components of net periodic benefit cost (credit):

Service cost
$
$
$
1
$
1

Interest cost
3
2
7
7
2

Expected return on plan assets
(3
)
(3
)
(9
)
(9
)

Amortization of prior service credit
(3
)
(4
)
(5
)
(12
)
(15
)

Amortization of net actuarial loss
1

Reclassification to regulatory liability
1
1
3
3

Net periodic benefit cost (credit)
$
(3
)
$
(53
)
$
(9
)
$
(13
)
21
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 $32 million for the three months ended September30, 2015 and 2014 , respectively, and $8 million and $9 million for the nine months ended September30March31, 20156 and 2014 , respectively5 . During the ninthree months ended September30March31, 20156 , we contributed $632 million to our pension plans and $52 million to our other postretirement benefit plans. We presently anticipate making additional contributions of approximately $261 million to our pension plans and approximately $15 million to our other postretirement benefit plans in the remainder of 20156. Note 98 netre



SeptMarch31,
2016
Dec
ember301, 2015
December 31,
2014

(Millions)

Natural gas liquids, olefins, and natural gas in underground storage
$
8471
$
15057

Materials, supplies, and other
721
8170

$
15642
$
231127
Note
109 Debt and Banking Arrangements Long-Term Debt Issuances and retirements On April 15January 22, 20156, WPZ paid $783 million , including a redemption premium, to early retire $750 million of 5.875 percent senior notes due 2021 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 pTransco issued $1 billion of 7.85 percent senior unsecured notes due 2026 to investors in a private debt placement. Transco used the net proceeds to repay debt and to fund capital expenditures. As part of the new issuance, Transco entered into a registration rights agreement with the initial purchasers of the unsecured notes. Transco is obligated to file and consummate a registration statement for an offer to exchange the notes for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended, within 365 days from closing and to use commercially reasonable efforts to complete the exchange offer. Transco is required to provide a shelf registration statement to cover resales of the notes under cent 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 purportain circumstances. If Transco fails to fulfill these obligations, additional interest will accrue on the affected securities. The rate of additional interest will be 0.25 percent per annum on the principal amount of the affected securities for the first 90-day period immediately following the occurrence of default, increasing by an additional 0.25 percent per annum with respect to each subsequent 90-day period thereafter, up to a maximum amount for all such defaults of 0.5 percent annually. Following the cure of any registration defaults, the accrual of additional interest will ceases. WPZTransco retired $75200 million of 3.86.4 percent senior unsecured notes that matured on February 15, 2015.
23
April 15, 2016. Commercial Paper Program As of March 31, 2016, WPZ had $135 million of Commercial paper outstanding under its $3 billion commercial paper program with a weighted average interest rate of 1.29 percent .
22

Notes (Continued)
C
ommercial Paper Program As of September 30, 2015, WPZ had $1.53 billion of Commercial paper outstanding under its $3 billion commercial paper program with a weighted average interest rate of 0.56 percent . Credit Facilities On August 26, 2015, WPZ entered into a Credit Agreement providing for a $1.0 billion short-term credit facility with a maturity date of August 24, 2016. The agreement governing this credit facility contains the following terms and conditions:redit Facilities


This facility becomes available when the aggregate amount of outstanding loans under WPZs long-term credit facility plus outstanding commercial paper borrowings reach a total of $3.5 billion .

March 31, 2016

Various covenants that limit, among other things, a borrowers and its respective material subsidiaries ability to grant certain liens supporting indebtedness, a borrowers ability to merge or consolidate, sell all or substantially all of its assets in certain circumstances, enter into certain affiliate transactions, make certain distributions during an event of default, enter into certain restrictive agreements and allow any material change in the nature of its business.


If an event of default with respect to a borrower occurs under the credit facility, the lenders will be able to terminate the commitments and accelerate the maturity of the loans and exercise other rights and remedies.


Each time funds are borrowed under the credit facility, the borrower may choose from two methods of calculating interest: a fluctuating base rate equal to an alternate base rate plus an applicable margin, or a periodic fixed rate equal to LIBOR plus an applicable margin. The borrower is required to pay a commitment fee based on the unused portion of the credit facility. The applicable margin and the commitment fee are determined by reference to a pricing schedule based on the borrowers senior unsecured long-term debt ratings. The significant financial covenant requires the ratio of debt to EBITDA, each as defined in the credit agreement, as of the last day of any fiscal quarter for which financial statements have been delivered to be no greater than 6.0 to 1.0. WPZ is in compliance with this financial covenant at September 30, 2015. 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.
24
Notes (Continued)
On February 2, 2015, we entered into a Credit Agreement with aggregate commitments remaining at $1.5 billion , and the credit facilities for Pre-merger WPZ and ACMP were terminated in connection with the ACMP Merger. WPZ also entered into a $3.5 billion credit facility.



September 30, 2015

Sae aaiy Outstanding

(Millions)

WMB

Lo
ansng-term credit facility
$
1,500
$
375

Swingline loans sublimit
50
1,035

Letters of credit sublimit
675

Letters of credit under certain bilateral bank agreements
14

WPZ

Long-term credit facility:

Loans
1
3,500
500625

Swingline loans sublimit
150

Letters of credit sublimit
1,125

Letters of credit under certain bilateral bank agreements
32

Short-term credit facility
1,0050




(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.
Note 110 Stockholders Equity The following table presents the changes in Accumulated other comprehensive income (loss) (AOCI)b opnn,nto noetxs



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

(Millions)

Balance at December31, 20145
$
(1
)
$
31(103
)

$
(37138
)
$
(
341442
)

Other comprehensive income (loss) before reclassifications
3
(103
)
(100
)
60
60


Amounts reclassified from accumulated other comprehensive income (loss)
(3
)
19
16
4
4


Other comprehensive income (loss)
(10360
)4
19
(84
)
64

Balance at
September30March31, 20156
$
(1
)
$
(7243
)
$
(35234
)
$
(
425
)
25
Notes (Continued)
Reclassifications out of Accumulated other comprehensive income (loss)
378
) Reclassifications out of AOCI
are presented in the following table by component for the ninthree months ended September30March31, 20156




Component
Reclassifications
Classification

(Millions)

Cash flow hedges:

Energy commodity contracts
$
(3
)
Product sales

Total cash flow hedges
(3
)


Pension and other postretirement benefits:

Amortization of prior service cost (credit) included in net periodic benefit cost
(4$
(1

)
Note 87 mlyeBnftPas
Amortization of actuarial (gain) loss included in net periodic benefit cost
348
Note
87 mlyeBnftPas
Total pension and other postretirement benefits, before income taxes
30


Reclassifications before income tax
2
7
Income tax benefit
(113
)
Provision (benefit) for income taxes

Reclassifications during the period
$
164
2
63
Notes (Continued)
Note 121 arVleMaueet n urnesTefloigtbepeet,b ee ihntefi au irrh,crano u iaca sesadlaiiis h arigvle fcs n aheuvlns consrcial,cmeca ae,adacut aal prxmt arvlebcueo h hr-emntr fteeisrmns hrfr,teeast n iblte r o rsne ntefloigtbe



Fi au esrmnsUig
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
September30March31, 20156:
Measured on a recurring basis:

ARO Trust investments
$
6382
$
6382
$
6382
$
$

Energy derivatives assets designated as hedging instruments
4
4
4

Energy derivatives assets not designated as hedging instruments
3
3
1
21
1


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

Additional disclosures:

NotesOther receivable and other
8
s
13
15

12
61
2
4

Long-term debt, including current portion (1)
(2
2,1804,676
)
(2
0,01,41
)
(2
0,01,41
)

Guarantee
(3029
)
(175
)
(175
)


Assets (liabilities) at December31, 20145:
Maue narcrigbss

ARO Trust investments
$
4867
$
4867
$
4867
$
$

Energy derivatives assets not designated as hedging instruments
5
5
3
3
1
2

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

Additional disclosures:

NotesOther receivable and others
12

30
5710
42
5318

Long-term debt, including current portion (1)
(2
0,83,98
)
(
21,13119,606
)
(
21,13119,606
)

Guarantee
(3129
)
(2716
)
(2716
)
___________________________________ (1) Excludes capital leases. 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.

27
Energy derivatives : Energy derivatives include commodity based exchange-traded contracts and over-the-counter contracts, which consist of physical forwards, futures, and swaps that are measured at fair value on a recurring basis.
24

Notes (Continued)
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 ninthree months ended September30March31, 20156 or 20145 . Additional fair value disclosures Notes receivable and other: Notes receivable and other consists of various notes, includingOther receivables: Other receivables primarily consists of margin deposits, which are reported in Other current assets and deferred charges in the Consolidated Balance Sheet. The disclosed fair value of our margin deposits is considered to approximate the carrying value generally due to the short-term nature of these items. Our other receivables are reported in Accounts and notes receivable net and Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet. The disclosed fair value of our other receivables is primarily determined by an income approach which considers the underlying contract amounts and our assessment of our ability to recover these amounts. Other receivables also includes 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 $4 million at Sept2 million and $18 million at March31, 2016 and December30 31, 2015 , respectively. We began accounting for the receivable under a cost recovery model in first-quarter 2015. Subsequently, we received a payments greater than the carrying amount of the receivable and as a result, the carrying value of this receivable is zero at SeptMarch31, 2016 and December30 31, 2015 . See Note 4 Investing Activities 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 SheeWe have the right to receive two remaining quarterly installments of $15 million plus interest. 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. Assets measured at fair value on a nonrecurring basis We recorded impairment charges for the nine months ended September30, 2015 , of $20 million for our Williams Partners segment associated with certain surplus equipment reported in Property, plant, and equipment, at cost in the Consolidated Balance Sheet . The estimated fair value of this equipment at the assessment date was $17 million . The estimated fair value was determined by a market approach based on our analysis of observable inputs in the principal market. These impairment charges are recorded in Other (income) expensenet within Costs and expenses in the Consolidated Statement of Operations . These nonrecurring fair value measurements fall within Level 3 of the fair value hierarchy. Certain of these assets were previously presented as held for sale, but are now reported as held for use. During the third quarter of 2015, we recognized other-than-temporary pre-tax impairment charges of $458 million and $3 million related to WPZs equity-method investments in the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, respectively, reflected within Impairment of equity-method investments in the Consolidated Statement of Operations . The historical carrying value of these investments was initially recorded basede carrying value of the guarantee is reported in Accrued liabilities in the Consolidated Balance Sheet.
2
85
Notes (Continued)
on estimated fair value during the third quarter of 2014 in conjunction with the ACMP Acquisition. For these Level 3 measurements, we estimated the fair value of these investments as of September30, 2015 , using an income approach based on expected future cash flows and appropriate discount rates. The determination of estimated future cash flows involved significant assumptions regarding gathering volumes and related capital spending. Discount rates utilized were 11.8 percent and 8.8 percent for the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, respectively, and reflected recent increases in our cost of capital driven by market conditions and risks associated with the underlying businesses. The fair values of the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments measured as of September30, 2015 , were estimated to be approximately $1.02 billion and $185 million , respectively. 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 cannot 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 $33 million at September30, 2015 . Our exposure declines systematically throughout the remaining term of WilTels obligation. Note 13 Contingent Liabilities Reporting of Natural Gas-Related Information to Trade Publications Direct and indirect purchasers of natural gas in various states filed class actions against us, our former affiliate WPX and its subsidiaries, 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 of discovery and pre-trial issues. We have agreed to indemnify WPX and its subsidiaries related to this matter. 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 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. 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 June 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 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. Multiple 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 postponed to September 6, 2016. We
29
Notes (Continued)
believe it is probable that additional losses will be incurred on some lawsuits, while for others we believe it is only reasonably possible that losses will be incurred. However, due to ongoing litigation involving 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 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. 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 currently 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 November 26, 2014, the City of North Pole (North Pole) filed suit in Alaska state court 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 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 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 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 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. Shareholder Litigation In July 2015, a purported stockholder of us filed a putative class and derivative action on 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 termination fee that became payable by us due to the termination of the merger agreement for the Acquisition of WPZ Public Units (see Note 1 - General, Description of Business, and Basis of Presentation). The action alleges, among other things, that the Individual Defendants breached their fiduciary duties owed to us and our stockholders by failing to adequately evaluate an unsolicited 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.
30
Notes (Continued)
Purported stockholders of us have filed various putative class actions in the Court of Chancery of the State of Delaware. Some cases name as defendants all of the individual members of our Board of Directors, Energy Transfer, and us, among others. One other case only names as defendants all of the individual members of our Board of Directors and Energy Transfer, among others. The actions allege, among other things, that the Directors breached their fiduciary duties by approving the merger into the Energy Transfer family of companies, claiming it to be the product of a flawed process that undervalues us and deprives the stockholders of the ability to participate in our long-term prospects. The actions further allege that we and/or Energy Transfer aided and abetted the Directors in their alleged breaches of fiduciary duties. The actions seek to enjoin the merger or, in the alternative, to rescind the merger. 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 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 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 estimate a range of liability at this time. 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 September30, 2015 , we have accrued liabilities totaling $41 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 one hour nitrogen dioxide emission limits, and new air quality standards impacting storage vessels, pressure valves, and compressors.On October 1, 2015, the EPA issued its new rule regarding National Ambient Air Quality Standards for ground-level ozone, setting a new standard of 70 parts per billion . We are monitoring the rules implementation and evaluating potential impacts to our operations. For these and other new regulations, we are unable to estimate the costs of asset additions or modifications necessary to comply 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 September30, 2015 , we have accrued liabilities of $8 million for these costs.We expect that these costs will be recoverable through rates.
31
Notes (Continued)
We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At September30, 2015 , we have accrued liabilities totaling $7 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 at the time the sale was consummated. Our responsibilities relate to the operations of the assets and businesses described below.
Assets measured at fair value on a nonrecurring basis


Former agricultural fertilizer and chemical operations and former retail petroleum and refining operations;

Date of Measurement
Fair Value
Impairments

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. At September30, 2015 , we have accrued environmental liabilities of $26 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 September30, 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 14 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 .)
32
Notes (Continued)
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; Provision (benefit) for income taxes; Interest incurred, net of interest capitalized; Equity earnings (losses); Gain on remeasurement of equity-method investment; Impairment of equity-method investments; Other investing income (loss) net; Depreciation and amortization expenses; Accretion expense associated with asset retirement obligations for nonregulated operations.


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. The following table reflects the reconciliation of Segment revenues to Total revenues as reported in the Consolidated Statement of Operations and Total assets by reportable segment.



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

(Millions)

Three Months Ended September 30, 2015

Segment revenues:

Service revenues

External
Impairment of equity-method investments (1)
March 31, 2016

$
1,23294
$
1
$
6
$
$
1,23
09
Internal
64
(64
Other impairment of equity-method investment
March 31, 2016

)3

Total service revenues
1,232
1
70
(64
)
1,239

Product sales

External
560
560

Internal

Total product sales
560
560

Total revenue
Level 3 fair value measurements of equity-method investments $
1
,792
$
1
$
70
$
(64
)
$
1,799
12
__________



Three Months Ended September 30, 2014(1)
Reflects other-than-temporary impairment charges related to Williams Partners equity-method investments in the Delaware basin gas gathering system and Laurel Mountain reported within Impairment of equity-method investments in the Consolidated Statement of Operations . Our carrying values in these equity-method investments had been written down to fair value at December 31, 2015. Our first-quarter 2016 analysis reflects higher discount rates for both of these investments, along with lower natural gas prices for Laurel Mountain. We estimated the fair value of these investments using an income approach based on expected future cash flows and appropriate discount rates. The determination of estimated future cash flows involved significant assumptions regarding gathering volumes and related capital spending. Discount rates utilized ranged from 13.0 percent to 13.3 percent and reflected increases in our cost of capital, revised estimates of expected future cash flows, and risks associated with the underlying businesses. 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 cannot 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 undiscounted exposure is approximately $32 million at March31, 2016 . Our exposure declines systematically throughout the remaining term of WilTels obligation. Note 12 Contingent Liabilities Reporting of Natural Gas-Related Information to Trade Publications Direct and indirect purchasers of natural gas in various states filed class actions against us, our former affiliate WPX and its subsidiaries, 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 of discovery and pre-trial issues. We have agreed to indemnify WPX and its subsidiaries related to this matter. 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 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 a potential loss 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. Geismar Incident On June 13, 2013, an explosion and fire occurred at our Geismar olefins plant and rendered the facility temporarily inoperable (Geismar Incident). We are addressing the following matters in connection with the Geismar Incident.
26
Notes (Continued)
On October 21, 2013, the U.S. Environmental Protection Agency (EPA) issued an Inspection Report pursuant to the Clean Air Acts Risk Management Program following its inspection of the facility on June 24 through June 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 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. Multiple 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 postponed to September 6, 2016. The court also set trial dates for additional plaintiffs in November 2016 and January and April 2017. We believe it is probable that additional losses will be incurred on some lawsuits, while for others we believe it is only reasonably possible that losses will be incurred. However, due to ongoing litigation involving 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 limit of $610 million applicable to this event 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 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. 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, which heard oral arguments in October of 2015. The Supreme Courts decision is expected this spring. We currently 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 March 6, 2014, the State of Alaska filed suit against FHRA, WAPI, and us in state court in Fairbanks seeking injunctive relief and damages in connection with sulfolane contamination of the water supply near the Flint Hills Oil Refinery in North Pole, Alaska. On May 5, 2014, FHRA filed cross-claims against us in the State of Alaska suit. FHRA also seeks injunctive relief and damages. On November 26, 2014, the City of North Pole (North Pole) filed suit in Alaska state court in Fairbanks against FHRA, WAPI, and us alleging nuisance and violations of municipal and state statutes based upon the same alleged sulfolane contamination of the water supply. North Pole claims an unspecified amount of past and future damages as well as punitive damages against WAPI. FHRA filed cross-claims against us. In October of 2015, the Court consolidated the State of Alaska and North Pole cases. On February 29, 2016, we and WAPI filed Amended Answers in the consolidated cases. Both we and WAPI asserted counter claims against both the State of Alaska and North Pole, and cross claims against FHRA. To our knowledge, exposure in these cases is duplicative of the reasonable loss exposure in the James West case.
27
Notes (Continued)
Independent of the litigation matter described in the preceding paragraphs, in 2013, the Alaska Department of Environmental Conservation 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. 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. Shareholder Litigation In July 2015, a purported shareholder of us filed a putative class and derivative action on behalf of us in the Court of Chancery of the State of Delaware.The action named as defendants certain members of our Board of Directors as well as WPZ, and named us as a nominal defendant. On December 4, 2015, the plaintiff filed an amended complaint for such action, alleging that the preliminary proxy statement filed in connection with our proposed merger with Energy Transfer is false and misleading. As relief, the complaint requested, among other things, an injunction requiring us to make supplemental disclosures and an award of costs and attorneys fees. On December 9, 2015, we moved to dismiss the amended complaint in its entirety, and on March 7, 2016, the Court granted our motion. Between October 2015 and December 2015, purported shareholders of us filed six putative class action lawsuits in the Delaware Court of Chancery that were consolidated into a single suit on January 13, 2016. Purported shareholders also filed a separate class action lawsuit in the Delaware Court of Chancery on January 15, 2016. These two pending putative class action lawsuits relate to our proposed merger with Energy Transfer. The complaints assert various claims against the individual members of our Board of Directors, that they breached their fiduciary duties by agreeing to sell us through an allegedly unfair process and for an allegedly unfair price and by allegedly failing to disclose material information about the merger. The complaints seek some combination of, among other things, damages, an injunction against the merger, and an award of costs and attorneys fees. We cannot reasonably estimate a range of potential loss at this time. Another putative class action lawsuit was filed in U.S. District Court in Delaware on January 19, 2016, but the plaintiff of that lawsuit filed a notice for voluntary dismissal on March 7, 2016, which the Court accepted. Additionally a putative class action lawsuit in U.S. District Court in Oklahoma, filed January 14, 2016, that claimed that disclosures about the merger violate certain federal securities laws and that the defendants are liable for such violations, was dismissed for failure to state a claim by April 28, 2016, although the plaintiff has the permission of the court to amend his claims. On March 7, 2016, a purported unitholder of WPZ filed a putative class action on behalf of certain purchasers of WPZ units in U.S. District Court in Oklahoma. The action names as defendants us, WPZ, Williams Partners GP LLC, Alan S. Armstrong, and Donald R. Chappel and alleges violations of certain federal securities laws for failure to disclose Energy Transfers intention to pursue a purchase of us conditioned on us not closing the WPZ Merger Agreement when announcing the WPZ Merger Agreement. The complaint seeks, among other things, damages and an award of costs and attorneys fees. 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 and claiming, among other things, violations of anti-trust laws and the Racketeer Influenced and Corrupt Organizations Act. We have also been named as a defendant in certain of these cases in Texas, Pennsylvania, and Ohio 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 calculations of the major customers royalty payments. On December 9, 2015, the Pennsylvania Attorney General filed a civil suit against one of our major customers and us alleging breaches of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, and on February 8, 2016, the Pennsylvania Attorney General filed an amended complaint in such civil suit, which omitted us as a party. We believe that the claims asserted are subject to indemnity obligations owed to us by that major customer. Due to the preliminary status of the cases, we are unable to estimate a range of potential loss at this time.
28
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, 2016 , we have accrued liabilities totaling $38 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 one hour nitrogen dioxide emission limits, and new air quality standards impacting storage vessels, pressure valves, and compressors.On October 1, 2015, the EPA issued its new rule regarding National Ambient Air Quality Standards for ground-level ozone, setting a new standard of 70 parts per billion . We are monitoring the rules implementation and evaluating potential impacts to our operations. For these and other new regulations, we are unable to estimate the costs of asset additions or modifications necessary to comply 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, 2016 , we have accrued liabilities of $7 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, 2016 , we have accrued liabilities totaling $7 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 at the time the sale was consummated. Our responsibilities relate to the operations of the assets and businesses described below.


Segment revenues:

Service revenuesFormer agricultural fertilizer and chemical operations and former retail petroleum and refining operations;

External
$
1,065
$
$
62
$
$
1,127

Internal
1
7
(8
)
Former petroleum products and natural gas pipelines;

Total service revenues
1,066
69
(8
)
1,127

Product salFormer petroleum refining facilities;

External
942
942

InternalFormer exploration and production and mining operations;
29
Notes (Continued)


Total product sales
942
942

Total revenues
$
2,008
$
$
69
$
(8
)
$
2,069
Former electricity and natural gas marketing and trading operations. At March31, 2016 , we have accrued environmental liabilities of $24 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, 2016 , 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 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. We define Modified EBITDA as follows: Net income (loss) before: Provision (benefit) for income taxes; Interest incurred, net of interest capitalized; Equity earnings (losses); Impairment of equity-method investments; Other investing income (loss) net; Impairment of goodwill; Depreciation and amortization expenses; Accretion expense associated with asset retirement obligations for nonregulated operations.
30
Notes (Continued)



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. The following table reflects the reconciliation of Segment revenues to Total revenues as reported in the Consolidated Statement of Operations and Total assets by reportable segment.

33
Notes (Continued)



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

(Millions)

NinThree Months Ended SeptemberMarch 301, 20156

Segment revenues:

Service revenues

External
$
3,6551,222
$
2
$
207
$
$
3,6771,229

Internal
1234
11

(1
235
)

Total service revenues
3,655
2
143
1,226
18

(1
235
)
3,6771,229

Product sales

External
1,677
1,677
428
3
431


Internal
1
(1
)

Total product sales
1,678
(1
)
1,677
428
3
431


Total revenues
$
5,3331,654
$
23
$
1438
$
(1245
)
$
5,3541,660


NinThree Months Ended SeptemberMarch 301, 20145

Segment revenues:

Service revenues

External
$
2,5911,192
$
$
1805
$
$
2,7711,197

Internal
21
14
(15
(21
)

Total service revenues
2,51,192
19426
(
215
)
2,7711,197

Product sales

External
2,725
2,725
519
519


Internal

Total product sales
2,725
2,725
519
519


Total revenues
$
5,3171,711
$
$
19426
$
(
215
)
$
5,491,716

September30March31, 20156

Total assets
$
4
9,6397,580
$
80277
$
999852
$
(
621502
)
$
50,81948,807

December31, 20145

Total assets
$
4
9,3227,870
$
612835
$
1,22850 $
(59135
)
$
50,56349,020
_______________


(1)
Includes certain projects under development and thus nominal reported revenues to date.
341
Notes (Continued)
The following table reflects the reconciliation of Modified EBITDA to Net income (loss) as reported in the Consolidated Statement of Operations .



Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

(ilos

Modified EBITDA by Ssemn:
Williams Partners
$
1,021955
$
8
43
$
2,891
$
2,14
17
Williams NGL & Petchem Services
(38
)
(5
)
(4
)
(13
)
(112
)

Other
(17
)
(17
)
(21
)
10
1
9
99
822
2,857
2,136
18
812


Accretion expense associated with asset retirement obligations for nonregulated operations
(7
)
(6
)
(4
)
(21
)
(13
)

Depreciation and amortization expenses
(43245
)
(369427
)
(1,287
)
(797
)

Equity earnings (losses)
9
27
66
236
5
51

Gain on remeasurement of equity-method investment
2,522
2,522

Impairment of equity-method investments
(
461112
)
(461
)

Other investing income (loss) net
18
11
27
43

Proportional Modified EBITDA of equity-method investments
(1859
)
(1326
)
(504
)
(273
)

Interest expense
(26391
)
(2
510
)
(776
)
(513
)

(Provision) benefit for income taxes
65
(998
(2
)
(
48
)
(1,13
30
)

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

Net income (loss)
$
(173 )
$
1
,708
$
23
$
2,031
3
Note 14 Subsequent Event As previously discussed, WPZ is the construction manager for and owns a 41 percent consolidated interest in Constitution. In December 2014, we received approval from the Federal Energy Regulatory Commission to construct and operate the Constitution pipeline. However, in April 2016, the New York State Department of Environmental Conservation (NYSDEC) denied a necessary water quality certification for the New York portion of the Constitution pipeline. We remain steadfastly committed to the project and intend to challenge the legality and appropriateness of the NYSDECs decision. In light of the NYSDECs denial of the water quality certification and the anticipated actions to challenge the decision, the target in-service date has been revised to as early as the second half of 2018, which assumes that the legal challenge process is satisfactorily and promptly concluded. An unfavorable resolution could result in the impairment of a significant portion of the capitalized project costs, which total $396 million on a consolidated basis at March 31, 2016, and are included within Property, plant, and equipment, at cost in the Consolidated Balance Sheet . It is also possible that we could incur certain supplier-related costs in the event of a prolonged delay or termination of the project.

3
52
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. 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
September30March31, 20156, 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. OurThe 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 (a consolidating entity), which is under development. As of December 31, 20145, Transco and Northwest Pipeline own and operate a combined total of approximately 13,600 miles of pipelines with a total annual throughput of approximately 3,8704,136 TBbtu of natural gas and peak-day delivery capacity of approximately 145 MMdth of natural gas. Williams Partners' midstream businesses primarily consist of (1)natural gas gathering, treating, compression, and processing; (2)natural gas liquid (NGL) fractionation, storage, and transportation; (3)oil crudeoil production handling and 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 areasBarnett, Eagle Ford, Haynesville, Marcellus, Niobrara and Utica shale plays as well as the Mid-Continent region. The midstream businesses include equity-method investments in natural gas gathering and processing assets and NGL fractionation and transportation assets, including a 62 percent equity-method investment in 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 EnergyII, 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 11multiple gas gathering systems in the Marcellus Shale (Appalachia Midstream Investments). The midstream businesses also include our Canadian midstream operations, which are comprised of an oil sands offgas processing plant near Fort McMurray, Alberta, and an NGL/olefin fractionation facility and butylene/butane splitter facility at Redwater, Alberta, and the Boreal Pipelinet Redwater, Alberta. 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 investing 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.
36
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
33

Managements Discussion and Analysis (Continued)
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 liquids extraction plant near Fort McMurray, Alberta, that began operations in March 2016, and a propane dehydrogenation facility under development in Canada. 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 aAnnual consolidated financial statements and notes thereto in Exhibit 99.1 of ourReport on Form 810-K dated MaFebruary 26, 20156. Dividends In SeptemberMarch 20156 , we paid a regular quarterly dividend of $0.64 per share, which was 140 percent higher than the same period last year. Overview of NinThree Months Ended September30March31, 20156 Net income (loss) attributable to The Williams Companies, Inc. , for the ninthree months ended September30March31, 20156 , decreased $1,77735 million compared to the ninthree months ended September30March31, 20145 , primarily due to the absence of a $2.5 billion gain recognized in 2014 as a result of remeasuring our previous equity-method investment in ACMP to fair value, impairment charges associated with certain equity-method investments (See Note 4 Investing Activities of Notes to Consolidated Financial Statements), declines in NGL margins driven by 67 percent lower prices, higher depreciation expense caused by significant projects that have gone into service in 2014 and 2015, as well as increased interest expense associated with new debt issuances. 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 associated 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 demand for midstream and pipeline infrastructure. We believe that we have successfully positioned our energy infrastructure businesses for significant future growth. However, an overall decline in energy commodity prices over the past year has adversely impacted the midstream industry, including us. Energy Transfer Merger Agreement On September 28, 2015, we entered into an Agreement and Plan of Merger (Merger Agreement) with Energy Transfer Equity, L.P. (Energy Transfer) and certain of its affiliates. The Merger Agreement provides thatreflecting the favorable impacts of an increase in olefins margins and higher equity earnings at Discovery related to the completion of the Keathley Canyon Connector in 2015, more than offset by impairment charges associated with certain equity-method investments, higher interest incurred, and an unfavorable change in net income attributable to noncontrolling interests driven by the impact of reduced incentive distributions from WPZ associated with the termination of the WPZ Merger Agreement. See additional discussion in Results of Operations. Energy Transfer Merger Agreement On September 28, 2015, we entered into an Agreement with Energy Transfer and certain of its affiliates. The Merger Agreement provides that, subject to the satisfaction of customary closing conditions, we will be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger)TC, with ETC surviving the ETC Merger. Energy Transfer formed ETC as a limited partnership that will be treated as a corporation for U.S. federal income tax purposes. Upon completion of the ETC Merger, ETC will be publicly traded on the New York Stock Exchange under the symbol ETC. At the effective time of the ETC Merger, each issued and outstanding share of our common stock (except for certain shares, such as those held by us or our subsidiaries and any held by ETC and its affiliates) will be canceled and automatically converted into the right to receive stock, cash, or a combination thereof as previously described in Note 1 of Notes to Consolidated Financial Statements. In connection with the ETC Merger, Energy Transfer will subscribe for a number of ETC common shares at the transaction price, in exchange for the amount of cash needed by ETC to fund the cash portion of the mMerger cConsideration (the Parent Cash Deposit), and, as a result, based on the number of shares of Williams common stock outstanding as of the date hereof, will own approximately 19 percent of the outstanding ETC common shares immediately after the effective time of the ETC Merger (which percentage will become approximately 17 percent after giving effect to the anticipated grant of awards under the Energy Transfer Corp LP 2016 Long-Term Incentive Plan following the ETC Merger). Immediately following the completion of the ETC Merger and of the LE GP, LLC (the general partner for Energy Transfer) merger with and into Energy Transfer Equity GP, LLC, ETC will contribute to Energy Transfer all of the assets and liabilities of Williams in exchange for the issuance by Energy Transfer to ETC of a number of Energy Transfer Class E common units equal to the number of ETC common shares issued to our stockholders in the ETC Merger plus
3
74
Managements Discussion and Analysis (Continued)
of the date thereof, will own approximately 19 percent of the outstanding ETC common shares immediately after the effective time of the ETC Merger. Immediately following the completion of the ETC Merger and of the LE GP, LLC merger with and into Energy Transfer Equity GP, LLC, ETC will contribute to Energy Transfer all of the assets and liabilities of Williams in exchange for the issuance by Energy Transfer to ETC of a number of Energy Transfer Class E common units equal to the number of ETC common shares issued to our stockholders in the ETC Merger plus the number of ETC common shares issued to Energy Transfer in consideration for the Parent Cash Deposit (such contribution, together with the ETC Merger and the other transactions contemplated by the Merger Agreement, the Merger Transactions). To address potential uncertainty as to how the newly listed ETC common shares, as a new security, will trade relative to Energy Transfer common units, each ETC common share issued in the ETC Merger, as well as the ETC common shares issued to Energy Transfer in connection with the Parent Cash Deposit, will have attached to it one contingent consideration right (CCR). The terms of the CCRs are fully described in the form of CCR Agreement attached to the Merger Agreement as Exhibit H to Exhibit 2.1 of our Current Report on Form 8-K dated September 29, 2015. We expect the transactionThe receipt of the Merger Consideration is expected to be tax-free to our stockholders, except with respect to any cash consideration received. The transaction is expected to close in the first halfsecond quarter of 2016. Completion of the Merger Transactions is subject to the satisfaction or waiver of a number of customary closing conditions as set forth in the Merger Agreement, including approval of the ETC Merger by our stockholders, receipt of required regulatory approvals in connection with the Merger Transactions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and effectiveness of a registration statement on Form S-4 registering the ETC common shares (and attached CCRs) to be issued in connection with the Merger Transactions. TermETC filed its inaition of WPZ Merger Agreal Form S-4 registration statement Oon May 12, 2015, we entered into an agreement for a unit-for-stock transaction whereby we would have acquired all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (WPZ Merger Agreement). On September 28, 2015, prior to our entry into the Merger Agreement, we entered into a Termination Agreement and Release (TNovember 24, 2015, and Amendments No. 1, 2, 3, and 4 to Form S-4 on January 12, 2016, March 7, 2016, March 23, 2016, and April 18, 2016, respectively. Amendments No. 5 and 6 were both filed on May 4, 2016. We and Energy Transfer have agreed with the United States Federal Trade Commission not to consummate the ETC Merger before May31, 2016. On April 6, 2016, we announced that we have commenced litigation against Energy Transfer and Kelcy L. Warren, Energy Transfers largest unitholder, in response to the private offering by Energy Transfer of Series A Convertible Preferred Units that Energy Transfer disclosed on March 9, 2016. The litigation against Energy Transfer seeks to unwind the private offermination Agreement), terminating the WPZ Merger Agreement. We are required to pay a $428 million termination fg of the Series A Convertible Preferred Units. On April 14, 2016, the Delaware Chancery Court granted our request to expedite the litigation, and on April 22, 2016, the court agreed to WPZ, of which we cschedule a hearing during the week of June 13, 2016 regarding our rently own approximately 60 percent , including the interests of the general partner and incentive distribution rights (IDRs). Such termination fee will settle through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $209 million per quarter). The next distribution from WPZ in November 2015 will be reduced by $209 million relatquest to unwind the private offering. The litigation against Mr. Warren is for tortious, or wrongful, interference with the Merger Agreement as a result of the private offering of the Series A Convertible Preferred Units. On May 3, 2016, Energy Transfer and LE GP, LLC filed an answer and counterclaim. The counterclaim asserts that we materially breached our obligations under the Merger Agreement by (i) blocking Energy Transfers attempts to complete a public offering of the Convertible Units, including, among other things, by declining to allow our independent registered public accounting firm to provide the auditor consent required to be included toin this termination fee. Williams Partners ACMP Merger On February 2, 2015, we completed a merger of our consolidated master limited partnerships, Pre-merger WPZ and ACMP (ACMP Merger). The merged partnership was renamed Williams Partners L.P. Under the terms of the ACMP me registration statement for a public offering, and (ii) bringing the action against Mr.Warren in the District Court of Dallas County, Texas. We believe that Energy Transfer and LE GP, LLCs counterclaim is without merit. On May 1, 2016, Williams and Energy Transfer entered into Amendment No. 1 to the Merger aAgreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the ACMP Merger. In conjunction with the ACMP 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. P (Amendment), pursuant to which the form of election (Form of Election), through which our stockholders will elect their preferred form of Merger Consideration, will be mailed to our stockholders on the same date as the proxy statement related to our stockholder meeting to consider and vote upon the ETC Merger. In addition, the Amendment changes the deadline for receipt of the Form of Election by the exchange agent from 30 days prior to the closing of the ACMPETC Merger, to 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-onearlier of (i) 20 business days after the mailing of the Form of Election to our stockholders and (ii) three bausis pursuant to the terms of the Pre-merger WPZ partnership agreement. Folness days prior to the anticipated clowsing the ACMP Merger, we own an approximate 60 percent ofdate of the ETC Merger. The Williams Board is unanimously committed to enforcing our rights under the mMerged partnership, includr Agreement and to delivering the gbeneral partner interest and incentive distribution rights. Geismar Incident and plant expansion Following the Geismar Incident in 2013, the Geismar plant ramped up fits of the Merger Agreement to our stockholders. Williams is committed to mailing the proxy statement, holding the second quarter of 2015 and reached full capacity in the third quarter of 2015tockholder vote, and closing the transaction as soon as possible.
3
85
Managements Discussion and Analysis (Continued)
Our total property damage and business interruption loss 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 we received in the second quarter of 2015. The remaining insurance limits total approximately $20 million and we are vigorously pursuing collection. Utica and Haynesville gas gathering agreements In September 2015, Williams announced an expansion of gas gathTermination of WPZ Merger Agreement On May 12, 2015, we entered into an agreement for a unit-for-stock transaction whereby we would have acquired all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (WPZ Merger Agreement). On September 28, 2015, prior to our entry into the Merger Agreement, we entered into a Termination Agreement and Release (Termination Agreement), terminating the WPZ Merger Agreement. Under the terms of the Terming services for a certain major producer customer in dry gas production areas of the Utica Shale in eastern Ohio and a consolidation of contracts in the Haynesville Shale in northwestern Louisiana. In the Utica, WPZ executed a long-term fee-based contract that extends the length of certain acreage dedication to 2035, increases the area of dedication from 140,000 acres to 190,000 net acres and converts the cost-of-service mechanism to a fixed-fee structure with minimum volume commitments (MVCs). A new Haynesville contract consolidaation Agreement, we are required to pay a $428 million termination fee to WPZ, of which we currently own approximately 60 percent , including the interests of the general partner and incentive distribution rights (IDRs). Such termination fee will settle through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $209 million per quarter). The distributions from WPZ in November 2015 and February 2016 were each reduced by $209 million related to this termination fee. The next distribution from WPZ in May 2016 will be reduced by the final $10 million related to this termination fee. Williams Partners Redwater expansion In March 2016, we completesd the Springridge and Mansfield contracts into a single agreement with a fixed-fee structure and extends the contract term to 2035. The consolidated contract is supported by MVCs and a drilling commitment to turn 140 equivalent wells online before the end of 2017. Virginia Southside In September 2015, Transcos Virginia Southside expansion from New Jersey to a power station in Virginia and delivery points in North Carolina was placed into service, which enabled us to begin providing 270 Mdth/d of additional firm transportation service. Northeast Connectorexpansion of our Redwater facilities in support of a long-term agreement to provide gas processing services to a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta. The expanded Redwater facility receives NGL/olefins mixtures from the second bitumen upgrader and fractionates the mixtures into an ethane/ethylene mix, propane, polymer grade propylene, normal butane, an alkylation feed and condensate. Williams NGL & Petchem Services Canadian NGL infrastructure expansion In Mayrch 20156, 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 syswe completed a new liquids extraction plant near Fort McMurray, Alberta. The Boreal pipeline was extended to enable transportation of the NGL/olefins mixture from the new liquids extraction plant to Williams Partners' expanded Redwater facilities. The plant increases the amount of NGLs produced in Canada to a total of approximately 40 Mbbls/d. To mitigate ethane price risk associatemd was placed ith our processing services, 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 delive have a long-term agreement with a minimum price for ethane sales to a third-party customer. Volatile Commodity Prices NGL per-unit margins were approximately 36 percent lower in the first three months of 2016 compared to the same period of 2015 driven primarily by 30 percent lowery points along the line was placed into servier-unit non-ethane prices, as well as a change in the relative mix of NGL products produced, which enabled us to begin providing 225 Mdth/d of additional firm transhas shifted to a higher proportation service on the Mobile Bay Lateral. Bucking Horse gas processing facility The Bucking Horse gas processing plant (Bucking Horof lower-margin ethane products . These decreases are partially offse)t began operating in February 2015. Bucking Horse is located in Converse County, Wyoming, and adds 120 MMcf/d ofy more than a 30 percent decline in per-unit natural gas feedstock proicessing capacity in the Powder River basin Niobrara Shale play. Processed volumes at Bucking Horse have continued to increase through the third quarter of 2015 as existing rich gas production was re-directed from other third-party processing facilities. Bucking Horse has led to higher gathering. 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 voalumes in 2015 ae from NGLs previously curtailed production has increased due to the additional processing capability. Eagle 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 is contributing approximately 20 MMcf/d to the existing Eagle Ford throughput of approximately 400 MMcf/dcovered 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.
3
96
Managements Discussion and Analysis (Continued)
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 61 percent lower in the first nine 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. Tefloiggahilsrtsteefcso agnvltlt n G rdcinadslsvlms swl stemri ifrnilbtenehn n o-taepout n h eaiemxo hs rdcs



The potential impact of commodity price
changesvolatility on our business for the remainder of 20156 is further discussed in the following Company Outlook.
40
Company Outlook As previously discussed, we entered into a Merger Agreement with Energy Transfer and certain of its affiliates and expect the ETC Merger to close in the second quarter of 2016. The following discussion reflects our operating plan for 2016. 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 demand driven growth markets and basins where we can become the large-scale service provider. We will continue to maintain a strong commitment to safety, environmental stewardship, operational excellence, and customer satisfaction. We believe that accomplishing these goals will position us to deliver safe and reliable service to our customers and an attractive return to our shareholders. This strategy remains intact and we continue to execute on infrastructure projects that serve long-term natural gas needs. We expect commodity prices to remain challenged and costs of capital to remain sharply higher throughout 2016 as compared to 2015. Anticipating these conditions, our business plan for 2016 includes significant reductions in capital investment and expenses, including the workforce reductions previously discussed in Note 4 Other Income and Expenses , from our previous plans. In addition, we expect proceeds from planned asset monetizations in excess of $1 billion during 2016.
37

Managements Discussion and Analysis (Continued)
Williams NGL & Petchem Services Texas Belle Pipeline In March 2015, thOur growth capital and investment expenditures in 2016 are 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 pipelpected to total $2.2 billion. Approximately $1.3 billion of our growth capital funding needs include Transco expansions and other interstate pipeline growth projects, most of which are fully contracted with firm transportation agreements. The remaining non-interstate pipeline growth capital spending in 2016 primarily reflects investment in gathering and processineg 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 entered into a Merger Agreement with Energy Transfer and certain of its affiliates and explimited to known new producer volumes, including wells drilled and completed awaiting connecting infrastructure. We also remain committed to projects the transaction to close in the first half of 2016. The following discussion reflects our operating plan for 2015 and 2016. Our strategy is to provide large-scale energy infrasat maintain our assets for safe and reliable operations, as well as projects that meet legal, regulatory, and/or contruacture 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 posial commitments.
Fee-based businesses are a significant component of our portfolio, which serves to somewhat reduce the influence of commodity price fluctua
tions ion current key markets and basins and entering new growth markeour operating results and bcasins 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.
We expect the sharp
h flows. However, producer activities are being impacted by lower energy commodity prices which may affect our gathering volumes. The credit profiles of certain of our producer customers are increasingly challenged by the current market conditions, which ultimately may result in a further reduction of our gathering volumes. Such reductions as well as further or prolonged declines in energy commodity prices beginning in fourth quarter 2014 and continuing through the present will have an adverse effect on our operating results and cash flows. Fee-based businesses are a significant component of our portfolio and have furmay result in noncash impairments of our assets. For example, we have been approached by certain customers seeking to revise certain of our gather increased as a result of the ACMP Acquisition and significant investments in fee-based projects. 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 energy commodity prices which may reduce the rate of growth of our gathering and processing volumes. Additionally, declines in NGL and olefins margins may also reduce our operating results and cash flows.
Our business plan for 2015 continues to reflect significant capital investment as well as 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 are expected to be approximately $4.3 billion. We expect to continue significant capital investment in 2016. Potential risks and obstacles
g and processing contracts, due in part to the low energy commodity price environment. In these situations, we generally seek to reasonably consider customer needs while maintaining or improving the overall value of our contracts. Any such revisions may impact the level and timing of expected future cash flows, requiring that we evaluate the recoverability of the underlying assets, which could result in noncash impairments. 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. We anticipate the following trends in energy commodity prices in 2016, compared to 2015 that couldmay impact the execution of our plan includeour operating results and cash flows:

General economic, financial markets, or industry downturnNatural gas prices are expected to be lower;

Lower than anticipated energy commodity prices and marginsNGL prices are expected to be somewhat consistent;

Decreased volumes from third parties served by our midstream business;Olefins prices, including propylene, ethylene, and the overall ethylene crack spread, are expected to be lower. In 2016, we anticipate our operating results will include increases from our fee-based businesses primarily as a result of Transco projects placed in service in 2015 and those anticipated to be placed in service in 2016, increases in our olefins volumes associated with a full year of operations at our Geismar plant following its 2015 repair and expansion, and lower general and administrative costs associated with previously discussed workforce reductions. Additionally, we anticipate these improvements will be partially offset by the absence of operating results associated with certain asset monetizations and additional operating expenses associated with growth projects placed in service in 2015 and those anticipated to be placed in service in 2016. It is also possible that certain asset monetization scenarios could result in impairments if assets are sold for amounts less than their carrying value. Potential risks and obstacles that could impact the execution of our plan include:


Unexpected significant increases in capital expenditures or delays in capital project executionFurther downgrades of our credit ratings and associated increase in cost of borrowings;

Lower than expected distributions, including IDRs, from WPZ. WPZs liquidity could also be impacted by a lack of adequate access to capital markets to fuHigher cost of capital and/or limited availability of capital due to a change in our financial condition, interest rates, and/or market or industry cond its growthions;

Higher cost of capital and/or limited availability of capital due to a change in our financial condition, interest rates, market or industry conditionCounterparty credit and performance risk, including that of Chesapeake Energy Corporation and its affiliates


DLowngrade of our credit ratings and assoer than anticipated increase in cost of borrowingproceeds from planned asset monetizations


Co
unterparty credit and performance riskst reductions at levels lower than anticipated;

Changes in the political and regulatory environments;


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


Reduced availability of insurance coverage.
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 due to increases in our fee-based businesses primarily as a result of the ACMP Acquisition and projects placed in service and an increase in our olefins volumes associated with the repair and expansion of the Geismar plant, 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. Following the sharp decline in overall energy commodity prices in the fourth quarter of 2014, we anticipate the following trends in 2015, compared to 2014:


Natural gas and ethane prices are expected to be lower 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 oversupply as well as lower prices of crude oil and correlated products.
Gathering, transportation, processing, and NGL sales volumes The growth of natural gas production supporting our gathering and processing volumes is impacted by producer drilling activities, which are influenced by commodity prices, including natural gas, ethane and propane prices. In addition, the natural decline in production rates in producing areas impact the amount of gas available for gathering and processing.


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.


We anticipate higher natural gas transportation revenues at Transco compared to 2014, as a result of expansion projects placed into service in 2014 and 2015.
41
Lower than anticipated energy commodity prices and margins;
38

Managements Discussion and Analysis (Continued)


In the northeast region, we anticipate growth in our natural gas gathering volumes compared to the prior year as our infrastructure grows to support producer activities in the region.Lower than anticipated volumes from third parties served by our midstream business;


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


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.Lower than expected distributions, including IDRs, from WPZ;


In the western region, we anticipate an unfavorable impact in NGL margins in 2015 compared to 2014, primarily due to the sharp decline in NGL prices.General economic, financial markets, or further industry downturn;


In 2015, our domestic businesses anticipate a continuation of periods when it will not be economical to recover ethane. Olefin production volumes Lower than expected levels of cash flow from operations;


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 returned to operations in late March. OtherChanges in the political and regulatory environments including the risk of delay in permits needed for regulatory projects;


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 offset by an expected decrease in results from our equity-method investment in the Delaware basin gas gathering system primarily due to a redetermination of rates in association with a contract extension.Physical damages to facilities, including damage to offshore facilities by named windstorms;


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
Reduced availability of insurance coverage.
We continue to address these risks through maintaining a strong financial position and liquidity, as well as through managing a diversified portfolio of energy infrastructure assets which continue to serve key markets and basins in North America
. Expansion Projects Our ongoing major expansion projects include the following: Williams Partners Access Midstream ProjectsEagle Ford 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 200 MMcf/d cryogenic natural gas processing plant, which, based on our customers needs, is expected to be placed into service in 2017.
42
9. Gathering System Expansion We will continue to expand the gathering systems in the Marcellus and Utica shale regions that are needed to meet our customers production plans. The expansion of the gathering infrastructure includes additional compression and gathering pipeline to the existing system. Constitution Pipeline In December 2014, we received approval from the FERC to construct and operate the jointly owned Constitution pipeline, which will have an expected capacity of 650 Mdth/d. However, in April 2016, the New York State Department of Environmental Conservation (NYSDEC) denied a necessary water quality certification for the New York portion of the pipeline. We remain steadfastly committed to the project and intend to challenge the legality and appropriateness of the NYSDECs decision. (See Note 14 Subsequent Event .) 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 126-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, as well as to a local distribution company serving New York and Pennsylvania. In light of the NYSDECs denial of the water quality certification and the anticipated actions to challenge the decision, the target in-service date has been
39

Managements Discussion and Analysis (Continued)
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 custo revised to as early as the second half of 2018, which assumers production plans. The expansion of the gathering infrastructure includes additional compression and gathering pipeline to the existing system. Atlantic Sunrise In Marchthat the legal challenge process is satisfactorily and promptly concluded. Garden State In April 20156, we filed an application withreceived approval from 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 AlabamaStation 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 second halffourth quarter of 2016 and the remaining portion in the third quarter 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. Norphlet Project In March 2016, we announced that we have reached an agreement to provide deepwater gas gathering services to the Appomattox development in the Gulf of Mexico.The project will provide offshore gas gathering services to our existing Transco lateral, which will provide transmission services onshore to our Mobile Bay processing facility.We also plan to make modifications to our Main Pass 261 Platform to install an alternate delivery route from the platform, as well as modifications to our Mobile Bay processing facility. The project is scheduled to go into service during the fourthirst quarter of 2015 and expect it to increase capacity by 525 Mdth/d.
Constitution Pipeline In December
9. Hillabee In February 20146, we received approval from the FERC to construct and operate the jointly owned Constitution pipeline. We also received a Notice of Complete Applicatthe FERC issued a certificate order for the initial phases of Transcos Hillabee Expansion fProm the New York Department of Environmental Conservation (NYDEC) in December 2014, but we continue to seek issuance of Clean Water Act Section 401 certification by the NYDEC. 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, toject (Hillabee). The project involves an expansion of Transcos existing natural gas transmission system from Station 85 in west central Alabama to a proposed new interconnection with the Sabal Trail project in Alabama. Construction is expected to begin in the second quarter of 2016. Hillabee will be constructed in phases, and all of the Iproquois Gas Transmission and Tennessee Gas Pipeline systems in New York. We plan to place the projectject expansion capacity will be leased to Sabal Trail. We plan to place the initial phases of Hillabee into service during the fourthsecond quarters of 20167 and 2020, assuming timely receipt of all necessary regulatory approvals, with an expected capacity of 650 Mdth/d.
Rock Springs
and together they are expected to increase capacity by 1,025 Mdth/d. In March 20156, 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.
Hillabee In Novem
WPZ entered into an agreement with the member-sponsors of Sabal Trail to resolve several matters. In accordance with the agreement, the member-sponsors will pay us an aggregate amount of $240 million in three equal installments as certain milestones of the project are met. The first $80 million payment was received in March 2016. WPZ expects to recognize income associated with these receipts over the term of the capacity lease agreement. Gulf Trace In October 20145, 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 systemreceived approval from the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from Station 865 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 ofSt. Helena Parish, Louisiana to a new interconnection with Sabine Pass Liquefaction in Cameron Parish, Louisiana. We plan to place the project into service during the secondfirst quarters of 2017 and 2020, assuming timely receipt of all necessary regulatory approvals, and together they areit is expected to increase capacity by 1,025200 Mdth/d.
Gulf Trace In December
New York Bay Expansion In July 20145, 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,
43
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.
40

Managements Discussion and Analysis (Continued)
Louisiana. We plan to place the project into service during the first quarter ofRock Springs In March 20175, 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 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,we received approval from the FERC to expand Transcos existing natural gas transmission system from New Jersey to a proposed generation facility in Maryland. We plan to place the project into service in the third quarter of 2016 and it is expected to increase capacity by 448192 Mdth/d. Garden State In FebruaryAtlantic 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 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 ofthe 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 as early as late 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,700 Mdth/d. 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 toStation 210 in New Jersey and Station 165 in Virginia to a new lateral extending from 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 it is expect ited to increase capacity by 250 Mdth/d. New York Bay In JulyDalton 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 Pennsylvania to the Rockaway Delivery Lateral transfer point and the Narrows meter station in Richmond County, New YorkStation 210 in New Jersey to markets in northwest Georgia. We plan to place the project into service during the fourth quarter ofin 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 115448 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
Williams NGL& Petchem Services Canadian PDH Facility We continued developing a project to construct a PDH facility in Alberta for the production of polymer-grade propylene. The new PDH facility would produce approximately 1.1 billion pounds annually. In the first quarter of 2016, we decided to substantially slow the capacitye 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 first quarter of 2016. 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 2019. 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 Asdevelopment activities, limit further investment, and proceed with a strategy to either sell the project or obtain a partner to fund additional development. We discontinued capitalization of the project development costs beginning in 2016. Gulf Coast NGL and Olefin Infrastructure Expansion Certain previously acquired liquids pipelines in the Gulf Coast region 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. In response to the current conditions in the midstream industry, we are slowing the partce 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 interconnectiondevelopment and may seek partners for these projects. Critical Accounting Estimates Goodwill
During the first quarter of 2016, we observed a decline in WMBs stock price and WPZs unit price and increases in equity yields
within the Boreal Pipeline, owned by our Williams Partners segment. The interconnection will enable transportation of themidstream industry. This served to increase our estimates of discount rates. Accordingly, as of March 31, 2016, we performed a qualitative interim assessment of the goodwill, all of which is reported within the West reporting unit.
4
41
Managements Discussion and Analysis (Continued)
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 first quarter of 2016, 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 with a minimum price 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 first quarter of 2016. Additional projects under development and/ or construction are expected to be placed into service in 2016 and 2017. Critical Accounting Estimates Goodwill The goodwill associated with the Access Midstream reporting unit at September 30, 2015 was $452 million, which was initially recorded during the third quarter of 2014 in conjunction with the ACMP Acquisition. As disclosed within the Critical Accounting Estimates discussion in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations in Exhibit 99.1 of our Current Report on Form 8-K dated May 6, 2015, we performed an impairment evaluation of the goodwill associated with the reporting units representing the central and northeast regions within the Access Midstream segment as of December 31, 2014. Following the merger of WPZ and Access Midstream in February of 2015, the reporting unit for purposes of evaluating goodwill for impairment is the Access Midstream segment of WPZ.
During the third quarter of 2015, we observed a decline in WPZs unit price and increases in equity yields within the midstream industry. This served to increase our estimates of discount rates. Accordingly, we performed an interim assessment of the goodwill associated with this reporting unit as of September 30, 2015.
We estimated the fair value of the reporting unit identified above based on an income approach utilizing discount rates specific to the underlying businesses of Access Midstream. The weighted-average discount rate utilized was 9.4 percent. Our forecasts of future cash flows considered current market conditions and our perspective on how each business operation would perform and develop in future years. For this reporting unit, we have experienced an increase in the discount rates utilized, offset by the benefit of increased future cash flows associated with growth of the businesses since their acquisition in 2014. We further corroborated our evaluation with a market capitalization analysis.
For the reporting unit evaluated, the estimated fair value
The estimated fair value of the West reporting unit significantly exceeded its carrying amount and thus no impairment of goodwill was recognized. For purposes of this measurement, the book basis of the reporting unit was reduced by the associated deferred tax liabilities. The fair value exceeded the carrying value by approximately 20 percent. Judgments and assumptions are inherent in our estimates of future cash flows, discount rates, and market measures utilized. The use of alternate judgments and assumptions could result in a different calculation of fair value, which could ultimately result in the recognition of an impairment charge in the consolidated financial statements.
We will complete our annual assEquity-Method Invesstment of goodwill as of October 1 during the fourth quarter. This review will consider all goodwill, including $693 million of additional goodwill within Williams Ps In response to declining market conditions in the first quartners.
Equity-method Investments In performing the interim assessment of goodwill as previously discussed, we observed that the fair value estimate
of 2016, we assessed whether the carrying amounts of certain of our equity-method investments were below their associated carrying amounts. As a result, we recognized other-
45
Managements Discussion and Analysis (Continued)
exceeded their fair value. As a result, we recognized other-than-temporary impairment charges of $45859 million and $350 million in the first-quarter related to our equity-method investments in the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments(DBJV) and Laurel Mountain (LMM), respectively. The historicalOur carrying value ofs in these investments was initially recorded based on estimated fair value during the third quarter of 2014 in conjunction with the ACMP Acquisition.
We attribute the decl
equity-method investments had been written down to fair value at December 31, 2015. Our first-quarter analysis reflects higher discount rates for both DBJV and LMM, along with lower natural gas prices for LMM.
We estimated the fair value of these
inves in fair value primarily to the previously described increase in discount rates. For the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, discounts rates utilized were 11.8 percent and 8.8 percent, respectively. tments using an income approach and discount rates ranging from 13.0 percent to 13.3 percent. These discount rates considered variables unique to each business area, including equity yields of comparable midstream businesses, expectations for future growth and customer performance considerations.
We estimate that an overall increase in the discount rates utilized of 50 basis points would have resulted in additional impairment charges on our at-risk equity-method investments of approximately $75104 ilo. Judgments and assumptions are inherent in our estimates of future cash flows, discount rates, and market measures utilized. The use of alternate judgments and assumptions could result in a different calculation of fair value, which could ultimately result in the recognition of a different impairment charge in the consolidated financial statements.
At
SeptemberMarch 301, 20156, our Consolidated Balance Sheet includes approximately $87.2 billion of investments that are accounted for under the equity-method of accounting. We evaluate these investments for impairment when events or changes in circumstances indicate, in our managements judgment, that the carrying value of such investments may have experienced an other-than-temporary decline in value. We continue to monitor our equity-method investments for any indications that the carrying value may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, we compare our estimate of fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred. We generally estimate the fair value of our investments using an income approach where significant judgments and assumptions include expected future cash flows and the appropriate discount rate. In some cases, we may utilize a form of market approach to estimate the fair value of our investments.
If the estimated fair value is less than the carrying value and we consider the decline in value to be other-than-temporary, the excess of the carrying value over the fair value is recognized in the consolidated financial statements as an impairment charge. Events or changes in circumstances that may be indicative of an other-than-temporary decline in value will vary by investment, but may include:


A significant or sustained decline in the market value of an investee;


Lower than expected cash distributions from investees;


Significant asset impairments or operating losses recognized by investees;


Significant delays in or lack of producer development or significant declines in producer volumes in markets served by investees;


Significant delays in or failure to complete significant growth projects of investees.
4
62
Managements Discussion and Analysis (Continued)
Constitution Pipeline Capitalized Project Costs As of March 31, 2016, Property, plant, and equipment, at cost in our Consolidated Balance Sheet includes approximately $396 million of capitalized project costs for Constitution, for which WPZ is the construction manager and owns a 41 percent consolidated interest. In December 2014, we received approval from the FERC to construct and operate this jointly owned pipeline. However, in April 2016, the New York State Department of Environmental Conservation (NYSDEC) denied a necessary water quality certification for the New York portion of the Constitution pipeline. We remain steadfastly committed to the project and intend to challenge the legality and appropriateness of the NYSDECs decision.
As a result of the denial by the NYSDEC, we evaluated the capitalized project costs for impairment as of March31, 2016, and determined that no impairment was necessary. Our evaluation considered probability-weighted scenarios of undiscounted future net cash flows, including a scenario assuming successful resolution with the NYSDEC and construction of the pipeline, as well as a scenario where the project does not proceed. We will continue to monitor the capitalized project costs associated with Constitution for potential impairment.
Property, Plant, and Equipment - Canadian Operations We evaluate our property, plant, and equipment for impairment when events or changes in circumstances indicate, in our judgment, that the carrying value of such assets may not be recoverable. When an indicator of impairment has occurred, we compare our estimate of undiscounted future cash flows attributable to the assets to the carrying value of the assets to determine whether an impairment has occurred and we may apply a probability-weighted approach to consider the likelihood of different cash flow assumptions and possible outcomes including selling in the near term or holding for the remaining estimated useful life. If an impairment of the carrying value has occurred, we determine the amount of the impairment recognized by estimating the fair value of the assets and recording a loss for the amount that the carrying value exceeds the estimated fair value. This evaluation is performed at the lowest level for which separately identifiable cash flows exist. We have previously announced that our business plan for 2016 includes the expectation of proceeds from planned asset monetizations. We have identified our Canadian operations, which have a net book value of property, plant, and equipment of approximately $1.7 billion as of March 31, 2016, as one possible source for such proceeds and have recently engaged in marketing efforts to identify potentially interested parties and indications of value. As a result of these developments and the influence of the current low-price commodity environment on market values, we performed an impairment evaluation of these assets as of March 31, 2016, which considered probability-weighted scenarios of undiscounted future net cash flows pursuant to the guidance of Accounting Standards Codification Topic 360. These included scenarios involving the continued ownership and operation of the assets, as well as selling all of or a partial interest in the assets at assumed transaction prices below our carrying value. As a result of this evaluation, we determined that no impairment was required as of March 31, 2016. Included in the scope of the marketing activities noted above is a Canadian PDH facility under development for which we have capitalized project development costs of approximately $136 million at March 31, 2016. Due to our current capital allocation considerations, we decided in the first quarter of 2016 to substantially slow the pace of development activities, limit further investment, and proceed with a strategy to either sell the project or obtain a partner to fund additional development. We have discontinued capitalization of project development costs beginning in 2016. We have also evaluated the recoverability of the previously capitalized costs associated with this project under various probability-weighted scenarios of undiscounted future cash flows. These included retaining a partial interest in the project and sales scenarios at assumed transaction prices that were below carrying value. As a result of this evaluation, we determined that no impairment was required as of March 31, 2016. As the marketing process continues and our cash flow and probability assumptions are updated, it is reasonably possible that a portion of the property, plant and equipment of our Canadian operations may be determined to be unrecoverable and thus result in a significant impairment as early as the second quarter of 2016. The primary factors that may affect this determination are the structure and likelihood of a sale and the level of proceeds estimated to be received.
43

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 nine months ended September30March31, 20156 , compared to the three and nine months ended September30March31, 20145 h eut foeain ysgetaedsusdi ute ealfloigti osldtdoeve icsin



Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
$Change*
%Change*
2015
2014
$Change*
%Change*

(Millions)
(Millions)

Revenues:

Service revenues
$
1,2329 $
1,1297
+
1132
+
103
%
$
3,677
$
2,771
+906
+33
%

Product sales
560
942
-382
431
519
-88

-
417
%
1,677
2,725
-1,048
-38
%

Total revenues
1,
799
2,069
5,354
5,49
660
1,71
6
Costs and expenses:

Product costs
426
807
+381
+47
318
462
+144
+31

%
1,382
2,300
+918
+40
%

Operating and maintenance expenses
403
412
+9
+2
391
387
-4
-1

%
1,227
1,018
-209
-21
%

Depreciation and amortization expenses
4
32
369
-63
-17
%
1,287
797
-490
-61
45
427
-18
-4

%

Selling, general, and administrative expenses
177221
1
7196
-
6
-4
25
-13

%
547
457
-90
-20
%

Net insurance recoveries Geismar Incident
%
(126
)
(161
)
Other (income) expense net
23
17
-6

-35
-22
%

Other (income) expense net
5
3
-2
-67
%
62
47
-15
-32
%

Total costs and expenses
1,
443398
1,
762
4,379
4,458
489

Operating income (loss)
356
307
975
1,038
262
227


Equity earnings (losses)
9
27
6651
+
246
+
390
%
236
55
+181
NM

Gain on remeasurement of equity-method investment
2,522
-2,522
-100
%
2,522
-2,522
-100
%

Impairment of equity-method investments
(
461112
)
-
461
NM
(461
)
-461
112
NM

Other investing income (loss) net
18
11
+7
+64
%
27
43
-16
-37
%
+18
NM


Interest expense
(26391
)
(2
510
)
-5340
-
2516
%
(776
)
(513
)
-263
-51
%

Other income (expense) net
2015
1
06
+10
+100
-1
-6

%
70
15
+55
NM

Income (loss) from continuing operations before income taxes
(
23811
)
2,706
71
3,160
43

Provision (benefit) for income taxes
(65
)
998
+1,063
NM
48
1,133
+1,085
2
30
+28

+9
63
%

Income (loss) from continuing operations
(173
)
1,708
23
2,027

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

Net income (loss)
(173 )
1
,708
23
2,031
3

Less: Net income (loss) attributable to noncontrolling interests
(13352
(57

)
30
+163
-109
NM
(121
)
110
+231
NM

Net income (loss) attributable to The Williams Companies, Inc.
$
(4065
)
$
1,678
$
144
$
1,921
70





*
+ = 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.

47
Three months ended March31, 2016 vs. three months ended March31, 2015 Service revenues increased primarily due to expansion projects placed in service across most of our operating areas in 2015 and 2016. These increases were partially offset by a decrease in storage revenues at Transco, natural volume declines in certain production areas, and operational issues of producers in the Gulf Coast region. Product sales decreased due to reduced marketing revenues primarily associated with lower prices across most products and lower volumes, as well as a reduction in revenues from our equity NGLs mainly related to a decrease in NGL prices. Additionally, olefin sales from our RGP Splitter and our Canadian operations decreased driven by lower per-unit prices. These decreases were partially offset by an increase in olefin sales primarily associated with resuming our Geismar operations. The decrease in Product costs includes lower marketing purchases primarily associated with a decline in per-unit costs across most products and lower volumes. The decrease also includes reduced natural gas purchases associated
44

Managements Discussion and Analysis (Continued)
Three months ended September30, 2015 vs. three months ended September30, 2014 Service revenues increased primarily due to transportation, production handling, and gathering fee revenue related to construction projects that have been placed into service, including Gulfstar One in the fourth quarter of 2014 and expansion projects placed in service by Transco in late 2014 and in 2015. Revenues from operations associated with the ACMP Acquisition and the northeast region also increased due to higher volumes relatwith the production of equity NGLs mostly due to lower natural gas prices, as well as decreased olefin feed sto new well connects. Product sales decreased due to a decrease in marketing revenues primarily associated with lower prices across all products and lower volumes, as well as a decrease in revenues from our equity NGLs reflecting a decrease in NGL prices. These decreases ck purchases at our RGP Splitter and our Canadian operations driven by lowere partially offset by aer-unit costs. An increase in olefin salfeedstock purchases primarily duerelated to resuming our Geismar operations. Product costs decrea partially offset thesed due to a decrease in marketing purchases associated with lower per-unit costs and lower volumes and a decrease in natural gas purchases associated with the production of equity NGLs primarily due to lower natural gas prices. An increase in olefin feedstock purchases primarily due to resuming our Geismar operations partially offset these decreaecreases. Operating and maintenance expenses includes $14 million of severance and related costs recognized in 2016 associated with workforce reductions. This increase was substantially offset by lower operating costs including electric power costs, outside services fees, and materials and supplies expenses. Depreciation and amortization expenses increased primarily due to depreciation on new projects placed in service, including Gulfstar One and the Geismar expansion. Selling, general, and administrative expenses increased primarily due to expenses associated with increased growth in operations acquired in the ACMP Acquisition,certain project development costs associated with the Canadian PDH facility that we began expensing in 2016 as well as $182 million of costs associated with our evaluation of strategic alternativeseverance and related costs recognized in 2016 associated with workforce reductions. These increases were partially offset by a $16 million decrease in acquisition,lower merger, and transition expensecosts associated with the ACMP Acquisition. Other (income) expense net within Operating income (loss) changed unfavorably primarily due to the absence of a 2014Merger. (See Note 4 Other Income and Expenses of Notes to Consolidated Financial Statements.) Other (income) expense net within Operating income (loss) includes an unfavorable change in net foreign currency exchange gains and losses, which was substantially offset by a $120 million net gain related to a partial acreage dedication releason the sale of unused pipe. Operating income (loss) changed favorably primarily due to increased service revenues related to construction projects placed in service, higher volumes related to new well connects from our gathering operations, $58 million higher olefin margins, and $18 million lower acquisition, merger, and transitionhigher olefin margins related to the resumption of operations at Geismar, higher fee revenues from expansion projects placed in service in 2015 and 2016 and lower costs related to the merger and integration of ACMP. These increases were partially offset by higher depreciation expenses related to constructionnew projects placed in service and $68 million lower NGL margins driven by lower prices, severance and related workforce reduction costs recognized in 2016 and higher project development costs, as previously discussed. Equity earnings (losses) changed favorably primarily due to a $285 million increase at Discovery primarily related to the completion of the Keathley Canyon Connector in early 2015 and the absence of ourthe first quarter of 2015. Additionally, UEOM contributed $190 million share of compensation costs triggered by the ACMP Acquisition in July 2014. These favorable changes were partially offset by a $16 millionprimarily due to an increase in our ownership percentage and Laurel Mountain contributed $9 million primarily related to the absence of impairments recognized during the first quarter of 2015. Impairment of equity-method investments reflects 2016 impairment charge in 2015s associated with certain equity-method investments. (See Note 43 Investing Activities of Notes to Consolidated Financial Statements). Gain on remeasurement of equity-method investment reflects the 2014 gain recognized as a result of remeasuring to fair value the equity-method investment that we held before we acquired a controlling interest in ACMP. Impairment of equity-method investments reflects a 2015 impairment charge associated with certain equity-method investmen.) Other investing income (loss) - net reflects higher interest income associated with a receivable related to the sale of certain former Venezuela assets. (sSee Note 43 Investing Activities of Notes to Consolidated Financial Statements).) Interest expense increased due to ahigher Interest incurred of $353 million decrease inprimarily attributable to new debt issuances in 2016 and 2015 as well as lower Interest capitalized of $7 million primarily related to construction projects that have been placed into service, partially offset by capitalized interest associated with assets acquired in the ACMP Acquisition. In addition, Interest incurrlower interest due to 2015 debt retirements. (See Note 9 Debt and Banking Arrangements of Notes to Consolidated Fincreased $18 million primarily due to new debt issuances in 2015, partially offset by lower interest associated with 2015 debt retirementsancial Statements.) Provision (benefit) for income taxes changed favorably primarily due to lower pretax income. (See Note 2 Acquisitions and Note 10 Debt and Banking Arrangements of Notes to Consolidated Financial Statements.) Other income (expense) net below Operating income (loss) changed favorably primarily due to a $10 million benefit related to an in5 Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rates compared to the federal statutory rate for both periods. The unfavorable change in Net income (loss) attributable to noncontrolling interests related to our investment in WPZ is primarily due to decreased income allowance for equity funds used during construction (AFUDC) associated with an increase in spending on various Transco expansion projects and Constitutioncated to the WPZ general partner driven by the impact of reduced incentive distributions from WPZ associated with the termination of the WPZ Merger Agreement and the absence of the accelerated amortization of a beneficial conversion feature from the first quarter of 2015, partially offset by the impact of lower operating results at WPZ. Period-Over-Period Operating Results - Segments 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) .
4
85
Managements Discussion and Analysis (Continued)
Provision (benefit) for income taxes changed favorably primarily due to lower pretax income. See Note 6 Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rates compared to the federal statutory rate for both periods. The favorable change in Net income (loss) attributable to noncontrolling interests related to our investment in WPZ is primarily due to lower operating results at WPZ and increased income allocated to the WPZ general partner, held by us, associated with IDRs. Nine months ended September30, 2015 vs. nine months ended September30, 2014 Service revenues increased primarily due to additional revenues associated with ACMP operations during the first half of 2015, increased revenues associated with the start-up of operations at Gulfstar One during the fourth quarter of 2014, and an increase in Transcos natural gas transportation fees due to new projects placed in service in 2014 and 2015. Revenues from operations associated with the ACMP Acquisition and the northeast region also increased due to higher volumes related to new well connects. A decrease in Canadian construction management revenues, reflecting a shift to internal customer construction projects, partially offset these increases. Product sales decreased due to a decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher non-ethane volumes, and a decrease in revenues from our equity NGLs reflecting lower NGL prices, partially offset by higher NGL volumes. These decreases are partially offset by an increase in olefin sales primarily due to resuming our Geismar operations during 2015. Product costs decreased due to a decrease in marketing purchases primarily associated with a decrease in per-unit costs, partially offset by higher non-ethane volumes, and a decrease in natural gas purchases associated with the production of equity NGLs primarily due to decreased natural gas prices, partially offset by higher volumes. These decreases are partially offset by an increase in olefin feedstock purchases primarily associated with resuming our Geismar operations. Operating and maintenance expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, increased growth of operating activity in certain areas, increased maintenance and repair expenses, and the return to operations of the Geismar plant. 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 and the Geismar expansion. Selling, general, and administrative expenses increased primarily due to administrative expenses associated with operations acquired in the ACMP Acquisition, including $44 million higher ACMP merger and transition-related costs, partially offset by the absence of $15 million of acquisition costs incurred in 2014. In addition, 2015 includes $25 million of costs associated with our evaluation of 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. Other (income) expense net within Operating income changed unfavorably primarily due to $29 million of impairments of certain assets at Williams Partners in 2015 compared to $17 million in 2014, the absence of a $12 million net gain recognized in 2014 related to a partial acreage dedication release, as well as an unfavorable change in the deferral of asset retirement obligation-related depreciation to a regulatory asset. These changes are partially offset by a $12 million benefit related to insurance proceeds received in 2015 related to certain claims from prior years. Operating income (loss) changed unfavorably primarily due to higher depreciation, operating, and maintenance expenses related to construction projects placed in service and the start-up of the Geismar plant, $186 million lower
49
Managements Discussion and Analysis (Continued)
NGL margins driven by lower prices, lower insurance recoveries related to the Geismar Incident, higher costs related to the merger and integration of ACMP into WPZ, and 2015 strategic alternative expenses. These decreases were partially offset by increased service revenues related to construction projects placed in service, $73 million higher olefin margins primarily due to our Geismar plant that returned to operations in 2015, and contributions from the operations acquired in the ACMP Acquisition. Equity earnings (losses) changed favorably primarily due to the absence of equity losses from Bluegrass Pipeline and Moss Lake in 2014 and due to contributions from investments acquired in the ACMP Acquisition. In addition, equity earnings at Discovery increased $51 million primarily related to the completion of the Keathley Canyon Connector in early 2015. Gain on remeasurement of equity-method investment reflects the 2014 gain recognized as a result of remeasuring to fair value the equity-method investment that we held before we acquired a controlling interest in ACMP. Impairment of equity-method investments reflects a 2015 impairment charge associated with certain equity-method investments (see Note 4 Investing Activities of Notes to Consolidated Financial Statements). Other investing income (loss) net changed unfavorably primarily due to lower interest income associated with a receivable related to the sale of certain former Venezuela assets. Interest expense increased due to a $208 million increase in Interest incurred primarily due to new debt issuances in 2014 and 2015 and interest expense associated with debt assumed in conjunction with the ACMP Acquisition. This increase was partially offset by a $9 million 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 $55 million primarily related to construction projects that have been placed into service, partially offset by new capitalized interest attributable to ACMP. Other income (expense) net below Operating income (loss) changed favorably primarily due to a $36 million benefit related to an increase in AFUDC associated with 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 6 Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rates compared to the federal statutory rate for both periods. The favorable change in Net income (loss) attributable to noncontrolling interests related to our investment in WPZ is primarily due to lower operating results at WPZ and the impact of increased income allocated to the WPZ general partner, held by us, associated with IDRs. These changes are partially offset by an increase related to our investment in Gulfstar One associated with its start up in 2014. Period-Over-Period Operating Results - Segments Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA . Note 14 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 investors an enhanced perspective of the operating performance of our assets. Modified EBITDA should not be considered in isolation or as a substitute for a measure of performance prepared in accordance with GAAP.
50
Managements Discussion and Analysis (Continued)
ilasPrnr



Three Months Ended
September 30,
Nine Months Ended
September 30
March 31,
2016
2015
2014
2015
2014

(Millions)

Service revenues
$
1,2
326
$
1,066
$
3,655
$
2,5
19

Product sales
560
942
1,678
2,725
428
519


Segment revenues
1,
792
2,008
5,333
5,317
654
1,711



Product costs
(426317
)
(807463
)
(1,383
)
(2,300
)

Other segment costs and expenses
(53071
)
(50867
)
(1,689
)
(1,297
)

Net insurance recoveries Geismar Incident
126
161

Proportional Modified EBITDA of equity-method investments
1859
1
50
504
26
36
Williams Partners Modified EBITDA
$
1,021955
$
8
43
$
2,891
$
2,14
17

NGL margin
$
374
$
105
$
118
$
30
44
Olefin margin
85
27
155
82
71
9
Three months ended March31, 2016 vs. three months ended March31, 2015 Modified EBITDA increased primarily due to higher olefin margins associated with resuming our Geismar operations and higher earnings from the completion of the Keathley Canyon Connector at Discovery, our increased ownership percentage of UEOM, and the absence of first-quarter 2015 impairments at Laurel Mountain. Additionally, higher service revenues related to projects placed in service improved Modified EBITDA . The increase in Service revenues is primarily due to a $36 million increase in natural gas transportation fees associated with new Transco projects placed in service in 2015 and 2016. Additionally, Service revenues increased related to Utica Shale gathering revenues primarily due to growth in volumes. These increases were partially offset by a $15 million decrease in Transcos storage revenue related to potential refunds associated with a ruling received in certain rate case litigation in 2016. The decrease in Product sales includes:


Marketing margin
7
(4
)
13
13
Three months ended September30, 2015 vs. three months ended September30, 2014 Modified EBITDA increased primarily due to new revenue related to construction projects placed in service including Gulfstar One during fourth quarter 2014, resuming our Geismar operations, and increased gathering volumes related to new well connects in addition to contributions related to the completion of the Keathley Canyon Connector at Discovery. 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. The increase in Service revenues is primarily due to $62 million of new fees associated with the start-up of Gulfstar One operations during the fourth quarter of 2014, and a $51 million increase in natural gas transportation fees due to new Transco projects placed in service in 2014 and 2015. Additionally, gathering fees increased $37 million primarily due to increased volumes related to new well connects. The decrease in Product sales includes:

A $121 million decrease in marketing revenues primarily due to lower NGL, natural gas, and crude oil prices and lower NGL and crude oil volumes (more than offset in marketing purchases);

A $390 million decrease in marketing revenues primarily associated with lower prices across all products and lower ethane and crude volumes (more than offset in marketing purchases).

A $23 million decrease in revenues from our equity NGLs primarily due to a $34 million decrease associated with lower NGL prices, partially offset by an $11 million increase associated with higher volumes;

A $93 million decrease in revenues from our equity NGLs reflecting $94 million associated with lower NGL prices.

A $5 million decrease in system management gas sales from Transco. System management gas sales are offset in Product costs and, therefore, have no impact on Modified EBITDA;

A $101 million increase in olefin sales primarily due to resuming our Geismar operations. The decrease in Product costs includes:


A $
40165 million deincrease in marketing purchasolefin sales primarily due to lower per-unit costs and lower volumes (substantially offset in marketing revenues).


A
$96 million in higher sales from our Geismar plant that returned to operation in late March 2015, partially offset by a $250 million decrease in natural gas purchases associated with the production of equity NGLs primarily due to lower natural gas prices.


A $43
from our RGP Splitter and a $11 million indecrease in olefin feedstock purchases primarily due to resuming our Geismar operationfrom our Canadian operations, both driven by lower per-unit prices.
5146
Managements Discussion and Analysis (Continued)
The
indecrease in Other segment costs and expenseProduct costsicue:

A $
3128 million indecrease in operating costmarketing purchases primarily due to increased growth of operating activity in certain areas and higher repair and maintenance explower per-unit costs and lower volumes (substantially offset in marketing revensues.);


A $
613 million indecrease in other costs that include the absence of a $12 million net gain recognized in 2014 related to a partial acreage dedication release, offset by a $12 million benefit related to insurancenatural gas purchases associated with the production of equity NGLs primarily due to lower natural gas proiceeds received in 2015 related to certain claims from prior years.s, partially offset by higher volumes;


A $
125 million decrease in administrative expenses primarily due to $20 million lower acquisition, merger, and transition costs associated with the ACMP Acquisition and Merger, partially offset by increases associated with growth of operating activity in certain areas.system management gas costs (offset in Product sales );


A $
103 million benefit related to a favorable change in AFUDC relatincrease in olefin feed sto higher spending on various Transco expansion projects and Constitution. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to ack purchases primarily comprised of $356 million increase from Discov highery primarily associated with higher fee revenues attributable to the completion of the Keathley Canyon Connector in the first quarter of 2015. Additionally, Caiman II increased $7 million resulting from assets placed into service in 2014 and 2015. These increases areurchases due to increased volumes at our Geismar plant as it returned to operation in late March 2015, partially offset by a $13$31 million decrease at Appalachian Midstream Investments primarily related to our share of impairments in 2015 (see Note 4 Investing Activities of Notes to Consolidated Financial Statements). Nine months ended September30, 2015 vs. nine months ended September30, 2014 Modified EBITDA increased primarily due to the acquisition of ACMP during the third quarter of 2014 and increased fee revenue associated with contributions from new and expanded facilities, including Gulfstar One durlower per-unit purchase costs at our RGP Splitter and $2 million lower per-unit purchase costs in our Canadian operations. The increase in Other segment costs and expenses is primarily due to $25 million of severance and related costs associated with workforce reductions incurred ing the fourthirst quarter 2014, in addition to resuming our Geismar operations and contributionsof 2016 and a $16 million unfavorable change in foreign currency exchange that primarily relateds to the completion of the Keathley Canyon Connector at Discovery. Partially offsetting these increases to Modified EBITDA is a decrease in NGL margins as a result of a significant decline in energy commodity prices beginning in the fourth quarter of 2014 and lower insurance recoveries related to the Geismar Incident. The increase in Service revenuelosses incurred on foreign currency transactions and the remeasurement of the U.S. dollar-denominated current assets and liabilities within our Canadian operations, partially offset by $28 million lower ACMP Merger and transition-related expenses. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to $666a $28 million additional revenues associated with ACMP operations during the first half of 2015, $183 million in increased revenues associated with the start-up of operations at Gulfstar One durincrease from Discovery primarily associated with higher fee revenues attributable to the completion of the Keathley Canyon Connector ing the fourthirst quarter of 2014, and a $109 million increase in Transcos natural gas transportation fees due to new projects placed in service in 2014 and 2015. Additionally, service revenues reflect higher fees associated with increased volumes and additional contributions from expanded gathering operations, primarily at our operations 5. Additionally, UEOM contributed $11 million primarily due to an increase in our ownership percentage and Laurel Mountain contributed $10 million primarily due to the absence of impairments recognized during the Northeast. The decrease in Product sales includfirst quarter of 2015. Williams NGL& Petchem Services:


A $931 million decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher non-ethane volumes (offset in marketing purchases).

Three Months Ended
March 31,

A $260 million decrease in revenues from our equity NGLs reflecting a decrease of $303 million due to lower NGL prices, partially offset by a $43 million increase associated with higher NGL volumes.


A $15 million decrease in revenues associated with various other products.


A $159 million increase in olefin sales primarily due to resuming our Geismar operations during 2015. The decrease in Product costs includes:


A $931 million decrease in marketing purchases primarily due to a decrease in per-unit costs, partially offset by higher non-ethane volumes (offset in marketing revenues).
52
Managements Discussion and Analysis (Continued)


A $74 million decrease in the natural gas purchases associated with the production of equity NGLs reflecting a decrease of $99 million due to lower natural gas prices, partially offset by a $25 increase associated with higher volumes.


An $86 million increase in olefin feedstock purchases primarily associated with resuming our Geismar operations. The increase in Other segment costs and expenses includes:


A $343 million increase in operating costs primarily due to new expenses associated with operations acquired in the ACMP Acquisition, increased growth of operating activity in certain areas, and increased maintenance and repair expenses in addition to increased expenses associated with the return to operation of the Geismar plant .


An $81 million increase in administrative expenses primarily associated with operations acquired in the ACMP Acquisition, including $27 million higher merger and transition-related costs, partially offset by the absence of $15 million of acquisition-related costs incurred in 2014.


An $18 million increase in other costs including $29 million of impairments of certain assets in 2015 compared to $17 million in 2014, the absence of a $12 million net gain recognized in 2014 related to a partial acreage dedication release and an unfavorable change in the deferral of asset retirement obligation-related depreciation to a regulatory asset. These increases are partially offset by a $12 million benefit related to insurance proceeds received in 2015 related to certain claims from prior years.


A $14 million gain associated with early retirement of certain debt in 2015.


A $36 million benefit related to an increase in AFUDC due to higher spending on various Transco expansion projects and Constitution. The decrease in Net insurance recoveries - Geismar Incident is primarily due to the 2015 receipt of $126 million of insurance proceeds compared to $175 million received in 2014, partially offset by the absence of covered insurable expenses in excess of our retentions (deductibles) related to the Geismar Incident in 2015 compared to $14 million in 2014. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to a $172 million contribution during the first half of 2015 from investments acquired in the ACMP Acquisition and a $69 million increase from Discovery associated with higher fee revenues attributable to the completion of the Keathley Canyon Connector in the first quarter of 2015. Additionally, Caiman II increased $14 million resulting from assets placed into service in 2014 and 2015, partially offset by the absence of business interruption insurance proceeds received in the prior year, and OPPL increased $13 million due to higher transportation volumes. These increases are partially offset by a $13 million third-quarter decrease at Appalachia Midstream Investments as previously discussed, as well as a $12 million decrease at Aux Sable, which includes lower NGL margins, and a $10 million decrease at Laurel Mountain primarily due to our share of impairments and lower gathering fees due to lower gathering rates indexed to natural gas prices, partially offset by higher volumes and an increase in our ownership percentage compared to the prior year.
53
Managements Discussion and Analysis (Continued)
Williams NGL& Petchem Services



Three Months Ended
September 30,
Nine Months Ended
September 30,
2016
2015
2014
2015
2014

(Millions)

Segment revenuProduct sale
$
13
$
$
2
$

Segment costs and expenses
(6
)
(5

Product costs
(2

)
(15
)
(34
)

Proportional Modified EBITDA of equity-method investments
1
Other segment costs and expenses
(
7839
)

Williams NGL & Petchem Services Modified EBITDA
$
(5
)
$
(4
)
$
(13
)
$
(112
) Nine months ended September30, 2015 vs. nine months ended September30, 2014 The favorable change in Modified EBITDA is due primarily to the absence of our share of the write-off of previously capitalized project development costs at Bluegrass Pipeline and Moss Lake as well as costs incurred in 2014 relating to the development of the Bluegrass Pipeline. Segment costs and expenses decreased primarily due to the absence of $19 million of project development costs incurred in 2014 relating to the Bluegrass Pipeline. The favorable change in Proportional Modified EBITDA of equity-method investments is due to the absence of our share of the write-off of previously capitalized project development costs at Bluegrass Pipeline and Moss Lake incurred in 2014. Other



Three Months Ended
September 30,
Nine Months Ended
September 30,

2015
2014
2015
2014

(Millions)

Other
Williams NGL & Petchem Services oiidEID
$
(1738
)
$
(
175
)

$
(21
)
$
101
Three months ended September30March31, 20156 vs. three months ended September30, 2014 Modified EBITDA reflects the absence of our share of compensation costs triggered by the ACMP Acquisition of $19 million recognized in July 2014, substantially offset by $18 million of costs incurred in 2015 primarily related to evaluating our strategic alternatives and the Merger Agreement with Energy Transfer. Nine months ended September30, 2015 vs. nine months ended September30, 2014 Modified EBITDA decreased significantly as the results from the businesses acquired in the ACMP Acquisition are presented within Williams Partners for periods subsequent to the July 1, 2014, acquisition. Other includes the proportional Modified EBITDA of $104 million of our former equity-method investment in ACMP for periods prior to that date, which was partially offset by our share of $19 million of compensation costs triggered by the ACMP Acquisition recognized in July 2014. Modified EBITDA also decreased by $25 million related to costs incurred in 2015 related to evaluating our strategic alternatives and the Merger Agreement with Energy Transfer, as well as $19 million of higher costs associated with integration and re-alignment of resources following the ACMP Acquisition and Merger.
54
March31, 2015 The increase in Product sales and Product costs is primarily due to the Horizon Liquid Extraction Plant coming online in March 2016. The unfavorable change in Other segment costs and expenses primarily relates to certain project development costs associated with the Canadian PDH facility that we began expensing in 2016. (See Note 4 Other Income and Expenses of Notes to Consolidated Financial Statements.)
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 cniu otasto oa vrl uiesmxta sicesnl e-ae.Atog u ahfosaeipce yfutain neeg omdt rcs htipc ssmwa iiae ycrano u ahfo tem htaentdrcl matdb hr-emcmoiypiemvmns nldn:

Firm demand and capacity reservation transportation revenues under long-term contracts;


Fee-based revenues from certain gathering and processing services. However, we are indirectly exposed to longer duration depressed energy commodity prices and the related impact on drilling activities and volumes available for 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. In particular, as previously discussed in Company Outlook, our expected growth capital and investment expenditures total approximately $2.2 billion in 2016. We retain the flexibility to adjust planned levels of capital and investment expenditures in response to changes in economic conditions or business opportunities. In addition, we expect proceeds from planned asset monetizations in excess of $1 billion during 2016. 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 20156. 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 nld:

Cs n aheuvlnso ad


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 fund its cash needs through its cash flows from operations, and its credit facilities and/or commercial paper program, and its access to capital marketsTranscos recent debt issuance described further below, and planned asset monetizations as previously mentioned. WPZ does not plan to issue public equity or public debt in 2016. We anticipate ourthe oesgiiatue fcs ob:

Maintenance and expansion capital expenditure Working capital requirements


Contributions to our equity-method investees to fund theirMaintenance and expansion capital and investment xedtrs


Interest on our long-term debt;


Repayment of current debt maturities;


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 .
5548
Managements Discussion and Analysis (Continued)
As of
September30March31, 20156 , we had a working capital deficit (current liabilities, inclusive of c$135 million in Commercial paper outstanding and l$976 million in Long-term debt due within one year , in excess of current assets) of $2.594 billion . Excluding the impact of the $1.530 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 $1.0641.528 ilo u vial iudt sa olw:


September30March31, 20156

Available Liquidity
WPZ
WMB
Total

(Millions)

Cash and cash equivalents
$
11025
$
1539
$
12564

Capacity available under our $1.5 billion credit facility (1)
1,125
1,12
465
46
5
Capacity available to WPZ under its $3.5 billion credit facility
, less amounts outstanding under its $3 billion commercial paper program (2)
1,470
1,47
2,740
2,74
0
Capacity available to WPZ under its $1 billion short-term credit facility (3)
1
,0050
1
,0050
$
2,5803,015
$
1,140504
$
3,720519





(1)
Th
rough March31, 2016 , the highest amount outstanding under our credit facility during 20156 was $451.075 mbillion. At September30March31, 20156 , we were in compliance with the financial covenants associated with this credit facility. See Note 10 Debt and Banking Arrangements of Notes to Consolidated Financial Statements for additional information on our credit facilityBorrowing capacity available under this facility as of May 3, 2016, was $461 million.

(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 $1.530 billion of commercial paper outstanding at September 30, 2015. TThrough March31, 2016 , the highest amount outstanding under WPZs commercial paper program and credit facility during 20156 was $3.11.856 billion. At September30March31, 20156 , WPZ was in compliance with the financial covenants associated with this credit facility and the commercial paper program. See Note 109 Debt and Banking Arrangements of Notes to Consolidated Financial Statements for additional information on WPZs credit facility and WPZs commercial paper programommercial paper program. Borrowing capacity available under this facility as of May 3, 2016, was $2.707 billion.

(3)
See Note 10 Debt and Banking Arrangements of Notes to Consolidated Financial Statements for additional information on WPZs short-term credit facility entered into August 26, 2015, and WPZs short-term fBorrowing capacility terminated March 3, 2015.
On September 24, 2015, WPZ received a special distribution of $396 million from Gulfstream reflecting its proportional share of the proceeds from new debt issued by Gulfstream. The new debt was issued to refinance Gulfstreams current debt maturities and WPZ will contribute its proportional share of amounts necessary to fund those current maturities of $500 million on November 1
available under this facility as of May 3, 20156, and $300 million on June 1, 2016was $150 million. WPZ Incentive Distribution Rights Our ownership interest in WPZ includes the right to incentive distributions determined in accordance with WPZs partnership agreement. We have agreed to temporarily waive incentive distributions of $2.403approximately $2 million per quarter in connection with WPZs acquisition of 13.0an approximate 13 percent additional interest in UEOM on June 10, 2015. The waiver will continue through the quarter ending September 30, 2017. We awere required to pay a $428 million termination fee to WPZ, of which we currently own approximately 60 percent, including the interests of the general partner and incentive distribution rights. Such termination fee willassociated with the Termination Agreement (as described in Note 1 General, Description of Business, and Basis of Presentation of Notes to Consolidated Financial Statements), which was to be settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $209 million per quarter). The nextNovember 2015 and February 2016 distributions from WPZ in November 2015were each reduced by $209 million related to this termination fee. The May 2016 distribution to be received from WPZ will be reduced by $209the final $10 million related to this termination fee (see Note 1 General, Description of Bus. Debt Issuances and Retirements Transco retired $200 million of 6.4 percent senior unsecured notes that matured on April 15, 2016. On January 22,2016, Transco issued $1 billion of 7.85 percent senior unsecured notes due 2026 to invess, and Basis of Presentation of Notes to Consolidated Financial Statements.)
56
tors in a private debt placement. Transco used the net proceeds from the offering to repay debt and to fund capital expenditures. Shelf Registrations In May 2015, we filed a shelf registration statement, as a well-known seasoned issuer. In February 2015, WPZ filed a shelf registration statement, as a well-known seasoned issuer and WPZ also filed a shelf registration statement for the offer and sale from time to time of common units representing limited partner
49

Managements Discussion and Analysis (Continued)
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 May 11, 2015, we filed a shelf registration statement, as a well-known seasoned issuer. On February 25, 2015, WPZ filed a shelf registration statement, as a well-known seasoned issuer and WPZ also 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 willare to 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 willare to 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 September30From February 2015 through March31, 20156 , no common units have beenwe have received net proceeds of approximately $59 million from equity sududrti eitain itiuin rmEut-ehdIvsesTeognztoa ouet fette nwihw aea qiymto neetgnrlyrqiedsrbto fteraalbecs otermmeso urel ai.I ahcs,aalbecs srdcd npr,b eevsaporaefroeaigterrsetv uiess rdtRtnsOraiiyt orwmnyi matdb u rdtrtnsadtecei aig fWZ h urn aig r sflos



Rtn gny Outlook
Senior Unsecured Debt Rating
Corporate CreditRating


WMB:
Standard & Poors
Stable
BB+
BB
+

Moodys Investors Service
Ratings Under Review For Downgrade
Baa31
N/A

Fitch Ratings
Rating Watch Negative
BBB-+
N/A


WPZ:
Standard & Poors
StablNegative
BBB
-
BBB
-

Moodys Investors Service
Negative
Baa23
N/A

Fitch Ratings
Rating Watch NegativStable
BBB
-
N/A
As previously discussed, on September 28, 2015, we entered into a Merger Agreement with Energy Transfer and certain of its affiliates. Following this announcement, the credit ratings agencies affConsidering our current credit ratings as of March31, 2016 , we estimate that we could be requirmed and/or revised the outlook and ratings as noted in the table above. While Moodys Investors Service made no changes to the outlook for WPZ, the other agencies revised the outlook of both WMB and WPZ.
Credit rating agencies perform independent analyses when assigning credit ratings. No assurance can be given tha
to provide up to $214 million in additional collateral of either cash or letters of credit with third parties under existing contracts.At the cpredit 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
57
Managements Discussion and Analysis (Continued)
September30
sent time, we have not provided any additional collateral to third parties but no assurance can be given that we will not be requested to provide collateral in the future. As of March31, 20156 , we estimate that a downgrade to a rating below investment grade for us or WPZ could require usit to postrovide up to $1.5283 million or $271million, respectively, in additional collateral with third parties. Capital and Investment Expenditures Each of our businesses is capital-intensive, requiring investment to upgrade or enhance existing operations and comply with safety and environmental regulations. The capital requirements of these businesses consist primarily ofSources (Uses) of Cash The following table summarizes the increase (decrease) in cash and cash equivalents for each of the periods presented:

Maintenance capital expenditures, which are generally not discretionary, including: (1)capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives; (2)expenditures which are mandatory and/or essential to comply with laws and regulations and maintain the reliability of our operations; and (3)certain well connection expenditures.

Three Months Ended
March 31,

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
Nine Months Ended
September 30, 2015

(Millions)

Maintenance
$
490
$
261

Expansion
3,785
2,691

Total
$
4,275
$
2,952
See Company Outlook - Expansion Projects for discussions describing the general nature of these expenditures. Sources (Uses) of Cash



Nine Months Ended
September 30,
2016
2015
2014

(Millions)

Net cash provided (used) by:

Operating activities
$
2,086779
$
1,104669

Financing activities
506
7,527
(369
)
188


Investing activities
(2,707346
)
(9,010756
)

Increase (decrease) in cash and cash equivalents
$
(115
)
64
$
(379
)
101
Operating activities The factors that determine operating activities are largely the same as those that affect Net income (loss) , with the exception of noncash items such as Gain on remeasurement of equity-method investmentDepreciation and amortization , Impairment of equity-method investments , 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 absence of contributions from ACMP for the first six months of 2014.in 2016 increased
5
80
Managements Discussion and Analysis (Continued)
from 2015 primarily due to the impact of higher operating income and cash received related to Hillabee (see Expansion Projects), partially offset by net unfavorable changes in operating working capital. Fnnigatvte infcn rnatosicue


$727 $365 million in 20156 and $3799 million in 20145 of net proceeds fromayments for Pscmeca ae;

$
1.895 billion998 million in 2016 and $2.992 billion in 2015 net received in 2014 from ourWPZs etofrns


$
2.992 billion in 2015 and $2.740 billion in 2014 net received from WPZs debt offering750 million paid in 2015 on WPZs debt retirements


$
1.533 billion paid in 2015 on WPZs debt retirement850 million in 2016 and $430 million in 2015 received from our credit facility borrowings


$
1.43465 bmillion received in 20156 and $670425 million received in 2014 fromin 2015 paid on u rdtfclt orwns


$
1.43840 bmillion paid in 20156 and $350 million paid in 2014 on our1.832 billion in 2015 received from WPZs rdtfclt orwns


$
2.4571.525 billion received in 20156 and $829 million received in 2014 from2.472 billion in 2015 paid on Pscei aiiybroig;

$
2.597 b480 million paid in 20156 and $513434 million paid in 2014 on WPZs credit facility borrowings5 paid for quarterly dividends on common stock;

$
3.378 billion received in 2014 from our equity offering;236 million in 2016 and $228 million in 2015 paid for dividends and distributions to noncontrolling interests. Investing activities Significant transactions include:


$1.356 bCapital expenditures of $513 million in 20156 and $986832 million in 2014 paid for quarterly dividends on common stock5 ;

$704 million in 2015 and $509 million in 2014 paid for dividends and distributions to noncontrolling interestsPurchases of and contributions to our equity-method investments of $63 million in 2016 and $83 million in 2015 ;

$85 million in 2015 and $260 million in 2014 received in contributions from noncontrolling interests;


$396 million special distribution from Gulfstream in 2015. Investing activities Significant transactions include:


Capital expenditures of $2.425 billion in 2015 and $2.943 billion in 2014;


$112 million paid in 2015 to purchase a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility in the Eagle Ford shale;


$5.958 billion paid, net of cash acquired, in 2014 for the ACMP Acquisition;


Purchases of and contributions to our equity-method investments of $529 million in 2015 and $345 million in 2014;


Distributions from unconsolidated affiliates in excess of cumulative earnings of $251109 million in 20156 and $16593 million in 20145 . Off-Balance Sheet Financing Arrangements and Guarantees of Debt or Other Commitments We have various other guarantees and commitments which are disclosed in Note 32 Variable Interest Entities , Note 9 Debt and Banking Arrangements , Note 112 Fair Value Measurements and Guarantees , and Note 132 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.
59 51
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
ninthree months of 20156 . 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 $1.36 billion at both September30nd $1.4 billion at March31, 20156 and December31, 2014 5 , 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 $172 million at Sept210 million and $179 million at March31, 2016 and December301, 2015 , respectively.
6052
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
thirdfirst quarter of 20156 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 Fort. Beeler gas processing facility located in West Virginia. We notified the EPA and the West Virginia Department of Environmental Protection and are workinged to bring the Fort. Beeler facility into full compliance. At September30March31, 20156 , we haved accrued liabilities of $140,000 for potential penalties arising out of the deficiencies. On November 7, and on April 26, 20146, the New Mexico EnvirEPA executed a conmsent Departments Air Quality Bureau (Bureau) issued a Notice of Violation (NOV) to Williams Four Corners LLC (Williams Four Corners) for the El Cedro Gas Treating Plant alleging a failure by Williams Four Corners 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
61
the
order resolving various air permitting and emissions issues requiring payment of $140,000 in civil penalties.We do not anticipate penalties being imposed by the West Virginia Department of Environmental Protection. On January 21, 2016, we received a Compliant. During the third quarter of 2015, Williams Four Corners paid $30,111 to resolve the NOV and was notified by the Bureau on August 17, 2015, that it had satisfied all requirements under the settlement agreement. Other The additional information called for by this item is provided in Note 13 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: The pendency of the proposed ETC Merger could adversely affect our business and operations. In connection with the proposed ETC Merger, some of our customers or vendors may delay or defer decisions, which could negatively impact our revenues, earnings, cash flows and expenses, regardless of whether the proposed ETC Merger is completed. Similarly, our current and prospective employees may experience uncertainty about their future roles following the proposed ETC Merger, which may materially adversely affect our ability to attract and retain key personnel during the pendency of the proposed ETC Merger. If we fail to complete the proposed ETC Merger, it may be difficult and expensive to recruit and hire replacements for departed employees. The proposed ETC Merger, its effects and related matters may also distract our employees from day-to-day operations and require substantial commitments of time and resources. In addition, due to operating covenants in the Merger Agreement, we may be unable, during the pendency of the proposed ETC Merger, to pursue certain strategic transactions, undertake certain significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business. There can be no assurance when or even if the proposed ETC Merger will be completed. Completion of the proposed ETC Merger is subject to the satisfaction or waiver of a number of customary closing conditionce Order from the Pennsylvania Department of Environmental Protection requiring the correction of several alleged deficiencies arising out of the construction of the Springville Gathering Line, the Pennsylvania Mainline Gathering Line, and the 2008 Core Zone Gathering Line. The Order also identifies civil penalties in the amount of approximately $712,000. We are working with the Pennsylvania Department
53
of Environmental Protection to address certain issues and are in the process of negotiating the Order and the associated penalty. Litigation against Energy Transfer and related parties On April 6, 2016, we filed suit in Delaware Chancery Court against Energy Transfer and LE GP, LLC alleging willful and material breaches of the Merger Agreement resulting from the private offering by Energy Transfer on March8, 2016, of Series A Convertible Preferred Units (the Special Offering) to certain Energy Transfer insiders and other accredited investors. The suit seeks, among other things, an injunction ordering the defendants to unwind the Special Offering and to specifically perform their obligations under the Merger Agreement. On April 14, 2016, the Delaware Chancery Court granted our request to expedite the litigation, and on April 22, 2016, the court agreed to schedule a hearing during the week of June 13, 2016, regarding our request to unwind the Special Offering. On May 3, 2016, Energy Transfer and LE GP, LLC filed an answer and counterclaim. The counterclaim asserts that we materially breached our obligations under the Merger Agreement by (i) blocking Energy Transfers attempts to complete a public offering of the Convertible Unit
s, including, approval of the proposed ETC Merger by our stockholders, receipt of required regulatory approvals in connection with the proposed ETC Merger, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and effectiveness of a registration statement on Form S-4 registering the ETC common shares (and attached CCRs) to be issued in connection with the proposed ETC Merger. There can be no assurance that we, ETC, and Energy Transfer will be able to satisfy the closing conditions or that closing conditions beyond their or our control will be satisfied or waived. We and Energy Transfer can mutually agree at any time to terminate the Merger Agreement, even if our stockholders have already voted to approve the Merger Agreement. We and Energy Transfer can also terminate the Merger Agreement under other specified circumstances. Ifmong other things, by declining to allow our independent registered public accounting firm to provide the auditor consent required to be included in the registration statement for a public offering, and (ii) bringing the action against Kelcy L.Warren in the District Court of Dallas County, Texas (see below.) We believe that Energy Transfer and LE GP, LLCs counterclaim is without merit. On April 6, 2016, we filed suit in the District Court of Dallas County, Texas, against Kelcy L. Warren, Energy Transfers largest unitholder, claiming that Mr. Warren tortiously interfered with the Merger Agreement by willfully, intentionally, and maliciously orchestrating the Special Offering with the puroposed ETC Merger is not completed, we will be subject to a number of risks, including the following:


Because the current price of shares of our common stock may reflect a market premium based on the assumption that we will complete the proposed ETC Merger, a failure to complete the proposed ETC Merger could result in a decline in the price of shares of our common stock;


In specified circumstances, we may be required to pay Energy Transfer a termination fee of $1.48 billion;


We will not realize the benefits expected from being part of a larger combined organization;
62


We have incurred and expect
and effect of siphoning value to Mr. Warren and away from our stockholders and Energy Transfers other common unitholders, in breach of the Merger Agreement. The suit seeks, among other things, compensatory and exemplary damages. Other The additional information called for by this item is provided in Note 12 Contingent Liabilities of the Notes to cContinue incurring a number of non-recurring ETC Merger-related expenses that must be paid even if the proposed ETC Merger is not completed. In addisolidated Financial Statements included under Part I, Item1. Financial Statements of this report, which information, if the proposed ETC Merger is not completed, we may exps incorporated by referience negative reactions from the financial markets and from our customers and employees. We also could be subject to litigation related to any failure to complete the proposed ETC Merger or to proceedings commenced against us to attempt to force us to perform our obligations under the Merger Agreement. The Merger Agreement contains provisions that could discourage a potential competing acquirer of us or could result in any competing proposal being at a lower price than it might otherwise be. The Merger Agreement contains provisions that, subject to certain exceptions, restrict our ability to solicit, encourage, facilitate or discuss competing third-party proposals to acquire all or a significant part of us. In addition, Energy Transfer will have an opportunity to negotiate with us in response to any competing proposal that may be made before our board of directors is permitted to withdraw or qualify its recommendation. In some circumstances, upon termination of the Merger Agreement, we may be required to pay to Energy Transfer a termination fee of $1.48 billion. These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of us from considering or proposing that acquisition, evinto 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, 2015, 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: We have filed lawsuits against ETE, LE GP and Kelcy L. Warren in relation to ETEs private offering and issuance of Series A Convertible Preferred Units (Convertible Units). If we are unsuccessful in our lawsuits, our current stockholders may not realize all of the anticipated benefits contemplated by the Merger Agreement and may be disadvantaged relative to the holders of the Convertible Units. We have reviewed the terms of the plan governing the Convertible Units offering (Plan) and the Convertible Units and ETEs description of the Plan and the Convertible Units and believe that the Convertible Units offering required our consent under the Merger Agreement and that by proceeding without such consent, ETE violated the Merger Agreement. We have filed a lawsuit in the Court of Chancery of the State of Delaware for breach of the Merger Agreement seeking, among other things, to unwind the private offering of Convertible Units. We have also filed a lawsuit against Kelcy L. Warren, if it were prepared to pay consideration with a higher value than the consideration proposed to be received or realized in the proposed ETC Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances. The integration of our business following the proposed ETC Merger will involve considerable risks and may not be successful. Achieving the anticin his capacity as the largest ETE unitholder, in the District Court of Dallas County, Texas, for tortious interference with the Merger Agreement in connection with the Convertible Units offering, seeking damages, among other things. We claim that Mr. Warren induced ETE to undertake the Convertible Units offering. If the Convertible Units are allowed to remain outstanding and the ETC Merger closes, ETC unitholders, including our current stockholders, may be negatively impacted benefits of the proposed ETC Merger will depend in part upon whether Energy Transfer can integrate our businesses in an effective and efficient manner. If the proposed ETC Merger is consummated, Energy Transfer may not be able to accomplish this integration process successfully. Successfully achieving the benefits of the proposed ETC Merger would depend in part on the integration of assets, op. For instance, following the ETC Merger our current stockholders will hold ETC common shares and ETCs sole asset will be Class E Units issued by ETE. If the Convertible Units were to remain outstanding, such Class E Units would be subordinated to the Convertible Units regarding the right to receive ETE distributions. Further, upon the conversion of the Converations, functions and personnel, the ultimate outcome of Energy Transfers operating strategy applied to our business and the ultimate ability to realize cost savings and synergiesble Units into ETE common units as provided
54
in the Plan, then existing ETE equity holders who did not participate in the Convertible Units offering, which
following the proposed ETC Merger. Any cost savings and synergies, as well would include ETC as other revenue enhancement opportunities anticipated from the proposed ETC Merger, may not occur. In addition, there will be integration costs and non-recurr holder of the ETE Class E Units, would suffer dilution. This could ultimately result in a reduction ing transaction costs associated with the proposed ETC Merger (such as fees paid to legal, financial, accounting and other advisors and other fees paid in conneche available cash for dividends on the ETC common shares that holders of our common stock would receive upon consummation withof the proposed ETC Merger) and achieving the expected cost savings and synergies associated therewith, and such costs may be significant. Stockholder litigation could prevent or delay the closing of the proposed ETC Merger or otherwise negatively impact our business and operations. We may incur additional costs in connection with the defense or settlement of the currently pending and any future stockholder litigation in connection with the proposed ETC Merger. Such litigation may adversely affect our ability to complete the proposed ETC Merger. Such litigation, as well as stockholder litigation relating to our previously proposed acquisition of publicly held WPZ common units representing limited partner interests which was subsequently terminated, could also have an adverse effect on our financial condition and results of operations.
63
. We believe that these lawsuits are an enforcement of our rights under the Merger Agreement and that these lawsuits are necessary to deliver to our stockholders the benefits of the Merger Agreement. At this preliminary stage, there is no way to predict the outcome of these lawsuits. In addition, the lawsuits could, among other things, adversely affect the business and results of operation, as well as the liquidity, of ETE and its affiliates and impact the trading price of the ETC common shares that holders of our common stock would receive upon consummation of the ETC Merger.
55

Item6.Exhibits



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).

Exhibit 2.2
Amendment No 1. to Agreement and Plan of Merger dated as of May 1, 2016, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on May 3, 2016 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).

Exhibit 2.3
Agreement and Plan of Merger dated as of September 28, 2015, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on October1, 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).

Ehbt.
Amended and Restated Certificate of Incorporation as supplemented (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 24, 2015, as Exhibit 3 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 4.1
Indenture, dated as of January 22, 2016, between Transcontinental Gas Pipe Line Company, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on January 22, 2016 as Exhibit 4.1 to The Williams Company, Incs current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.1
CreditRegistration Rights Agreement, dated as of AugustJanuary 262, 2015, among Williams Partners L.P., the lenders named therein, and Barclays Bank PLC as Administrative Agent (incorporated by reference to6, between Transcontinental Gas Pipe Line Company, LLC and each of the initial purchasers listed therein (filed on January 22, 2016 as Exhibit 10.1 to The Williams Partners L.P.s Current Report on Form 8-K (File No. 001-34831) filed on August 28, 2015Companies, Inc.s Form 8-K (File No. 001-04174) and incorporated herein by reference)

*
#Exhibit 10.2
Form of 2015 Short-Term Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officerComputation of Ratio of Earnings to Fixed Charges

*#Exhibit 10.3
Form of 2015 Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officers.

Exhibit 10.4
Termination Agreement and Release, dated as of September 28, 2015, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P. and WPZ GP LLC (incorporated by reference to Exhibit 10.1 to Current Report on Form8-K (File No. 001-04174) of The Williams Companies, Inc. filed with the Securities and Exchange Commission on September28, 2015).

*Exhibit 12
Computation of Ratio of Earnings to Combined Fixed Charges.

*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.

*Exhibit101.INS
XBRL Instance Document.

*Exhibit101.SCH
XBRL Taxonomy Extension Schema.

*xii11CL XBRL Taxonomy Extension Calculation Linkbase.
564



Exhibit No.
Description


*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 contract or compensatory plan or arrangement.


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.
657
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) October29May5, 20156
EXHIBIT INDEX



Exhibit No.
Description


Ehbt21 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).

Exhibit 2.2
Amendment No 1. to Agreement and Plan of Merger dated as of May 1, 2016, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on May 3, 2016 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).

Exhibit 2.3
Agreement and Plan of Merger dated as of September 28, 2015, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on October1, 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).

Ehbt.
Amended and Restated Certificate of Incorporation as supplemented (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 24, 2015, as Exhibit 3 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 4.1
Indenture, dated as of January 22, 2016, between Transcontinental Gas Pipe Line Company, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on January 22, 2016 as Exhibit 4.1 to The Williams Company, Inc.'s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.1
CreditRegistration Rights Agreement, dated as of AugustJanuary 262, 2015, among Williams Partners L.P., the lenders named therein, and Barclays Bank PLC as Administrative Agent (incorporated by reference to6, between Transcontinental Gas Pipe Line Company, LLC and each of the initial purchasers listed therein (filed on January 22, 2016 as Exhibit 10.1 to The Williams Partners L.P.s Current Report on Form 8-K (File No. 001-34831) filed on August 28, 2015Companies, Inc.s Form 8-K (File No. 001-04174) and incorporated herein by reference)

*
#Exhibit 10.2
Form of 2015 Short-Term Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officers.

*#Exhibit 10.3
Form of 2015 Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officer
Computation of Ratio of Earnings to Fixed Charges

Exhibit 10.4
Termination Agreement and Release, dated as of September 28, 2015, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P. and WPZ GP LLC (incorporated by reference to Exhibit 10.1 to Current Report on Form8-K (File No. 001-04174) of The Williams Companies, Inc. filed with the Securities and Exchange Commission on September28, 2015).

*Exhibit 12
Computation of Ratio of Earnings to Combined Fixed Charges.

*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.

*Exhibit101.INS
XBRL Instance Document.

*Exhibit101.SCH
XBRL Taxonomy Extension Schema.

*xii11CL XBRL Taxonomy Extension Calculation Linkbase.

*Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase.



Exhibit No.
Description


*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 contract or compensatory plan or arrangement.


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.