3. Proposed Transaction

The Application states that, on February 23, 2010, the board of directors of NW Natural authorized its officers and directors, subject to advance Commission approval, to take the actions necessary to transfer 100% of NW Natural's membership interest in GRS to its wholly owned subsidiary, NW Natural Energy, and to immediately transfer this membership to NW Natural Energy's wholly owned subsidiary, NW Natural Gas Storage.

Specifically, NW Natural will contribute and dispose of its membership interest and all related rights as a member in GRS to NW Natural Energy. NW Natural Energy will immediately contribute and dispose of the same to NW Natural Gas Storage. NW Natural Gas Storage will assume the obligations of NW Natural and be admitted as a member in GRS.⁷ Upon completion of these transactions, GRS will be wholly owned by NW Natural Gas Storage. The corporate organization structure prior to and after the proposed transactions is shown in Appendix A.

The Application states that the proposed restructuring will change the legal ownership, and the legal, but not actual, control of GRS, and no outside entity will be injected into the GRS chain of ownership. According to GRS, NW Natural, NW Natural Energy, and NW Natural Gas Storage (Applicants), this internal restructuring will allow NW Natural to more appropriately categorize and segregate business segments to facilitate the identification and consolidation of the company's non-utility business activities for reporting purposes. Applicants state that the internal restructuring will more clearly distinguish these affiliates as separate legal entities from core distribution utility services, and accommodate other non-core business opportunities that NW Natural may undertake in the future.

Upon approval of the Application and completion of the corporate restructuring, NW Natural Gas Storage will own GRS. GRS will continue to operate as an independent natural gas storage provider subject to Commission jurisdiction, GRS will continue to own a 75% interest in the Project and GRS will continue to serve as the initial operator of the Project. GRS will remain bound by the terms and conditions set forth in D.09-10-035 granting GRS' and PG&E's applications for authority to construct and operate the Project.

⁷ Exhibit K to the Application contains a copy of the Assignment of Membership Interest pursuant to which the proposed transactions will be accomplished, and Exhibit L contains organization charts showing the corporate organization structure prior to and after the proposed transactions.