(Mark One)

For the quarterly period ended September 30, 2016

or

For the transition period from _____________ to ____________ _

Commission file number 1-4174

Registrant's 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 Section 13 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):

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 issuer's classes of common stock, as of the latest practicable date.

The Williams Companies, Inc.

Index

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 Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These forward-looking statements relate to anticipated financial performance, management's 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. Forward-looking statements can be identified by various forms of words such as "anticipates," "believes," "seeks," "could," "may," "should," "continues," "estimates," "expects," "forecasts," "intends," "might," "goals," "objectives," "targets," "planned," "potential," "projects," "scheduled," "will," "assumes," "guidance," "outlook," "in service date" or other similar expressions. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

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:

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.

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 February 26, 2016 and in Part II, Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q.

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 September 30, 2016 , we account for as an equity-method investment, including principally the following:

Aux Sable: Aux Sable Liquid Products LP

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

OPPL: Overland Pass Pipeline Company LLC

UEOM: Utica East Ohio Midstream LLC

Government and Regulatory:

EPA: Environmental Protection Agency

FERC: Federal Energy Regulatory Commission

SEC: Securities and Exchange Commission

Other :

DRIP : Distribution Reinvestment Program

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 was to be merged into ETC

Fractionation: The process by which a mixed stream of natural gas liquids is separated into constituent products, such as ethane, propane, and butane

GAAP: U.S. generally accepted accounting principles

IDR: Incentive distribution right

NGLs: Natural gas liquids; natural gas liquids result from natural gas processing and crude oil refining and are

used as petrochemical feedstocks, heating fuels, and gasoline additives, among other applications

NGL margins : NGL revenues less any applicable Btu replacement cost, plant fuel, and third-party transportation and fractionation

PDH facility: Propane dehydrogenation facility

PART I – FINANCIAL INFORMATION

The Williams Companies, Inc.

Consolidated Statement of Operations

(Unaudited)

See accompanying notes.

The Williams Companies, Inc.

Consolidated Statement of Comprehensive Income (Loss)

(Unaudited)

See accompanying notes.

The Williams Companies, Inc.

Consolidated Balance Sheet

(Unaudited)

See accompanying notes.

The Williams Companies, Inc.

Consolidated Statement of Changes in Equity

(Unaudited)

See accompanying notes.

The Williams Companies, Inc.

Consolidated Statement of Cash Flows

See accompanying notes.

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, 2015, in our 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 under which we would be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger), with ETC surviving the ETC Merger. The general terms of the Merger Agreement were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

ETC filed its initial Form S-4 registration statement on November 24, 2015, and on May 25, 2016, the Form S-4 was declared "effective" by the U.S. Securities and Exchange Commission. On June 9, 2016, the Federal Trade Commission cleared the ETC Merger subject to certain conditions that we and Energy Transfer agreed to undertake, to be satisfied following a closing of the ETC Merger, including the sale of certain assets.

On April 6, 2016, we announced that we commenced litigation against Energy Transfer in response to the private offering by Energy Transfer of Series A Convertible Preferred Units that Energy Transfer disclosed on March 9, 2016.

On May 3, 2016, Energy Transfer and LE GP, LLC (the general partner for Energy Transfer) filed an answer and counterclaim. The counterclaim asserted that we materially breached our obligations under the Merger Agreement.

On May 13, 2016, we announced that we filed a separate action in the Delaware Court of Chancery seeking a declaratory judgment and injunction preventing Energy Transfer from terminating or otherwise avoiding its obligations under the Merger Agreement by asking the court to prohibit Energy Transfer from relying on either (i) any failure to close the transaction by the "Outside Date" of June 28, 2016 (Outside Date) or (ii) any failure to obtain a Section 721(a) tax opinion from Latham & Watkins LLP (Energy Transfer's outside counsel) (Latham), as a basis for Energy Transfer to avoid fulfilling its obligation to close the proposed transactions with us. We alleged that Energy Transfer breached the Merger Agreement through a pattern of delay and obstruction designed to allow Energy Transfer to avoid its contractual commitments.

On May 20, 2016, Energy Transfer filed its affirmative defenses and counterclaim and sought, among other things, a declaratory judgment that, in the event Latham failed to deliver the Section 721(a) tax opinion prior to the Outside

Date, Energy Transfer would be entitled to terminate the Merger Agreement without liability due to the failure of a closing condition. Energy Transfer also asserted that we breached the Merger Agreement, due to our Board of Directors modifying or qualifying its approval and recommendation of the ETC Merger in addition to other alleged breaches.

On June 17, 2016, our Board of Directors declared a special dividend in the amount of $0.10 per share of our common stock, pursuant to the terms of the Merger Agreement. The special dividend was contingent on the consummation of the ETC Merger and would be payable to our holders of record at the close of business on the last business day prior to the closing of the ETC Merger.

On June 24, 2016, the Delaware Court of Chancery issued an opinion finding that Energy Transfer was contractually entitled to terminate the Merger Agreement in the event Latham was unable to deliver the required Section 721(a) tax opinion prior to the Outside Date in the Merger Agreement.

On June 27, 2016, our stockholders voted to approve the Merger Agreement and the transactions contemplated thereby. We also filed papers commencing an appeal in the Delaware Supreme Court of the Delaware Court of Chancery's June 24, 2016 ruling relating to the Merger Agreement.

On June 29, 2016, Energy Transfer announced that Latham had advised Energy Transfer that it was unable to deliver the Section 721(a) tax opinion as of the Outside Date. Energy Transfer subsequently provided us written notice terminating the Merger Agreement, citing the alleged failure of conditions under the Merger Agreement. (See Note 12 – Contingent Liabilities .)

Termination 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 Termination Agreement, we were 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 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 distributions from WPZ in November 2015, February 2016, and May 2016 were reduced by $209 million , $209 million , and $10 million , respectively, 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 consummation of the ACMP 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.

Description of Business

We are a Delaware corporation whose common stock is listed and traded on the 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.

WPZ's 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.

WPZ's midstream businesses primarily consist of (1) natural gas gathering, treating, compression, and processing; (2) natural gas liquid (NGL) fractionation, storage, and transportation; (3) crude 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 Barnett, 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 (DBJV) in the Mid-Continent region, 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 interest 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. In September 2016, we completed the sale of our Canadian operations. (See Note 2 – Divestiture .)

Williams NGL & Petchem Services

Williams NGL & Petchem Services includes certain domestic olefins pipeline assets, a liquids extraction plant near Fort McMurray, Alberta, that began operations in March 2016, and a propane dehydrogenation facility under development in Canada. In September 2016, we completed the sale of our Canadian operations. (See Note 2 – Divestiture .)

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 September 30, 2016 , we own approximately 60 percent of the interests in WPZ, a variable interest entity (VIE) (see Note 3 – Variable Interest Entities ), including the interests of the general partner, which are wholly owned by us, and IDRs.

In August 2016, WPZ completed an equity issuance of 6,975,446 common units sold to us in a private placement transaction for an aggregate purchase price of approximately $250 million . In addition, we contributed the proportionate share necessary to maintain our 2 percent general partner interest.

WPZ is self-funding and maintains separate lines of bank credit and cash management accounts and also has a commercial paper program. (See Note 9 – Debt and Banking Arrangements .) Cash distributions from WPZ to us, including any associated with our IDRs, occur through the normal partnership distributions from WPZ to all partners.

Significant risks and uncertainties

At the end of the third quarter of 2016, we became aware of changes involving certain of DBJV's customer contracts, which impacted our estimates of DBJV's future cash flows. As such, we evaluated this investment for impairment at September 30, 2016, and through the date of this filing, and determined that no impairment was necessary. The carrying value of our investment in DBJV at September 30, 2016, is $964 million .

We estimated the fair value of this investment using an income approach. The computations considered our estimate of the future cash flows associated with the underlying business. We have recently entered into initial discussions with the system operator regarding the terms and economic assumptions of these contract changes. Depending upon the outcome of these discussions, we may not approve of the contract changes and it is possible that we could exercise our rights pursuant to the operating agreement and move to arbitration proceedings to address these contracts and other matters potentially impacting the future cash flows of DBJV. As a result, it is reasonably possible that the ultimate outcome could adversely affect our estimates of future cash flows and could ultimately result in a future impairment of our investment in DBJV.

Accounting standards issued but not yet adopted

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15 "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" (ASU 2016-15). ASU 2016-15 provides specific guidance on eight cash flow classification issues, including debt prepayment or debt extinguishment costs and distributions received from equity method investees, to reduce diversity in practice. The new standard is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The new standard requires a retrospective transition. We are evaluating the impact of the new standard on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowances for losses. The guidance also requires increased disclosures. The new standard is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. 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 March 2016, the FASB issued 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 periods beginning after December 15, 2016. 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 15, 2018. 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 2015-17). ASU 2015-17 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 interim and annual periods beginning after December 15, 2016, with either prospective or retrospective presentation allowed. Early 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 Consolidated Statement of Operations and Consolidated Statement of Cash Flows.

In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (ASC) 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 – Divestiture

In September 2016, we completed the sale of subsidiaries conducting Canadian operations, including subsidiaries of WPZ, (such subsidiaries, the disposal group), for total consideration of $1.02 billion , including $712 million of cash proceeds, net of $31 million of cash divested and subject to customary working capital adjustments. The total consideration also includes $243 million of escrowed proceeds expected to be fully received in late 2016 or early 2017 pending clearance by the Canadian Revenue Agency, and $81 million of other contingent consideration, both reflected in Other current assets and deferred charges in the Consolidated Balance Sheet . In connection with the sale, we agreed to waive $150 million of incentive distributions otherwise payable by WPZ to us in the fourth quarter of 2016 in recognition of certain affiliate contracts wherein WPZ's Canadian operations provided services to certain of our other businesses. We used the cash proceeds from the transactions to reduce borrowings on credit facilities.

The other contingent consideration primarily relates to proceeds deposited into an escrow account pending the buyer's receipt of certain governmental incentives being pursued. Our estimate of the fair value of this contingent consideration reflects management's probability-weighted scenarios of the buyer being awarded the associated incentives prior to a March 31, 2017, end-date specified in the sales agreement. The loss on sale will be impacted in future periods by the ultimate disposition of the escrowed proceeds, either being adjusted to reflect the receipt of the actual amount of proceeds or increased to reflect the derecognition of the associated asset in the event that the buyer is not awarded the incentives by March 31, 2017.

During the second quarter of 2016, we designated these operations as held for sale. As a result, we measured the fair value of the disposal group as of June 30, 2016, resulting in an impairment charge of $747 million , reflected in Impairment of long-lived assets in the Consolidated Statement of Operations . (See Note 11 – Fair Value Measurements and Guarantees .) We recorded an additional loss of $65 million upon completion of the sale, primarily reflecting revisions to the sales price and estimated contingent consideration and including a $15 million benefit related to transactions to hedge our foreign currency exchange risk on the Canadian proceeds, during the third quarter of 2016 reflected in Other (income) expense – net within Costs and expenses in the Consolidated Statement of Operations . The total loss consists of a loss of $32 million at Williams Partners and $33 million at Williams NGL & Petchem Services.

The following table presents the results of operations for the disposal group, excluding the impairment and loss noted above.

Note 3 – 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, our consolidated master limited partnership is now a VIE. We are the primary beneficiary of WPZ because we have the power to direct the activities that most significantly impact WPZ's economic performance.

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.

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 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 One's 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 completed in two phases. The first phase went into service in July of 2016 and the second phase is expected to go into service in the fourth quarter of 2016. The current estimate of the total remaining construction cost for the expansion project is approximately $19 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 Constitution's economic performance. WPZ, as construction manager for Constitution, is responsible for constructing the proposed pipeline connecting its gathering system in Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and the Tennessee Gas Pipeline systems. The total remaining cost of the project is estimated to be approximately $687 million , which is expected to be funded with capital contributions from WPZ and the other equity partners on a proportional basis.

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 in May 2016, Constitution appealed the NYSDEC's denial of the certification and filed an action in federal court seeking a declaration that the State of New York's authority to exercise permitting jurisdiction over certain other environmental matters is preempted by federal law. In light of the NYSDEC's denial of the water quality certification and the actions taken to challenge the decision, the project in-service date is targeted 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 $381 million on a consolidated basis at September 30, 2016, and are included within Property, plant, and equipment, at cost in the Consolidated Balance Sheet . Beginning in April 2016, we discontinued capitalization of development costs related to this project. It is also possible that we could incur certain supplier-related costs in the event of a prolonged delay or termination of the project.

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 Cardinal's 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 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 Jackalope's 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 4 – Investing Activities

Investing Income

The three and nine months ended September 30, 2016 , includes a $27 million gain from the sale of an equity-method investment interest in a gathering system that was part of WPZ's Appalachia Midstream Investments within the Williams Partners segment.

During the third quarter of 2015, we 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. This item is reported within the Williams Partners segment.

Impairments

The nine months ended September 30, 2016 , includes $59 million and $50 million of other-than-temporary impairment charges related to WPZ's equity-method investments in DBJV and Laurel Mountain, respectively (see Note 11 – Fair Value Measurements and Guarantees ) within the Williams Partners segment.

During the third quarter of 2015, we recognized other-than-temporary impairment charges of $458 million and $3 million related to WPZ's equity-method investments in DBJV and certain of the Appalachia Midstream Investments, respectively (see Note 11 – Fair Value Measurements and Guarantees .) These items are reported within the Williams Partners segment.

Interest income and other

The nine months ended September 30, 2016 , includes $36 million , and the three and nine months ended September 30, 2015 , includes $18 million and $27 million , respectively, of income associated with payments 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 is zero , there is one remaining payment due to us (see Note 11 – Fair Value Measurements and Guarantees ).

Investments

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 Gulfstream's debt maturities. Subsequently, WPZ contributed $248 million and $148 million to Gulfstream for its proportional share of amounts necessary to fund debt maturities of $500 million due on November 1, 2015, and $300 million due on June 1, 2016, respectively.

Note 5 – Other Income and Expenses

The following table presents certain gains or losses reflected in Other (income) expense – net within Costs and expenses in our Consolidated Statement of Operations :

ACMP Merger and Transition

Nine months ended September 30, 2016

Selling, general, and administrative expenses includes $5 million for the nine months ended September 30, 2016 , associated with the ACMP Merger and transition. These costs are reflected within the Williams Partners segment.

Three and nine months ended September 30, 2015

Selling, general, and administrative expenses includes $1 million and $35 million for the three and nine months ended September 30, 2015 , 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 also includes $7 million and $20 million for the three and nine months ended September 30, 2015 , respectively, of general corporate expenses associated with integration and re-alignment of resources.

Operating and maintenance expenses includes $10 million for the nine months ended September 30, 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 nine months ended September 30, 2015 , from the ACMP Merger.

Geismar Incident

On June 13, 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 of insurance recoveries during the nine months ended September 30, 2015 , reported within the Williams Partners segment and reflected as gains in Net insurance recoveries - Geismar Incident .

Additional Items

Three and nine months ended September 30, 2016

Service revenues have been reduced by $15 million for the nine months ended September 30, 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 includes $21 million and $40 million for the three and nine months ended September 30, 2016 , respectively, of costs associated with our evaluation of strategic alternatives and related costs within Other. Selling, general, and administrative expenses also includes $16 million and $61 million for the three and nine months ended September 30, 2016 , respectively, of 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 development.

Selling, general, and administrative expenses and Operating and maintenance expenses include $26 million for the nine months ended September 30, 2016 , in severance and other related costs associated with an approximate 10 percent reduction in workforce in the first quarter of 2016, primarily within the Williams Partners segment.

Other income (expense) – net below Operating income (loss) includes $23 million and $62 million for the three and nine months ended September 30, 2016 , respectively, for allowance for equity funds used during construction primarily within the Williams Partners segment.

Three and nine months ended September 30, 2015

Selling, general, and administrative expenses includes $18 million and $25 million for the three and nine months ended September 30, 2015 , respectively, of costs associated with our evaluation of strategic alternatives and related costs within Other.

Other income (expense) – net below Operating income (loss) includes $26 million and $70 million for the three and nine months ended September 30, 2015 , respectively, for allowance for equity funds used during construction primarily within the Williams Partners segment. Other income (expense) – net below Operating income (loss) also includes a $14 million gain for the nine months ended September 30, 2015 , resulting from the early retirement of certain debt.

Note 6 – Provision (Benefit) for Income Taxes

The Provision (benefit) for income taxes includes:

The effective income tax rate for the three months ended September 30, 2016 , is less than the federal statutory rate primarily due to the impact of the allocation of income to nontaxable noncontrolling interests and the effects of taxes on foreign operations, partially offset by the effect of state income taxes, including a $43 million provision related to an increase in the deferred state income tax rate (net of federal benefit).

The effective income tax rate for the nine months ended September 30, 2016 , is less than the federal statutory rate primarily due to the effects of taxes on foreign operations, which includes the reversal of anticipatory foreign tax credits and a valuation allowance associated with impairments and losses on the sale of our Canadian operations (see Note 2 – Divestiture ), and the effect of state income taxes, including a $43 million provision related to an increase in the deferred state income tax rate (net of federal benefit). These decreases are partially offset by the impact of the allocation of income to nontaxable noncontrolling interests. The foreign income tax provision includes the tax effect of the impairments associated with our Canadian disposition.

The effective income tax rate for the three months ended September 30, 2015 , is less than the federal statutory rate primarily due to the impact of the allocation of income to nontaxable noncontrolling interests, partially offset by the effect of state income taxes and taxes on foreign operations.

The effective income tax rate for the nine months ended September 30, 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 the allocation of income to nontaxable noncontrolling interests and the effect of state income taxes.

During the next 12 months, we do not expect ultimate resolution of any unrecognized tax benefit associated with domestic or international matters to have a material impact on our unrecognized tax benefit position.

Note 8 – Employee Benefit Plans

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 $2 million and $3 million for the three months ended September 30, 2016 and 2015 , respectively, and $7 million and $8 million for the nine months ended September 30, 2016 and 2015 , respectively.

During the nine months ended September 30, 2016 , we contributed $64 million to our pension plans and $5 million to our other postretirement benefit plans. We presently anticipate making additional contributions of approximately $1 million to our pension plans and approximately $1 million to our other postretirement benefit plans in the remainder of 2016.

Note 9 – Debt and Banking Arrangements

Long-Term Debt

Issuances and retirements

On January 22, 2016, Transco 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 certain 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 cease.

Transco retired $200 million of 6.4 percent senior unsecured notes that matured on April 15, 2016.

Northwest Pipeline retired $175 million of 7 percent senior unsecured notes that matured on June 15, 2016.

Commercial Paper Program

As of September 30, 2016, WPZ had $2 million of Commercial paper outstanding under its $3 billion commercial paper program with a weighted average interest rate of 1.30 percent .

Credit Facilities

Note 10 – Stockholders' Equity

The following table presents the changes in Accumulated other comprehensive income (loss) (AOCI) by component, net of income taxes:

Reclassifications out of AOCI are presented in the following table by component for the nine months ended September 30, 2016 :

Note 11 – Fair Value Measurements and Guarantees

The following table presents, by level within the fair value hierarchy, certain of our financial assets and liabilities. The carrying values of cash and cash equivalents, accounts receivable, commercial paper, and accounts payable approximate fair value because of the short-term nature of these instruments. Therefore, these assets and liabilities are not presented in the following table.